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Transcript from
THE CHINA YEAR BOOK, 1913
Chapter 10


COMMERCE

Historical

For the purposes of this chapter it is only necessary to record briefly the chief incidents leading up to the establishment of international trade in China on the footing that it now occupies.*

* Footnote — For an exhaustive account of the growth of China's international relations the reader is referred to The International Relations of the Chinese Empire, by H. B. Morse (Kelly and Walsh, 1910) — a masterly work which has been largely laid under contribution for the accompanying précis of events — and to Mr. A. J. Sargent's Anglo-Chinese Commerce and Diplomacy (Clarendon Press, Oxford).

To pass over the names of individual travellers who visited China at various times from the third to the fifteenth century, the order in which the Western nations had (or attempted to have) direct trade dealings with the Chinese Empire is as follows:-

Portugal

1516

 

Spain

1575

 

Holland

1604

 

England

1637

 

Russia

1658

Unsuccessful embassies had been sent to Peking at earlier dates

France

1660

 

The United States

1784

 

During the seventeenth and eighteenth centuries the ships of other countries — Denmark, Sweden, Austria, Prussia — reached China, but their trade did not attain any considerable dimensions, although the two first named had factories at Canton. From the middle of the seventeenth century Anglo-Chinese relations dominated the Chinese foreign affairs, and it was left to Great Britain to fight out the principle of unfettered trade with China for all nations.

PORTUGAL
Direct trade between Europe and China was inaugurated by Portugal. In 1511 Alfonso Dalboquerque (D'Albuquerque) captured Malacca, near the southernmost point of the Malay Peninsula, and in 1516 Rafael Perestrello sailed from Malacca to China on a prospecting expedition. Up to that time Chinese trade had used Singapore (Singhapura), Malacca, or some other port as a centre for transhipment, the goods being conveyed thence in Arab sailing-ships to India, Persia, etc. These latter countries had also been reached overland by Chinese trade. Perestrello returned to Malacca, and in 1517 Fernão Perez de Andrade arrived with eight ships at Changchuen (St. John's Island), seventy-five miles south-west of Macao. With two ships Andrade proceeded to Canton, and received permission from the Viceroy to trade. In the following years the attitude of the Portuguese aroused the hostility of the Chinese, and their trading depot was attacked and destroyed in 1522. The survivors retired to Lampa (Lampaco), in Kuangtung, where a trading-post existed for the next fifty years. Another expedition reached the coast of Fukien in 1518 and established trade centres in due course at Chuanchoufu, north of Amoy, at Foochow, and at Ningpo in Chekiang. Between 1545 and 1549 an Imperial order for the general extermination of the Portuguese was put into effect. Macao was established as a trading-post in 1537 or, according to other authorities, in 1557. The Portuguese paid a rental for the peninsula until 1849 (Tls. 500 for the last hundred years, prior to that Tls. 600, and at first Tls. 1000), when they abolished the Chinese Customs House and declared the independence of the port. During the eighteenth century Macao was the chief port for Western trade with China. The cession of Hongkong to Great Britain in 1842, however, and the commercial prosperity of that port, led to the downfall of Macao, which is now in a decadent condition.

SPAIN
The Spaniards were the next nation to venture upon direct relations with the Chinese, using Manila as their base. Two priests reached Canton in 1575, were favourably received by the Viceroy at Shiuhsing on the West River, and returned to Manila. The bulk of the trade that then sprang up between China and the Philippines was in the hands of the Chinese themselves, but the port of Amoy was closed from 1730 to 1842 to all foreigners except Spaniards. "The trade with the Chinese Empire, conducted by the Spanish themselves, was insignificant" (Morse).

