English East India Company, in China

In the late seventeenth century the East India Company shifted its attention in East Asia to China. Tea, silk, and porcelain were the main exports from China; silver, Bengal cotton, and, eventually, opium (traded indirectly) were the company's principal exports.

Tea had been introduced to Europe in the middle of the seventeenth century. After 1704 consumption became popular in England. To meet the public's demand the company sought regular access to China but faced resistance from the Chinese government. Disinterested in overseas trade, the government was prepared to tolerate it as long as trade was controlled and confined to the empire's periphery. By 1713 the company had secured access to Canton, although it attempted trade at other ports until 1757 when the Chinese restricted all foreign trade to Canton.

The company conducted its trade under a structure known as the Council of China. The China voyages carried five or six merchants who formed a single board or council under a chief merchant to manage all aspects of the trade during the trading season. The trading season extended from June to February, although between the 1730s and 1757 two councils existed, to foster competition. The merchants returned with the ships. In 1770 the company decided to form a permanent council. Merchants were to remain for one year in Canton, where the company had been given permission to establish a permanent factory, or trading station, in 1762.

To pay for the tea, the ships carried mainly silver. The Chinese were little interested in European manufactures. To ensure that the trade was conducted as orderly as possible, the Chinese devolved administration of all aspects of the trade to a group of merchants or Hong, organized into a guild or Co-Hong. The first Hong had been active foreign traders, but after 1730 their income depended solely on the European trade at Canton. They became brokers and bureaucrats, intermediaries between European merchants and imperial Chinese authorities. The potential for misunderstanding was great.

The company's position concerning European competitors at Canton and smugglers at home was strengthened by the Commutation Act (1784), reducing the tea duty in Britain from 125 percent to 12.5 percent. In 1757 the company imported 1.3 million kilograms (3 million pounds) of tea, in 1800, 10.5 million kilograms (23.3 million pounds), and in 1833, 15.8 million kilograms (35 million pounds). To end the drain of silver financing this boom the company responded ingeniously to two developments: British private traders' domination of the Asian country trade by the 1780s, and the company's territorial expansion in India, giving it control over the opium-producing areas of northeastern India.

Chinese imports of opium, which had been used mainly for medical purposes, were banned in 1800 as demand for the drug for recreational purposes increased. But immense profits could be made by encouraging this unlawful habit. Mutually advantageous business relationships involving the company, private British merchants (to whom the company outsourced the shipping and sales of the illicit commodity), corrupt Chinese officials, and Chinese merchants evolved. By the 1820s opium outstripped cotton as the most profitable export from India to China and became essential to the financing of the tea trade. The contraband traders exchanged their profits (bullion) for bills of exchange issued by the company in Canton (payable in London or Calcutta) enabling British traders to recycle their gains securely and the company to pay for its tea.

This virtuous circle was short lived. In 1813 the company was stripped of its trade monopoly with India and in 1833 the China trade was opened to all. Trade between Britain and China became a matter of interstate relations. These quickly soured resulting in the Opium War of 1839–42, the Treaty of Nanjing, and the forced opening of China on terms highly advantageous to Western powers and detrimental to China.

see also China, First Opium War to 1945; English East India Company (EIC).

BIBLIOGRAPHY

Chaudhuri, K. N. The Trading World of Asia and the English East India Company 1660–1760. New York: Cambridge University Press, 1978.

Cheong, Weng Eang. Hong Merchants of Canton: Chinese Merchants in Sino-Western Trade. Richmond, Surrey: Curzon Press, 1997.

Fairbank, John King. Trade and Diplomacy on the China Coast: The Opening of the Treaty Ports 1842–1854. Cambridge, MA: Harvard University Press, 1953.

Morse, Hosea Ballou. The Chronicles of the East India Company, Trading to China 1635–1834. Cambridge, MA: Harvard University Press, 1926–29.

Mui, H.C. and L.H. Mui. The Management of Monopoly: A Study of the East India Company's Conduct of its Tea Trade 1784–1833. Vancouver: University of British Columbia Press, 1984.