OPIUM AND THE CANTON SYSTEM 59 58 THE FIRST BRITISH TREATY SETTLEMENT in the drug traffic.The abolition of the East India Company's monopoly of of the Canton trade,it eventually became conservative and inclined more British trade in 1834 was merely the coup de grace that killed the old order and more,as the nineteenth century began,to let well enough alone and and precipitated the Anglo-Chinese struggle over the new. tone down its efforts at future reform lest they impede present profits. Decline of the Company.The Company monopoly of all British trade The new day of the industrial revolution was heralded by the famous in the Far East had been accompanied by the grant of wide powers such as Macartney embassy which was dispatched by the Crown,paid for by the were necessary for trade in the seventeenth century across perilous seas Company,and motivated partly by the desire to find an outlet for new and in distant lands.Although the Company used these powers in India British manufactures(vide the serious overproduction in the cotton indus- to grow into a government,at Canton it never lost its mercantile character. try in 1788).+Macartney was properly announced via Canton and arrived It was an organization run for profit,but not mainly for dividends.2 On by sea at Taku (Tientsin)in the summer of 1793 on H.M.S.Lion with the books it was usually tending toward bankruptcy while at the same time presents for the emperor worth fifteen thousand pounds sterling.These were profiting its servants through patronage,opportunities of private trade,and labelled in Chinese "Tribute from the Kingdom of England,"and Macart- similar devices.Thus the governor-general in Bengal received a salary of ney was politely urged to get himself in trim for the appropriate tributary $I25,ooo a year,and the president of the Select Committee at Canton ceremonies.He refused to kotow,however,and felt sure that the Chinese sometimes earned $roo,ooo a year in commissions,while the dividends in saw "that superiority which Englishmen,wherever they go,cannot con- England remained fixed at 8 to ro per cent.The Honorable Company ceal."5 The Ch'ien-lung Emperor,on his part,in his famous letter to had,so to speak,the body of a government with the brain of a merchant. George III,used the traditional phraseology of the tribute system,"I have In China it represented the British nation and yet it was recognized to be a already taken note of your respectful spirit of submission...I do not trading concern,its policy being dictated by commercial considerations. forget the lonely remoteness of your island,cut off from the world by in- Until the latter part of the eighteenth century,the British Company in tervening wastes of sea."The British learned a good deal about China, the Far East had met vigorous competition from other European nations. but their requests concerning trade were not granted. First the Portuguese and Dutch,and later the companies of the Austrian It is significant,however,that Macartney asked for trade at northern Netherlands ("Ostenders"),Sweden,Denmark,France,Prussia and other ports (Chusan,Ningpo,and Tientsin),for island depots near Chusan and continental powers profited by smuggling Canton teas into the English Canton,and for a printed tariff.These requests of 1793,which can be traced market.This competition reached its height in 1783-84 when twenty-one back even further in the writings of Company officials at Canton,formed continental ships at Canton exported nineteen million pounds of tea,s most a substantial part of what the British finally gained in 1842.Thus the of which would find its best market inside the British Isles.In 1784 the needs of British trade were apparent for at least a generation before action British government met the combined menace of smuggling and competi- was taken to obtain them.The delay must be attributed in part to the fact tion in the tea trade by passing the Commutation Act.It cut the tea duties that the East India Company was more and more on the defensive.It lost in England from I19 per cent to I2 per cent and made smuggling un- its monopoly of British trade in India after 1813.Seeing the handwriting profitable.Within a few years the French Revolution further impeded on the wall,the directors in England pursued a carpe diem policy.The competition from the continent and left England dominant in the China Amherst embassy of 1816 was not strongly supported and got no results, trade,where American participation had barely got under way after 1784. and it remained for economic and military forces to succeed where diplo- By this time the Canton system had become firmly established,partly, macy had failed in breaking down the barriers to trade. in fact,with British help;for the Company had given up its early efforts The most powerful economic factor at Canton was the need for cargoes to trade at Amoy or Chusan Island,preferring to do business in the well to sell to China.Something more than British woolens was required in the established and dependable market of Canton where native capital was tropical climate of Canton to balance the mounting exports of tea and silk. sufficient for large dealings.No doubt this outcome was in part engineered The Company's tea shipments out of Canton rose from 2,626,oo0 lbs.(worth by the jealous merchants of Canton,a point which has not yet been studied. 831,ooo)in 176I to 23,300,oo0 lbs.(worth f3,665,oo0)in 1800.Here At any rate,by the end of the eighteenth century,the Company found itself the so-called"country"trade (the trade between India and China)entered the dominant monopolist on the foreign side,dealing with a powerful the scene as the necessary link in a triangular commerce between India, Chinese merchant guild.The two could afford to be friends;and while the China,and England.s This country trade was conducted by private indi- Company chafed and fretted at the restrictions,bad debts,and stoppages viduals who were licensed by the East India Company in India and re-
58 THE FIRST BRITISH TREATY SETTLEMENT in the drug traffic. The abolition of th E . British trade in 1834 was merel th e a~ India Company's monopoly of and precipitated the Anglo-Ch.Y e ctoup Ie grace that killed the old order D r j mese s rugg e over the new ec zne 0 the Company The Com . in the Far East had been ac~omp . d tanYh monopoly of all British trade were necessary for trade in the ~~Ie t y t t e grant of wide powers such as and in distant lands. Although th v~n een h century across perilous seas to grow into a government, at Can:on ~tm:any luse~ these powers in India It was an organization run for rofi ever ost I.tS mercantile character. the books it was usually tending Pt t'dbbut knot mamly for dividends.2 On fi . . owar an ruptcy while t th . pro tmg Its servants throu h atr . . a e same time similar devices Th th g P onage, opportumtIes of private trade and . us e governor-general in Ben I . d ' $12 5,000 a year, and the president of the S I t~= rece~ve a salary of sometimes earned $100000 a year. . ~ ec ommlttee at Canton England remained fixed at 8 t ~~ commIssIOns, while the dividends in had, so to speak the body of aO 10/2 per cent. The Honorable Company I Ch··' government with the bra·n f h n ma It represented the British f d . loa merc ant. trading concern, its policy being di~~~~~ ~n yet It w~s recog?ized to be a Until the latter part of the eight th y commercial consIderations. the Far East had met . een .. century, the British Company in F. . VIgorous competition from other E Irst the Portuguese and Dutch and I . uropean nations. Netherlands ("Ostenders") SW'd Dater the compames of the Austrian . ' e en, enmark France P . d contmental powers profited by smu lin ' , .rusSIa an other: market. This competition reached itsg't . ghtC~nton teas mto the English continental ships at Canton exported ni~~~ m ~7.83-84 when twenty-one of which would find its best market insid:e~h mIlh?