In foreign policy the first period of the Later Han dynasty was one of extraordinary success, both in the extreme south and in the question of the Hsiung-nu. During the period of Wang Mang's rule and the fighting connected with it, there had been extensive migration to the south and south-west. Considerable regions of Chinese settlement had come into existence in Yuennan and even in Annam and Tongking, and a series of campaigns under General Ma Yuean (14 B.C.-A.D. 49) now added these regions to the territory of the empire. These wars were carried on with relatively small forces, as previously in the Canton region, the natives being unable to offer serious resistance owing to their inferiority in equipment and civilization. The hot climate, however, to which the Chinese soldiers were unused, was hard for them to endure.

The Hsiung-nu, in spite of internal difficulties, had regained considerable influence in Turkestan during the reign of Wang Mang. But the king of the city state of Yarkand had increased his power by shrewdly playing off Chinese and Hsiung-nu against each other, so that before long he was able to attack the Hsiung-nu. The small states in Turkestan, however, regarded the overlordship of the distant China as preferable to that of Yarkand or the Hsiung-nu both of whom, being nearer, were able to bring their power more effectively into play. Accordingly many of the small states appealed for Chinese aid. Kuang-wu Ti met this appeal with a blank refusal, implying that order had only just been restored in China and that he now simply had not the resources for a campaign in Turkestan. Thus, the king of Yarkand was able to extend his power over the remainder of the small states of Turkestan, since the Hsiung-nu had been obliged to withdraw. Kuang-wu Ti had had several frontier wars with the Hsiung-nu without any decisive result. But in the years around A.D. 45 the Hsiung-nu had suffered several severe droughts and also great plagues of locusts, so that they had lost a large part of their cattle. They were no longer able to assert themselves in Turkestan and at the same time to fight the Chinese in the south and the Hsien-pi and the Wu-huan in the east. These two peoples, apparently largely of Mongol origin, had been subject in the past to Hsiung-nu overlordship. They had spread steadily in the territories bordering Manchuria and Mongolia, beyond the eastern frontier of the Hsiung-nu empire. Living there in relative peace and at the same time in possession of very fertile pasturage, these two peoples had grown in strength. And since the great political collapse of 58 B.C. the Hsiung-nu had not only lost their best pasturage in the north of the provinces of Shensi and Shansi, but had largely grown used to living in co-operation with the Chinese. They had become much more accustomed to trade with China, exchanging animals for textiles and grain, than to warfare, so that in the end they were defeated by the Hsien-pi and Wu-huan, who had held to the older form of purely war-like nomad life. Weakened by famine and by the wars against Wu-huan and Hsien-pi, the Hsiung-nu split into two, one section withdrawing to the north.

The southern Hsiung-nu were compelled to submit to the Chinese in order to gain security from their other enemies. Thus the Chinese were able to gain a great success without moving a finger: the Hsiung-nu, who for centuries had shown themselves again and again to be the most dangerous enemies of China, were reduced to political insignificance. About a hundred years earlier the Hsiung-nu empire had suffered defeat; now half of what remained of it became part of the Chinese state. Its place was taken by the Hsien-pi and Wu-huan, but at first they were of much less importance.

In spite of the partition, the northern Hsiung-nu attempted in the years between A.D. 60 and 70 to regain a sphere of influence in Turkestan; this seemed the easier for them since the king of Yarkand had been captured and murdered, and Turkestan was more or less in a state of confusion. The Chinese did their utmost to play off the northern against the southern Hsiung-nu and to maintain a political balance of power in the west and north. So long as there were a number of small states in Turkestan, of which at least some were friendly to China, Chinese trade caravans suffered relatively little disturbance on their journeys. Independent states in Turkestan had proved more profitable for trade than when a large army of occupation had to be maintained there. When, however, there appeared to be the danger of a new union of the two parts of the Hsiung-nu as a restoration of a large empire also comprising all Turkestan, the Chinese trading monopoly was endangered. Any great power would secure the best goods for itself, and there would be no good business remaining for China.

For these reasons a great Chinese campaign was undertaken against Turkestan in A.D. 73 under Tou Ku. Mainly owing to the ability of the Chinese deputy commander Pan Ch'ao, the whole of Turkestan was quickly conquered. Meanwhile the emperor Ming Ti (A.D. 58-75) had died, and under the new emperor Chang Ti (76-88) the "isolationist" party gained the upper hand against the clique of Tou Ku and Pan Ch'ao: the danger of the restoration of a Hsiung-nu empire, the isolationists contended, no longer existed; Turkestan should be left to itself; the small states would favour trade with China of their own accord. Meanwhile, a considerable part of Turkestan had fallen away from China, for Chang Ti sent neither money nor troops to hold the conquered territories. Pan Ch'ao nevertheless remained in Turkestan (at Kashgar and Khotan) where he held on amid countless difficulties. Although he reported (A.D. 78) that the troops could feed themselves in Turkestan and needed neither supplies nor money from home, no reinforcements of any importance were sent; only a few hundred or perhaps a thousand men, mostly released criminals, reached him. Not until A.D. 89 did the Pan Ch'ao clique return to power when the mother of the young emperor Ho Ti (89-105) took over the government during his minority: she was a member of the family of Tou Ku. She was interested in bringing to a successful conclusion the enterprise which had been started by members of her family and its followers. In addition, it can be shown that a number of other members of the "war party" had direct interests in the west, mainly in form of landed estates. Accordingly, a campaign was started in 89 under her brother against the northern Hsiung-nu, and it decided the fate of Turkestan in China's favour. Turkestan remained firmly in Chinese possession until the death of Pan Ch'ao in 102. Shortly afterwards heavy fighting broke out again: the Tanguts advanced from the south in an attempt to cut off Chinese access to Turkestan. The Chinese drove back the Tanguts and maintained their hold on Turkestan, though no longer absolutely.