CHAPTER XI.

TRADE UNDER THE TREATY OF NANKING.

Trade the sole motive in all British and American dealings with China -- Simplicity of this trade -- Chief staple imports and exports -- Data for any review of Chinese trade -- Mutual alarm caused by excess of imports -- Peculiar conditions of British trade -- Entailing a loss of over 30 per cent, yet steadily maintained -- System of barter -- Consequent impossibility of clear accounts -- And ignorance of position at any given moment -- Trade also hampered by traditions of the East India Company -- Such as that of keeping large stores on hand -- Gradual improvement on these methods -- Advantages of landed investment in China -- Perceived and acted on by the Jesuits -- And later by foreign merchants -- The American trade -- Similarity of currency -- Excess of Chinese exports met by shipments of specie -- And later by credits on London banks.

Whatever may be said of that of other nations, the intercourse of Great Britain and the United States with China, from the earliest period to the latest, whether in peace or war, has had no other object than trade between the nations, and therefore all the steps in that intercourse must be judged in their relation to the promotion of international commerce. War and diplomacy, geographical exploration and reforms, even literary researches and mutual instruction, being all ancillary to the main purpose, it seems fitting to consider as briefly as may be what manner of thing it was which set, and still keeps, all these auxiliary forces in motion.

From its first introduction till now one feature has characterised the Chinese foreign trade, and that is its simplicity. Both on the export and the import side a few staple commodities have made up its whole volume, and in this respect the statistics of to-day differ but little from those of fifty years ago. The leading Chinese imports at the conclusion of the first war were: From India, opium and raw cotton, to which has been added, since the development of steam factories, cotton yarn. From England, plain bleached and unbleached cotton goods, cotton yarn, some descriptions of woollens, iron and lead, account for nearly the whole value. The trade from the United States and the continent of Europe in those days did not greatly affect the general aggregate. The exports of Chinese produce were at the period in question almost confined to the one article--tea. Subsequently silk grew into importance, and soon exceeded in value the great speciality of China. Rhubarb was a commodity on which, next to tea, the Chinese affected to lay much stress, on the ground that foreigners were dependent upon it for the preservation of their health, and that stopping the supply might offer an easy means of coercing them. But the article never assumed any important commercial value. Sugar, camphor, and matting were also among the exports, the last named being much in demand in the United States. It is only of recent years, however, that anything like assorted cargoes of produce have been sent away from the Chinese ports. The trade has passed through many vicissitudes, has had its periodical ebb and flow, but has on the whole been prosaically progressive. And this has been especially the case with the imports of British and other Western produce.

It would be instructive to review the circumstances of the Chinese trade at successive stages of its progress, and to note the grievances of merchants and manufacturers at different epochs and the obstacles to commercial development as they were felt from time to time. It would be more interesting to do this were it possible to discriminate between permanent causes and temporary accidents. But it is not always what is of the most lasting importance that makes the strongest impression upon those who are actively engaged in the struggle for life. The trader does not greatly differ from the world at large in his love of a whipping-boy--that is to say, in the common tendency to attribute mischances to objective rather than to subjective causes. Prosperity, like good health, is, to those who enjoy it, its own sufficient explanation, the normal reward of the merit each one takes to himself as a matter of course. Adversity, on the other hand, is assigned to demonic origin, its victims being martyrs to the powers of nature or the hostile combinations of men. For these reasons it would be as difficult to gather from their own accounts what were the real helps and what the real hindrances to the traders' progress, as to draw general conclusions on the state of agriculture from conversations with working farmers. The commercial circular is a familiar product of the modern era of open trade. It undertakes to record the actual state of markets and to give the reasons why they are not otherwise. If one were to circumnavigate the globe and compare the ordinary run of these reports issuing from the great emporia, one feature would be found common to them all--it is the bogy. Everything would be for the best--but for certain adverse influences. It may be the vagaries of some Finance Minister or Tariff Commission, the restraint of princes, war, pestilence, or famine--inundations here and droughts there; but a something there must always be to explain away the moral accountability of the individual traders, manufacturers, or planters. China and Japan have seldom been without such fatalistic obstacles to commerce. For many years the rebellion was the _bête noire_ of merchants, then the mandarins, and smaller rebellions; the scarcity of specie at one period, at another the superabundance of cheap silver. In Burma the King of Ava stood for long as the root of all commercial evil. In Japan the Daimios and the currency served their turn. India is never without calamities sufficient to account for perhaps more than ever happens there. All such drawbacks, however, though real enough as far as they go, are never exhaustive, and seldom even reach to the core of the problem. They are as atmospheric phenomena, to be observed, taken advantage of, or provided against, and are extremely interesting to the individuals immediately affected by them. But as regards the general course of trade, such incidents are but as storms on the surface of the deep oceanic currents: it is the onward sweep of the great volume of traffic that alone possesses public interest. Of the circumstances which influence the course and direction of that beneficent current a collation of the utterances of traders would yield but a refracted account. So that in order to appreciate the progress of commerce we have to fall back on the unadorned columns of statistical tables, which themselves leave something to be desired on the score of completeness.[20]