~ pounds of tea,S most British government met the comb· d e BntIsh Isles. In 1784 the t . . me menace of smuggli d IOn m the tea trade by passing the Com. ng an competi- in England from II9 per cent to 12I mutatIOn Act. It cut the tea duties profitable. Within a few years the ~ perh cent and .made smuggling uncompetition from the continent and le~;~n ~:~OlutIO? furt?er impeded trade, where American participation h d b gl dommant m the China By this time the Canton system ha~ are y got under way after 1784. in fact, with British help. for th C become firmly established, partly , e ompany had .. ' to trade at Amoy or Chusan Island . gIVen up Its early efforts established and dependable market' Pfrecfernng to do business in the well ffi . 0 anton where n f . I su Clent for large dealings. No doubt this out .a Ive capIta was by the jealous merchants of Canton a po· t h:O:~ was m part engineered At any rate, by the end of the eight~enth m 7 IC as not yet been studied. the dominant monopolist on the fo . cen .~ry, the Company found itself Chinese merchant guild. The two COU~~I!~O~I e, deali?g with a powerful Company chafed and fretted at the restr. f d to bbedfnends; and while the IC IOns, a debts, and stoppages OPIUM AND THE CANTON SYSTEM ., 59 of the Canton trade, it eventually became conservative and inclined more and more, as the nineteenth century began, to let well enough alone and tone down its efforts at future reform lest they impede present profits. The new day of the industrial revolution was heralded by the famous Macartney embassy which was dispatched by the Crown, paid for by the Company, and motivated partly by the desire to find an outlet for new British manufactures (vide the serious overproduction in the cotton industry in 1788 ).4 Macartney was properly announced via Canton and arrived by sea at Taku (Tientsin) in the summer of 1793 on H.M.S. Lion with presents for the emperor worth fifteen thousand pounds sterling. These were labelled in Chinese "Tribute from the Kingdom of England," and Macartney was politely urged to get himself in trim for the appropriate tributary ceremonies. He refused to kotow, however, and felt sure that the Chinese saw "that superiority which Englishmen, wherever they go, cannot conceal." 5 The Ch'ien-lung Emperor, on his part, in his famous letter to George III, used the traditional phraseology of the tribute system, "I have already taken note of your respectful spirit of submission . . . I do not forget the lonely remoteness of your island, cut off from the world by intervening wastes of sea." 6 The British learned a good deal about China, but their requests concerning trade were not granted. It is significant, however, that Macartney asked for tnide at northern ports (Chusanj Ningpo, and Tientsin), for island depots near Chusan and Canton, and for a printed tariff. These requests of 1793, which can be traced back even further in the writings of Company officials at Canton,7 formed a substantial part of what the British finally gained in 1842. Thus the needs of British trade were apparent for at least a generation before action was taken to obtain them. The delay must be attributed in part to the fact that the East India Company was more and more on the defensive. It lost its monopoly of British trade in India after 1813. Seeing the handwriting on the wall, the directors in England pursued a carpe diem policy. The Amherst embassy of 1816 was not strongly supported and got no results, and it remained for economic and military forces to succeed where diplomacy had failed in breaking down the barriers to trade. The most powerful economic factor at Canton was the need for cargoes to sell to China. Something more than British woolens was required in the tropical climate of Canton to balance the mounting exports of tea and silk. The Company's tea shipments out of Canton rose from 2,626,000 Ibs. (worth £83 1,000) in 1761 to 23,300,000 Ibs. (worth £3,665,000) in 1800. Here the so-called "country" trade (the trade between India and China) entered the scene as the necessary link in a triangular commerce between India, China, and England.8 This country trade was conducted by private indi~ viduals who were licensed by the East India Company in India and re-
60 THE FIRST BRITISH TREATY SETTLEMENT OPIUM AND THE CANTON SYSTEM 61 mained under its control in the Far East.It represented the final entrance of a foreign government,Beale was beyond Company jurisdiction and of the British flag into the native carrying trade of Southeast Asia,the could not be expelled from China.By ISor the firm had become Reid, ancient coastal traffic which brought to China cotton piece-goods,opium, Beale and Company,David Reid having arrived under the protection of a and elephants'teeth from India,and birds'nests,camphor,rattans,tin, commission as captain of Danish infantry.The succession,including the and spices from the coasts and islands of Malaysia.The country trade in- indispensable Prussian consulship,by 1819 had passed to Charles Magniac creasingly and directly competed with the Chinese junk trade to the Straits and Company. and served a very useful purpose by importing products for which there Dr.William Jardine (1784-1843)was taken into this partnership by was an established demand in China.Until 1823 raw cotton from India 1825.He had been a Company ship surgeon at the age of eighteen but after was the largest staple import.The funds realized by this trade in its sales fifteen years had left the service to enter the China trade on his own as an at Canton were paid into the Company treasury there in return for bills of agent for firms in India.James Matheson (1796-1878),likewise a Scots- exchange on London.Between 1775 and 1795 the Company was already man,had received an education at the University of Edinburgh and then deriving more than a third of its funds from this source. entered the counting house of Mackintosh and Company at Calcutta.By Origins of the private trade.The private traders first appeared at Can- r82o he had established himself at Canton as Danish consul and was soon ton in the late 176o's.By the eighties bills of exchange were regularly in trade with Manila and Singapore.About 1827 he joined forces with being issued to partnerships such as Hunter,Vansittart and Law of London, Jardine,who was now in charge of Magniac and Company.1a and Fairlie,Ferguson and Company of Calcutta.More than two score of It should be emphasized that the early British merchants (including these firms were active in Canton at various times before 18oo.Samuel "representatives"of Sardinia,Sweden,Sicily,and Hanover,as well as of Smith and Sons,Capt.William Mackintosh,Capt.James Farquaharson, Prussia and Denmark)survived and prospered in the China trade not only David Scott and Company,Lance and Fitzhugh of London,Dady Nasser- because they circumvented the Company monopoly by obtaining the com- wanjee