HOLLAND
The Dutch made attempts to open up trade with China in 1604 and 1607, but, although their ships reached Canton, the requisite permission was denied them by the Chinese at the instigation of the Macao authorities. In 1622 a Dutch force appeared off Macao, and an unsuccessful attempt was made to capture the place. With the Pescadores (in the Formosa Channel) as their base, the Dutch continued their efforts to seize Macao during the next two years, but subsequently contented themselves with occupying Formosa without opposition. They established centres at Taiwanfu, Tamsui and Kelung. In 1661 they were driven out of Formosa by Koxinga, who was maintaining an ineffectual struggle on behalf of the Ming dynasty against the usurping Manchus. Various efforts were made by the Dutch to obtain recognition in China, mainly by means of embassies to Peking (1655, 1665, 1795), which were characterized by complete acquiescence in all Chinese demands regarding the kowtow before the Emperor, etc.; but these attempts met with no success. A very small trade was indulged in spasmodically on the coast of Fukien, and it was not until 1762 that a Dutch factory was established at Canton.

FRANCE
Trade relations between France and China date from the formation of a trading company in 1660, and from that year French ships reached Canton at irregular intervals. The company was reorganized in 1698, and thirty years later a factory was established at Canton. In 1776 (L. Richard.  H. B. Morse gives the date as 1802) a French Consulate was established at that port.

THE UNITED STATES OF AMERICA
The first American ship to reach China arrived at Canton in 1784, and from the outset American trade obtained a good footing, ultimately taking second place.

ANGLO-CHINESE RELATIONS
The first attempt on the part of the English to open up trade with China was made in 1596, when Queen Elizabeth sent a letter to the Emperor of China. The mission started, but the ship and all on board were lost at sea. In 1635 the East India Company, under licence from the Governor of the Portuguese colony of Goa, dispatched a ship to Macao, and in the following year a squadron of four (five) ships left England with a letter from King Charles to the Portuguese Captain-General at Macao. This expedition, under Captain John Weddell, reached Macao on June 25, 1637. Captain Weddell failed to obtain recognition from the Portuguese, and was obliged to force his own way to Canton, where he disposed of his cargo and loaded with sugar and ginger (Morse).

In 1664 and 1674 further attempts were made to open up trade with Canton by the East India Company, but without much success, owing in part to Portuguese opposition. In 1670, however, similar efforts met with success at Amoy and in Formosa, a second ship being sent to Amoy in 1677. The year 1680 saw the Company's factory at Amoy closed, and another unsuccessful attempt to open trade at Canton. But in 1685 an Imperial decree was issued opening all the ports of China to foreign trade. This permission was given effect to at once in the case of Amoy, but the first ship to reach Canton under the new conditions did not arrive until 1689.

In 1757 other counsels prevailed, and in that year an Imperial edict prohibited all foreign trade at any other port than Canton, which in the meantime had become the main centre of foreign trade on account of the ruinous exactions enforced at other ports.

In 1702 the first attempt on the part of the Chinese Government to create a foreign trade monopoly was made by the appointment of the Hoppo (or Emperor's Merchant) "to be the sole broker through whom all foreigners must buy their teas and silk, and must sell the few foreign products for which a demand then existed." Two years later the Hoppo had to admit other merchants to a share of his monopoly, and the establishment of the Co-hong (as will be seen) brought him into less direct contact with foreign merchants; but his post, that of Administrator of the Canton Customs, was not actually abolished until 1904, when its functions were transferred to the Viceroy.

From the beginning of the eighteenth century the East India Company gave more serious attention to its trade with China, and arranged not only for a regular service of ships, but also for the permanent domicile of its representatives at Canton. At first the Company had to content itself with an annual "committee" of its servants on the spot during the trading season (mainly from October to April, when the monsoons favoured arrival and departure respectively); but ultimately more permanent residence was secured for a few merchants (of all nationalities), while the majority would be compelled by the Chinese to withdraw to Macao to await the next season. In 1699 royal assent had been obtained for the head of the Company's committee or council to be styled "Consul." From this time on the East India Company exercised a monopoly of the English trade with China, outside merchants trading under the licence of the Company, and the monopoly was not abolished until 1834.

In 1720 the Cantonese merchants engaged in the foreign trade formed themselves into a guild, or Co-hong, with the object of regulating prices. A protest was at once entered by the supercargoes, and the Co-hong may have been nominally suppressed, but it was quickly in existence again. In 1760 it received a formal charter, and remained in existence until abolished under the Treaty of Nanking in 1842.