With regard to certain periods of the China trade we have rather full data, as, for instance, in the decade following the war, when the working of the trade exercised the minds both of British merchants and of their Government in a degree which has scarcely been equalled since. The same may be predicated of the Chinese Government also, and, as has been observed in a previous chapter, it was an interesting coincidence that during that critical period it was the self-same grievance that pressed on both sides--namely, the insufficiency of the Chinese exported produce to pay for the goods imported. The effect of this on the Chinese Government was to excite unfeigned alarm at the steady drain of silver required to pay for the excess of their imports. On the British side the grievance came home to the manufacturers in the form of the incapacity of the Chinese to take off an adequate quantity of the products of English looms. The remedy proposed from the two sides was thoroughly characteristic of their respective traditions. On the Chinese side it was negative, obstructive, prohibitory, and absolutely vain. On the British side the proposal was positive, expansive, and in accord with the spirit of modern commerce. The Chinese remedy was to forbid the export of silver and the import of opium, which, being the article in most urgent demand, was usually paid for in bullion or in coined dollars. The English remedy was to stimulate the export of Chinese produce. But here a paradox stands in the way of a clear perception of the position. The British trade was being carried on at a loss, which some of the merchants estimated at 33 per cent on the round venture. That is to say, manufactured goods were sold in China at a loss of 15 to 20 per cent, and the proceeds, being invested in Chinese produce, realised a further loss on sale in England of 17 or 20 per cent.

To account for this unremunerative trade being carried on voluntarily year after year, it is necessary to remember the great distance of the two markets in the days before the introduction of steam and the shortening of the voyage by the piercing of the Suez Canal. We have to allow also for the gambling or speculative element which animates all commerce, and the "hope-on-hope-ever" spirit without which no distant adventure would ever be undertaken. The rationale of the phenomenon was reduced to a very simple expression by Mr Gregson, who, when asked by the Committee of the House of Commons if he could explain "the singular proceeding of continuing the trade for a series of years with perpetual losses on it," replied: "The manufacturers reason that as the losses have been considerable the exports will fall off, and therefore they may export again. They are generally deceived, because their neighbours taking the same view, the exports are kept up and the loss continues."