of Bombay-Scotsmen and Parsees (Indians of Persian extrac- missions of foreign governments,but also because they performed a very tion)were already a significant element.10 necessary commercial function.As Michael Greenberg's illuminating study This growth of private trade is epitomized in that of Jardine,Matheson of the Jardine,Matheson archives makes clear,they were the Canton cor- and Company,a firm which has played a dominant role in the China trade respondents and agents of private firms in London and India who were ever since the dissolution of the East India Company monopoly and which rapidly building Britain's great nineteenth century nexus of trade, has held much of the British stake in Chinese coastal shipping,docks,rail- credit,shipping,insurance,and investment activity all over the world. roads,mines,and cotton mills.While this firm was but one of many Western These“agency houses”not only traded themselves but also“acted as commercial enterprises in China,its preeminence among them and the happy banker,billbroker,shipowner,freighter,insurance agent [and]purveyor" fact that its voluminous records have been preserved,make it of major all at once.The surplus production of Britain's new machine industry could interest to the historian. be sent overseas on consignment to such agency houses,to be sold by them Jardine's did not take its present name until 1832.Before that date the on a commission basis.This required a modicum of capital but a maximum style of the firm varied,as was the custom,with each change of partners. of enterprise.Partners in an agency house might invest their personal funds But its lineage can be traced back to 178211 when a certain John Henry in a "speculation"or purchase of goods,but the firm made its money chiefly Cox was in Canton with the Company's permission to engage for three years from commissions,earned at rates varying from perhaps one-half per cent in the selling of clocks and automata.These devices,such as "snuff boxes to five per cent on a great diversity of operations-sale or purchase of concealing a jewelled bird which sang when the lid was opened,"12 were goods for others,remittance of returns in goods,bills,or treasure,guaran- known as "sing-songs"and had a great sale as curios for the imperial teeing of bills or bonds,insuring cargoes,chartering vessels,handling court (a collection of them may still be seen at the Palace Museum in freight,recovering debts,and in short all manner of commercial transac- Peking).Cox soon expanded his activities,entering the country trade,acting tions which could be performed for correspondents at a distance.Thus the as Canton agent for British Indian firms,and experimenting with the im- agency houses became involved in various forms of banking,set up insur- portation of furs from the northwest coast of America.In 1787 he entered ance companies,and acquired fleets of vessels long before the first treaties into partnership with Daniel Beale,formerly purser of a Company ship, made it possible for them to develop their warehouses and establishments on who had obtained consular papers from the King of Prussia.As the agent Chinese soil in the new ports
60 THE FIRST BRITISH TREATY SETTLEMENT mained under its control in the Far East. It represented the final entrance of the British flag into the native carrying trade of Southeast Asia, the ancient coastal traffic which brought to China cotton piece-goods, opium; and elephants' teeth from India, and birds' nests, camphor, rattans, tin, and spices from the coasts and islands of Malaysia. The country trade increasingly and directly competed with the Chinese junk trade to the Straits and served a very useful purpose by importing products for which there was an established demand in China. Until 1823 raw cotton from India was the largest staple import. The funds realized by this trade in its sales at Canton were paid into the Company treasury there in return for bills of exchange on London. Between 1775 and 1795 the Company was already deriving more than a third of its funds from this source.9 Origins of the private trade. The private traders first appeared at Canton in the late 1760's. By the eighties bills of exchange were regularly being issued to partnerships such as Hunter, Vansittart and Law of London, and Fairlie, Ferguson and Company of Calcutta. More than two score of these firms were active in Canton at various times before 1800. Samuel Smith and Sons, Capt. William Mackintosh, Capt. James Farquaharson, David Scott and Company, Lance and Fitzhugh of London, Dady Nasserwanjee of Bombay - Scotsmen and Parsees (Indians of Persian extraction) were already a significant element.10 This growth of private trade is epitomized in that of Jardine, Matheson and Company, a firm which has played a dominant role in the China trade ever since the dissolution of the East India Company monopoly and which has held much of the British stake in Chinese coastal shipping, docks, railroads, mines, and cotton mills. While this firm was but one of many Western commercial enterprises in China, its preeminence among them and the happy fact that its voluminous records have been preserved, make it of major interest to the historian. Jardine's did not take its present name until 1832. Before that date the style of the firm varied, as was the custom, with each change of partners. But its lineage can be traced back to 1782 11 when a certain John Henry Cox was in Canton with the Company's permission to engage for three years in the selling of clocks and automata. These devices, such as "snuff boxes concealing a jewelled bird which sang when the lid was opened," 12 were known as "sing-songs" and had a great sale as curios for the imperial court (a collection of them may still be seen at the Palace Museum in Peking). Cox soon expanded his activities, entering the country trade, acting as Canton agent for British Indian firms, and experimenting with the importation of furs from the northwest coast of America. In 1787 he entered into partnership with Daniel Beale, formerly purser of a Company ship, who had obtained consular papers from the King of Prussia. As the agent OPIUM AND THE CANTON SYSTEM 61 of a foreign government, Beale was beyond Company jurisdiction a~d could not be expelled from China. By 1801 the firm had become ReId, Beale and Company, David Reid having arrived under the protection of a commission as captain of Danish infantry. The succession, including ~he indispensable Prussian consulship, by 1819 had passed to Charles Magmac and Company. Dr. William Jardine (1784-1843) was taken into this partnership by 1825. He had been a Company ship surgeon at the age of eighteen but after fifteen years had left the service to enter the China trade on his own as an agent for firms in India. Jan:es Matheson .