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The Embassy and the Canton System, episode 11

Fire and Silver

Howqua, by now the senior hong merchant and one of the richest men in the world, rides out a British stoppage of the trade, a fire that burns down the foreign quarter, and a decade in which China begins, for the first time, to pay out more silver than it takes in. The episode follows Howqua through the 1820s, from the Topaze affair to taking a young American into his business, and asks why the silver began to flow out of China and why it mattered to every farmer who paid taxes in it; here the sources disagree on whether opium or the world's silver supply was to blame, and the episode gives both sides their time. It leans heavily on the Company's records and scholars; no Chinese voice is heard directly.

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Nei Lingding Island Guangzhou China
Map drawn by Then and There on Natural Earth's public domain coastlines, rivers and lakes

Transcript

Charles Richardson
Charles Richardson. Unknown author, Public domain, via Wikimedia Commons

Last time, a new emperor took the throne in Beijing. The Jiaqing Emperor died in 1820, and his son came to the throne as the Daoguang Emperor, a man who called opium a great harm to the customs and morals of the people. Canton ordered that every foreign ship arriving at Macau be searched for the drug. Then a sailor on an American ship, Francis Terranova, was tried on her deck for the death of a woman in a boat, handed over, and strangled early one morning. The viceroy at Canton turned on the opium trade. He stripped a hong merchant of his rank for conniving in it, and ordered the ships caught with opium out of the port. They went only as far as the island of Nei Lingding, out in the wide mouth of the river. There the opium trade set up its floating warehouses, and it went on growing. Nei Lingding is where this episode begins, with a British warship, a crowd on the shore, and some liquor buried in the sand. This episode covers most of a decade, and on the surface very little happens in it. No embassy, no war, no new emperor. But underneath, almost everything that will matter later starts to move: who carries the money, who speaks for the foreigners, and who gets blamed when it goes wrong. Our guide through it is Wu Bingjian, by now the first of the hong merchants of Canton. The foreign traders called him Howqua, and so will we. The hong merchants were the handful of Chinese firms licensed to trade with the foreigners. Each foreign ship had one of them as its security merchant, who answered to the government for everything that ship and its crew did. That last part is the job. Whatever the foreigners did, it was the hong merchants who would be asked to explain it, and, quite often, to pay for it. And when the viceroy named the four merchants who must vouch for every foreign ship entering the port, Wu's name came first. Nei Lingding was an island about halfway between Macau and the river below Canton, and the Canton authorities had officially named it as a place where the King's warships were allowed to anchor. In December 1821 one of those warships was the frigate Topaze, under Captain Charles Richardson. She carried forty guns and three hundred men. A frigate was a fast warship, smaller than the great ships of the line, built for patrol and escort far from home. On the fifteenth of December the frigate sent her barge ashore at Nei Lingding for fresh water, and so that the seamen could wash their clothes. While they were at it, a large crowd of Chinese came at them, armed with clubs and with bamboo poles that had spears fixed at the end. From the ship, the first lieutenant could see his men were in trouble. He fired several shots from the frigate's guns and sent the boats away, manned and armed, to bring them off. The men sent to the rescue fought the crowd on the shore. When it was over, two Chinese were dead and several more wounded, and fourteen of the frigate's men were wounded as well. And how did it start? As the Company men heard it, local people had buried two jars of liquor in the sand for the seamen, and the officer in charge of the shore party had destroyed them. The attack, they supposed, was the revenge. Buried liquor on a beach, and now there were dead men. That is how small the sparks at Canton could be, and how quickly they caught. Captain Richardson moved first. He sent an address to the viceroy calling for redress for the attack on his men, and asking that an officer of the government be sent to Nei Lingding to look into what had happened. The viceroy was the emperor's governor general over Guangdong and Guangxi, the two southern provinces around Canton, the highest official in the city and the man every foreigner's business ultimately came before. Richardson's letter was translated into Chinese by Dr Robert Morrison, the Company's translator, and in the end it took officers from the Company's merchant ships to get it presented at the city gates, on the nineteenth of December. The next day the hong merchants called on the Company's men with the letter still unopened. They wanted to be sure it really came from Captain Richardson. Once they were assured it did, they carried it to the viceroy, who received it and let it be known he would send someone to Nei Lingding to investigate. Notice who did the carrying. Not a mandarin, not a soldier. The merchants. The hong merchants then suggested that the wounded seamen be sent ashore to be examined. Richardson declined. A mandarin could come on board the frigate if he liked, but there would be no official examination on board a King's ship. Dead men on a beach, a frigate that would not be searched, and a captain who would not give anyone up. Everyone at Canton had seen a standoff like this before, and everyone knew who usually paid for it.

