History of China and Japan

HISTORY

Subject : History
(For under graduate student)

Paper No. : Paper - VIII

History of China & Japan  

Unit No. & Title : Unit- 1

History of China

Topic No. & Title : Topic - 1

China & Imperialism during 19th
Century

Lecture No. & Title : Lecture - 4

Canton Trade System in China

Script

For a long time, China followed a policy of isolationism

towards the Western powers. This was conditioned partly by
the age-old concept of the “Central kingdom” and partly by
the realization that feudal China had nothing to gain, but
much to lose by coming into contact with the Western
powers. However, it became difficult for China to stick to
such a policy for long in the face of the onslaughts by
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2

aggressive foreign merchants. The Canton trade system

was a system that the Chinese imperial government
introduced in the face of the onrush of Western merchants
towards China. Canton was opened as the only port city
where foreign merchants were allowed entry for conducting
trade. It was around this port-city that the Canton trade
developed and along with it the ‘tribute system’, which was
the manifestation of the application of the “Central
Kingdom” concept. It ushered in a process that culminated
in a process leading to the Opium War of 1840-42 and the
opening of and subjugation of China to foreign powers.

The beginning of China’s direct and regular contact with the

western countries started at the beginning of the 16th
century when merchant-adventurers from different
countries of Europe flocked to China in search of business
and profit. The process started in 1514 with Portugal
establishing contact with China. Portugal at that time was
the greatest sea-going nation. Her merchants were, lured
by the silk products of China; and the spices of the
Indonesian group of islands, which they took to Europe to
meet the growing demand. Their commercial empire
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embraced India, and Malacca and extended to Macao near

Canton. The Portuguese supremacy was curbed by the rise
of the Dutch and British merchants in the 17th century.
Henceforth, the Dutch, the British, the Spanish and the
French merchants started setting up their business enclaves
in different areas of East Asia.

China quickly fell prey to foreign capitalist aggression and

control. There were three distinct stages of western
capitalist penetration into China. The first stage commenced
from the mid-18th century and continued till the Opium War
of 1840-42. This was the stage of merchant capitalism. The
second stage started from the treaty of Nanking of 1842 to
the end of the 19th century. This stage was known as the
stage of industrial capitalism or free trade. The third stage
commenced from the late 19th century when foreign
capitalist countries such as Britain, USA, France, Germany,
Italy, Belgium and Japan had started investing their
industrial and banking capital and the Japanese captured
large parts of northeastern China in the 1930s.
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Canton Trade
From the mid-18th century China’s commercial relations
with the Western merchants were established around the
port-city of Canton, which at that time was the only port
officially opened to Western merchants. Canton Trade drew
its name from the city of Canton. The hong merchants
under the direct control of the imperial authorities formed
their trading firms known as the cohong. The quantity of
the commodities to be made available in the market, the
price to be fixed for their sale etc. was decided by the
cohong. Recently, however, Yen-Ping Hao in his book ‘The
Commercial Revolution in 19th Century China’ has argued
that the cohong was far from being a monopoly concern like
the East India Company and that it did not exercise any all-
round control over products.
The hong merchants were entrusted with the duty of
looking after the business activities of the foreign traders
and thereby amassed huge wealth. There was much
demand for Chinese silk and tea in the Western world; the
American and British merchants bought those goods in
large quantities. Areas inside the city were designated for
foreign merchants to carry on their business activities. In
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the later years, the hong merchants were replaced by the

compradors and a group of Chinese merchants emerged
who started serving as brokers or compradors instead of
retaining their own independent existence. Yen-Ping Hao
has described these compradors as “the bridge between
East and West”.
The relations between the capitalist West and China were
based on the Tribute System. It was influenced to a large
extent by the Chinese outlook towards the world and
history. According to this concept China resembled the
“Central Kingdom” or Chung-kuo, which meant China stood
at the centre of the Earth while all other countries stood at
the periphery. In the eyes of the Chinese, people in all
other countries—“men from afar”—were “barbarians” and
uncivilized.

