To make peace with the Western powers in China, Prince Gong was made regent, grand councilor, and head of the newly formed Zongli Yamen (Office of Foreign Affairs). He would be assisted by a new generation of leaders (see below). By contrast, Cixi was virulently anti-foreign, but she had to accommodate Prince Gong because he was an influential political figure in the Qing court. She would, however, become the most formidable opponent of reform as her political influence increased.
The majority of the ruling elite subscribed to a more conservative view; namely, in order to strengthen China against the West, China had merely to learn from the West its techniques of manufacturing ships and guns, and the scientific knowledge behind that military technology. This could be achieved by establishing shipyards and arsenals, and by hiring foreign advisers to train Chinese artisans to manufacture such wares in China. It was believed that since the intelligence and wisdom of the Chinese are superior to those of barbarians, China would thus first learn from foreigners, then equal them, and finally surpass them.
The movement can be divided into three phases. The first lasted from 1861 to 1872, emphasized the adoption of Western firearms, machines, scientific knowledge and training of technical and diplomatic personnel through the establishment of a diplomatic office and a college.
As a result of treaties with the Western powers, two ports — Tianjin and Shanghai — were opened to Western trade. Two officials — titled Commissioner of Trade for the southern and northern ports, respectively — were appointed to administer foreign trade matters at the newly opened ports.
Although the ostensible reason for the establishment of these two government offices was to administer the new treaty ports, the underlying reasons for their establishment were more complicated: these superintendents were supposed to confine to the ports all diplomatic dealings with foreigners, rather than burdening Peking with them. The authority of the commissioners also came to include the overseeing of all new undertakings utilizing Western knowledge and personnel; thus, they became the coordinators of most self-strengthening programmes.
Li Hongzhang was the Tianjin Superintendent from 1870 and was so successful in taking over the functions of the Zongli Yamen that communication between the imperial court and the foreign diplomats at Peking were kept under the auspices of the Self-Strengthening reformers.
A British national, Horatio Nelson Lay, was appointed as the Inspector general of the Imperial Maritime Customs Service, which was established in April 1861. This office evolved from the Inspectorate of Customs, which had been created in 1854 as a response to the threat of attacks on Shanghai by Taiping rebels. The office was designed to collect tariffs equitably and generate new revenues for the Manchu court from the import dues on foreign goods. Lay's main duty was to exercise surveillance over all aspects of maritime revenue and to supervise the Chinese inspector superintendents who collected revenue at the various treaty ports. Rather than being an innovation, this move merely institutionalized a system which had been in existence since 1854.
The maritime customs service ensured the Chinese government a reliable and growing source of new revenue. Customs revenues increased from 8.5 million taels in 1865 to 14.5 million taels in 1885. Customs revenue paid off the 1860 indemnities. It also furnished part or all of the revenues of such new undertakings as the Peking Tongwenguan, the Jiangnan and Tianjin Arsenals, the Fuzhou Navy Yard, and the educational mission to the United States. The customs service also played an important role in checking smuggling. It also charted the Chinese coast and installed lighthouses, beacons, and other modern aids to navigation. The customs service thus set the best example of joint Sino-Western administration in the handling of China's problems of foreign contact and modernization.
As a result of a conflict with the Chinese government regarding the use of British naval units to suppress the Taiping rebellion, Lay was replaced by Robert Hart in 1863. Hart tried to do more than ensure that the customs service provided a steady flow of revenue to the Manchu court. He tried to initiate some reforms that would contribute towards Self-Strengthening: he tried to persuade the Manchu government of the need to establish a modern mint; he also advocated a national post office; he even tried to help China organize a modern naval fleet. However, he was unable to win acceptance for any of his ideas because the Manchu court was not willing to allow foreigners to play an active role in the self-strengthening movement.