(17~6-1878),.ukewise a Scotsman, had received an educatIOn at the Umversity of Edmburgh and then entered the counting house of Mackintosh and Company at Calcutta. By 1820 he had, established himself at Canton as Danish consul and was soon in trade with Manila and Singapore. About 1827 he joined forces with Jardine, who was now in charge of Magniac an? .Company.lS . . It should be emphasized that the early BntIsh merchants (mcludmg "representatives" of Sardinia, Sweden, Sicily, and Hanover, as well as of prussia and Denmark) survived and prospered in the China trade not only because they circumvented the Company monopoly by obtaining the commissions of foreign governments, but also because they performed a very , necessary commercial function. As Michael Greenberg's illuminating study of the Jardirie, Matheson archives makes clear, they were the Canton correspondents and agents of private firms in London and India who were rapidly building Britain's great nineteenth century nexus of trade, credit, shipping, insurance, and investment activity all over the world. These "agency houses" not only traded themselves but also "acted as banker, billbroker, shipowner, freighter, insurance agent [and] purveyor" all at once. The surplus production of Britain's new machine industry could be sent overseas on consignment to such agency houses, to be sold by them on a commission basis. This required a modicum of capital but a maximum of enterprise. Partners in an agency house might invest their personal funds in a ~'speculation" or purchase of goods, but the firm made its money chiefly from commissions, earned at rates varying from perhaps one-half per cent to five per cent on a great diversity of operations - sale or purchase of goods for others, remittance of returns in goods, bills, or treasure, guaranteeing of bills or bonds, insuring cargoes, chartering vessels, handling freight, recovering debts, and in short all manner of commercial transactions which could be performed for correspondents at a distance. Thus the agency houses became involved in various forms of banking, set up ins~rance companies, and acquired fleets of vessels long before the ~rst treatIes made it possible for them to develop their warehouses and establIshments on Chinese soil in the new ports
62 THE FIRST BRITISH TREATY SETTLEMENT OPIUM AND THE CANTON SYSTEM 63 A curious tendency toward duopolistic competition runs through the rates.To avoid dependence on the British Company's rate for bills of ex- history of these early firms in China-as though the circumstances of change on London,the British private traders bought bills of exchange commercial enterprise called for rivalry between two organizations but no from American merchants.With these they could remit funds from Canton more.Dent and Company had its origin in W.S.Davidson,another Scots- to London more advantageously than could be done from Bombay.These man,who came to Canton as a naturalized Portuguese subject in I8I, operations helped funnel the profits of India through Canton to England. thereby assisting his business by his legal immunity to Company control. Imagination,assiduity,and an eagle eye for profit and loss characterized Greenberg points out that the Jardine and Dent firms,while they dealt the successful Canton agent.James Matheson studied the Chinese taste with all comers,developed especially close ties with their principal cor- and found that blue bandanas,for instance,"with weaving white lines sell respondents in Calcutta,Bombay and London,who were often mutual for considerably more than if marked with round white spots."1 His rivals already.Among the many firms (with constantly changing names) ships avoided British restrictions when necessary by sailing under Danish in Calcutta "the two leading ones were the Fairlie'and Palmer'houses. or Portuguese colors.For several years he worked in partnership with a ..The Canton firms were largely outgrowths of these India houses, Spanish firm at Manila which had outlets in the Americas,but most of his frequently stemming directly from them in personnel and capital."The business was done in the country trade for British firms in India and bitter rivalry of Jardine,Matheson and Company and Dent and Company, Singapore.In all this he was indirectly aiding the Honorable Company to which enlivened two generations of life on the China coast,seems to have lay down funds for the tea trade,which at times had provided a tenth of the reflected a pattern already visible elsewhere in British commercial expan- revenues of Great Britain.By 1834 "more than half the British trade with sion. China was already in private hands." Family connections played a great part in establishing these relations Rise of the opium trade.As the next step in the disruption of the old as well as in determining partnership within the firms in China.Jardine's Canton system,the ingenuity and energy of these newcomers on the Chinese dealt principally with Lyall,Matheson and Company (after 1832)in scene became focussed upon the importing of opium.This grew into a tide Calcutta,and in London successively with Magniac,Smith and Company, which could not be checked. Magniac,Jardine and Company (from 1841),and Matheson and Com- The origin of the drug traffic lay first of all in the Chinese demand for pany (from 1848).Intermarriage among the Scottish clans of the prin- opium-a social phenomenon which is the more perplexing because it is cipal partners made the kinship tie even more pervasive than their names decidedly recent in Chinese history.Though the poppy was known early, would indicate (see App.A,sec.2,partners of Jardine,Matheson and smoking was not widely practiced in China before the late eighteenth cen- Company,who included seven nephews of the founders).The firm's ar- tury and the growth of the poppy there was not extensive until after 1850. ticles as redrawn in 1842 provided that management should be vested in Opium being a modern vice,it raised novel problems of regulation and had the immediate Jardine and Matheson relatives.Nepotism,however,seldom destructive social repercussions the limits of which could not be foreseen. if ever was allowed to triumph over business ability.One of Jardine, The most obvious economic reason for its importation has been noted above, Matheson and Company's principal correspondents in Bombay was Jam- namely,the constant pressure to balance the Canton tea trade.Indian raw setjee Jeejeebhoy and Sons. cotton had at first served this purpose equally well,but the Chinese demand The most striking thing about these pioneers was their ingenuity and for the drug increased so rapidly that it soon eclipsed all other commodi- enterprise.Investing in furs from northwest America was only one example. ties.Finally,by the time the traffic was well established,the production of They developed a direct trade with England through the device of buying opium in India had become a great vested interest on which the government from Company officers the private space to which each was entitled in the had come to rely for revenue.This vicious spiral,demand and supply each East Indiamen.In the late 182o's they invented a system of unloading stimulating the other,is worth examining in more detail. China cargoes at the free port of Singapore,reloading them on the same When the Company first began to use opium for revenue in India it was vessels,and so shipping them to England without infringing (?)upon the in a position to take it or leave it alone,but not for long.There were two Company monopoly of direct Canton-London trade.To profit from the general types of opium,grown in the eastern and western areas of northern dearth of capital at Canton,they regularly accepted fortunes from India on India,respectively.15 The chief type grown in Bengal was called Patna,and deposit,paying ten and twelve per cent interest on them year after year its cultivation there was directly under the Company's control.The Indian while making loans in turn to the Canton hong merchants at even higher peasant cultivator received an advance from the government and promised
