Already the Sui 隋 (581-618) emperors begun to construct a Great Canal (dayunhe 大運河) to ensure the transport of grain from the rich lower Yangtse area 長江 to the north, the Tang government 唐 (618-907) prolonged this traffic line to the capital Chang'an 長安 (modern Xi'an 西安/Shaanxi) in the northwest. Chang'an and Luoyang 洛陽 (modern Luoyang/Henan) were fortified with wall and moat, the city was divided into quarters that were easy to control and administer. Two markets served as supply of goods and for tax income. City life was enriched by many temples and monasteries. The equal-land-system (see below) was intended to ensure a certain tax income to the state by reducing the amount of large land estates. To realize such a system, exact household registers (huji 戶籍) from a census were necessary. But although all land theoretically owned to the emperor, the local aristocracy was able to gain more and more land by legal ways. Most of the peasants from middle Tang period on were only tenant farmers of the aristocracy, a tendency that was only ended in 1949 by the communist revolution. Among the large estate owners were many Buddhist monasteries, a fact that caused the state guided persecutions of Buddhism. A new tax system should solve the problem of the decreased tax income in the second half of Tang Dynasty. Many great clans, the imperial family and the monasteries owned large land estates (zhuangyuan 莊園) that could not be taxed directly by the state. The equal-land-system had based upon families and their land, but from 780 on the tax was two times collected a year (called liangshuifa 兩稅法 "double-tax-system"), depending on the seize of the land owned and on the amount of the harvest.
Of major importance for the richness of the Tang upper class was of course the "international" trade between China and the Inner Asian countries, the Southeast Asian kingdoms (including India) and Korea and Japan. Chinese economic articles are found in the Near Orient, having passed the trading routes of the Indian and Arab merchants along the Indian Ocean.
Under Tang rule, the custom of tea drinking became widespread. It was introduced by monks that used tea as a stimulating drink during their night meditations. The first bills of exchange (feiqian 飛錢) were used by the tea traders. Tea, rice and silk were all products of the lower Yangtse area, which had served as China's grainhouse from the time of Southern and Northern Dynasties (Nanbeichao 南北朝, 420~589) on. China opened to the ocean, because in Inner Asia nomadic tribes built up their own empires and controlled the trade routes to West Asia, a matter also influencing the decline of Buddhism.
The reconstruction of the economy during the previous Sui Dynasty had been effectively initiated. The task of the newly founded Tang Dynasty was to continue the measures to develop a strong and healthy economy. Especially the area of the lower Yellow River 黃河 had suffered badly during the last few centuries.
The Tang Dynasty inherited the equal field system (juntianfa 均田法) that had been introduced by the Northern Wei Dynasty 北魏 (386-534) in the 5th century. Every male adult person (dingnan 丁男) was bestowed 80 "acres" (mu 亩 or 畝) state fields (koufentian 口分田; to be rendered back to the state after death) and 20 mu personal, inheritable fields (yongyetian 永業田). Old and sick people obtained 40 mu, widows 30 mu state fields, and as owner additionaly 20 mu inheritable fields. Buddhist priests or monks obtained 20 mu state fields, craftsmen and merchants 10 mu each. Additionally, for each three persons and five slaves in a household one mu of orchard (yuanzhai 園宅) was given. The amount of lended field increased substantially depending on the rank of an official-aristocrat. An imperial prince for example obtained 100 "hectares" (qing 頃) of inheritable fields, down to officials of ninth grade who only obtained 2.5 qing. State fields were not allowed to be sold, and inheritable fields only after the death of the owner, and the amount of acquired fields was restricted. Substantial changes to the older equal fields systems of Northern Wei was the allotment of fields to slaves, but not to women. The importance of monasteries in the economical sphere can be seen from the allotment of fields to monks and nuns.
