The Causes of Indian Ocean Commerce

cash (2)

AP Theme

Economic Systems

Learning Objective 2.3E

Explain the causes of the growth of networks of exchange after 1200.

Historical Development 1

 Increased Indian Ocean commerce was encouraged by multiple economic causes, such as new commercial practices. 

Historical Development 2

Technologies also led to the expansion of Indian Ocean commerce. 

Historical Development 3

Political changes like the expansion of trading states also grew Indian Ocean trade. 


Indian Ocean Trade Continued From Previous Periods in History

Indian Ocean trade is maritime trade that takes place across the Indian Ocean and the western Pacific Ocean.  Indian Ocean trade has a history spanning thousands of years and continues today.

  • By the 13th century, Indian Ocean trade had been taking place for over 1500 years. 
  • Before Europeans forced the Americas into the global trade network in the 15th century, commerce across the Indian Ocean was the closest to a truly global trading system that human civilization had created.
  • In the 9th century, Islamic merchants expanded Indian Ocean trade. 
  • As trade prospered, new trading states and cities emerged across the Indian Ocean and gained immense wealth from trade activities.  
  • Important Indian Ocean trade spanned from Africa’s east coast to the Chinese and Japanese shores in the Pacific Ocean.

Economic Causes of Continued Growth in Indian Ocean Trade

Various economic circumstances resulted in increased trade across the Indian Ocean exchange network in the middle ages. 

  • Ocean travel allowed for the bulk movement of goods, which resulted in lower prices and increased demand. 
  • China’s economic revival under the Tang and Song dynasties led to China supplying and consuming more goods. 
  • Trade across the Indian Ocean was self-regulating, meaning no single state had control over the movement of goods across the maritime shipping routes. Merchants moved freely with their products, paying required taxes when necessary. Goods sold were not the result of government choices but the supply and demand of the marketplace.


Historical trend: Improved commercial practices were also responsible for helping to stimulate trade along with land-based trade routes such as the Silk Roads.

New or Improved Commercial Practices

New commercial practices helped expand both overland and Indian Ocean maritime trade. While these practices seem simpler than current commercial methods, they were revolutionary at the time.

Banking houses and credit

While banking was not new during this period, access to banking services became more formalized and available to increased numbers of merchants. 

  • In China, flying money developed, allowing merchants to make deposits in one location and withdraw them in a different location. 
  • Both India and the Islamic world in the Middle East also further developed their banking and credit systems. 
  • In the 13th century, Europe developed its credit and banking systems from knowledge gained through interactions with Muslim merchants. Credit was first available to European merchants to finance the trading of goods. By the 15th century, banks developed to hold large currency deposits made by merchants and elites. These banks originated first in the merchant kingdoms of Italy before spreading to the rest of Europe. 

Paper money and promissory notes

Paper money originated in China during the Tang, Song, and later Mongol Yuan dynasties. 

  • Paper money started as promissory notes that one could cash in at a counter to receive the amount of money promised on the bill. 
  • Eventually, merchants just began exchanging these papers as a form of currency.
  • To save money on coinage, Chinese governments began issuing promissory notes as currency. 
  • Early European explorers such as Marco Polo brought back knowledge of paper money to Europe–although it was not until the 19th century that paper money became common in Europe. Though, in medieval Europe, promissory notes began to be used by traders. 

Historical trend: Commercial wealth is important in building state power. The Song dynasty, the Mongol Empire, the Abbasid Caliphate, and Mali and Songhai in Africa were all wealthy due to trade connections.

Technological Causes of Continued Growth in Indian Ocean Commerce

As maritime technology improved, trade across the Indian Ocean became safer, quicker, and more efficient.

The magnetic compass originated in China. While its discovery date is unknown, it first showed in historical records in the 11th century. By the 12th century, European merchants had acquired the technology from Islamic merchants.

Astrolabes helped mariners determine their location on the earth’s surface using the position of the sun and the stars. First invented between 220 and 150 BCE, Muslim scholars improved the device’s accuracy in the middle-ages.

Between the 10th and 15th centuries, ship technology throughout Afro-Eurasia improved to allow for larger, faster, and more stable ships. In China during the Song dynasty, the junk was developed and had sails that could be raised and lowered in sections and had adjustable angles for changing wind directions. Javanese sailors from Southeast Asia traveled in djongs, which were large enough to carry bulk cargos. Djongs were designed to survive on rough and heavy seas and took shipments as far away as Ghana on the Northwest African coast. In the 15th century, the Portuguese invented the carack to explore the Atlantic Ocean and Africa’s west coast. The ships were large and had lateen sails that adjusted to allow the vessel to sail against the wind.

Historical trend: Global commercial centers along land based trade routes are also centers of cultural diffusion. Major centers along the Silk Roads were Baghdad in the Abbasid Empire and Samarkand and Kashgar in Central Asia.

Political Causes of Continued Growth in Indian Ocean Commerce

There were a variety of political causes of increasing levels of Indian Ocean trade. Two major causes included: 

  1. The rise and expansion of Islam in the 7th century led to vast Islamic empires such as the Abbasid supporting commerce: Muhammad had been a trader before founding Islam, so trade always had a favored position within Islam. 
  2. Looking to enrich themselves from the tax revenue that came with trade, new states and cities arose that encouraged increased trade. 

Trading States Supported Indian Ocean Commerce

Large states that derived their wealth from trade arose along the Indian Ocean trade network.

Major Trading Cities

Cities served as hubs of exchange and relay stations for exchanging goods.