The prosperity of the small states of South China was largely due to the growth of trade, especially the tea trade.  The habit of drinking tea seems to have been an ancient Tibetan custom, which spread to south-eastern China in the third century A.D.  Since then there had been two main centres of production, Szechwan and south-eastern China.  Until the eleventh century Szechwan had remained the leading producer, and tea had been drunk in the Tibetan fashion, mixed with flour, salt, and ginger.  It then began to be drunk without admixture.  In the T’ang epoch tea drinking spread all over China, and there sprang up a class of wholesalers who bought the tea from the peasants, accumulated stocks, and distributed them.  From 783 date the first attempts of the state to monopolize the tea trade and to make it a source of revenue; but it failed in an attempt to make the cultivation a state monopoly.  A tea commissariat was accordingly set up to buy the tea from the producers and supply it to traders in possession of a state licence.  There naturally developed then a pernicious collaboration between state officials and the wholesalers.  The latter soon eliminated the small traders, so that they themselves secured all the profit; official support was secured by bribery.  The state and the wholesalers alike were keenly interested in the prevention of tea smuggling, which was strictly prohibited.

The position was much the same with regard to salt.  We have here for the first time the association of officials with wholesalers or even with a monopoly trade.  This was of the utmost importance in all later times.  Monopoly progressed most rapidly in Szechwan, where there had always been a numerous commercial community.  In the period of political fragmentation Szechwan, as the principal tea-producing region and at the same time an important producer of salt, was much better off than any other part of China.  Salt in Szechwan was largely produced by, technically, very interesting salt wells which existed there since c. the first century B.C.  The importance of salt will be understood if we remember that a grown-up person in China uses an average of twelve pounds of salt per year.  The salt tax was the top budget item around A.D. 900.

South-eastern China was also the chief centre of porcelain production, although china clay is found also in North China.  The use of porcelain spread more and more widely.  The first translucent porcelain made its appearance, and porcelain became an important article of commerce both within the country and for export.  Already the Muslim rulers of Baghdad around 800 used imported Chinese porcelain, and by the end of the fourteenth century porcelain was known in Eastern Africa.  Exports to South-East Asia and Indonesia, and also to Japan gained more and more importance in later centuries.  Manufacture of high quality porcelain calls for considerable amounts of capital investment and working capital; small manufacturers produce too many second-rate pieces; thus we have here the first beginnings of an industry that developed industrial towns such as Ching-te, in which the majority of the population were workers and merchants, with some 10,000 families alone producing porcelain.  Yet, for many centuries to come, the state controlled the production and even the design of porcelain and appropriated most of the production for use at court or as gifts.