62 THE FIRST BRITISH TREATY SETTLEMENT A curious tendency toward duopolistic competition runs through the history of these early firms in China - as though the circumstances of commercial enterprise called for rivalry between two organizations but no more. Dent and Company had its origin in W. S. Davidson, another Scotsman, who came to Canton as a naturalized Portuguese subject in I8II, thereby assisting his business by his legal immunity to Company control. Greenberg points out that the Jardine and Dent firms, while they dealt with all comers, developed especially close ties with their principal correspondents in Calcutta, Bombay and London, who were often mutual rivals already. Among the many firms (with constantly changing names) in Calcutta "the two leading ones were the 'Fairlie' and 'Palmer' houses. . . . The Canton firms were largely outgrowths of these India houses, frequently stemming directly from them in personnel and capital." The bitter rivalry of Jardine, Matheson and Company and Dent and Company, which enlivened two generations of life on the China coast, seems to have reflected a pattern already visible elsewhere in British commercial expansion. Family connections played a great part in establishing these relations as well as in determining partnership within the firms in China. Jardine's dealt principally with Lyall, Matheson and Company (after 1832) in Calcutta, and in London successively with Magniac, Smith and Company Magniac, Jardine and Company (from 1841), and Matheson and Com~ pany (from 1848). Intermarriage among the Scottish clans of the principal partners made the kinship tie even more pervasive than their names would indicate (see App. A, sec. 2, partners of Jardine, Matheson and Company, who included seven nephews of the founders). The firm's articles as redrawn in 1842 provided that management should be vested in the immediate Jardine and Matheson relatives. Nepotism however seldom 'f ' , I ever was allowed to triumph over business ability. One of Jardine, Matheson and Company's principal correspondents in Bombay was Jamsetjee Jeejeebhoy and Sons. The most striking thing about these pioneers was their ingenuity and enterprise. Investing in furs from northwest America was only one example. They developed a direct trade with England through the device of buying from Company officers the private space to which each was entitled in the East Indiamen. In the late 1820'S they invented a system of unloading China cargoes at the free port of Singapore, reloading them on the same vessels, and so shipping them to England without infringing (?) upon the Company monopoly of direct Canton-London trade. To profit from the dearth of capital at Canton, they regularly accepted fortunes from India on deposit, paying ten and twelve per cent interest on them year after year while making loans in turn to the Canton hong merchants at even higher , OPIUM AND THE CANTON SYSTEM 63 rates. To avoid dependence on the British Company's rate for bills of exchange on London, the British private traders bought bills of exchange from American merchants. With these they could remit funds from Canton to London more advantageously than could be done from Bombay. These operations helped funnel the profits of India through Canton to England. Imagination, assiduity, and an eagle eye for profit and loss characterized the successful Canton agent. James Matheson studied the Chinese taste and found that blue bandanas, for instance, "with weaving white lines sell for considerably more than if marked with round white spots." 14 His ships avoided British restrictions when necessary by sailing under Danish or Portuguese colors. For several years he worked in partnership with a Spanish firm at Manila which had outlets in the Americas! but most of his business wlj-s done in the country trade for British firms in India and Singapore. In all this he was indirectly aiding the Honorable Company to lay down funds for the tea trade, which at times had provided a tenth of the revenues of Great Britain. By 1834 "more than half the British trade with China was already in private hands." Rise of the opium trade. As the next step in the disruption of the old Canton system, the ingenuity and energy of these newcomers on the Chinese scene became focussed upon the importing of opium. This grew into a tide which could. not be checked. The origin of the drug traffic lay first of all in the Chinese demand for opium - a social phenomenon which is the more perplexing because it is decidedly recent in Chinese history. Though the poppy was known early, smoking was not widely practiced in China before the late eighteenth century and the growth of the poppy there was not extensive until after 1850. Opium being a modern vice, it raised novel problems of regulation and had destructive social repercussions the limits of which could not be foreseen. The most obvious economic reason for its importation has been noted above, namely, the constant pressure to balance the Canton tea trade. Indian raw cotton had at first served this purpose equally well, but the Chinese demand for the drug increased so rapidly that it soon eclipsed all other commodities. Finally, by the time the traffic was well established, the production of opium in India had become a great vested interest on which the government had come to rely for revenue. This vicious spiral, demand and supply each stimulating the other, is worth examining in more detail. When the Company first began to use opium for revenue in India it was in a position to take it or leave it alone, but not for long. There were two general types of opium, grown in the eastern and western areas of northern India, respectively.15 The chief type grown in Bengal was called Patna, and its cultivation there was directly under the Company's control. The Indian peasant cultivator received an advance from the government and promised
64 THE FIRST BRITISH TREATY SETTLEMENT OPIUM AND THE CANTON SYSTEM 65 to sell his product only to the official agency and at a stated price.The four pounds apiece and packed forty to a chest.Each ball contained some raw opium so collected was refined and sold under Company auspices at three pounds of opium inside an inch-thick cover of many layers of poppy auctions held periodically in Calcutta.The Company opium thus produced leaf.Malwa opium came in irregular lumps,averaging four to six ounces was of standard quality bearing the Company's stamp.It was purchased at in weight and loosely packed. auction by private individuals,chiefly British and Parsee,and taken by Preparation of opium for smoking proceeded through two stages.In the them to China.After a brief period of experimentation in the eighteenth first stage the crude opium was boiled with water in copper pans for three century,the Company itself had refrained from carrying opium to the to five hours over a slow fire.During this process it was constantly stirred East.It is important to note,however,that the private traders who did until it attained the consistency of pill mass.It was then pressed into thin the carrying were required to be licensed,and the Company granted the sheets an eighth of an inch thick,porous and friable.Water was then poured licenses. over the sheets and allowed to stand overnight.In the second stage,on the Unfortunately,this