The most important goal of the Self-Strengthening Movement was the development of military industries; namely, the construction of military arsenals and of shipbuilding dockyards to strengthen Chinese navy. The programme was handicapped by several problems:
This programme was spearheaded by regional leaders like Zeng Guo Fan who established the Shanghai arsenal, Li Hong Zhang who built the Nanking and Tientsin Arsenal, Zuo Zong Tang who constructed the Fuzhou Dockyard. Zeng and Li collaborated to construct the Kiangnan Arsenal. Schools for the study of mechanical skills and navigation under the direction of foreign advisers were established at these arsenals and dockyards. These powerful regional strongmen were able to act rather independently of the central government. Thus, there was little coordination between the provinces and the government.
These military industries were largely sponsored by the government. As such, they suffered from the usual bureaucratic inefficiency and nepotism. Many of the Chinese administrative personnel were sinecure holders who got on the payroll through influence.
The programme proved expensive: Li Hong Zhang had wanted the Kiangnan Arsenal to produce breech loading rifles of the Remington type. Production finally started in 1871 and produced only 4,200 rifles by 1873, and these rifles were not only more costly than, but also far inferior to, the imported Remingtons. Shipbuilding efforts were also disappointing: the programme consumed half of the arsenal's annual income but the ships built were at least twice as costly as comparable vessels available for purchase in Britain. The lack of material and human resources proved to be a formidable problem. The programme was heavily reliant on foreign expertise and materials. The unavoidable growth in the number of foreign employees had made increased costs inevitable. Furthermore, officials were not even aware when the foreigners were not competent to perform the tasks that they had been hired to do. Laxity in procurement practices also contributed to escalating costs. Many opportunities for corruption existed in construction contracts and in the distribution of workers' wages.
Another area of reform targeted the modernization of military organization and structure. The most urgent reform was to reduce the Green Standard forces to a fraction of its size and to modernize the remainder. This was done in two provinces under the influence of Li Hong Zhang, but the effort failed to spread.
In 1870 a number of foreigners were killed during riots in the city of Tianjin. This incident soured China's relatively stable relations with Western nations and marked the end of the first period of the Self-Strengthening Movement. By the second period, Li Hongzhang had emerged as the most important leader of the reform movement. He played a pivotal role in starting and supporting many of the initiatives during this period. Over 90 per cent of the modernization projects were launched under his aegis.
During this phase, commerce, industry, and agriculture received increasing attention. Attention was also given to the creation of wealth in order to strengthen the country. This was a new idea for the Chinese, who had always been uncomfortable with activities which create wealth from anything other than land. The development of profit-oriented industries such as shipping, railways, mining, and telegraphy were therefore rather new ventures for the Chinese government.
The Chinese government sanctioned what was known as "government-supervised merchant undertakings". These were profit-oriented enterprises which were operated by merchants but which were controlled and directed by government officials. Capital for these enterprises came from private sources but the government managed them and also provided subsidies in some cases.
Examples of such government supervised merchant undertakings include the China Merchants' Steam Navigation Company, Kaiping Coal Mines, the Shanghai Cotton Mill, and the Imperial Telegraph Administration.
However, being government supervised, these enterprises could not escape from the ugly sides of government administration: they suffered from nepotism, corruption, and lack of initiative. Managers also found ways to siphon off profits in order to avoid the payment of official levies and exactions. And they monopolized business in their respective areas, and by thus discouraging private competition, they impeded economic development. Despite its economic inefficiencies, the merchant-bureaucrat combination remained the principal device for initiating industrial enterprises.
By this period, the enthusiasm for reform had slowed down to a crawl. The conservative faction at court had managed to overwhelm Prince Gong and his supporters.
While the emphasis on military industries continued, the idea of enriching the country through light industry gained the court's favour; thus industries like textiles and cotton-weaving developed rapidly.
New types of enterprises sprouted in this period: joint government and merchant enterprises, even incipient "private enterprises". Whereas the Chinese government had traditionally discriminated against private merchants, all the initial encouragement of private enterprises seemed to mark a change in the government's attitude. However, the government was only interested in getting capital from private enterprises; the government was still not ready to let them take an active role in economic development. Thus, the private enterprises failed to flourish, and control of such enterprises remained firmly in government's hands.
Examples of such enterprises included Kweichow Ironworks established in 1891 and the Hupeh Textile Company established in 1894. Like all other newly-sprouted enterprises of its kind, they were very weak and represented only a small fraction of the total investment in industry.