The system enforced under the Co-hong monopoly was that for every foreign merchant trading at Canton one of the thirteen Hong merchants had to be security, and through him alone, both in regard to what he sold and what he bought, could the foreigner transact business. "The traders during the winter season lived in the factories (the residence and office of the factor, or business agent), which were the property of the Hong merchants, and rented, in whole or in part, to the foreigners" (Morse). There were thirteen factories. The exactions levied on the foreign traders throughout this period were continually the subject of protest, and the more glaring attempts to prejudice the trade for the benefit of the Chinese officials could only be remedied by threats to withdraw the ships and their consignments. In exchange for the chief exports, tea, silk and cotton cloth, the English traders brought raw cotton, opium and woollen goods, while specie was an important factor in the early trade relations of England and China.

The unsatisfactory conditions under which trade with China was being carried on, and the persistent determination of the Chinese officials at Canton to expose British subjects and Government representatives to every possible indignity, caused the Home Government to attempt to induce China to adopt a more reasonable attitude by dispatching embassies to Peking. The first mission, under Lord Macartney, in whose suite were Sir George Staunton and J. Barrow, reached Peking on August 21, 1793, had audience of the Emperor Kien Lung twice at Jehol, and returned without securing any definite undertaking in regard to British trade.

In 1816 the Embassy of Lord Amherst to the Emperor Kia King was even less successful, for the kowtow being insisted upon and refused, Lord Amherst left Peking without obtaining an interview. A further attempt to improve the trade relations between the two countries and to conciliate the Chinese was made in 1834, when Lord Napier arrived at Macao as chief superintendent of trade with certain powers of jurisdiction in Canton waters. The Viceroy of Canton refused to receive any communication from Lord Napier, unless it came through the Hong merchants, and after a stoppage of trade by the Chinese, the Chief Superintendent, thwarted of the purpose of his mission, was compelled to withdraw on September 21, 1834, to Macao, where he died three weeks later.

On top of this contemptuous attitude towards British overtures, the studied determination of the Chinese Government not to promote in any way trade with foreign countries, and the equally strong resolved of the Chinese officials on the spot to use that trade to the utmost for their own interests, came the opium question. On this subject it is only necessary to state* here that, whereas the poppy has been grown in China and opium known to the Chinese medicinally for a thousand years, the practice of mixing opium with tobacco for smoking purposes was first introduced by the Dutch from Java into Formosa, and thence to Amoy and the mainland of China.

* Footnote — General authority for statement on the opium trade, H. B. Morse, op. cit.

Foreign opium was first brought to China by the Portuguese from Goa. In 1780 the East India Company took the English share of the trade out of the hands of private English traders, in which it had been for seven years under licence of the Company, and monopolized it for its own benefit. When, however, the Chinese Government, in 1800, showed itself resolved to suppress the trade, the Company ceased to have anything to do with opium, and the traffic reverted to private traders.

In 1839 Commissioner Lin Tse-sü was appointed by the Emperor Tao Kuang to eradicate the opium habit at all costs, and the surrender of all chests of opium in the hands of British merchants was actually agreed to, under pressure by the British representative, Captain Elliott, Chief Superintendent of Trade in China. In consequence of a dispute on this point, British ships had been prohibited from entering Cantonese waters, when in an affray at Hongkong on July 7, 1839, a Chinese was killed by a party of British sailors (American participation was alleged, but was denied by the American Consul).

This incident was the immediate cause of the war between Great Britain and China, commonly known under the erroneous title of the Opium War. The actual murderers of the Chinese could not be discovered, and the British Superintendent refused the Chinese demand for the execution of a substitute. The war was marked by the blockade of Canton and the capture of Amoy, Ningpo, and Shanghai. It terminated with the signing of a Convention at Nanking, August 29, 1842.

China paid an indemnity of $21,000,000. By the Treaty of Nanking Hongkong was ceded to the British*, the five ports of Canton, Amoy, Foochow, Ningpo and Shanghai were opened to foreign trade, the right to appoint consuls at these ports was recognized, the Canton monopoly system was abolished, regular tariffs on imports and exports were to be established, and it was provided that the officials of corresponding rank of the two countries should be regarded as equal and communicate with one another on equal terms.