Then the viceroy learned that two Chinese had been killed, and he instantly suspended the Company's trade. The East India Company held the British monopoly of the China trade, and its tea bought at Canton was one of the most valuable cargoes in the world, so stopping its trade struck at the centre of the whole business. The trading season at Canton ran through the autumn and winter, while the monsoon winds suited the voyage home, so a stoppage in December fell on the busiest months of the year. At the head of the Company's men in Canton was James Urmston, chief of the English factory. The Company's business at Canton was run by its Select Committee, a few senior merchants who bargained with the hong merchants and spoke for every British subject in the port. And the factories were not workshops; they were the row of foreign trading houses along the river, where the foreigners lived and kept their goods. The viceroy's demand was simple. Two lives had been taken, so two culprits must be surrendered, and the only Englishman he would deal with on it was the chief of the English factory. The Committee knew the rule well. In every case of homicide in China, they wrote, a life was required for a life, and where foreigners were concerned, the local government would go to almost any length to enforce it. Qing law did in fact tell murder apart from manslaughter and accident, but when a foreigner was involved, officials at Canton usually insisted that someone be handed over first and the details sorted out after. Urmston's answer was just as simple. He had no authority over a King's ship. Notice how the viceroy had picked his target. He ignored the frigate's captain and squeezed the Company's trade instead, knowing it was his hold over the warship. He meant it literally. The Topaze belonged to the Royal Navy, not to the Company, and her captain took his orders from the navy and the Crown, not from a committee of tea buyers. The viceroy did not accept the distinction. His edict asked why the nation's ships of war came to China at all, if not for the trade, and said the chief, "in making the men of war and the trade two concerns, talks very absurdly." And you can see how it looked from his side. One country, one chief, one set of ships. Why should it matter to him which office in London had sent which ship? The Committee was sure of one thing: the Chinese expected them to fold. A few weeks earlier the Americans had handed over Terranova, and the Committee believed it had "induced a supposition that we should finally accede to their unjust demands as easily as the Americans had done." They did not intend to be the next Americans. The edicts that followed grew harsher, until they were threatening the personal safety of the Company's own representatives. Then the translator brought word that the viceroy had searched the records for a precedent and found one: a ship's gunner back in 1784, who had been strangled. The message was hard to miss. The last time the British had been asked for a life, a man had died for it. Captain Richardson, for his part, stated that he would never surrender any of his people to Chinese justice. So the Committee left Canton. They withdrew down the river to an anchorage near its mouth, where they stayed with the Company's ships, and waited. It was the strongest card they held. Leave the factories empty, keep the ships outside, and let the tea pile up unsold in the warehouses of the hong merchants. This is where the hong merchants found themselves squeezed from both sides. A stoppage hurt them first and worst. Their money was tied up in goods only the foreigners would buy, and the government held them answerable for those same foreigners. On the viceroy's orders, the merchants tried to hand out copies of his edict among the commanders of the Company's ships, to split the ship captains away from the Committee. They also floated a way out that might have saved everyone's face. The British could simply say that two men had run away, and could not be found. The Committee rejected it on the spot. Think about what that offer tells you. The hong merchants did not need anyone to die. They needed a story the viceroy could write down, so that the file could be closed and the ships could load tea. The Committee was in no mood for stories. It even ordered the commander of the Repulse that if the forts fired on him, he was to "repel force by force." Yet Urmston knew the limits of his hand. The extreme step of quitting China altogether, he felt, would never be expected or approved by the Company's directors in London or by the British government. So both sides were bluffing, and both of them knew it. The question was only who would find a way to stop first.