The “tribute system” was the application of Confucian

principles to foreign affairs. By this the Chinese rulers got
the moral authority to establish their political control over
others. As the Chinese emperor had gained the “Mandate of
Heaven” to rule over mankind, it was his duty to be kind
and benevolent to all “men from afar”. As he stood at the
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top of the “Central Kingdom”, it was expected of the

foreigners that they would offer their loyalty to the
emperor. This involved a reciprocal relationship. Loyalty to
the emperor was to be expressed in a ritual form, in the
handing over of tribute to the emperor, accompanied by the
customary practice of kowtow (bowing low thrice before the
Emperor). This tribute system thus became one of the rites
of the Chinese court, which betokened the admission of a
barbarian to the Chinese civilization. The trading states of
East Asia presented tribute to the Chinese court in order to
maintain their trade and friendly relations and were duly
enrolled as tributaries. Certain ports and markets were
designated for them. When the first Europeans reached
Canton, they were similarly enrolled and became part of
China’s tributary system.
Since the Canton authorities governed aliens under the
notion that trade was a privilege and not a right of
foreigners, the latter were obliged to submit to certain
restrictions. No foreign warships might sail inside the
Bogue. No foreign women or arms were to be brought into
the factories designated for the stay of foreign merchants,
nor could Chinese maids be employed. Foreigners may not
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communicate with Chinese officials except through the

proper channel of the cohong, and they must not remain in
Canton once the trading season was over. These regulations
governing foreign behaviour no doubt caused discomfort
among foreign merchants who only agreed to them due to
the prospect of monetary gains.
Canton Trade during its peak period 1760-1840 was carried
on under a working compromise between the Chinese
system of tributary trade and European mercantilism.
However, Western expansion and free trade in particular,
disrupted the Canton System. At the beginning of the 19th
century, the foreign capitalists forced their way into the
Chinese market, despite the restrictions imposed on them
by the Canton system. Purchase of Chinese goods by
foreign powers stimulated the production of porcelain,
cotton, silk and brocade as also tea. Many trade routes-both
overland and water-borne, all converging on Canton, were
organized to bring the goods from other areas. Until about
1820, Western purchases were made in Spanish silver
dollars (the carolus). It has been estimated that by 1810, a
total of 350 million dollars had entered China.
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Expansion of British trade outside Canton was not allowed

and the Chinese followed a closed-door policy. According to
Fairbank, the policy of partially closing the country arose
mainly from the anxiety to protect the political and social
regime from foreign influence. The dominant scholar-
officials—feudal in character--distrusted foreign merchants,
because they distrusted all merchants. In the same way,
the officials distrusted Christianity because they distrusted
all unorthodox cults. They believed that China had nothing
to gain and much to lose by opening the doors to Western
traders and missionaries. It is notable that the closed-door
policy was the expression of a defensive reaction rather
than a systematic hostility towards everything foreign. This
is confirmed by the fact that the policy did not apply to
Russia with which China developed relationships based on
equality from the 17th century.
However, in spite of Chinese opposition, the Western
countries put increasing pressure on China during 1820-35.
When the Napoleonic wars were over, the aggressive
expansion of the Western economies once again drove
Western traders abroad, especially in the direction of East
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Asia. But their doctrine of “free trade” was incompatible

with the Chinese conception of “controlling the barbarians”.
Under the growing pressure for trade, the purchases made
by British and American firms in Canton were multiplying.
The Westerners were anxious first to balance this trade with
China, and then to dominate over it. They were not ready to
go on paying for goods with silver. But the Chinese showed
almost no interest in Western products as their own output
was so varied. So it was practically impossible to dump
British goods on the Chinese market. It was this greed for
profits and a favourable balance of trade that drove the
British and American merchants to smuggle opium into
China on an extensive scale and to utilize the services of
Chinese smugglers to take the narcotic to as many areas as
possible.
The image of Chinese addicts who thronged the gambling
houses and addiction centres, were being projected not only
in books but also in children’s comics. This was however a
deliberate attempt by the Western capitalist world to justify
their so-called ‘civilizing mission’. The reality was that the
main responsibility for the widespread addiction to opium
among the Chinese lay with the British and American
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capitalists. Opium was not unknown in China, but it was

forbidden except for medicinal use. British and American
merchants started exporting it to China, - from India by the
British merchants and from Turkey and Persia by the
American merchants. Initially, the Manchu government
permitted the imported opium to be used as a medical
ingredient. In 1773, the British-Indian government adopted
the policy of large-scale opium exports to China and
granted the right to monopolize the opium trade in India to
the East India Company. The smuggling of opium to China
fetched enormous profits for the British merchants.
According to one estimate, the cost of one chest of top-
grade opium in India in 1813 was Rs.237, but its price after
auction rose 10 times totaling Rs.2, 428 (The Opium War by
Compilation Group, Peking 1976). Before the importation of
opium into China on a large scale, the company had to
spend huge sums of money every year in silver dollars to
pay for Chinese tea and silk. But now the proceeds of
exports to China alone financed the purchase of large
quantities of Chinese tea and silk. The British-Indian state
also benefited immensely as opium became a major item in
its revenue.
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For the opium dealers, the trade was immensely lucrative.