* Footnote — Kowloon, a strip of territory on the mainland, was added by the Treaty of October 24, 1860, and to this was added, under lease for 99 years, by the Convention of June 9, 1898, the peninsula south of a line drawn between Deep Bay and Mirs Bay, together with the islands of Lantao and Lamma.

The Treaty of Nanking was followed by other treaties still further regulating the commercial relations between China and foreign countries: the Treaty of the Bocca Tigris with the British (October 8, 1843), the Treaty of Wanghsia with the United States (July 3, 1844), the Treaty of Whampoa with France (October 24, 1844), a Convention with Belgium signed at Canton (July 25, 1845), and a treaty of peace, amity and commerce with Sweden and Norway signed at Canton (March 20, 1847).

Shanghai was opened to foreign trade on November 17 1843, Ningpo in December 1843, but the admission of foreigners was postponed by the Treaties of April 4 1846, and April 6 1847.

The following years were marked by a series of outrages on foreigners by Chinese, who could not accept the new régime. A climax was reached on October 8, 1856, when a Hongkong-registered lorcha flying the British flag was boarded at Canton by Chinese officers and soldiers, who hauled down the flag and removed the crew to guard-boats. All attempts on the part of the British authorities to obtain redress failed, and the two nations finally found themselves at war.

Great Britain in this struggle was joined by France, who had been unable to secure satisfaction at the hands of China for the murder of a missionary, and on December 29, 1857, Canton was captured by the Allies. The next year saw the British and French carrying the war to the north. The Peiho forts were taken on May 20 and China agreed to discuss terms of settlement in Tientsin in June.

Negotiations for treaties of peace and commerce were opened simultaneously by Great Britain, France, Russia and the United States, and the order in which the Treaties were signed was: Russia (June 13), United States (June 18), Great Britain (June 26), France (June 27). Russia had previously concluded a treaty at Aigun (May 16) defining Russo-Chinese boundaries along the River Amur and providing for trade on the banks of the Ussuri, Amur and Sungari.

In June, 1859, the British and French plenipotentiaries, when on their way to Peking to exchange ratifications of the treaties, were fired upon by the Taku forts. After an advance by the allied forces had received a check, a bigger joint expedition was fitted out. Peking was entered on October 13, 1860, and the Treaties agreed upon in June 1858 were ratified (with additional clauses) on October 24 (by Great Britain) and October 25 (by France).

By these Treaties the Powers concerned were to appoint Ministers to reside permanently in Peking, nine ports including Tientsin were to be opened to foreign trade, Kowloon (the mainland facing Hongkong) was ceded to the British, and an indemnity of Tls. 8,000,000 each was to be paid to the Allies. The revision of the tariff system fixed by the Treaty of Nanking (5 per cent duty on imports and exports) was provided for, and this was subsequently carried into effect, a scheduled tariff of import and export duties being drawn up on November 8, 1858, at Shanghai. France also secured privileges for the propagation and practice of Christianity ("the teachings of the Lord of Heaven") and compensation for churches, schools, land and buildings that had been confiscated from Christians.

In the course of the next few years treaties with other Powers were also signed by China: Russia (Nov. 14, 1860), Germany (Sept. 2, 1861), Portugal (Aug. 13, 1862, not ratified), Denmark (July 13, 1863), Netherlands (Oct. 6, 1863), Spain (Oct. 10, 1864), Belgium (Nov. 2, 1865), Italy (Oct. 26, 1866), United States (July 28, 1868), Austria-Hungary (Sept. 2, 1869).

The Chefoo Agreement with Great Britain (September 13, 1876) was brought about by an attack on a British Commission from India by Chinese on the Yunnan frontier. (Murder of R. A. Margary of H.M. Consular Service.) By this Agreement China undertook to allow frontier trade between Burma and Yunnan, four new ports were opened to foreign trade (Ichang, Wuhu, Wenchou, and Pakhoi), a British Mission of Exploration to Tibet was authorized, and provision was made for collection of likin on opium in addition to the tariff duty (Tls. 80 per chest as likin and Tls. 30 as duty).

