Early Reign
As emperor, Liu Yao showed flashes of brilliance, both at governance and military matters, at times, as well as willingness to listen to contrary opinions. However, he was also often impulsive and quick to anger, and toward the end of his reign appeared to develop alcoholism, which impaired his judgment.
His first sign of impulsiveness might have contributed to the formal division of Han Zhao into two. In 319, when Shi Le sent messengers to offer tribute to Liu Yao, Liu Yao was initially very happy, as Shi was effectively the master of the eastern half of the empire and his submission therefore showed that his throne was secure. He created Shi the Prince of Zhao and granted him a number of imperial privileges. However, when one junior member of Shi's delegation, who wished to stay in Chang'an, thereafter submitted a report that Shi was in fact plotting an attack, Liu became angry and slaughtered Shi's delegation. When Shi received the news, he became angry and was resolved to declare himself independent of Han Zhao.
Later in 319, Liu Yao created Princess Yang—the former Jin empress—empress, making her the only person in Chinese history to serve as empress for two emperors and two empires. He created her son Liu Xi crown prince. He also changed the name of the state from Han to Zhao. (Liu Yuan had declared the empire's name Han to create a linkage with Han Dynasty -- to which he claimed he was a descendant, through a princess, but Liu Yao felt that it was time to end the linkage with Han and explicitly restore the linkage to the great Xiongnu chanyu Maodun, and therefore decided to change the name of the state. However, this was not a break from Liu Yuan, as he continued to honor Liu Yuan and Liu Cong posthumously.)
In winter 319, Shi declared himself the Prince of Zhao, thus establishing Later Zhao and officially breaking from Han Zhao.
Liu Yao's impulsiveness led to a major Di and Qiang rebellion in 320. After a conspiracy involving two Di chiefs, Ju Xu (句徐) and Ku Peng (庫彭) was discovered, Liu Yao executed not only Ju and Ku but also 50 other Di chiefs, throwing their bodies into the Wei River. When his official You Ziyuan (游子遠) tried to persuaded him against these actions, he threw You into jail. Aggravated, Di and Qiang tribes declared independence in a state named Qin (秦). Subsequently, he released You and commissioned You with a force to suppression the rebellion, and You was able to persuade most of the rebels to surrender and defeat the rest.
In 322, while on a campaign against the Di chief of Chouchi, Yang Nandi, Liu Yao was stricken by a communicable disease, and while he was still able to force Yang to submit, his general Chen An (陳安), a former subordinate of Sima Bao, mistakenly thought that Liu Yao had already died, and therefore declared independence as the Prince of Liang, controlling most of Qin Province (秦州, modern eastern Gansu). In 323, Liu Yao, having recovered, personally attacked Chen's headquarters at Shanggui (上邽, in modern Tianshui, Gansu). Chen fled but was eventually captured and killed. Qin Province was once again Han Zhao domain.
After his victory over Chen, Liu Yao continued west and attacked the Jin vassal Former Liang, crushing all bases that Former Liang had east of the Yellow River. He declared that he would next cross the Yellow River and head for the Former Liang capital Guzang (姑臧, in modern Wuwei, Gansu), but instead was intending to intimidate the Former Liang leader Zhang Mao (then carrying the Jin-created title Duke of Xiping) into submission. Zhang was indeed intimidated and submitted to Han Zhao suzerainty. Liu Yao created him the Prince of Liang.
Later that year, Liu Yao's son Liu Yin, who had been a slave with the Heiniyuju tribe, because Chen had been defeated, revealed his identity to the chief, who was surprised and respectfully delivered Liu Yin back to Liu Yao. (It is not clear where Heiniyuju was or why Liu Yin waited until Chen's defeat to reveal his identity to the chief; it could have been that Heiniyuju was initially a Chen ally, and while Chen was, prior to his rebellion, nominally a Han Zhao general, Liu Yin might have been concerned about being detained by Chen as a bargaining chip.) Liu Yao considered making Liu Yin his crown prince instead (since Liu Yin had previously been his heir), but, not having the heart to depose Liu Xi, the son of Empress Yang (who died earlier that year), and particularly because Liu Yin personally declined and did not wish to replace his brother, Liu Yao left Liu Xi as crown prince and created Liu Yin the Prince of Yong'an with special honors.
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