William Jardine, the biggest of the British opium smugglers,
disclosed in a private letter that “in the good years…gross
profits were sometimes as high as $1000 a chest” (See
Michael Greenberg, British Trade and the Opening of China
1800-42, 1951,p.105, footnote 2.) Some of these nefarious
dealers could manage to become members of the English
Parliament while some were knighted for their
achievements. James Matheson, another dealer, amassed
huge fortunes so much so, that he bought an island off the
west coast of Scotland, and spent 3,29,000 pounds on its
reclamation alone, and Queen Victoria knighted him. These
two smugglers worked hand in glove and formed the
Jardine Matheson & Co., which exercised complete
monopoly over exports from India to China. The Indian
compradors from the Parsi, Marwari, Gujarati and other
business communities played a leading role as underlings to
the British in this opium traffic.
At the beginning of the 19th century Britain’s exports of
opium to China rose sharply. To curb opium traffic, the
Manchu/Ching government imposed restrictions on it in
1796, 1800, and 1813 and then in 1815, but to no avail.
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When the Ching authorities took strict prohibition measures,

the traders countered them by removing the opium ships to
the open sea near Lintin Island at the mouth of the Pearl
River. Henceforth, unbridled smuggling went on an ever-
increasing scale. The scale at which opium was smuggled
could be gauged from the figures from 1820 to 1835. The
number of crates smuggled during 1820-25 stood at around
9,700 per year; during 1830-35, it reached around 35,500
per year.

Impact of Opium smuggling

Opium had been known in China since the Chinese Middle
Ages, but only as medicine. Now the drug became a vice.
The first to take it were the young men from rich families;
but in the towns it spread rapidly among all men under 40:
small shopkeepers, peddlers, officials, the entire army and
others. Essentially, it affected the services sector. The
situation became so grave that around 1835, 90% of the
entire army developed opium addiction. There were
between 4 and 12 million smokers in China at that time.
Because of opium, business slowed down, the standard of
living fell and public services no longer worked smoothly.
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Lin Tse-hsu, an official who later played a leading role in the

opium crisis, calculated in 1839 that Chinese opium
smokers were spending 100 million taels each year, while
the government’s annual revenue was approximately 40
million taels.
The development of smuggling and the consumption of
opium led to a shortage of silver that had an erosive effect
on the monetary system. The sale of Chinese goods to the
Westerners no longer balanced Chinese purchases of opium.
The difference was made up by the export of Chinese silver.
In 1837, opium represented 57% of the Chinese imports.
Thus there was an outflow of silver from China to the West.
In fact, between 1828 and 1836, China exported 38 million
Spanish dollars in silver (carolus).
As a result of the outflow of silver from China the price of
the metal inside the country rose sharply. The outflow of
silver contributed to disturbances in the exchange rate
between silver and copper that was crippling to the Chinese
economy. The rate of exchange between silver and copper,
which was 1 tael: 1000 copper coins before 1835 became 1
tael: 2000 copper coins in 1835. The burden of this
economic crisis fell primarily upon the peasants. The great
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majority of the population usually used copper coins to pay

for goods. Prices for agricultural products were also paid in
copper and the peasants were paid for their work in copper
as before. But now they had to pay taxes not in copper, but
in silver. Thus for the peasants, taxes were doubled simply
by the alteration in the rate of exchange. This added to the
strains on the feudal society of China, which were already
so great that a new cycle of peasant revolts had begun in
the mid-18th century. From 1810, risings against the
Manchu dynasty became more frequent and widespread.
Ports like Canton became centres of insubordination and
corruption. Smuggling was carried out by means of a vast
network of Chinese clients. Many Chinese comprador
merchants were eager to grow rich through trade with
foreigners and in the process defied imperial authority.
China now stood face to face to face with an internal crisis
of a grave nature and it was combined with an external
crisis of a new sort, without precedent in the history of
China.