Paper Example on Canton Trade System

Introduction

For many centuries, the great empires in Europe and Asia hade trade relations. In an effort to advance trade activities, these empires conquered new territories to facilitate internal and external trade relations and networks. This interaction and advancement saw many powers come into conflict with each other and later, became threats to other areas. It is in this wave of advancement of trade and needs to control many areas that the scramble and partition of Africa arose. On the other hand, exploration and advancement in marine technology facilitated the discovery of newer lands which had not been accessed in the past. It also facilitated trade between countries and regions which had been separated by water bodies. In the midst of this wave of trade advancement, the Canton trade system developed in China between the mid 18th Century and mid 19th century as a means of controlling trade with western powers.

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The Origin of the Canton Trade System

The Canton trade system developed as a response to threats by western powers in China. From 1500 to 1800, world great empires interacted in terms of trade and advanced their prowess to other regions (Norwood, n.d.). China had traded with the outside world for many years before the development of the system. For example, camel caravans had been crossing silk routes in Central Eurasia transported trade commodities from China to Europe and the Middle East (Van Dyke, 2017). These activities went on peacefully for many years with no major conflict or suspicion arising between these powers. However, things started to change gradually from the 16th Century.

Starting from the 16th century, the interaction and trade activities had advanced in Europe and Asia to the great trading cities in South China. It is these developments that necessitated for the negotiation of rules that were acceptable by all powers in order to profit from the trade (Downs, 2014). In 1557, the Portuguese were able to lease the Macau region and this marked the onset of regulated trade in South China. It is this regulation that brought the birth of the Canton or "Old China" trade system. Chiefly, the decree issued by the Qing emperor that Canton was the only city free for foreign trade gave the onset of this system. The system had a number of regulations; restricting the foreigners (Westerners) access to China's interior ("Golden Ghetto: The American Commercial Community at Canton and the Shaping of American China Policy, 1784-1844," n.d.). However, they were given permission to conduct trade under the name of "tribute" to the Emperor of China.

Which Were the Parties Involved in the Canton System?

Canton is the only city in South China that westerners were allowed to trade in from the mid-1700s and the mid-1800s. Apart from the confinement in one city of all European traders, they were subjected to a number of rules by the Chinese administration (Norwood, n.d.). East India had for many years enjoyed a monopoly in the trade between China and the British. Later, the company made Canton (Currently known as Guangzhou) the major port in China where Chinese major commodities like silk, tea, rhubarb and species that were sought by westerners were exported through. The trade had three elements: the China trade between China and the Europeans; the Chinese trade with Southeast Asia and country trade of Europeans (Downs, 2014). All this trade was conducted from the city of Canton under the regulations provided by the Chinese administration. The central feature in Canton system was the Cohong.

The Cohong Merchants

The Cohong was a monopolistic guild of merchants. The merchants were authorized by the Chinese government to conduct trade with the European merchants. They operated foreign-trade firms in Canton on behalf of the Chinese central government (Downs, 2014. Among the many functions carried out by the Hong Merchants, they started the system of collective price-fixing. Furthermore, with the evolution in the Canton trade system, the merchants took the role of government agents. As agents of the Chinese government, they brought Chinese trade goods such as silk to the city of Canton. Additionally, they negotiated the prices for the specific goods and arranged for pilotage of the goods (Van Dyke, 2017). Every foreign vessel was expected to have at least one Hong merchant responsible for it and regulated all trade dealings by the vessel. Their positions strengthened the government regulation of foreign trade (Norwood, n.d.). Also, the merchants enjoyed a monopoly in a business transaction and acted as an independent agency of the government.

The Strategic Significance of Canton for Foreign Trade

Canton had strategic advantages that made it the most appropriate centre of foreign trade. The location and topography of Canton made it ideal for foreign investors to conduct trade at the city. Being a port, the monsoon winds had a major contribution in making Canton accessible by sea. The winds blew from southwest from June to September. This made it possible for ships to ride smoothly across the Indian Ocean to the South East China Sea. The winds stopped in October for four months, and during this time, the ships would stay in Canton. However, the trade was not without challenges. Despite the great profits expected and gained from the trade, the sailors faced the dangers of pirates and warships. For example, the East Indiamen, who had by far developed the biggest sailing, ships of the time, needed heavy guns for protection.

The Fall of the Canton Trade System

The Canton system of commercial exchange came to an end with the china's loss in the Opium war (1839-42). With the many regulations by the Chinese administration that directed the trade system, the British traders began to chafe from it in the 19th century. Two factors made the British chafe from the trade. First, the monopoly enjoyed by the East India Company was abolished in 1834. Furthermore, there was an influx of private investors and foreign trade merchants into India ("Canton Trade and The Hong Merchants System," n.d.). The British became reluctant of shipping into China so much silver and alternatively, they preferred exporting Opium into China in exchange for Chinese trade goods such as silk. The trade of Opium resulted in economic and social disruption in China. The efforts by China to stop the trade of opium resulted in the first Opium War between Britain and China. The victory of Britain in the war resulted to the abolishment of Canton System ("Canton Trade and The Hong Merchants System," n.d.). Eventually, the system was replaced with five treaty ports which allowed foreigners to work and trade whenever they wished outside Chinese Jurisdiction.

Conclusion

In conclusion, the Canton system of exchange developed in China as a response to the influx in the number of traders in South China. The system, which developed during the reign of Qing Emperor saw Canton as the only free trading city for traders, all trading activities in the city were controlled by a series of regulations from the Chinese administration. The strategic position of Canton city as a port in China has access to it by sea. With the advancement in sailing ship at the moment, Canton was accessible by sea. This was despite the challenges and threats from pirates and warships. Eventually, the rise of opium trade resulted in a conflict that brought the tragic end of the commercial exchange system in China. In the years that followed, foreign trade was permitted and access into the interior of China and other regions was not restricted.

References

The Canton Trade and The Hong Merchants System. (n.d.). Retrieved from https://www.library.hbs.edu/hc/heard/canton-trade.html

Downs, J. M. (2014). Opium Transforms the Canton System. The Golden Ghetto, 105-140. doi:10.5790/hongkong/9789888139095.003.0006

The Golden Ghetto: The American Commercial Community at Canton and the Shaping of American China Policy, 1784-1844. (n.d.). The SHAFR Guide Online. doi:10.1163/2468-1733_shafr_sim060130047

Norwood, D. A. (n.d.). China Trade | Encyclopedia of Greater Philadelphia. Retrieved from https://philadelphiaencyclopedia.org/archive/china-trade/

Van Dyke, P. A. (2017). The Canton Trade, 1700-1842. Oxford Research Encyclopedia of Asian History. doi:10.1093/acrefore/9780190277727.013.127