The post-rebellion settlement not only pardoned several of the most powerful rebel generals but also appointed them as imperial governors in command of the areas they had surrendered. Hebei was divided into four new provinces, each under surrendered rebels, while Shandong became the province of An Lushan’s former garrison army from Pinglu in Manchuria, which had held an ambivalent position during the fighting. The central government held little power within these provinces. The leadership was decided within each province, and the central government in its appointments merely approved faits accomplis. Succession to the leadership was frequently hereditary. For all practical purposes, the northeastern provinces remained semi-independent throughout the later part of the Tang era. They had been among the most populous and productive parts of the empire, and their semi-independence was not only a threat to the stability of the central government but also represented a huge loss of revenue and potential manpower.

Provincial separatism also became a problem elsewhere. With the general breakdown of the machinery of central administration after 756, many of the functions of government were delegated to local administrations. The whole empire was now divided into provinces (dao), which formed an upper tier of routine administration. Their governors had wide powers over subordinate prefectures and counties. The new provincial governments were of two main types.

In northern China (apart from the semiautonomous provinces of the northeast, which were a special category) most provincial governments were military, their institutions closely modeled on those set up on the northern frontier under Xuanzong. The military presence was strongest in the small frontier-garrison provinces that protected the capital, Chang’an, from the Tibetans in Gansu and in the belt of small, heavily garrisoned provinces in Henan that protected China—and the canal from the Huai and Yangtze valleys, on which the central government depended for its supplies—from the semiautonomous provinces. Military governments were also the rule in Sichuan, which continued to be menaced by the Tibetans and Nanzhao, and in the far south in Lingnan.

In central and southern China, however, the provincial government developed into a new organ of the civil bureaucracy. The civil governors of the southern provinces were regularly appointed from the bureaucracy, and it became customary to appoint to these posts high-ranking court officials who were temporarily out of favor.

All the new provinces had considerable latitude of action, particularly during the reigns of Suzong and Daizong, when central power was at a low ebb. There was a general decentralization of authority. The new provinces had considerable independence in the fields of finance, local government, law and order, and military matters.

Under Daizong (reigned 762–779) the court was dominated by the emperor’s favorite, Yuan Zai, and by the eunuchs who now began to play an increasing role in Tang politics. A succession of eunuch advisers not only rivaled in influence the chief ministers but even exerted influence over the military in the campaigns of the late 750s and early 760s. Under Daizong many of the regular offices of the administration remained unfilled, while the irregularities encouraged by Yuan Zai and his clique in the appointment of officials led to an increasing use of eunuchs in secretarial posts and to their increasing dominance over the emperor’s private treasury.

The central government did achieve some success in finance. The old fiscal system with its taxes and labor services had been completely disrupted by the breakdown of authority and by the vast movements of population. The revenue increasingly came to depend on additional taxes levied on cultivated land or on property, and the government attempted to raise more revenue from the urban population. But its survival depended on the revenues it drew from central China, the Huai valley, and the lower Yangtze. Those revenues were sent to the capital by means of a reconstructed and improved canal system maintained out of the new government monopoly on salt. By 780 the salt monopoly was producing a major part of the state’s central revenues, in addition to maintaining the transportation system. The salt and transportation administration was controlled by an independent commission centered in Yangzhou, near the mouth of the Yangtze, and this commission gradually took over the entire financial administration of southern and central China.

The weak Daizong was succeeded by a tough, intelligent activist emperor, Dezong (reigned 779–805), who was determined to restore the fortunes of the dynasty. He reconstituted much of the old central administration and decided on a showdown with the forces of local autonomy. As a first step, in 780 he promulgated a new system of taxation, under which each province was assessed a quota of taxes, the collection of which was to be left to the provincial government. This was a radical measure, for it abandoned the traditional concept of head taxes levied at a uniform rate throughout the empire and also began the assessment of taxes in terms of money.

Those in the semi-independent provinces of the northeast saw this as a threat to their independence, and, when it became apparent that Dezong was determined to carry out consistently tough policies toward the northeast—reducing their armies and even denying them the right to appoint their own governors—the Hebei provinces rebelled. From 781 to 786 there was a wave of rebellions not only in the northeastern provinces but also in the Huai valley and in the area of the capital itself. These events brought the Tang even closer to disaster than had the An Lushan rising. The situation was saved because at a crucial moment the rebels fell out among themselves and because the south remained loyal. In the end, the settlement negotiated with the governors of Hebei virtually endorsed the preceding status quo, although the court made some marginal inroads by establishing two small new provinces in Hebei.

After that disaster, Dezong pursued a much more careful and passive policy toward the provinces. Governors were left in office for long periods, and hereditary succession continued. Nonetheless, the latter part of Dezong’s reign was a period of steady achievement. The new tax system was gradually enforced and proved remarkably successful; it remained the basis of the tax structure until Ming times. Revenue increased steadily, and Dezong left behind him a wealthy state. Militarily, he was also generally successful: the Tibetan threat was contained, Nanzhao was won from its alliance with the Tibetans, and the garrisons of the northwest were strengthened. At the same time, Dezong built up large new palace armies, giving the central government a powerful striking force—numbering some 100,000 soldiers by the end of his reign. Command was given to eunuchs considered loyal to the throne. The death of Dezong in 805 was followed by the brief reign of Shunzong, an invalid monarch whose court was dominated by the clique of Wang Shuwen and Wang Pei. They planned to take control of the palace armies from the eunuchs but failed.