ABSTRACT
This chapter describes the international environment and analyses its effects on China’s political and economic institutions, and evaluates the effects of foreign intervention on the domestic resources needed for industrialization. China’s defeat also destroyed much of the political legitimacy of the Ch’ing dynasty; Japan had proven that the Ch’ing government was ill-equipped to defend China against imperialist intervention. Foreign intervention inflicted equally serious, though subtle, indirect damage to China’s dynastic system. Between 1897 and 1902, China was nearly colonized. Although the Open Door policy of the United States and Britain prevented full colonization, increased foreign intervention financially bankrupted the Chinese government and eroded its political legitimacy. The indemnity payments drained China’s scarce capital and slowly suffocated the political system. Indemnity and foreign loan payments, combined with foreign control of many possible revenue sources such as tariffs, drained the government’s coffers and caused it to cut expenses and increase domestic taxes.