The Tang period ministry of finance (hubu 戶部) had four sources of tax income in a system called "grain-labour-kind tax" (zuyongdiaofa 租庸調法): In taxable households (kehu 課戶) every adult person had to pay two shi of grain (“grain tax” zu 租), a certain amount of silk or other fabric measured in length or weight (“fabric tax” diao 調). Every year a male person had to serve two weeks for official labour (“labour service” yong 庸 or yi 役). Especially this kind of tax could be interchanged with additional or less tax grain. To prevent famine in years of drought or calamities, state granaries (yicang 義倉) were established. People that were still wandering around after leaving their home because of famine were forced to return to their homelands, and people were encouraged to marry. Within a few decades, the population especially of northern China could be stablized. The political measures of Emperor Tang Taizong 唐太宗 (r. 626-649) contributed to the revitalization of the Chinese economy. Empress Wu Zetian 武則天 (r. 684/690-704) had effective agricultural work on the fields and in the mulberry gardens rewarded and ordered many waterways to be constructed for the irrigation of fields. At the begin of the 8th century, the situation concerning monasteries had already aggravated: Because monks were exempted labour service many people had escaped into monasteries. Emperor Tang Xuanzong 唐玄宗 (r. 712-755) forced clergymen into laity in order to tax them, and it was forbidden to found new Buddhist monasteries. Furthermore, the tax income of the fiefdoms was united with the state tax revenues. A fourth tax source were miscellaneous taxes (zashui 雜稅) for salt, tea etc.
During the Tang period a new kind of plough with a curved shaft (quyuan 曲轅) was invented that was able to tranmit a higher amount of animal power to the plough share, and iron harrows (tieda 鐵搭, lizhai 礪礋, chao 耖). New tools for irrigation were invented or became more widespread like a TRET wheel (lulu 轆轤).
Handicrafts and artisanry was in wide fields controlled by the state. The production of metal tools and objects, casting, shipbuilding, spinning and weaving, the fabrication of material and leather, lacquerware, the production of salt, tea, sugar, liquor, medicine, porcelain, paper and ink, as well as flour mills, stood under the direction of state officials. Nonetheless private managed crafts were well-developed and widespread, especially in southern China.
The capital and the large cities in the different regions of Tang China were important trade centers with their markets. Chang’an, the capital, had city walls with a circumference of 36 kms, an eastern and a western market with more than 3000 stalls that were arranged in commercial branches along alleys (hang 行). The markets did not only serve as distribution places for goods from the different regions within the vast Tang empire; foreign goods from Southeast Asia, Korea, Japan, the Middle and Near East could be found on the markets in Chang’an and Luoyang. Of course, seasonal markets in smaller towns and regional centers supplied the population of the different parts of Tang China. From the commercial alleys, merchant guilds and craftsmen guilds (hanghui 行會) developed. In order to distribute goods to the different markets, a sophisticated traffic organisation was necessary. While in northern China roads were the main traffic routes, in southern China waterways served to transport goods from the countryside to the cities, and along the Imperial Canal (dayunhe 大運河) and other canals (Bianqu 汴渠, Shanyang Canal 山陽瀆, Yongji Canal 永濟渠, Danba Canal 丹灞水道, Baoxie Canal 褒斜道) from the rich Yangtse delta to the north. The most important traffic roads lead from Chang’an to the east (modern Shandong), to Sichuan, to Guangzhou via Changsha, to the northeast (modern Beijing), to the west into Central Asia along the silkroad.
Very important steps to facilitate trade and taxes were the unification of weights and measures and the introduction of a standardized currency. The first Tang money were the Kaiyuan tongbao 開元通寶 and the Qianfeng yuanbao 乾封元寶 coins. In 99 mints every year 22 strings (guan 貫) of copper cash coins (qian 錢) were casted (not minted!). But although coins were very widespread in the Tang empire, silk and hemp cloth still served as currency unit.