In the end the way out sailed away. Captain Richardson wrote to the viceroy that, now the mandarins had fully enquired into the Nei Lingding affair, he intended to go to sea and rejoin his commodore, Sir Henry Blackwood. Blackwood commanded the Royal Navy's squadron in the East Indies, and the Topaze was one of his ships. The affair was beyond his management, he said. It would be laid before His Majesty's government in London, and looked into according to the laws of the land. And the Topaze left. The Committee then wrote to the viceroy that, with the frigate actually gone, there was nothing more they could explain. If he would lift the suspension, they were willing to return to Canton and take up their trade again. On the twenty second of February 1822 the viceroy issued an edict. It noted that the frigate had departed, that the men who had done the killing therefore could not be surrendered, and it allowed the trade to go on. Nobody had won the argument. The ship was simply gone, and the problem had gone with it. There is a dry kind of genius in that. The viceroy did not have to admit he had been defied, and the Committee did not have to admit it had given anything up. The frigate had simply removed the question. On the twenty fourth the Company's men left their anchorage, came back up the river with the Company's ships, and arrived at Canton on the twenty fifth. Two days later the Committee reported that the whole business had been brought to a favourable close, "without any compromise of the honor of the British Nation, or any unnecessary sacrifice of the valuable interests entrusted to our charge." That same day the Canton government issued a long edict of its own on the affair. The Committee called it full of gross misrepresentations, a striking example of how the local officials deceived the emperor and his ministers. So each side wrote down that it had won, and both went back to the tea. And the viceroy had let the trade go on without the two lives he had demanded for the dead men at Nei Lingding. It is worth holding on to that, because it is the pattern of the whole decade. Neither side gave way on the principle. Both of them gave way to the trade.

Howqua
Howqua. Unknown author, Public domain, via Wikimedia Commons

Then, at the end of that same year, Canton burned. Most of the city's houses and shops were built of wood and packed into narrow lanes, and a fire there could run for hours. On the first of November 1822, at half past nine in the evening, word was brought to the British factory that a great fire was raging a mile and a half to the north. The usual defence against a fire like that was a firebreak: pull down a line of houses ahead of the flames so they have nothing left to burn. A letter went to the viceroy urging him to do it. It was not done. By three in the morning it was obvious that the factories must go. By noon every one of them was a total loss, and by three in the afternoon the staffs had been driven to the boats, even from the open ground between the factories and the river. Think of that walk down to the water. Behind them, every foreign trading house in Canton was on fire. The Company's treasure, seven hundred and sixty thousand dollars, was loaded into boats and carried under guard to Puiqua's hong. The dollars were silver coins minted in Spain's American colonies, the money the whole China trade was counted in. Notice where the silver went for safety. Not to a government office, but to a hong merchant's house. The Company had also lost the greater part of the woollen cloth it had landed by the first of November, worth nine hundred and forty six thousand three hundred and fifty two taels. The Company shipped British woollens to Canton every season, often selling them at a loss, largely to keep the cloth makers at home on its side. A tael was the Chinese measure of silver by weight, a little over an ounce, and the unit in which the Qing reckoned its accounts and taxes. But the foreigners had boats to run to. The city around them did not. The fire had started a mile and a half away, in the city, and through the night it had worked its way down to the river. Something like seven thousand shops belonging to the outside merchants, the small traders of Canton, were destroyed. The Chinese losses were enormous, and among the hong merchants, Puiqua and Mowqua lost heavily. For the hong merchants, a fire was not only a loss of buildings, and their reckoning was still to come. Then came the paperwork, and here Howqua steps forward. After the fire, a petition was to go to the viceroy asking for relief. Howqua drafted one for the Company's men to send, and they threw it out, because its language was so cringing. Petitions to a Qing official were written in a fixed humble form. Even the richest merchant in the city wrote to the viceroy as a lowly subject begging a favour, and Wu knew that form better than any foreigner did. Yet when the viceroy reported to the emperor, the petition he quoted from the Committee was word for word the draft of Wu's that they had rejected. And, apparently moved by this display of abject submission, the viceroy gently suggested that the duties owed by the foreigners, one hundred and forty thousand two hundred and forty three taels, be remitted entirely. So the English got credit for a grovel they had refused to sign, and the offer of a large tax bill forgiven for it. As for the sums owed by the hong merchants, five hundred and twenty four thousand taels and more, half was to be paid the next year and the rest by instalments. For Howqua this was the job in miniature. The fire was nobody's fault. And still it was the hong merchants who found the words, made the foreigners sound humble, and carried the debt.

