tion of their country so soon
as it proved to be tolerable. And the Sung empire could only endure and
gain strength if it had control of the regions along the Yangtze and
around Canton, with their great economic resources. The process of
absorbing the small states in the south continued until 980. Before it
was ended, the Sung tried to extend their influence in the south beyond
the Chinese border, and secured a sort of protectorate over parts of
Annam (973). This sphere of influence was politically insignificant and
not directly of any economic importance; but it fulfilled for the Sung
the same functions which colonial territories fulfilled for Europeans,
serving as a field of operation for the commercial class, who imported
raw materials from it--mainly, it is true, luxury articles such as
special sorts of wood, perfumes, ivory, and so on--and exported Chinese
manufactures. As the power of the empire grew, this zone of influence
extended as far as Indonesia: the process had begun in the T'ang period.
The trade with the south had not the deleterious effects of the trade
with Central Asia. There was no sale of refined metals, and none of
fabrics, as the natives produced their own textiles which sufficed for
their needs. And the export of porcelain brought no economic injury to
China, but the reverse.

This Sung policy was entirely in the interest of the gentry and of the
trading community which was now closely connected with them. Undoubtedly
it strengthened China. The policy of nonintervention in the north was
endurable even when peace with the Kitan had to be bought by the payment
of an annual tribute. From 1004 onwards, 100,000 ounces of silver and
200,000 bales of silk were paid annually to the Kitan, amounting in
value to about 270,000 strings of cash, each of 1,000 coins. The state
budget amounted to some 20,000,000 strings of cash. In 1038 the payments
amounted to 500,000 strings, but the budget was by then much larger. One
is liable to get a false impression when reading of these big payments
if one does not take into account what percentage they formed of the
total revenues of the state. The tribute to the Kitan amounted to less
than 2 per cent of the revenue, while the expenditure on the army
accounted for 25 per cent of the budget. It cost much less to pay
tribute than to maintain large armies and go to war. Financial
considerations played a great part during the Sung epoch. The taxation
revenue of the empire