profitable opium monopoly in Bengal was stimulated following day,the water in which the opium had been steeped was care- by the competition of opium from western India,partly shipped by the fully filtered.This liquid filtrate,which now contained the opium,was Portuguese from Damaun and partly from native states through Bombay. boiled and stirred from four to seven hours until it had the consistency of The latter opium was called Malwa,and at the beginning of the nineteenth treacle.It was then poured into jars,three pounds of crude opium having century it was produced in territories which were not under the control of produced about two pounds of smoking extract.In the process a proportion the East India Company.Since the Malwa product competed with that of of dross or seconds,collected from smokers'pipes,had been mixed in with Bengal,a long struggle ensued in which the Company tried to control both the fresh opium. sources of supply in order to prevent competition and keep up prices.Their The opium smoker,lying on his couch,took a bit of the opium extract efforts were not successful until I830.By that time the Company had ob- on the point of a wire and warmed it over his lamp flame,dipping it again tained control of the Bombay area and the best ports for shipment of in his opium jar until he worked it into a soft solid by partial evaporation Malwa,so that opium produced in areas beyond their control still must of the water in it.When the little bolus of opium had swelled into a light come through their territory or follow a difficult,circuitous route.As the porous mass,the smoker dexterously deposited it in the bowl of his pipe. Malwa opium passed through Company territory,a transit tax was levied "The stem of the pipe being applied to his lips and the bowl held over the on it,high enough to produce revenue and yet not so high as to divert the lamp,the heat of the flame is drawn in over the opium,converting into trade.This control was perfected in 1843 by the conquest of Sind. vapor all the volatizable material in the bolus."Thus the opium vapor Partly because of this early competition and partly because of the which is inhaled into the lungs of a smoker is not a smoke produced by pressure for funds,the production of opium steadily increased,as did also combustion but merely a water vapor containing the soluble alkaloids of its importance in the Indian revenue.About 18oo,for example,opium the opium extract in a volatile form.The process is not like tobacco smok- provided less than 3 per cent of the Company revenue in India.In 1826- ing but is an efficient mode of introducing morphine into the system. 27 this had risen to over 5 per cent and by the 185o's it was more than I2 Opium on the China coast.In the 1830's the competition in India led the per cent,a sum of almost four million pounds.16 In this way the Company East India Company to increase the supply of Bengal opium in order to became dependent,in the short term at least,upon its opium revenue and maintain their revenue.They soon found that they were selling more chests therefore upon the sales in China.It is true that an expanding market was at lower prices per chest to get the same return.In 1831-32 the Company found in the Malay Peninsula and the adjacent islands,where Singapore production doubled,by 1836 it had tripled and the import of opium in served as the distributing center after 1819,but the numbers involved China had risen to 30,oo0 chests.Quite fortuitously,this sudden boom in could never compare with the China market.On the other hand,the total opium coincided with the end of the Company monopoly of trade with number of smokers being supplied in China in the 184o's,judged by the China in 1834,and both together precipitated the Canton crisis. quantity of opium available,can hardly have exceeded one million and was One fundamental cause of the crisis at Canton after 1834,and so of the probably less.17 first Anglo-Chinese war in 1840-42,was the expansion of trade beyond the The process of preparing and smoking opium in China was rather simple. limits of the ancient Canton system of regulation.In this expansion opium At the height of the opium trade in the 188o's,for example,Patna and provided the profits which motivated both the Western and the Chinese Benares opium arrived in China in the form of round balls weighing about merchants and the Chinese officials,who all cooperated with mutual benefit
64 THE FIRST BRITISH TREATY SETTLEMENT to sell his product only to the official agency and at a stated price. The raw opium so collected was refined and sold under Company auspices at auctions held periodically in Calcutta. The Company opium thus produced was of standard quality bearing the Company's stamp. It was purchased at auction by private individuals, chiefly British and Parsee, and taken by them to China. After a brief period of experimentation in the eighteenth century, the Company itself had refrained from carrying opium to the East. It is important to note, however, that the private traders who did the carrying were required to be licensed, and the Company granted the licenses. Unfortunately, this profitable opium monopoly in Bengal was stimulated by the competition of opium from western India, partly shipped by the Portuguese from Damaun and partly from native states through Bombay. The latter opium was called Malwa, and at the beginning of the nineteenth century it was produced in territories which were not under the control of the East India Company. Since the Malwa product competed with that of Bengal, a long struggle ensued in which the Company tried to control both sources of supply in order to prevent competition and keep up prices. Their efforts were not successful until r830. By that time the Company had obtained control of the Bombay area and the best ports for shipment of Malwa, so that opium produced in areas beyond their control still must come through their territory or follow a difficult, circuitous route. As the Malwa opium passed through Company territory, a transit tax was levied on it, high enough to produce revenue and yet not so high as to divert the trade. This control was perfected in 1843 by the conquest of Sind. Partly because of this early competition and partly because of the pressure for funds, the production of opium steadily increased, as did also its importance in the Indian revenue. About 1800, for example, opium provided less than 3 per cent of the Company revenue in India. In I826- 27 this had risen to over 5 per cent and by the r850's it was more than 12 per cent, a sum of almost four million pounds.16 In this way the Company became dependent, in the short term at least, upon its opium revenue and therefore upon the sales in China. It is true that an expanding market was found in the Malay Peninsula and the adjacent islands, where Singapore served as the distributing center after 1819, but the numbers involved could never compare with the China market. On the other hand, the total number of smokers being supplied in China in the I840'S, judged by the quantity of opium available, can hardly have exceeded one million and was probably less.17 The process of preparing and smoking opium in China was rather simple. At the height of the opium trade in the r880's, for example, Patna and Benares opium arrived in China in the form of round balls weighing about ill OPIUM AND THE CANTON SYSTEM 65 four pounds