Foreign capitalism played an important part in the
disintegration of China’s social economy; on one hand, it
undermined the foundation of her self-sufficient natural
economy and wrecked the handicraft industries both in the
cities and in the peasants’ home; and on the other hand, it
hastened the growth of the commodity [market] economy in
town and country (Mao Tse-tung 1967, 309).
Western capitalism greatly changed the Chinese
economy as foreign trading flourished. To outsource work
they found unprofitable or could not handle, Western
merchants encouraged domestic business firms. Starting at
the trade ports, especially Shanghai and Canton, a new
social class emerged, the comprador—merchants. These
were Chinese who became involved with foreign trade.
Some became middlemen and agents to facilitate importing
and exporting. Other Chinese set up warehouses to sell
imported commodities and purchase goods for export. They
brought raw materials purchased from inland areas to
coastal cities for mass production. Over time, the
comprador—merchant became a social force.
More and more farmers abandoned the production of
food stuffs to produce silk and tea when prices for these
products soared in the 1880s (Stockwell, 2003). The
domestic urban handicraft and rural homestead industries
were on the verge of collapse. This was aggravated by a
liquidity crisis. Transactions across different economic
sections had increased significantly after the Opium War,
thus silver could not satisfy the demand for currency in
circulation. In 1853, the monetary system switched from
silver to paper money. China gradually moved from a stable
self-sufficient self-reliant economy to a market economy.