In 1279, Kublai Khan defeated the Southern Song Dynasty of the Han Chinese, and for the first time, all of China was under foreign rule.

Kublai Khan was the first non-Han emperor to rule over the united territory of China.

The entire population of China was divided into four categories based on the perceived loyalty to the Yuan regime.

1.     Mongols (蒙古人) — the ruling royalty.

2.     Semuren (色目人) — people of coloured eyes; they are primarily of West Asian descent and took up many important government positions.

3.     Northern Chinese (北人) — those who were previously under the reign of the Great Jin Dynasty, including Han Chinese, Jurchens and Khitans.

4.     Southern Chinese (南人) — those who were previously under the reign of the Southern Song Dynasty; they were considered the least trustworthy in the eyes of the Mongols.

The class system affected an individual's employment eligibility, taxation status and treatment under the law. For example, a Mongol found guilty of murder would only have to pay a fine, but a Southern Chinese found guilty of even minor theft was not only fined but also tattooed as a criminal.

Class segregation was strongly enforced. For example, the Chinese were forbidden from wearing Mongol clothing, learning the Mongol language, or taking Mongol names. Intermarriage was also discouraged.

Some scholars believe, rather than just racially motivated policies, the class system allowed the ruler to control their subjects better, quickly and easily identify them, and ensure no uprisings. For example, the Chinese were also not allowed to carry weapons or congregate in public.

During the Song and Great Jin Dynasties, even though paper money was in circulation, it existed as an addition to the bronze and copper coins, which had remained the most popular means of legal tender.

The Yuan government was the first to make paper money the only legal currency throughout its empire. Some speculate that one of the reasons for the adaptation of paper currency might have been that much of the available copper and bronze were used to create religious statues. Thus, there was not enough metal to go into coin production.

Foreign Merchants who wished to trade with China had to sell their metal to the government to exchange for Chinese paper money.

This standardised currency further fuelled commerce and economic growth.

The Yuan distrusted the Chinese, especially the Southern Chinese, who resisted the Mongol invasion the longest. The Yuan abolished the Imperial Examinations, believing the system would favour the Chinese literati infused with Confucian ideology. As a group, these scholars were largely ignored by the Mongols. Even when they did receive appointments, they were often insignificant roles such as low-level clerks or school teachers.

The Mongols entrusted the management of the country to foreigners, particularly those of Middle Eastern descent. They were often in charge of taxation or finance. The Muslim administrator often took up local wives and brought up their children as Muslims.

This prompted much resentment among the Chinese.

To lessen the tension, in 1313, the Yuan reinstituted the Imperial Examinations, but the status of the Chinese in society remained low.

The stability offered by the Mongol Empire linked up the once isolated civilisations, and the Silk Road was the dominant method of transport. The Mongols constructed infrastructure along the Silk Road, provided loans to the caravan travellers and offered protection to the merchants. As a result, Chinese silk, porcelain, and gun powder went in one direction, while western silver, spices and linen went in the other.

The Maritime Silk Road linked the coastal cities in southern China with the world connected to the Indian Ocean, the Arabian Sea, the Red Sea, the Persian Gulf, and even the water off the coast of East Africa.

Merchants, having been discriminated against under the Song Dynasty for not being producers, have been granted a new social status accompanied by favourable tax measures, low-cost loans, and the end of sumptuary regulations.

In addition to the tangible goods, science, philosophy, and even people moved freely across the Eurasian landmass. The Mongols encouraged the immigration of Jewish, Christian, and Muslim people into their land. Marco Polo was but one of the many foreigners who worked in the Imperial Court of Kublai Khan.

Travel was secure, trade active, and the economy boomed.

Kublai Khan was a big believer in the rule of law and therefore created the law of Yuan, which was based on the legacies of the Jin law, traditional Chinese law, and traditional Mongol practices, especially pertaining to penal law.

Mongolian law and the institutions that created, monitored, and enforced them are captured thoroughly in the History of Yuan. Moreover, many additional rules, ordinances, and individual-based cases are captured in the Code of Yuan, which sheds much light on the legal system and the social environment in general.

When the Mongolian empire faced economic turmoil, Kublai Khan became far less tolerant of the merchant classes, which, in large part, was made up of Muslims and Jews. As a result, in the late 1270s, he began to issue anti-Muslim and anti-Jewish legislation, such as forbidding circumcision and ritual slaughtering.