Assessing the role of trade in shaping the Great Divergence between Imperial China and Western Europe

This paper examines the role of international trade in shaping the economic development of Imperial China and Western Europe, focusing on the 50 years following the Opium War, a pivotal moment in the Great Divergence. Utilizing newly discovered primary data from Chinese Customs records, this study explores how trade dynamics—including volume, volatility, and product categories—interacted with political, institutional, and colonial factors. While trade significantly boosted industrialization in Western Europe, China’s weak institutions and colonial exploitation made it particularly vulnerable to trade fluctuations. Unlike other peripheral economies that experienced deindustrialization, China faced economic instability without industrial decline due to deteriorating trade terms. Trade, acting as an influence amplifier, magnified China’s institutional weaknesses, further deepening the divergence between China and the West. This paper contributes fresh insights into the broader impact of trade on the Great Divergence and offers practical lessons for underdeveloped regions today.