Bao Shichen
Bao Shichen. ReijiYamashina, CC BY-SA 3.0, via Wikimedia Commons

Now let me step back from the river, because something bigger than any fire was happening to China's money, and it would end up deciding the fate of everyone in this story. China ran on two kinds of money. Ordinary people lived in copper: wages, market prices and the price of a sack of rice were counted in copper coins, strung together by the hole in the middle. Silver, weighed out in taels, was for big trade and for the government. In normal times a tael of silver was worth a thousand copper coins. By the time Daoguang came to the throne, it took twelve hundred. By 1830 it took one thousand three hundred and sixty five, and it showed no sign of stopping. The value of silver was rising sharply, and as it rose, the exchange between silver and copper was skewing out of control. This was the root of the economic turmoil of the 1830s. Here is why a farmer in the hills, who had never seen a foreigner, felt it. The land tax was set in silver. The farmer sold his crop for copper. To pay his tax, he had to turn copper into silver, at whatever rate the market gave him. Over these years, the peasants of China saw the real weight of their taxes rise by nearly forty percent. Same tax on paper. Same field, same harvest. And a great deal more copper out of the same pocket every year. And it was not only farmers. Anyone who earned in copper and owed in silver, from a porter to a small shopkeeper, was getting poorer without anything in his own life having changed. There was something stranger still. For centuries China had been the world's largest net importer of silver, the place where the world's silver went to stay. Now, unexpectedly, it was sending silver out. You heard the flow turn around last time. The question is why it turned. Here the sources disagree. Since this question will end up shaping a war, it deserves a proper hearing on both sides. The first answer was given at the time, and it was simple: the foreigners were taking it. As early as 1820, a scholar named Bao Shichen had predicted that China's silver would vanish into foreign hands. Bao was one of the statecraft writers, scholars who worked on the practical problems of running the empire, from moving grain to selling salt. As the exchange rate climbed year after year, Bao's admirers came to see the whole crisis his way. It was the fault of foreign trade. And the opium trade itself had grown enormously, the imports you heard climbing last time, nearly four times over in a decade. Already by 1828, the opium coming in was worth more than all the tea the Company shipped home to England. The drug was sold for cash. The deals were struck in money changing shops in the foreign quarter, with the agents of Chinese wholesalers, and at the receiving ships the opium was taken out of its chests, which never left the ship, packed in mat bags and carried off in fast armed boats with crews of fifty to seventy men. Officials who denounced the traffic in public were quietly levying their own charges on it. One informer's report to the throne said that not less than several millions of sycee went beyond the seas every year. A memorial to the throne in these years made the same charge, that foreign ships came to the ports in the provinces under the pretence of trade, but really to buy up sycee silver. Sycee was silver cast into ingots, the form in which large sums moved inside China. Then the silver came full circle. The private traders paid the silver from their opium sales into the Company's treasury at Canton, in exchange for bills they could cash in London or in India, and the Company used that silver to buy its tea. A memorial was a formal report from an official to the emperor, the main way news and advice reached the throne. And the opium was there to explain it. From 1830, the opium sold off the Chinese coast not only paid for everything the English bought at Canton, it also covered the bills of exchange that financed the American trade. A bill of exchange was a written order to pay, bought in one place and cashed in another, so that merchants could move money without shipping coin. In other words, opium had become the thing that paid for the tea. And if the foreigners were paying for tea with opium, the argument ran, then China's silver was paying for opium. By the middle of the 1830s that was the consensus. The silver crisis was the opium crisis, and it had become the single most urgent problem facing Daoguang's government. Officials at Canton could see the ships but could not touch them. One official report admitted that "there are no means of preventing them from coming." Put all that together and the case looks strong. A drug was coming in by the ton, it was being paid for in silver, and the silver was leaving. That is one side. The other starts not at Canton but on the far side of the Pacific. For more than two centuries silver had poured into China, because the world wanted Chinese silk, porcelain and tea and China wanted little in return but silver. Most of the silver that came to China had been dug out of the mines of Spain's American empire, above all in Mexico. Americans alone carried a full third of Mexico's entire silver output between 1805 and 1834 across the ocean to China. Then Spain's colonies rose in revolution, and in the 1810s, as the mines were caught up in the wars, global silver production fell by nearly half. Mexico's war of independence broke out in 1810, and in the years of fighting that followed many of its mines were abandoned or flooded. And then in 1834, a change in American government money policy made silver more expensive for American merchants, so they switched abruptly to paying with bills of exchange, and far less silver came in. On this reading, the opium ships did not drain China's silver so much as the world simply stopped sending it. The tap was turned down at the source, half a world away, and then turned off. And if less silver arrives in a country that still needs it to pay its taxes, silver grows dearer against copper, whatever the opium ships are doing. On this view, opium is part of the story, but the larger part is a silver famine that started far from China and had nothing to do with it. So on one side, a drug pulling silver out through the back door. On the other, a world that had run short of silver to send in through the front. What nobody disputes is who paid. The farmer with his strings of copper paid, whatever the cause, and a court that believed the answer was opium would go looking for someone to stop.

