China was regarded as a great power until the end of the seventeenth century. But by the mid-nineteenth century it was a backward agrarian country. Europe caught up with China, not because of higher productivity but because of the discovery of the New World, which brought piles of gold and silver to Europe. The new wealth dramatically enhanced living standards there. When the Industrial Revolution started in the eighteenth century, technological innovation accelerated in Europe, soon leaving China behind, and the gap continued to widen.

Beginning a history of humiliation

China's per capita income in 1820 was 523 international monetary units, much less than the 1, 287 for the United States and 1, 756 (then highest) for the United Kingdom. In 1950 China's per capita income was 614, a small fraction of the 9, 573 (then highest) for the United States and 6, 847 for the United Kingdom. So China's per capita income had fallen to one-fifteenth of that of the United States and one-tenth of the United Kingdom.

China's position in international politics also plummeted. Before the mid-Qing Dynasty (1644–1911) China was still the most powerful country in the world and the suzerain of its neighboring countries, which paid it tribute. When Great Britain first dispatched its envoys to China, China gave it a pejorative name suggesting that it was a country of barbarians with no respect for protocols. But less than a century after the Industrial Revolution, China was soundly defeated by Britain in the Opium War of 1840. After that it was successively defeated by France, Japan, and the Eight-Power Allied Forces, inflicting unspeakable injury and insult.