War between China and France over the annexation by the latter of Tongking led to the Treaty of Tientsin (April 25, 1886), by which inter alia two towns, subsequently specified as Lungchou, in Kuangsi, and Mengtze, in Yunnan, were opened to foreign trade. An additional convention between the same parties, signed in Peking, June 20, 1895, secured the opening to trade of two other towns, Hokow and Szemao, in Yunnan.

The Treaty of Shimonoseki (November 8, 1895), that marked the end of the China-Japan War, provided for the opening of Chungking in Szechuan, Shasi in Hupeh, Soochow in Kiangsu, and Hangchow in Chekiang. The intervention of Russia, Germany, and France to prevent the cession of the Liaotung peninsula, provided for in the first draft of the treaty (April 17), procured for Russia the right to carry the Siberian Railway through Manchuria to Vladivostok, and for France the right to extend the Tongking Railway to Nanningfu in Kuangsi (June 20, 1895).

The foreign occupation of the mainland of China was brought about by the murder of two German missionaries in Shantung. By an agreement signed on March 6, 1898, China leased to Germany for 99 years the territory of Kiaochou (193 square miles), and sanctioned the construction of two lines of railway in Shantung. A similar agreement (March 27, 1898) leased to Russia for 25 years, subject to extension by mutual agreement, Port Arthur and Talienwan (Dalny or Tairen). Other agreements leased Kuangchouwan in Kuangtung to France (April 22, 1898) and Weihaiwei (285 square miles) to Great Britain (July 1, 1898).

The Boxer rising of 1900 led to the increase of China's indebtedness by £67,500,000 by way of indemnity, and prepared the ground for the three commercial treaties with Great Britain (Sept. 5, 1902), the United States (Oct. 8, 1903), and Japan (Oct. 8, 1903).

The "Most-Favoured-Nation" clause appears first in China's international undertakings in the treaty with the United States signed at Tientsin, June 18, 1858, which was negotiated as a substitute for the Treaty of Wanghsia, July 3, 1844. The clause was inserted in the British and French treaties of the same time, and has appeared in the commercial treaties subsequently ratified with other countries.


THE CHINESE MARITIME CUSTOMS

By the Treaty of Nanking China undertook to establish at the five ports open to foreign trade a fair and reasonable tariff of export and import dues. In 1843 Shanghai was declared an open port and a Customs House was duly established. The native city of Shanghai fell into the hands of the Taipings in 1853, and with it the Customs House. After an interval during which no duties were collected, the British and American Consuls in Shanghai decided that their respective nationals had to continue to declare the nature of their imports and exports and to pay or to deposit bonds for the payment of a 5 per cent duty. This system lasted until June 29, 1854, when an agreement was made with the Shanghai Taotai, then a refugee in the foreign concession, that a Customs Office should be established under foreign control, each of the Consuls of Great Britain, the United States and France nominating an inspector. This Customs Office was opened on July 12, 1854.

Of the three Inspectors appointed, the British nominee alone, Mr. T. F. Wade, spoke Chinese, and the supreme direction of the Customs House devolved on him. He was summoned to the Peking Legation in the following year and his place was taken by Mr. H. N. Lay. The latter was confirmed in his post and became after the Treaty of Tientsin the first Inspector-General of the Customs Service, which in the course of these few years had been extended to the other open ports in China.

In 1859 Mr. Robert Hart was appointed Deputy Commissioner of the Canton Customs, and became Acting Inspector-General when Mr. Lay obtained leave of absence to proceed to England. Mr. Lay had elaborated a scheme for the purchase of revenue cruisers by China for the purpose of suppressing piracy, and in England bought eight vessels, which were dispatched to China under the command of Captain Osborne, R.N. His action was repudiated by the Chinese authorities and owing to the consequent disagreement Mr. Lay was forced to resign his post.

Mr. Robert Hart became Inspector-General of the Imperial Maritime Customs on November 30, 1863. The head offices were transferred to Peking from Shanghai, and a complete reorganization of the Service was introduced. Mr. Hart, who was knighted in 1882, retained the post of Inspector-General until his death on September 21, 1911. He had left Peking in May, 1908, nominally on leave of absence, but it was understood that he would not return to China to take up active work again.