apiece and packed forty to a chest. Each ball contained some three pounds of opium inside an inch-thick cover of many layers of poppy leaf. Malwa opium came in irregular lumps, averaging four to six ounces in weight and loosely packed. Preparation of opium for smoking proceeded through two stages. In the first stage the crude opium was boiled with water in copper pans for three to five hours over a slow fire. During this process it was constantly stirred until it attained the consistency of pill mass. It was then pressed into thin sheets an eighth of an inch thick, porous and friable. Water was then poured over the sheets and allowed to stand overnight. In the second stage, on the following day, the water in which the opium had been steeped was carefully filtered. This liquid filtrate, which now contained the opium, was boiled and stirred from four to seven hours until it had the consistency of treacle. It was then poured into jars, three pounds of crude opium having produced about two pounds of smoking extract. In the process a proportion of dross or seconds, collected from smokers' pipes, had been mixed in with the fresh opium. The opium smoker, lying on his couch, took a bit of the opium extract on the point of a wire and warmed it over his lamp flame, dipping it again in his opium jar until he worked it into a soft solid by partial evaporation of the water in it. When the little bolus of opium had swelled into a light porous mass,the smoker dexterously deposited it in the bowl of his pipe. "The stem of the pipe being applied to his lips and the bowl held over the lamp, the heat of the flame is drawn in over the opium, converting into vapor all the volatizable material in the bolus." Thus the opium vapor which is inhaled into the lungs of a smoker is not a smoke produced by combustion but merely a water vapor containing the soluble alkaloids of the opium extract in a volatile form. The process is not like tobacco smoking but is an efficient mode of introducing morphine into the system. Opium on the China coast. In the r830's the competition in India led the East India Company to increase the supply of Bengal opium in order to maintain their revenue. They soon found that they were selling more chests at lower prices per chest to get the same return. In 183I-32 the Company production doubled, by 1836 it had tripled and the import of opium in China had risen to 30,000 chests. Quite fortuitously, this sudden boom in opium coincided with the end of the Company monopoly of trade with China in 1834, and both together precipitated the Canton crisis. One fundamental cause of the crisis at Canton after 1834, and so of the first Anglo-Chinese war in r840-42, was the expansion of trade beyond the limits of the ancient Canton system of regulation. In this expansion opium provided the profits which motivated both the Western and the Chinese merchants and the Chinese officials, who all cooperated with mutual benefit
66 THE FIRST BRITISH TREATY SETTLEMENT OPIUM AND THE CANTON SYSTEM 67 In his first year in the opium business Dr.William Jardine sold 649 chests manufactures on sale in the Chinese shops of Foochow and Ningpo.At of Malwa for a price of $818,o00.18 The drug had the small bulk,imperish- Shanghai he saw many shops with European goods.When Lindsay landed ability,steady demand,and wide market most to be desired in a product, on the north bank of the Yangtze opposite Wusung,he found a village and the expansion of its sale was very rapid.At times gross profits were as three miles inland with a shop "which announced in large characters that high as Srooo a chest.As early as I806 Magniac had sought to avoid the it sold Company's camlets and broad cloth;but on inquiry I was told that trammels of the Canton system by delivering Bengal cotton "at an anchor- they had none of these precious commodities at present,but merely kept age near the port of Amoy."1 The occasional delivery of opium on the the characters on their sign to look respectable."22 While woolens were coast on orders arranged at Macao appears to have begun early in the cen- known,opium at this date was already in great demand.At every place tury.In 182I the exactions and fears of the Canton officials,concerned both where the Lord Amherst stopped,both the officials and native merchants for their profits and for their official positions,drove the opium receiving expected opium was aboard and could hardly be convinced of the contrary. ships from the Whampoa anchorage below Canton to Lintin Island in the Since the experimental voyages of foreign opium vessels were just begin- outer seas of Macao,and to the Cumsingmoon anchorage near Hongkong. ning in 1832,we must assume that the demand for opium had been built Serious expansion up the coast began soon after.In 1823 James Matheson up by Chinese rather than foreign distributors.This suggests that the tried out the east coast (toward Fukien)with two opium cargoes that Chinese opium trade along the coast had begun with Chinese merchants brought in S2I2,oo0.According to his testimony,this was the first attempt and officials distributing it from Macao in the 182o's,without waiting for to effect sales on the coast without prearrangement.20 Other firms like Dent the foreigners to inaugurate this service.But the foreigners soon took it and Company and Portuguese from Macao were soon competing,but the over,organized and expanded it on the lines already laid down by Chinese officials made trouble,and the new market appears to have been given up initiative. for a time,to be resumed in the following decade. Chinese official connivance.The Chinese officials whom Lindsay en- By 1834 sales on the coast of Kwangtung and Fukien were being under- countered were all under the pressure of responsibility to see him gone. taken by a fleet of fast,armed,running vessels which soon were supplying They assumed various attitudes,some bullying the barbarian until Lindsay armed receiving ships stationed at definite points.The armament was neces- and Gutzlaff took a high tone themselves (they broke in the doors of the sary against pirates.The decade of the 183o's was the experimental period taotai's yamen at Shanghai and were thereupon served tea),while other in the growth of this distribution system and it naturally saw a certain mandarins adopted a soothing manner from the beginning.In each case, amount of friction between the foreign traders and their colleagues,the some official was punished because of the barbarians'arrival in the city. Chinese opium dealers,on the one hand,and the Chinese officials on the Many pleas were made by the endangered officers to secure their departure other.But the chief problem appears to have been not whether the trade Some minor officials,for example,knelt and offered to perform the kotow, was to go on but how much the parties involved were to gain from it. in private interviews with Lindsay,if only he would depart.At Ningpo Evidence of the early situation on the China coast can be gleaned from they even offered to pay.28 In most cases they readily promised trade out- the report of Hugh Hamilton Lindsay,who in the year 1832 conducted a side the port. market survey on behalf of the East India Company in the ship Lord Am- The timidity which made these minor officials acquiesce in foreign trade, kerst.He was accompanied by sailing men several of whom later had careers if only it were conducted outside their jurisdiction,was at times mixed in the opium fleet and by a versatile German missionary,the Rev.Charles with greed to participate in it.At Foochow an officer named Yang intro- Gutzlaff,as interpreter.