This chapter describes significant economic developments before 1800 and explains why they occurred. According to Chinese historians, embryonic capitalism appeared several centuries later in China than in Europe, but they were weak, and had atrophied by the 1800s. The chapter elucidates how state and private economic organizations, operating under new institutions or rules, reduced the economy's transformation and transaction costs. Recognizing that excessively taxing China's depressed and fragmented economy, the Ch'ing government tried to coordinate tax collection under central government control and disburse funds to lower administrations without imposing higher taxes. The Ch'ing government was committed to building an ideal Confucian society based on the rural way of life, in which peace, social harmony, and minimal prosperity would reign. The Chinese people responded to the Ch'ing reforms and the incentives and positive externalities that followed by organizing their households, lineages, and communities in ways that promoted growth.