One of the first acts of the new Sung emperor, in 963, was a fundamental reorganization of the administration of the country.  The old system of a civil administration and a military administration independent of it was brought to an end and the whole administration of the country placed in the hands of civil officials.  The gentry welcomed this measure and gave it full support, because it enabled the influence of the gentry to grow and removed the fear of competition from the military, some of whom did not belong by birth to the gentry.  The generals by whose aid the empire had been created were put on pension, or transferred to civil employment, as quickly as possible.  The army was demobilized, and this measure was bound up with the settlement of peasants in the regions which war had depopulated, or on new land.  Soon after this the revenue noticeably increased.  Above all, the army was placed directly under the central administration, and the system of military governors was thus brought to an end.  The soldiers became mercenaries of the state, whereas in the past there had been conscription.  In 975 the army had numbered only 378,000, and its cost had not been insupportable.  Although the numbers increased greatly, reaching 912,000 in 1017 and 1,259,000 in 1045, this implied no increase in military strength; for men who had once been soldiers remained with the army even when they were too old for service.  Moreover, the soldiers grew more and more exacting; when detachments were transferred to another region, for instance, the soldiers would not carry their baggage; an army of porters had to be assembled.  The soldiers also refused to go to regions remote from their homes until they were given extra pay.  Such allowances gradually became customary, and so the military expenditure grew by leaps and bounds without any corresponding increase in the striking power of the army.

The government was unable to meet the whole cost of the army out of taxation revenue.  The attempt was made to cover the expenditure by coining fresh money.  In connection with the increase in commercial capital described above, and the consequent beginning of an industry, China’s metal production had greatly increased.  In 1050 thirteen times as much silver, eight times as much copper, and fourteen times as much iron was produced as in 800.  Thus the circulation of the copper currency was increased.  The cost of minting, however, amounted in China to about 75 per cent and often over 100 per cent of the value of the money coined.  In addition to this, the metal was produced in the south, while the capital was in the north.  The coin had therefore to be carried a long distance to reach the capital and to be sent on to the soldiers in the north.