China was a great power in the 18th century. Its commodities – most notably porcelain and tea – were prized throughout the rest of the world, and it possessed great naval strength. This afforded China with considerable leverage in its dealings with foreign merchants.
“The poverty of the lower ranks of people in China far surpasses that of the most beggarly nations in Europe. In the neighbourhood of Canton many hundred, it is commonly said, many thousand families have no habitation on the land, but live constantly in little fishing boats upon the rivers and canals.” (WN I.8)
By 1776, western merchants could only conduct trade with China through one port: Canton. Canton provided a unique nexus of qualities that made it ideal for both facilitating and controlling the flow of international trade. It had been one of the first ports used by foreign merchants, so its customs officials were experienced. Moreover, its close proximity to Macau, then a Portuguese colony, meant that Portuguese interpreters and administrators were readily available for translating and mediating disputes. Finally, it had access to inland supply routes and was home to a strong artisanal community suited to making ship repairs. At the same time, since access to Canton depended on the services of a trained pilot, administrators (nicknamed ‘Hoppos’) were able to guarantee the payment of port fees.
Trading at Canton required following an elaborate set of protocols. Ships would first dock near Macau and recruit a pilot. The pilot was required to report details of the ship and its contents to customs officials. Then, they would navigate the ship further upriver to Whampoa. The river was so shallow that movement was only possible using the ebb and flow of the tide. At Whampoa, the ship would be tied down, and an official from Canton would measure the ship to ascertain its required fees. Often, a performance would be given to impress the official, which commonly included music, the exchanging of gifts, the firing of cannons, and sometimes a skit performed by the crew members. Meanwhile, officers from the ship would meet with Chinese merchants to arrange the exchange of products. Once deals had been agreed, trading cargo, as well as select crew members, would then be transported via river boat between Whampoa and Canton itself.
This lengthy process conferred great power on the Hoppos and other administrators, who were keen to maintain both the imperial revenues and line their own pockets. As a result, corruption was rife in the Canton System. This took the form of private trade, conducted between crew and Hoppos, as well as bribes to officials. There was also a great degree of smuggling, often done simply by loading the contraband into the bottom of the river boat in plain view of officials.
Smith, however, took a dim view of these arrangements. He saw the Chinese economy as stagnating, both in terms of its aggregate size (what we today call GDP) and the living standards of its people, which Smith considered the real measure of the wealth of nations. Eventually Smith was proven right: after the invention of the steamship, Chinese authorities were no longer able to funnel international trade exclusively into Canton, nor control the flow of ships entering the Pearl Delta. In the 19th century, the British East India Company would force China to open its market to British goods at gunpoint in two Opium Wars.
Image: Forts Zeelandia and Provintia and the City of Tainan, courtesy of Metropolitan Museum of Art