Although in theory the equal field system was quite perfect it began to disintegrate since the 8th century. In theory it was forbidden to sell alloted state fields, but under certain conditions it was possible to personally acquire this kind of land and to convert it into personally owned, inheritable estate. Many large estate owners acquired more and more land, and the amount of state-owned territory decreased in favor to private-owned land. Large estate owners were not only aristocrats, high officials and rich merchants, but also Buddhist monasteries that possessed enough wealth to acquire estates. An additional factor that contributed to the aggravation of the fact that the amount of state-owned land per capita decreased more and more, was the population growth as consequence of the ameliorated economic situation in general. With more and more political obstacles there was also a higher need for the Tang government to rely on labour service of the free peasant population. As a consequence many peasants were eager to give up their status as free peasant and sold their land that they would hitherto till as tenant farmers that were tax-exempted. The direct impact of the decrease of free peasants was a sharp diminuation in the tax revenue.
In 780 Emperor Tang Dezong 唐德宗 (r. 779-804) decided to replace the equal field system by a double tax system (liangshuifa 兩稅法). From the second half of the Tang period on manors or large estates (zhuangtian 莊田, zhuangyuan 莊園) were a normal form of land ownership. A great part of the manors were owned by members of the imperial family, and by high officials, but also by monasteries. Manors did not only produce grain or lettuce but also every kind of fruits or animals, and mulberry trees and tea bushes could be found there, as well as oil mills, spinneries and breweries. The employees at these large estates (zhuangke 莊客, zhuanghu 莊戶, or kehu 客戶) were slaves, craftsmen, and tenant farmers.
A main source of tax revenue for the Tang state was now salt production and sales. The salt distribution and disposition was rigidly controlled by special salt agents (yanguan 鹽官) in 13 salt touring brokerages (xunyuan 巡院) all over the country. Private vending of salt and disturbing the salt distribution were prohibited. Under the guidance of Liu Yuan 劉晏 not only fiscal reforms were conducted, but state granaries (changpingcang 常平倉 "ever-normal granaries") were reestablished. But the most important fiscal reform was the introduction of the double-tax system, introduced in 780 by chancellor Yang Yan 楊炎, that was oriented towards the household (hu 戶) income of the taxpayers, classified into nine tax brackets. The tax had to be paid in money, not in goods or labour, and higher social classes were not exempted. The second part of the double-tax system was the real property size (di 地), and this land tax – collected twice a year in summer and in winter – had to be paid whether the farmer war the owner of the holding or not. Traders without stationary shop had to pay a certain amount of his capital. Miscellaneous taxes were also an important source of tax revenue, especially the taxes on salt, tea, and liquor, but also the tax on ores and metals, but also a market and traffic taxes on bridges and passes, tax on capital or non-tilled fields, and much more.
When the disturbances by the An Lushan rebellion were ended the economy was also ready to be refreshed. Once again, northern China was again the place that had suffered most during the internal war. In southern China, from the 9th century on tea production became one of the most important agricultural activities. Lu Yu 陸羽 even wrote a small encylopedia about tea called Chajing 茶經. White porcelain and blue-green porcelain with white glazing or yellow-brown glazing became more and more widespread. The most important kilns (yao 窑) were that of Neiqiu 内邱 in Xingzhou 邢州, the kilns of Shanglin 上林湖 in Yuyao 余姚, and Wazha 瓦渣坪 near Changsha 長沙. The most important salt sources of the Tang period were the two salt lakes at Xie 解縣 and Anyi 安邑. Although there was a strict partition between dwelling quarters and markets, the difference between those parts of a city more and more vanished. Night markets appeared, and because trade and marchandise contributed to the wealth not only of the population but also to the tax revenue, the official side did not punish the disrespecting of the traditional market laws. With the growing economy moneylending became an important financial activity. Pawnbroking became a normal way to obtain credits or loans, and credit usury was often seen.
The burden of taxes on the population was quite high at the end of Tang, mainly because the central government had lost its grip on the different regions of the empire and because more and more land was purchased by large estate owners.
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