James Matheson
James Matheson. Henry Cousins / After James Lonsdale, Public domain, via Wikimedia Commons

Back at Canton, the foreign community was changing too. Alongside the Company there was now a growing crowd of private British merchants, licensed by the Company to trade between India and China, and many of them made their money in opium. One of them was James Matheson, whose opium you met slipping out of the river to Nei Lingding. Matheson was a young Scot who had come out to the East to make his fortune in the country trade, the private trade between India and China. Private traders like him lived at Canton on the Company's sufferance, and several of them got round its rules by taking posts as consuls for other European countries, which put them beyond the Company's reach. In 1825 he took on the expense himself of bringing a printing press to Canton. In November 1827 that press gave the China coast its first commercial newspaper, a paper in English for the foreign traders. Its purpose was to share shipping news: which ships had come in, with what cargoes, at what prices. More quietly, it argued for the doctrine of free trade. Free trade meant that any merchant should be free to trade where he liked, with no chartered company holding a monopoly over him, and at Canton everybody knew which company that meant. The shipping news mattered as much as the opinions. For the first time in the history of the China trade, the foreign traders, Company and private alike, could get a fairly clear picture of what everyone else was doing. And laying the trade open like that helped to undermine the Company's control of it. A newspaper does one more thing. It turns the scattered people reading it into a public, with a shared set of complaints, and the complaint of this public was the Company. Information had been the Company's quiet advantage. Now a private trader with a printing press was giving it away, with his opinions attached.

