First Grand Canal. During the Tang dynasty (618— 907) both Chang'an and Luoyang served as capitals of the central government. By that time the problem of supplying the interior was to some extent different from that in the Han era (206 B.C.E.-220 C.E.). With the growth in the Yangzi (Yangtze) River valley, many canals were built to transport grain from the south to the north. Combined into a single system during the Sui empire (589-618), these canals served to link the northern and southern parts of the empire by a route leading from Hangzhou to Kaifeng. Known as the Grand Canal, this system of waterways was supplemented by ancillary routes that carried goods to the Northwest.

Increased Revenues. After the unification of the country under the Tang dynasty, movement along internal water routes increased. The opening of...