The Canton System (1757–1842) served as a means for China to control trade with the west within its own country by focusing all trade on the southern port of Canton (now Guangzhou). Known in Chinese as the Yī kǒu tōng shāng (一口通商, "Single port commerce system") the policy arose in 1757 as a response to a perceived political and commercial threat from abroad on the part of successive Chinese emperors.
From the late seventeenth century onwards, Chinese merchants known as Hongs (háng, 行 ) managed all trade in the port. Operating from the Thirteen Factories located on the banks of the Pearl River outside Canton, in 1760, by order of the Qing Qianlong Emperor, they became officially sanctioned as a monopoly known as the Cohong. Thereafter Chinese merchants dealing with foreign trade (known as yángháng (洋行, literally "ocean traders") acted through the Cohong under the supervision of the Guangdong Customs Supervisor (Yuèhǎi guānbù jiàn dù, 粵海關部監督), informally known as the "Hoppo", and the Governor-general of Guangzhou and Guangxi.
Although trade between China and the West had a long history via the Silk Road, international trade was relatively insignificant in terms of economic impact until Portuguese ships arrived on China's southern coasts in 1522. They were soon followed by other European traders, eager to buy Chinese silk and porcelain, and later tea. Trade increased rapidly: between 1550 and 1600 Europeans bought an average of 50 tons of silver's worth of Chinese products; between 1600 and 1650 this increased to 115 tons per year. This trade relationship, where Europeans paid for Chinese products with silver, and silver alone, formed the trade paradigm upon which the Canton System was built.
At the start of his reign, the Kangxi Emperor (r. 1661–1722) faced a number of challenges, not the least of which was to integrate his relatively new dynasty with the Chinese Han majority. The Manchu Qing had only come to power in 1644, replacing the Ming dynasty. Support for the previous rulers remained strong, particularly in the south of the country. Kangxi twice banned all maritime trade for strategic reasons, to prevent any possible waterborne coup attempt. Several rebellions took place, including one led by Ming loyalist Koxinga and separately the Rebellion of the Three Feudatories, which led to the capture of Taiwan in 1683. Once the rebellions had been quelled, in 1684 Kangxi issued an edict:
"Now the whole country is unified, everywhere there is peace and quiet, Manchu-Han relations are fully integrated so I command you to go abroad and trade to show the populous and affluent nature of our rule. By imperial decree I open the seas to trade." 
Hǎiguān (海关), or customs stations, were subsequently opened at Canton, Xiangshan County (Zhuhai and Zhongshan) and Macau (Aomen) in Guangdong Province; Foochow (Fuzhou), Nantai (Southern Fuzhou) and Amoy (Xiamen) in Fujian Province; Ningpo (Ningbo) and Dinghai County (Dinghai District) in Zhejiang Province; and Huating County (Huating Town, Shanghai), Chongque (No longer exists) and Shanghai proper in Jiangsu Province. One year later in 1685, foreign traders received permission to enter Chinese ports.
|Number of Ships||4||1||2||2||4||1|
|Black Tea (piculs)||7,194||8,000||8,000||5,000|
|Green Tea (piculs)||6,151||1,450||550||1,400|
|Raw Silk (piculs)||28||250|
|Woven Silk (bales)||11,074||6,000||7,000||7,500|
|1An alloy of copper, nickel and zinc||source: Gao (2003)|
The Qing Court under Kangxi set up a trading company in Canton in 1686 to deal with Western trade known as the Yánghuò Háng (洋货行, literally "Ocean Trading House"). This dealt with both imports and exports with sub-offices responsible for taxes and import/export declarations respectively. When a ship arrived or departed, the Chinese merchant involved would visit the Ocean Trading House to pay any taxes due. This set up became the basis for the later Thirteen Factories through which all foreign trade would be conducted. Although he now had the foreign trade situation under control, Kangxi's liberal attitude towards religion led to a clash between Chinese and Christian spiritual authority. After Pope Clement XI issued his 1715 papal bull Ex illa die, which officially condemned Chinese religious practices, Kangxi expelled all missionaries from China except those employed in a technical or scientific advisory capacity by the Qing Court. Thereafter a growing climate of xenophobia and suspicion towards all foreigners on the part of the Chinese scholar-bureaucrats responsible for administering the empire took over.
Implementation of the Cohong
In 1745, Kangxi's grandson the Qianlong Emperor ordered his court to implement changes to the Ocean Trading House system. Thereafter a local Chinese merchant stood as guarantor for every foreign trading vessel entering Canton Harbour and took full responsibility for the ship and its crew along with the captain and supercargo. Any tax payments due from a foreign trader were also to be guaranteed by the local merchant. With permission from the authorities, in 1760 Hong merchant Pan Zhencheng (潘振成) and nine others hong specialising in the western trade joined together to become the intermediary between the Qing government and the foreign traders. The role of the new body would be to purchase goods on behalf of the foreigners and deduct any taxes and duties payable for imports and exports; at the same time, according to Guangdong customs records (粤海关志, Yuèhǎi guān zhì),they established a new harbour authority to deal with tribute from Thailand and handle pay for the troops involved in trade as well as manage domestic maritime trade in the South China Sea. Henceforth, the Cohong possessed imperial authority to levy taxes on the foreign merchants as they saw fit.