For two years Sir Robert Bredon, Deputy Inspector-General, was Acting Inspector-General. He was succeeded in that capacity in April, 1910, by Mr. F. A. Aglen, who after the death of Sir Robert Hart received the substantive appointment of Inspector-General by Imperial Rescript on October 25, 1911.

In addition to collecting duties on imports and exports, the Imperial Maritime Customs are charged with the collection of (1) duties on the coasting trade in foreign-built bottoms, whether Chinese or foreign-owned; (2) tonnage dues on shipping; (3) transit duties exempting foreign imports from further taxation on removal inland; (4) likin (special levy in addition to the tariff) on foreign opium. They are also responsible for the lighting of the coast and some inland waterways, and at Shanghai they maintain a force of river police. All moneys collected by the Customs are paid to an official Customs Bank, attached to each office, which is under the control of a Chinese Superintendent.

By Imperial Decree of May 9, 1906, the Maritime Customs, which had hitherto been (more nominally than actually) under the Chinese Foreign Office, was placed under the direct control of a new Board specially created for this purpose — the Shuiwuchu or Revenue Council.

The Imperial Chinese Post Office, which grew up under the Imperial Maritime Customs and was formally recognized by Imperial Edict on March 20, 1896, was ordered on May 29, 1910, to be separated from the Service and to be put under the Ministry of Posts and Communications (Yuchuanpu), and the actual transfer was carried out in May, 1911.

The administration of the Customs Service is now divided into two main sections:–
(1) the Revenue Department, and (2) the Marine Department. The total number of employees is 7200, while as many more are employed in the Postal Service. The foreigners in the Service number approximately 1400 (representing twenty nationalities), of whom a little more than 50 per cent are British.


LIKIN

Likin (literally "contribution of a thousandth," i.e. one-tenth of 1 per cent) is a tax imposed upon goods in inland transit. Originally levied to meet the additional expenditure caused by the Taiping Rebellion, it was first imposed in 1853, but in 1861, when the Taiping and Mohammedan Rebellions were simultaneously in progress, the tax was extended throughout the country.

Likin stations (barriers) exist at all large towns and are placed along the main routes of commerce, both by land and water. An official tariff is in existence, but is practically ignored both by officials and traders, by the former in order to allow for "squeeze", by the latter in order to pay the enhanced rate (which would be imposed in any case) on a less amount of goods than is actually being cleared. This incidence of bartering and coming to terms in the matter of likin renders its imposition the more severe on railway lines, where the specified weight of goods is recorded and offers little opportunity of "adjustment" to the mutual convenience of likin official and trader. For this reason goods traffic on certain lines where likin is heavy at the towns en route (e.g. Shanghai-Nanking Railway) is seriously affected.

Guilds and regular traders meet likin charges by the payment of lump sums. The tax collected is generally 3 per cent at the departure station and 2 per cent at each inspection station. The amount collected within a province, however, is usually so arranged as not to exceed 10 per cent, but when goods are transported through several provinces it may reach from 15 to 20 per cent.

Foreign imports and exports, on payment to the Maritime Customs of half the import duty, plus the ad valorem tariff, are exempt from likin taxation in the course of transport.

Article VIII of the Mackay Treaty (Shanghai, 1902) states:– "The Chinese Government, recognizing that the system of levying likin and other dues on goods at the place of production, in transit and at destination, impedes the free circulation of commodities and injures the interests of trade, hereby undertake to discard completely those means of raising revenue with the limitation mentioned in section 8."

In exchange, the British Government agreed to a surtax not exceeding 12½ per cent on foreign imports and 7½ per cent on exports, plus a consumption tax on articles of Chinese origin not intended for export.

No attempt has yet been made to carry this clause into effect. It is noticeable, however, that one of the first measures of reform propounded by the successful revolutionaries of Wuchang in October-November, 1911, was the abolition of likin.

The Imperial Budget for 1911 estimated a revenue of Kuping Tls. 44,176,541 from the Likin Tax (= £5,931,900), but for 1912 the estimate had fallen to Kuping Tls. 24,389,337.


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