(Gutzlaff came from Pomerania.He married,al- duced Chinese merchants and arranged for the Lord Amkerst's sale of cloth together,three English ladies,meanwhile becoming frontier scout for Chris- to the value of $6,2o0,of which he received 3 per cent as commission.Yang tian missions,visiting Siam in 1828,Tientsin and Korea in 1832,and Liu- came alongside in a small war-junk in broad daylight to effect payment. ch'iu and Japan in 1837).Lindsay of course had no opium aboard.He held "Strange and almost incredible as it will appear to those practically unac- extensive intercourse with the Chinese authorities at Amoy,Foochow, quainted with the complicated machinery and habitual deception of the Ningpo and Shanghai-the later treaty ports.His lengthy report became Chinese government,only three days subsequent to an admiral and several an important document,formulating opinions which influenced the course superior officers having been degraded from their rank for having permitted of British expansion in China.21 a foreign merchant ship to force the entrance of the port of one of the prin- At this early date,a decade before the treaties,he found European woolen cipal towns of the empire,and while edicts are placarded in every quarter
66 THE FIRST BRITISH TREATY SETTLEMENT In his first year in the opium business Dr. William Jardine sold 649 chests of .~alwa for a price of $8r8,000.18 The drug had the small bulk, imperishabIlIty, steady demand, and wide market most to be desired in a product, and the expansion of its sale was very rapid. At times gross profits were as· high as $rooo a chest. As early as r806 Magniac had sought to avoid the trammels of the Canton system by delivering Bengal cotton "at an anchorage near the port of Amoy." 19 The occasional delivery of opium on the coast on orders arranged at Macao appears to have begun early in the century. In r82I the exactions and fears of the Canton officials, concerned both for their profits and for their official positions, drove the opium receiving ships from the Whampoa anchorage below Canton to Lintin Island in the outer seas of Macao, and to the Cumsingmoon anchorage near Hongkong. Serious expansion up the coast began soon after. In r823 James Matheson tried out the east coast (toward Fukien) with two opium cargoes that brought in $2r2,000. According to his testimony, this was the first attempt to effect sales on the coast without prearrangement.20 Other firms like Dent and .Company and Portuguese from Macao were soon competing, but the offiClals made trouble, and the new market appears to have been given up for a time, to be resumed in the following decade. By r834 sales on the coast of Kwangtung and Fukien were being undertaken by a fleet of fast, armed, running vessels which soon were supplying armed receiving ships stationed at definite points. The armament was necessary against pirates. The decade of the r830'S was the experimental period in the growth of this distribution system and it naturally saw a certain am?unt of. friction between the foreign traders and their colleagues, the Chmese opIUm dealers, on the one hand, and the Chinese officials on the other. But the chief problem appears to have been not whether the trade was to go on but how much the parties involved were to gain from it. Evidence of the early situation on the China coast can be gleaned from the report of Hugh Hamilton Lindsay, who in the year r832 conducted a market survey on behalf of the East India Company in the ship Lord Amherst. He was accompanied by sailing men several of whom later had careers in the opium fleet and by a versatile German missionary, the Rev. Charles Gutzlaff, as interpreter. (Gutzlaff came from Pomerania. He married, altogether, three English ladies, meanwhile becoming frontier scout for Christian missions, visiting Siam in r828, Tientsin and Korea in r832, and Liuch'iu and Japan in r837). Lindsay of course had no opium aboard. He held extensive intercourse with the Chinese authorities at Amoy , Foochow , Ningpo and Shanghai - the later treaty ports. His lengthy report became an important document, formulating opinions which influenced the course of British expansion in China.21 At this early date, a decade before the treaties, he found European woolen OPIUM AND THE CANTON SYSTEM 67 manufactures on sale in the Chinese shops of Foochow and Ningpo. At Shanghai he saw many shops with European goods. When Lindsay landed on the north bank of the Yangtze opposite Wusung, he found a village three miles inland with a shop "which announced in large characters that it sold Company's camlets and broad cloth; but on inquiry I was told that they had none of these precious commodities at present, but merely kept the characters on their sign to look respectable." 22 While woolens were known, opium at this date was already in great demand. At every place where the Lord Amherst stopped, both the officials and native merchants expected opium was aboard and could hardly be convinced of the contrary. Since the experimental voyages of foreign opium vessels were just beginning in 1832, we must assume that the demand for opium had been built up by Chinese rather than foreign distributors. This suggests that the Chinese opium trade along the coast had begun with Chinese merchants and officials distributing it from Macao in the r820's, without waiting for the foreigners to inaugurate this service. But the foreigners soon took it over, organized and expanded it on the lines already laid down by Chinese initiative. Chinese official connivance. The Chinese officials whom Lindsay encountered were all under the pressure of responsibility to see him gone. They assumed various attitudes, some bullying the barbarian until Lindsay and Gutzlaff,took a high tone themselves (they broke in the doors of the taotai's yamen at Shanghai and were thereupon served tea), while other mandarins adopted a soothing manner from the beginning. In each case, some official was punished because of the barbarians' arrival in the city. Many pleas were made by the endangered officers to secure their departure. Some minor officials, for example, knelt and offered to perform the kotow, in private interviews with Lindsay, if only he would depart. At Ningpo they even offered to pay.23 In most cases they readily promised trade outside the port. The timidity which made these minor officials acquiesce in foreign trade, if only it were conducted outside their jurisdiction, was at times mixed with greed to participate in it. At Foochow an officer named Yang introduced Chinese merchants and arranged for the Lord Amherst's sale of cloth to the value of $6,200, of which he received 3 per cent as commission. Yang came alongside in a small war-junk in broad daylight to effect payment. "Strange and almost incredible as it will appear to those practically unacquainted with the complicated machinery and habitual decep,tion of the Chinese government, only three days subsequent to an admiral and several superior officers having been degraded from their rank for having permitted a foreign merchant ship to force the entrance of the port of one of the principal towns of the empire, and while edicts are placarded in every quarter