The case thus bluntly stated by Mr Gregson was not such a temporary phase as might naturally have been concluded. The same remarkable features continued for many years afterwards more or less characteristic of the China trade, so that had another commission been appointed to consider the subject they would have been surprised to find the old riddle still awaiting solution, Why so regular and simple a trade should be carried on apparently without profit? The data of supply and demand being well ascertained, prices remunerative to the merchant might have been expected to arrange themselves automatically. Further explanations seem, in fact, required to supplement Mr Gregson's, and some of these must appear somewhat whimsical and farfetched to the general reader. The peculiar method in vogue of stating accounts was not perhaps without its influence in obscuring the merchants' perceptions of the merits of their current operations. The trade being virtually conducted by barter, the sale of a particular parcel of goods did not necessarily close the venture. A nominal price was agreed upon between buyer and seller for the convenience of account-keeping, but this almost always had reference to the return investment in tea or other produce. So that British goods were regarded as a means of laying down funds in China for the purchase of tea, while tea was regarded as a return remittance for the proceeds of manufactured goods, and as a means of laying down funds in England for further investments in the same commodity for shipment to China. The trade thus revolving in an eternal circle, having neither beginning nor end, it was impossible to pronounce definitely at what particular point of the revolution the profit or loss occurred. A bad out-turn of goods exported would, it was hoped, be compensated for by the favourable result of the produce imported, and _vice versâ_, _ad infinitum_. Thus no transaction stood on its own merits or received the unbiassed attention of the merchants. Their accounts did not show the actual amount of loss or gain on a particular invoice, the formula simply recording the price at which the venture, as an operation in exchange, "laid down the dollar." The par value of that coin being taken at 4s. 4d., the out-turn of a sterling invoice which yielded the dollar at any price below that was of course a gain, or anything above it a loss. But the gain or loss so registered was merely provisional. The dollar as such was never realised: it was but a fiction of the accountant, which acquired its substantial value only when reinvested in Chinese produce. The final criterion, therefore, was how much the dollar invoices of Chinese produce would yield back in sterling money when sold in London, and how that yield compared with the "laid-down" cost of the dollar in China. But even that finality was only provisional so long as the circuit of reinvestment was uninterrupted.

Merchants were not called upon to face their losses as they were made, nor could they realise their profits as they were earned. Long before one year's account could be closed, the venture of one or two subsequent years had been launched beyond recall, and the figures of the newest balance-sheet related to transactions which, having already become ancient history, were but a dry study compared with the new enterprises bearing the promise of the future and absorbing the whole interest of the merchant. Business was thus carried on very much in the dark, the eyes of the trader being constantly directed forward, while past experience was not allowed its legitimate influence in forming the judgment. A blind reliance on the equalising effect of averages was perhaps the safest principle on which such a commerce could be carried on. The merchants themselves were wont to say that after drawing the clearest inferences from experience, and making the most careful estimates of probabilities, the wisest man was he who could act contrary to the obvious deductions therefrom. Business thus became a kind of concrete fatalism.

The China trade was, moreover, much hampered by certain traditions of the East India Company which long clung to its skirts. One of these relics of conservatism, transmitted from the days of the maritime wars, was the principle of storing up merchandise at both termini. It was an understood thing that the Company should never keep less than two years' supply of tea in the London warehouses, and long after the Company ceased to trade stocks of that commodity often amounted to nearly twelve months' consumption. Similarly, manufactured goods were accumulated, whether of set purpose or from the mere force of habit, in the China depots. The merchant seemed to have inherited the principle of holding merchandise for some ideal price, locking up his own or his constituents' capital, incurring cumulative charges on commodities which were all the while deteriorating in value, and eventually perhaps selling under some financial or other pressure. A certain satisfaction seems to have been derived from the contemplation of a full "go-down," as if the merchandise there stored had been realised wealth instead of a block to such realisation.

That primitive state of affairs is now a thing of the past, since the progress of the world during the last thirty years has revolutionised not the foreign trade of China, but the peculiar system on which it was carried on. The distribution of capital and the services of Exchange banks exploded many conservative doctrines. The first merchants who, perceiving the necessity of reforming the habits of the trade, boldly resolved to "sell and repent" on the arrival of their merchandise, were pitied by their more antiquated neighbours, and thought to be likely to stand much in need of repentance. But in their case wisdom has been justified of her children.

