Relying on privileges extorted from China after the two Opium Wars, foreign capitalists continued to make inroads into China's economy, turning China into a dumping-ground for their goods and a base for their industrial raw materials.
Apart from dumping industrial goods and seizing China's raw materials, foreign capitalists continued to open banks and factories in China.
In total disregard of China’s sovereignty, foreign aggressors began to set up factories in many Chinese cities soon after the Opium Wars, and factories with foreign investment grew steadily in number from the 1860s on. By 1894, there were more than a hundred foreign-owned factories on Chinese territory, with a total investment amounting to twenty-eight million Chinese yuan. Foreign export of capital and the establishment of banks and factories in China were further indications of the semi-colonial nature of the Chinese economy.
The "Westernization group" studied western technology in order to build up their military and civilian industries and a modern navy and army. Represented by Yixin (Prince Gong), Zeng Guofan, Li Hongzhang, Zuo Zongtang, Zhang Zhidong and others, the "Westernization group" can be distinguished from members of landlord class who had little contact with foreign capitalism and were blindly anti-foreign. The "Westernization group" devoted the greatest effort to establishing war industries. More and more weapon and ammunition factories were set up in the 1870s in many cities. Not capitalist but government-owned enterprises, they depended completely on foreign personnel from establishment to management and were under their sole control.
To provide the necessary raw materials, fuels and means of transport for the war industries, and envying the large and profitable sales of foreign goods in China, the “Westernization group” began to open up factories, mines and transport and communication facilities of a capitalist nature in the 1870s.
In the 1870s, the "Westernization group" planned to build up two navies, the Beiyang and the Nanyang fleets.