Although the unequal treaties with foreign powers did impede China's ability to strengthen its economy with the tariff restrictions, China could still have succeeded in overcoming this handicap by modernizing its economy through the vigorous pursuit of industrialization.
China's total investment in state-patronized industries was by no means inconsiderable, and the scope of developments undertaken was very wide. If the state-sponsored enterprises had been as successful as their founders had hoped and if private enterprise had been allowed to develop, China might have laid the foundations for self-reliant industrialization. However, efforts at industrialization succeeded only in areas where there was effective leadership, such as that provided by Li Hong Zhang, Zeng Guo Fan, and Zuo Zong Tang. Furthermore, all kinds of obstacles from the conservative majority of the official class impeded progress.
Conservative attitudes regarding the creation of wealth and the social position of merchants hindered the industrialization effort. The new mindset required for modern industrialization was simply not present. The traditional emphasis on agriculture was retained. Private enterprises were discouraged because most industrialization efforts remained in government hands. There was no willingness to accept long-term risks. There was also a stubborn refusal to accept foreign capital and investments. The refusal to allow foreigners to open factories in areas outside the treaty ports impeded the effective transmission of modern technology and practices to the Chinese. Most fundamentally, the officials were not concerned with the promotion of commercially viable development.
Reform of its antiquated revenue collection and distribution system was also essential. Peking's fiscal system was still based on the age-old system of tax farming: provincial officials were expected to send the central government certain quotas of local tax revenue while the same officials maintained themselves and the local administration on whatever tax monies were not submitted. Thus, the mobilization and use of fiscal resources was beyond the control of the central government and left by default to provincial officials.
Two sources of conflict characterized Court politics during the period of the Self-Strengthening Movement. The first was the struggle for influence between the conservative and progressive/pragmatic factions in court. The other was the conflict between the central government's interests and new regional interests. These tensions determined the character and ultimately the successes and failures of the movement.
The conservative faction was led by Empress Dowager Cixi, who became the most powerful political figure in the Manchu court after she succeeded first in controlling the young emperor Tongzhi and then in making Guangxu, her nephew, emperor in 1875. Cixi was adept at manipulating court politics and rivalry to her advantage. She had to accept the reforms of Prince Gong and his supporters initially because of Prince Gong's role in helping her seize power and because of her relative inexperience in political affairs. However, as her own political acumen developed over the years, her support of either faction would depend on the political circumstances. Increasingly, she began to undermine the influence of Prince Gong's faction by supporting conservatives' (Prince Chun, Wo Jen, Li Hung Tsao, Chou Tsu Pei) opposition and criticism of reforms. Prince Gong was also temporarily removed from his office several times to undercut his influence. Wenxiang's death in 1876 further weakened the position of Prince Gong. Cixi's final success was evident from her removal of Prince Gong from power in 1884.
Cixi was also acutely aware of the tensions that had arisen as a result of the growing influence of regional Chinese leaders: from 1861-1890, almost half of the governors general were Chinese who had risen through military command. Regionalism became even stronger because modernization projects were spearheaded by these regional officials. Modernization projects like arsenals and industries increased the influence of regional officials like Li, Zeng, and Zuo. Manchu rule was thus dependent on the loyalty of regional officials. Cixi thus had to cooperate with these regional leaders initially but her strong influence over these regional leaders continued to determine the success or failure of modernization efforts.
The Manchu court was fortunate in that despite their own growing power, regional leaders like Li remained loyal to the central government. Li Hongzhang provides the best example of the delicate balance between regional power and dynastic loyalty. He was governor-general of Chili and commissioner for the northern ports, and he controlled the Anhwei Army, which was supplied by arsenals that he had established at Tianjin, Nanjing and Shanghai; thus he had substantial provincial revenues at his disposal. Nevertheless, he remained loyal to the throne and to Cixi. The regional leaders were also increasingly restricted by the opposition from the conservative faction in court as that faction grew more influential. In time, even Li Hongzhang had to resort to allying with Prince Chun in order to win the favor of Cixi.