This bald sketch of the trade customs inherited from the East India Company, though typical, is by no means exhaustive. There were, both before and after the treaty of Nanking, many byways and specialities and exceptions by which the vicious circle was broken with happy results to the individuals. Indeed at all points there have been collateral avenues to fortune, contributory enterprises more profitable than those which were purely commercial. The various ways of taxing commerce, as by insurance, freightage, storage, lighterage, packing, financing, &c., have afforded, on the whole, safe and good returns on capital. In countries where family improvidence is prevalent, and where capital is scarce and dear, as is the case generally in the Far East, both the opportunity and the inducement to invest in real estate are afforded to those who are in a position to take advantage of them,--for the same conditions which bring property into the market provide the tenants for the new proprietors. By following with that singleness of purpose which distinguishes all their proceedings the line of financial policy so obviously suggested by this state of things, the Jesuits, Lazarists, and other religious orders have gradually accumulated in every locality where they have settled a very large amount of house property in and around populous centres. By this means they have laid whole communities of natives, and even foreigners, under permanent tribute to the Church, and have thereby rendered their missions independent of subventions from Christian countries. Many of the foreign merchants, following this worldly-wise example, have in like manner rendered themselves independent of mercantile business.

The American trade was for the most part exempt from the drawbacks as well as the advantages of the circuit system. The similarity of currency helped to simplify American commerce with China, and though from an early period the United States exported manufactures to that country, these went but a little way in payment for the products which they imported from China. Hence large shipments of specie had to be made to purchase their cargoes. No statistics exist, but Mr Hunter incidentally mentions one ship carrying amongst other cargo $350,000, and three other vessels carrying between them $1,100,000, which may be taken as typical of the course of trade prior to the abolition of the East India Company's monopoly. This mode of paying for produce was succeeded in after-years by credits on London banks, drafts under which supplied the most convenient medium of remittance to shippers of opium and other produce from India. The circuit was trilateral, and to a considerable extent remains so.

I. TEA.

Causes of bad state of trade -- Failure of hopes built on "free" trade -- Efforts for improvement -- Select Committee of 1847 -- Excessive duties in England -- Irregularities in valuation -- Annual consumption at this time -- Revenue from the duties -- Beginnings of the India tea trade -- Mr Robert Fortune -- Lord William Bentinck, Governor-General, introduces tea culture, 1834 -- Assam Company founded 1839 -- Fortune's missions to China -- Tea-plant indigenous in India -- Progress of scientific culture -- Vicissitudes of the trade -- Ultimate success of the India and Ceylon trade -- An example of Western as against Eastern methods -- Tea-planting introduced in Ceylon -- Rapid increase there -- Why China has been supplanted in the market -- Ingenuity and enterprise of the Indian planters -- A victory of race and progress -- Obstructive measures of the Chinese Government.

There was an apparent inconsistency in the outcry for larger quantities of Chinese produce to balance the trade, while the small quantity that did come forward could only be sold at a loss. The explanation may partly be found in the "boom" which naturally ensued on the emancipation of the China trade from the oppressive monopoly of the East India Company, and in the disappointment which, no less naturally, succeeded the boom. To some extent also the onerous imposts laid upon the principal article of export--tea--by the British Exchequer might be held responsible for the anomaly; for the English duties were a mechanical dead-weight on the trade, impeding the free play of the other economic factors. There was a practically unlimited supply of tea in China, and a growing demand for it in England, and yet some £2,000,000 in specie was annually sent away from China as the balance of trade. How to commute that amount of silver into tea for the benefit of both countries might be said to be the problem before the merchants and their Governments.

The only means which appeared to them feasible to effect this object was to lower the British import duty. Among many interesting particulars concerning the actual state of the Chinese trade at that time, we get from the report of the Select Committee of the House of Commons on "Commercial Relations with China," of 1847, an insight into the difficulties, such as in our day can scarcely be imagined, which stood in the way of any reduction of the tea duties.

