A painting of foreign factories and trading stations located along Canton Harbor in China during the early 1800s. The city of Canton, capital of Guangdong province, is located on a river delta near the South China Sea. After the Opium War (1840–1842), the Treaty of Nanjing opened the port to foreign trade and ended the Canton system.

The Canton system was a complex of institutions and practices by which the Qing dynasty (1644–1911) rulers of China controlled, taxed, and facilitated the trade of foreigners at the southern port of Guangzhou, capital of Guangdong province, which the foreigners called Canton. The Canton system sometimes is referred to as cohong (Mandarin gonghang), meaning public or unified firm, but this properly refers only to the phase of the system from 1760 to 1771, when the state forced an amalgamation of all the licensed Chinese merchants into a single trading entity.

Canton and a few other ports were reopened to foreign trade, and to overseas trade in Chinese shipping, in 1684. Modest tariffs on imports and exports and “measurement” charges per ship were adapted from late Ming precedents. Direct official contact with foreigners was minimal. Maritime trade seemed too politically sensitive and potentially lucrative to turn over to already powerful high provincial officials, so special supervisors of maritime customs were dispatched from Beijing. Several of the early inspectors were from the Board of Revenue (Hubu), and Europeans came to call this official the hoppo. From the 1730s on, all were officials of the Imperial Household Department (Neiwufu). Statutory revenue quotas were kept low; by 1800 the surplus, which went straight to the Neiwufu, often was twenty times the quota, equaling the regular tax revenue of an entire province.

Having the government license a limited number of substantial merchants to manage an important and sensitive line of trade was common in China, and could facilitate trade and minimize disputes. For the government, this practice had the additional benefit of making formally powerless merchants responsible for keeping order in the marketplace and for collecting taxes. In 1720 the Canton officials sought to organize a hong, or combine of the principal firms to manage the rapidly growing trade, but backed down when the foreigners protested. European records for the 1730s and 1740s show as many as thirty firms trading with the foreigners in these years, with no clear hierarchy or organization among them. Each foreign ship had assigned to it a “security merchant” responsible for the foreigners’ good behavior and the payment of tolls on their trade. This practice received formal imperial approval in 1745.

The steady expansion of foreign trade at Canton from the early 1700s to 1820 or later did much to help integrate the early modern maritime world. It was driven above all by the newly found thirst for tea of peoples around the North Atlantic. All the tea consumed in the eighteenth-century West was Chinese. European buyers at Canton relied on their Chinese counterparts to deliver the quantities, qualities, and varieties ordered; if a batch was found deficient it could be returned for prompt repayment. The Chinese managed these deliveries through a series of market transactions, from cultivator to upcountry processor to wholesale merchant to licensed exporter in Canton. Until 1760 or later, 90 percent of the payment for tea and other exports was in silver. Silver imports plateaued thereafter, and continued growth of exports was covered by growing imports of Indian cotton, English woolens (transshipped to the northern and western reaches of the Qing Empire), and opium. Silk, so important in earlier Chinese exports, was less attractive to Europeans as new sources of supply emerged in Bengal, Persia, and eventually in Europe. China exported approximately 30,000 piculs (the Asian trade “hundredweight” of about 60 kilograms) of tea in 1720, 60,000 in 1740, 120,000 in 1765, and 240,000 in 1795.

Some imports and exports were less important economically but very significant in cultural history; for example, elaborate European clocks were much sought after by officials. Europeans at Canton bought large quantities of lacquer, furniture, and other decorative goods, and above all porcelain. Porcelain could be ordered in custom sets, including shapes never seen or used in China, from the great manufacturing center at Jingdezhen. In lively commercial streets near the foreign companies’ “factories” (warehouses and living quarters) in Canton, items could be custom-ordered, including family arms or Christian scenes on porcelain. The supplying and victualling of foreign ships and their movements up and down the river channels were very efficiently organized.

From the 1750s on, these remarkable arrangements ran into greater conflict, though trade continued growing. The English had increasing difficulty obtaining security merchants, who were the leading importers of clocks and other treasures for the court, which led court agents to take an unwelcome direct interest in their affairs. From 1755 to 1760 the English attempted to circumvent restrictions and private interest at Canton by trading at Ningbo in Zhejiang, slightly south of the mouth of the Yangtze River. The court and bureaucracy reacted decisively, stifling the Ningbo attempt and issuing regulations making Canton the only port for foreign trade, making licensed merchants there the landlords of the foreigners’ “factories” and responsible for every aspect of their conduct, forbidding foreigners to stay in China beyond the trading season, and forbidding Chinese to borrow from foreigners. Finally, all the licensed firms were to negotiate and trade as one unit, a gonghang (public firm,” Cantonese cohong). These changes gave the Chinese vastly increased negotiating leverage, and were hated by the foreigners. In 1771 some massive payments by the English and the efforts of one major Chinese merchant broke the cohong; Chinese merchants dealt with the foreigners as individuals thereafter. One collective practice that remained was the regular contributions by the merchants to a fund that aided merchants who got into debt.

Chinese merchants borrowed from the foreigners nonetheless. Their capital was largely locked up in the tea trade, with its long chains of credit to up-country suppliers. Some firms prospered, but several went bankrupt. Officials made conscientious efforts to arrange bankrupts to repay gradually, with the help of contributions by other merchants. For the foreigners, and especially for impatient Englishmen of the age of Adam Smith and a growing empire, the frustrations of the Canton system were emblematic of a corrupt, despotic China whose doors would have to be kicked down. The Canton system was abolished in 1842 by the Treaty of Nanjing ending the Opium War.

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