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Although the economy was heavily damaged as a result the suppressive policy of the Qin Dynasty 秦 that had imposed a heavy burden of taxes and labour corvée on the peasant population that had to serve in the military and for the construction of the fortification wall in the north (the Great Wall 長城). The next four years after the downfall of Qin in 207 were characterized by a civil war between several regional rulers that strove for the imperial power. Nontheless, the first few rulers of the Han Dynasty did not politically interfere into the economy but rather relied on a laissez-faire policy. The only steps they undertook was to abolish suppressive laws of the Qin Dynasty and to lower taxes imposed on peasants and merchants. Field taxes (tianzu 田租) were lowered to 1/30 of the harvest, labour corvée was reduced to once every three years and could be avoided by paying a tax (gengfu 更賦), the taxes on merchants (suanfu 算賦) were lowered to 40 qian 錢 a year, and the production of salt and iron was promoted. Although merchants were still prohibited from taking office they were rewarded if they substantially contributed to the economic output. On this base, it was possible for merchants to accumulate substantial wealth during the next decades and to acquire land estates.
Far the most part of the population were peasants, and their production output was the base for the tax revenue. During the first century of the Han Dynasty technological changes took place in agriculture: Oxen and horses became more and more important as draught animals, the most advances ploughs were pulled by two oxen and mastered by three men; we have presentations of agricultural activities in tomb mural paintings and brick reliefs. These use of such ploughs gradually spread within northern China and to the northeast and northwest, following the territorial expansion of the Han empire. There were also some ploughs combined with a sawing equipment (louche 耬車) In southern China agriculture was still quite backward, and people used simple step-on ploughs (zhilei 蹠耒), "ploughing with fire and weeding with water". During the rule of Emperor Wudi 漢武帝, Zhao Guo 趙過 invented a new cultivation method called daitianfa 代田法 "replacement-field method". The field were ploughed with alternating furrows (quan 甽) and ridges (long 壟), seedlings placed into the furrows were protected from wind and could be nourished from the earth and pulled out weeds from the ridges; by midsummer ridges and furrows were level with each other. The next year the positions of furrows and ridges were reversed ("replaced"). Apart from the free peasants, there were many tenant farmers (diannong 佃農) that often had to sell their own land to a rich person and now worked their own fields as tenant; the third group of peasants were landless persons - often refugees (liuwang 流亡) - that were employed as field workers (gunong 雇農) on the lands of an estate owner.
Although the north relied on a dry field culture and the wet paddy field culture in the south developed later, irrigation projects were crucial for agriculture and the supply of the capital region (Guannei 關內 "within the pass", Jingji 京畿). Canals (caoqu 漕渠) like the Baiqu 白渠 and Longshou Canal 龍首渠 connected the Yellow River 黃河 with the Wei 渭水 and Jing 涇水 rivers.
Silk as an agricultural product had already a long history. It was almost only produced in the north in private households as well as in state manufacturies. Spinning, weaving and dyeing had acheived a certain quality standard, from tomb excavations we know that Han people wore raw silk (juan 絹), fine silk fabric (jian縑), twilled figured silk (qi 綺), gauze (sha 紗), light fabric (luo羅) and already simplier types of brocade (jin 錦). The textile fabric of the south was linen (ma 麻). Silk was used as currency and as tribute (kuici 餽賜) to the nomad peoples of the northwestern steppe who often sold the silk farther to the west along the Silk Road. Lacquerware (qiqi 漆器) came from the region of modern Sichuan and the south and was made from coated wooden, bamboo or wedged fiber body, some decorated with golden color (kouqi 釦器).
Handicrafts and industry were mainly producing iron and bronze tools, utensils and weapons. Iron replaced more and more bronze as the main metal. Relics of an iron mill have been discovered by Guying 古滎 near Zhengzhou/Henan; the furnaces were not only charged with wirewood but also with coal, and the iron was quenched and tempered. Bronze produced in Jiangsu and Sichuan was still in use but served only as material for coins, mirrors, candleholders and incense-burners. Since the time of Emperor Wudi the production of coins, iron, salt and liquors became a state monopoly, the goods were produced in state-run factories whose workforce was largely constituted from state-owned slaves. State-owned slaves (nubi 奴婢) were indeed an important economical factor during the Han period, enslavement was the result of debt, crime or war. Private slaves were mainly indebted peasants that had to sell themselves to their creditor or to a rich landowner. Richness was not only the result from the ownership of land, but traders highly profited from the state monopoly on the transport of salt and iron. Emperor Wudi's expansionist politics required an increased tax revenue that was partially ensured by defending the state monopole over cash minting, salt and iron/steel production and alcoholic liquors. A great debate over these measures was held in 81 BC and written down in Huan Kuan's 桓寬 Yantielun 鹽鐵論 "Discussion over salt and iron" that was guided by a general view of government. The state monopoly on salt and iron was never again usefully implemented after the reign of Wudi.
Economy of Eastern Han:
The prohibition of people selling themselves as slaves and the land reform of Wang Mang - both measures being continued under Emperor Guangwudi - proved to be ineffective in practice and were soon given up. An important undertaking to reconstruct economy was to repair the canals in the lower Yellow River area that had been destroyed by serious floodings in the years before. In the 60s CE Wang Jing 王景 and Wang Wu 王吳 organized the huge project to repair the Bianqu canal 汴渠, a work to which also many local magistrates contributed with sending peasants as workforce for these official works. Especially these waterworks (also used for water mills) were crucial for the significant rise in agricultural output during the Eastern Han period. Other factors contributing to economical growth were the amelioration of iron tools like plough shares and the curved plough shafts. Ploughs driven by two oxen and with sharper shares could plough much deeper than before. Sericulture spread from the north southwards, but southern silk was for a long time of lower quality. Iron tools were mainly privately cast because the modernist policy of state monopolies could not be reintroduced during Later Han. The quality of Later Han iron was much better than before, water driven bellows allowed better smelting results. Private iron casting and processing resulted also in the private production of weapons. Bronze was mainly used for items of daily use like mirrors. Lacquerware from southern China was an important commodity, while woolen fabrics, horses, "barbarian" slaves from the south and perfumes were traded within Han China and across the borders. Salt was mainly produced in salt wells in modern Sichuan. The 5-zhu-coin 五銖錢 was still the standard coin currency. With an increasing economical output, especially growing in southern China where more and more people immigrated from the north, traffic became more intensive. The Han government had to built official roads from the political center to the economically important region of Shu 蜀 (modern Sichuan), crossing the Qiling Mountains 秦嶺山脈. This Baoxie road 褒斜道 was flanked by post stations every few miles.