On the opening of what was called free trade with China--"free," that is to say, of the East India Company's monopoly--the duty was 96 per cent _ad valorem_ on all teas sold at or under 2s. a pound, or 100 per cent on all above that price. These _ad valorem_ duties worked iniquitously for both the Government and the merchants, the Customs levying the higher rate when the lower was appropriate, and the merchants redressing the injustice in their own fashion when occasion served. An attempt was made to remedy this regrettable situation by the reduction of tea to three classifications, and the conversion of the _ad valorem_ duties into specific duties ranging from 1s. 6d. to 3s. per pound on these classifications. The arrangement was still found unworkable, and the most glaring irregularities were common. The same parcel of tea, absolutely uniform in quality, divided between London and Liverpool, would be assessed in one port on the lower, and in the other on the higher, scale of duties, and the Customs would grant no redress, though the overcharge might be ruinous to the trader.

This impossible state of things was remedied in 1836, when the duties were converted to one uniform rate of 2s. per pound on all teas. Subsequently 5 per cent was added to this, so that the duty in 1847 was 2s. 2¼d. The object to which the Government inquiry was primarily directed was to gauge the effect on the consumption of tea of the raising or lowering of the duties, on which depended the ultimate retail price. The admission of competition in the Chinese trade in 1834 had the immediate effect of reducing the "laid-down" cost of tea, which promptly reacted upon the consumption of the article in England. But as the import duty remained unaltered, while the prime cost of the tea was much lowered, the Exchequer derived the whole benefit from the increased consumption.

The annual consumption at that time in Great Britain was 1 lb. 10 oz. per head, or 46,000,000 lb. in total, and it was shown that in every instance where the duty was lower the consumption was proportionately greater. In the Isle of Man, where the duty was 1s. per pound, the consumption quickly rose, when the restriction on the quantity allowed to be imported there was removed, to 2 lb. 10 oz. per head. In the Channel Islands it was 4 lb. 4 oz. per head. "In Newfoundland, Australia, and other colonies the consumption is very much larger per head than it is in this country." The Australian colonies have maintained to the present day their pre-eminence as tea-drinkers, their consumption averaging no less than 10 lb. per head. Consumption in Russia and the United States is estimated at a little over 1 lb. per head of the population.

The colonists have always been the most intelligent consumers of the article. Forty years ago they substituted good black teas for the pungent green which had supplied the wants of the mining camps and primitive sheep stations, and within the last few years they have shown their appreciation of the flavoury Ceylon leaf by taking every year a larger quantity in relative displacement of the rougher qualities which come from India. The "geographical distribution" of the taste for tea presents some rather curious facts. In the United Kingdom, for example, dealers find that Irish consumers demand the best quality of tea. The United States remained faithful to their green tea long after that description was discarded in Australia; and even when black tea came to be in part substituted, it was not the Ceylon or Chinese Congou, but the astringent Oolong kinds, such as are so largely supplied from Japan, which met the taste of American consumers.

The cost price of tea had been so much reduced by the abolition of the East India Company's monopoly that the fixed rate of duty, instead of being equivalent, as it had been when originally fixed, to 100 per cent on the value, was estimated to average 165 per cent on Congou tea, which was much beyond what the Legislature intended when the tariff was decided; for while they reckoned on getting a revenue of £3,600,000, the increase in the quantity had been so considerable that the yield of the duty had risen to £5,000,000. The arguments and the evidence in favour of reducing the duties were unanswerable from every point of view. Yet the utmost which the advocates in 1847 seem to have hoped for was that it might be reduced to 1s. per pound, which they considered would entail a temporary loss to the revenue. But we see in our day that the Government draws nearly £4,000,000 from the article on a tariff rate of 4d. per pound, while the consumption per head of population has risen to 6 lb., or a total of 235,000,000 lb. per annum.