The hong merchants had their own monopoly to defend, and it was leaking. Besides the hong merchants, Canton had the outside shopkeepers, smaller dealers who were meant to sell the foreigners only small wares, but who in practice did much more, often working under a hong merchant's name. In March 1828 the hong merchants told the Company's men that they wanted to stop the outside shopkeepers trading through their hongs. It made them a trifling profit for now, they said, but in the end it worked greatly against them. On the twenty fifth of March they presented articles of agreement, with lists of the main goods coming in and going out that no one but the members of the Co-hong would be allowed to deal in. The Co-hong was the hong merchants acting together as one body, answerable as a group to the government. They were also answerable for each other. When one hong merchant went bankrupt owing money to the foreigners, the rest had to pay his debts out of a common fund, so every failure fell on all of them. The Company backed the plan. It had seen the costs of the free for all, in its own words, "in the form of Bankrupt Hongs," and in shopkeepers competing with the hong merchants for the tea, which fell heavily on its commerce in the end. And then the hong merchants broke their own agreement almost at once. In April they explained why. The foreigners had come clamouring to their hongs, they said, and "we receiving the resentment and the clamour of the multitude are compelled to yield to the Barbarian Merchants" and let the old ways go on, so as to avoid their anger. Among the foreigners clamouring for the old ways were the Americans, who complained that the hongs were now too few to handle their business. And somebody had to be blamed for the attempt to shut the shopmen out. It was put down to the overmastering decision, as they put it, of the Company and of Howqua himself. Standing next to the Company had a price, and Howqua was paying it. The Americans took their side of it to the viceroy. His reply came down on the ninth of May, and it went against them on every point. Then on the nineteenth of July a fuller mandate from the viceroy split the trade in two. A list of the main goods was reserved to the hong merchants alone. All other goods could be traded by the shopkeepers, including the most important of them, silk piece goods, of which no ship could take more than eight thousand catties, which is to say eighty piculs, and always under the name of the ship's security merchant. A catty was a Chinese pound, a little heavier than an English one, and a picul was a hundred catties, about what a man could carry on a pole across his shoulders. Silk piece goods were woven silk cloth, after tea one of the most valuable things a ship could carry away from Canton. And there was a sting in it. The hong merchants were made responsible for any smuggling that happened in the shopkeepers' dealings. The Company's men saw exactly what had happened. The failure of the plan, they wrote, had "exposed their own weakness, proclaimed the strength of the opposite party," and won the hong merchants only fresh burdens and responsibilities on top of what they already carried. The monopoly was split. The responsibility was not.

And yet Howqua was doing very nicely indeed. In the trading season of 1830 to 1831, a teenage American named John Murray Forbes arrived in Canton. Americans had been trading at Canton since the 1780s, sailing out of Boston, New York and Philadelphia with silver, furs and ginseng to buy tea and silk. His older cousin, the American merchant John Perkins Cushing, was there for one more month, and in that month he introduced his young cousin and Howqua to each other. Cushing had spent most of his working life at Canton and had grown rich in close partnership with Wu, so this was not a casual introduction. It was a handover. Forbes took a part time job as English language secretary to Wu. Here is the first thing to know about his new employer. Howqua was adamant about keeping his own hands clean of the opium trade, and he demanded the same of his foreign partners. In a port floating on opium money, the first of the hong merchants would not touch it. The second thing is the money. The Americans in Canton reckoned Howqua's fortune in the early 1830s at twenty six million dollars. That made him one of the richest men alive anywhere, in any trade. And Wu came to trust young Forbes intimately, almost like a son. By the time Forbes turned eighteen, Wu had him chartering ships loaded with Wu's own cargoes of tea, in Forbes's name. Wu paid him a generous ten percent commission. For a boy his age that was a fortune in the making, built on the trust of a Chinese merchant old enough to be his grandfather. Forbes reckoned that he had more than half a million dollars of investment property under sail in his own name. "I soon found myself playing a man’s part," he wrote years later, with pride. Forbes would go home a rich man, and go on to become one of the great railway builders of the American Midwest. Think about what that arrangement was. A Chinese merchant who answered to the viceroy for the foreign ships in the river now had his own tea at sea under an American name, his money at work far from Canton. Whatever Canton did next, that part of his fortune was already at sea. He was not the only one deciding that the old arrangements would no longer do. The private traders had a newspaper and a grievance. The hong merchants had a split monopoly and the debts of their bankrupt colleagues. And the court had a silver crisis it was coming to blame on opium. And the Company had sat out one stoppage over the Topaze and lost its factory to the fire. Next time, the Company's men stop bargaining around the edges, and take on the whole Canton system at once.

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