A History of Chinese Thoughts on Public Finance

The following sections are included:

• Preface
• Acknowledgments
• About the Authors
• About the Translators
• Contents

The following sections are included:

• The Establishment of States and the Beginning of Thoughts on Public Finance
  • The beginning of states
  • The beginning of thoughts on public finance in the three earliest dynasties
• Thoughts on Public Finance Reflected by the Revenue Generating Systems
  • Equality in tax and contribution, graded taxes, exemption to state-owned houses
  • Consistency in the imposition of labor services and taxes, and equal attention to the two
  • Taxes and contributions used as incentive means
  • Integration of rents and taxes, coexistence of multiple taxes and universal coverage in tax levying
• Thoughts on Public Finance Reflected by the Expenditure Systems
  • Expenditure cutting and expenditure-oriented tax levying
  • Land-allocation-based salaries
  • Farmer-based military services
• Thoughts on Public Finance Reflected by the Corresponding Regulatory Systems
  • Establishing posts as needed, and selecting official candidates on the basis of personal merit
  • Thoughts on public finance reflected in financial systems
  • Shihuo-centered financial policies that prioritized food and trading
  • The primitive idea of social security
  • Policies on transferred payment
  • The burgeoning of state budgets
  • Public-run businesses
  • Administrative intervention in pricing
  • Bookkeeping and accounting
  • Emphasis on ecological balances and sustainable development

In 771 BCE, the monstrous Emperor Zhou Youwang was killed by the Quanrong tribe. Under the support of dukes, Prince Yijiu was enthroned. The new emperor, known in history as Emperor Zhou Pingwang, moved the capital eastward to Luoyi, which marked the beginning of the Eastern Zhou Dynasty. This dynasty consisted of two periods, the Spring and Autumn Period (770–403 BCE) and the Warring States Period (403–221 BCE). A dynasty marked by earth-shaking social turmoil, political transformation and major boosts in economy, science and culture, the two periods were also remarkable for the thriving of various schools of thoughts, including that on finance, which in turn laid down a solid foundation for the dynasty to flourish in later generations.

The period ranging from the Qin Dynasty (221–206 BCE) through the Han Dynasty (206 BCE–220 CE) marked the formal debut of the feudal society in China and the progress it attained in its economy and politics during its early development. At the same time, it was also a period during which the country’s former established systems, institutions and thoughts concerning finance evolved continually toward ever more sophisticated and more advanced levels. Therefore, it constituted a most crucial part of China’s ancient history and had left a profound influence on the overall developmental trend of the country’s feudal society afterward.

The Three Kingdoms Period, the Jin Dynasties and the Southern and Northern Dynasties (220–589 CE) on the whole was a time marked by constant changes in government and major social disruptions. Meanwhile, it was also a period marked by large-scale ethnic integration, increasing maturation of the country’s feudal politic and economic policies, as well as further advancement of its culture and thought systems. In a nutshell, this period could be viewed as a significant transitional point in China’s history, during which the fine traditional civilization legacy initiated in the pre-Han Dynasty era was further perfected and passed down, laying down at the same time a solid foundation for the advent of a more prosperous era that culminated with the rise of a mighty empire during the Sui & the Tang Dynasties. A much similar trajectory could be charted for the development of China’s financial systems and thoughts during this period.

In 581 CE, Yang Jian, prime minister of the Northern Zhou State, took over the throne and established his reign over the country, known in history as the Sui Dynasty. Shortly afterward in 589 CE, he defeated the Southern Chen State, bringing an end to the 370-year-long period of great social turmoil and fragmentation, and ushering once again a unified, centrally controlled China. The establishment of the centralized Sui Dynasty marked the beginning of a new phase in Chinese history that lasted for 380 years, during which the feudal political, social and economic systems of the country were further consolidated and developed. This new phase, which included the Sui Dynasty (581–618 CE), the Tang Dynasty (618–907 CE), and the Five Dynasties and Ten Kingdoms Period (907–960 CE), also witnessed the emergence of an increasingly sophisticated feudal financial system and a rich diversity of thoughts on public finance in this aspect.

The Northern Song Dynasty (960–1126 CE) and the Southern Song Dynasty (1126–1279 CE), totaling about 320 years, are together one of the longest dynasties in Chinese history, and also one of the dynasties in which poverty and weakness were deeply rooted. After the establishment of the Northern Song Dynasty, the Central Plains and southern states were unified. However, the Liao and the Xixia tribes in the North, the Dali, the Tubo and other minority communities in the South remained separated from the unified central government. The Southern Song Dynasty satisfied itself on the left side of the Yangtze River. So, during the Song Dynasties, China faced many political confrontations. Nevertheless, the Northern Song Dynasty was worthy of credit for unifying most parts of China and thus ending the separated states of the Five Dynasties and the Ten States. It brought about a relatively stable situation in most parts of China, creating a more favorable condition for social and economic development. On the basis of this, the financial systems and thoughts on public finance of the Song Dynasties were also changing and evolving.

