The period of 1840 (when the Opium War broken out) till now is commonly regarded as China’s modern era, ‘modern’ in terms of China’s departure from its original growth and developmental path. In this context, the term modern has been intimately associated with something alien to the Chinese indigenous culture and pattern. There are several distinctive features for this period of 150 years (1840–1990). First, China did not begin with zero or primitivism. Up to c. 1800, China also produced roughly a third of the world total manufacturing output, ahead of the West (about 20 percent of the world total) by a significant 10 percent in the world total. In around 1830, China still matched the West reasonably comfortably. However, there was a dramatic change after 1840. In 1900, China’s share of manufacturing output declined to 6 per cent while the share of the West shot up to 77 per cent. Second, unmistakably changes during this period began with external shocks in the form of force majeure from the newly industrialised/industrialising modern powers. Table 1 contains main events marked by treaties between those powers and Qing China. Just about all such powers were actively involved. Third, changes in China during this period were both frequent and often extreme with the direction shifting from time to time. It all began with the Nanking Treaty Reform (1842) which opened the floodgate for foreign powers to move in China and dismantle institutional barriers for China’s domestic market in the strict classical and neo-classic sense. Fourth, the results of these changes were mixed and messy. With these features in mind, it presents a challenging task to investigate why and how the changes occurred and what were the consequences. It is equally challenging as for how to evaluate these changes and their consequences. So, despite the amount of efforts made in what is broadly called ‘Chinese studies’, a critical point with which our comprehension of the nature and magnitude of the Chinese economic growth/development seems to have yet been passed. It is no exaggeration therefore that the Chinese economy during the modern era is one of the least understood in the world. But why does state-building matter? Empirically, at least in China’s past, state-building was always associated with a cluster of major changes, marking the beginning of an array of new developments in terms of (1) changing the ‘game’ and its rules at all levels, (2) altering growth trajectory of the economy, and hence (3) breaking away from the old historic continuity. But, these new institutions were not necessarily beneficial and inductive to growth and development as time went on. They led to a deadlock for the premodern Chinese economy. Thus, state-building gives us some very promising hints in tackling modern Chinese economic history in general and in investigating and explaining, in a coherent way, all the main features of China’s modern economic history in particular. To introduce state-building into a model will thus not only fill in the vacuum but also ensure a factual and dynamic thrust in the study. This new dimension will transcend the narrow approach of the ‘state-market’ paradigm which leans too much towards the Western European experiences. This is essential in analysing Maoist planned economy.