With the Cohong in place as a virtual monopoly, import/export prices became fixed and left no room for individual negotiation. While this gave Qing officials greater control over foreign trade, it proved to be a major restriction on the traders themselves whose many protests over the new system fell on deaf ears.
When foreign traders began to submit complaints about their dealings in Canton directly to Beijing in the 1750s, the emperor and his officials became alarmed at this breach of normal protocol and realised that something had to be done to control the situation. The Qing court's previous laxity had effectively allowed a coterie of Chinese merchants and local officials to take over foreign commerce in the southern port according to their own best financial interests. One of the fundamental tenets of traditional Chinese diplomacy prohibited contact with Beijing except in the case of tributary envoys from other states. Although the foreign merchants knew of this restriction, they had to balance a breach of etiquette against the risks of seeing their substantial investments in China destroyed by bribery and corruption. Englishman James Flint, a long-term East India Company supercargo and a fluent speaker of Chinese, became the focus of the impetus for change.
see also: James Flint
In 1757 the Qianlong Emperor banned all non-Russian ships from the ports of northern China. Thereafter all such commerce was to be conducted via a single port under what became known in as the Canton System (In Chinese: Yī kŏu tōngshāng (一口通商 literally, "Single port commerce system"). During Qianlong's reign Qing foreign trade policies had a political aspect largely based on real or imagined threats from abroad; historian Angela Schottenhammer suggests that although the single port trading policy arose in part from lobbying by officials and Chinese merchants, it was more likely triggered by the activities of Flint in what became known as The Flint Affair (Hóng Rènhuī Shìjiàn, 洪任辉事件). Flint had been repeatedly warned to remain in Canton during the trading season and not to venture north in search of commercial opportunities. Despite this, back in 1755 Flint, together with Company director Samuel Harrison, sailed north to explore possibilities for trade in Zhejiang. In 1759, he again journeyed north to file a complaint in Ningbo over corruption amongst the officials in Canton. He had hoped that his criticisms of the current system would usher in a new era of free trade but instead, not only did his plan to open up the ports of Zhejiang fail, the Qing authorities reacted by imposing further restrictions on foreign trade. Worse still, Flint found himself deported to Macau where he was imprisoned between December 1759 and November 1762. The new rules, known as the Vigilance Towards Foreign Barbarian Regulations (Fángfàn wàiyí guītiáo, 防范外夷规条) or Five Counter-Measures Against the Barbarians (Fáng yí wŭ shì, 防夷五事) contained the following provisions:
- 1) Trade by "foreign barbarians" in Canton is prohibited during the winter.
- 2) "Foreign barbarians" coming to the city must reside in the foreign factories under the supervision and control of the Cohong.
- 3) Chinese citizens are barred from borrowing capital from "foreign barbarians" and from employment by them.
- 4) Chinese citizens must not attempt to gain information on the current market situation from "foreign barbarians"
- 5) Inbound "Foreign barbarian" vessels must anchor in the Whampoa Roads and await inspection by the authorities.
The First Opium War
A seemingly insatiable western demand for tea from China towards the end of the 18th century caused a significant deficit in the British balance of trade. The Chinese had little interest in Western goods and would only accept silver in payment. This spurred the East India Company to sell opium grown on its plantations in India to independent traders who shipped it on to China for sale for payment in silver.[vague] China prohibited the importation of this opium, but the traders persisted, which led to the First Opium War.[further explanation needed] The traders/British Empire won this war.
Following the signature of the 1842 Treaty of Nanking, Shanghai, Amoy (Xiamen), Ningpo (Ningbo) and Foochow (Fuzhou) all opened to foreign trade thereby eliminating Canton's former monopoly advantage. In 1859 Canton's trade moved to a new site on the reclaimed sandbank of Shaming Island, a short distance west of the former factories. By then much of the foreign trade with China had shifted to the by then British colony of Hong Kong (acquired under the Treaty of Nanking), and to the northern ports, with their advantage of proximity to Beijing as well as the Grand Canal and the Yellow River, both vital arteries in the internal trade of Qing China. By 1866, only 18 foreign firms still had offices in Canton while there were only 60 foreign residents excluding British Indians and tidewaiters (who boarded boats as part of custom's inspections) employed by Sir Robert Hart's Imperial Maritime Customs Service.
By the time Hong Kong became a full-fledged British Colony, many of the merchants would be led by a newer generation of western hong merchants. Many of these companies would become the back bone of the young Hong Kong economy.
Notes and References
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