The Liao Dynasty (r. 916–1125 CE) was established by the Khitan people, the Jin Dynasty (r. 1115–1234 CE) by the Jurchen people and the founder of the Yuan Dynasty (r. 1206–1368 CE) was Kiyan Borjikin, a Mongolian aristocrat. The three dynasties were all built up by ethnic minorities by wielding their military strength in a succession of wars, and witnessed the transformation of China from a society marked by relatively backward modes of production, culture and political system to one characterized by more advanced features in these aspects. This transformation was also reflected in the fiscal policies and thoughts on public finance that were adopted primarily during this period.

Thoughts on public finance during the Ming Dynasty (1368–1644) were established and developed on the basis of its economic and political foundation. Formulated by drawing heavily on insightful financial viewpoints that wise politicians and rulers in the previous dynasties had raised, they marked both a continuation and further development of the worthy parts of previous theories concerning the financial work of a country. Therefore, it can be said that thoughts on public finance during this dynasty were summaries of experiences and lessons left by former dynasties as well as rational analyses of peace and upheaval, rise and fall, and revolutionary development in the Ming Dynasty. Given their complicated nature, Ming’s thoughts on public finance can be divided into three stages according to their evolution trend, namely, the early Ming Dynasty, the middle period and the late Ming Dynasty. In the early Ming Dynasty, although there were thoughts that attempted to find excuses for officials to take advantage of the system and to pursue personal gains at the cost of lower classes, the mainstream was centered on relieving people’s burden, resting and building up strength, equalizing taxes and bringing comfort to the common people. During the middle period, under devastating financial conditions, there emerged thoughts and discussions focused on reforming the tax system for the purpose of fostering strength and removing weakness. However, these efforts made little differences. The situation was much graver in the late Ming Dynasty when bribery was rampant in the bureaucratic government and the whole country was plagued by abject poverty. Despite the emergence of fiscal reform proposals put forward by Zhang Juzheng to improve governance, thoughts on public finance eventually went downhill due to the powerful suppression by the conservatives.

The early Qing Dynasty (1644–1840) witnessed the historical transition from division to unity, stability to development and prosperity to decline. In the beginning, the thoughts on public finance, as an extension of the critical thoughts on the conventional financial dogmas since the Northern and Southern Song Dynasties, were reflections on the financial and economic measures and the theoretical basis of the overthrown Ming Dynasty by Enlightenment Thinkers, and their political advocacy reflecting the interest of the new citizen class. After the ruling order of the Qing Dynasty was established and further consolidated, this ideology was still present in certain thoughts on public finance brought up by the landlord class. However, more thoughts on public finance during this period were limited to specific policies to tackle the realistic financial problems for the purpose of consolidating the Qing regime.

The late Qing Dynasty (1840–1911) was a period when a semi-colonial and semi-feudal society emerged and formed in China. The invasion of imperialist powers was to transform China into a colony, but the production modes of capitalism and bourgeois ideas were also introduced into China. At the same time, the thoughts on public finance of western capitalism, accompanied by western academic thoughts spreading to China, were understood and used for reference by Chinese thinkers…

During the period of the Beiyang Government (1912–1927), China’s thoughts on public finance began to be fundamentally transformed partly as a result of the influx of western fiscal theories. This transformation, on the one hand, manifested itself in the introduction, digestion and absorption of the western fiscal works, and the modern finance system was gradually formulated, a ready example of which was the publication of Public Finance written by Chen Qixiu (Chen Baoyin) in 1924. On the other hand, the transformation underway was made evident by the fact that increasingly more Chinese scholars were trying to solve China’s financial problems by applying western financial theories. During this process, the officials from the Beiyang Government planned and formulated some financial policies by employing modern financial theories, and some scholars applied western financial theories to study and solve the financial problems. Besides, the capitalist democratic revolutionary party headed by Dr. Sun Yat-sen gave priority to and aimed to resolve realistic problems in China’s revolution, learning, drawing lessons from and critically absorbing the western capitalist democratic theories. As a result, Sun Yat-sen proposed the Three Principles of the People, which guided the formulation and establishment of the financial policies and systems of the Nanjing National Government that was established in the wake of the downfall of the Beiyang Government. The People’s Livelihood aspect of these three principles was regarded as the thought on public finance.

During the period when the Nanjing National Government was in office, modern financial theories were further developed. By the 1930s, financial theories of western bourgeois had already been deeply rooted among the academic circle in China and academic writings about financial theories were steadily increasing. Statistics show that 86 books about financial theories were published in the 1930s and 47 books in the 1940s. In 1935, three best-selling books about finance, Fundamental Theory of Finance by Li Quanshi, Finance by He Lian and Li Rui, and Finance by Yin Wenjing, were published by the Commercial Press. In addition, Hu Shanheng’s Treatise on Taxes and Contributions (published by the Commercial Press in 1934) focused especially on tax. Some academic works, focusing on studying and analyzing the reality of Chinese finance, were guided by fiscal theories of Western bourgeois, such as Finance written by He Lian and Li Rui and The Science of Finance and Chinese Finance by Ma Yinchu (published by the Commercial Press in 1948)…