While the mercantile community were thus straining after means of developing the tea trade from China there were causes at work, of which they seemed to have no suspicion, which have completely revolutionised that trade, reducing China to a quite secondary position as an exporter. Among the witnesses examined before the Committee of 1847 there was one who may almost be said to have held the fate of the Chinese tea trade in his hands, though probably he himself was unaware of it. This was Mr Robert Fortune, curator of the Physic Gardens at Chelsea, who had travelled in some of the tea districts of China as agent of the Horticultural Society of London, being also commissioned by the East India Company to investigate the processes of the growth and manufacture of tea in China, and to bring to India seeds and plants as well as skilled workmen to manipulate the leaves. The idea of cultivating tea in India had long been entertained by the Company. The plant itself had been found indigenous in Upper Assam twenty years before Fortune's day, but no practical notice was taken of the discovery until 1834, when the Government of India resolved to attempt the culture of the leaf. The scheme received its first embodiment in a Minute of Lord William Bentinck, the first Governor-General of India,[21] in 1834. The plan he laid down was to "select an intelligent agent, who should go to Penang and Singapore and in conjunction with authorities and the most intelligent of Chinese agents should concert measures for obtaining the genuine plant, and actual cultivators." The state of affairs in China at the time did not favour the prosecution of such an enterprise. The native resources of India, however, began at once to be utilised. The Assam Company, the pioneer of tea-culture, was established in 1839, and continues its operations to our own day. After the treaty of peace and the successful establishment of trade at the new ports in China, Lord William Bentinck's ideas were realised in the two missions of Fortune, who succeeded in conveying to India nearly 20,000 plants from both the black and green tea countries of Central China. Although, judging from subsequent experience, India might by her unaided efforts have developed this great industry, yet it can hardly be doubted that the enterprise of the practical Scottish gardener applied the effective stimulus which raised tea-growing to the rank of a serious national interest. Hybridisation between the imported Chinese plants and those of indigenous growth proceeded actively, no less than one hundred varieties being thus produced. Planters now consider that the native plant would have served all their purposes without any intermixture, but probably nothing short of practical experience would have persuaded them of this.

The vicissitudes of tea-growing in India have been so sharp that they would form of themselves an interesting episode of industrial history. Mania and panic alternated during the experimental stages of the enterprise, with the inevitable result of wholesale transfers of property, so that of the early pioneers comparatively few were destined to enjoy the ultimate reward of their sacrifices. Difficulties of many kinds dogged the steps of the planters, among these being the unsatisfactory land tenure and the supply of labour. The mortality among the imported coolies was for many years so heavy that the Government was eventually obliged to interfere with severe regulations, which were imposed in 1863. These and other difficulties being successfully grappled with, the prosperity of the industry flowed as smoothly as the Niagara river below the Falls, until the supply of tea from India and Ceylon had completely swamped that from the original home of the trade.

The supplanting of Chinese by Indian tea in the markets of the world--for even Russia is now an importer of the latter--is an interesting example of the encroachment of Western enterprise on the ancient province of Eastern habits. These are of course only general terms, for from all such comparisons Japan must be either excluded or classed rather among the foremost of the progressive nations than among her nearest geographical neighbours. When tea-cultivation was once shown to be "payable" in British Indian territory the energy of the Western people was quickly brought to bear on the industry, and through several cycles of success and failure, and over the dead bodies, so to speak, of many pioneers, the production available for and distributed in the English market has steadily grown from nothing up to 154,000,000 lb. per annum.

The cultivation of tea was introduced at a much later period into Ceylon, where it most opportunely took the place of coffee, which had been ruined by disease, and already the deliveries of tea from that island press hard on that from India itself, having reached 90,000,000 lb., or more than half of the Indian supply. The rate of progress in Ceylon has been most remarkable. In 1883 the most experienced residents in the island considered themselves sanguine in predicting that the export of tea would eventually reach the total of 20,000,000 lb.--it being at that time under 1,000,000 lb. While the products of India and Ceylon have thus been advancing by leaps and bounds, the import from China has dwindled down to 29,000,000 lb.,--about one-tenth part of a trade of which forty years ago she held an easy monopoly.

How has such a gigantic displacement been brought about? Primarily, no doubt, from the vigorous following up of the discovery that tea could be profitably grown in India. But beyond that it is a victory of race over race, of progress over stagnation, of the spirit of innovation and experiment over that of conservative contentment. The Indian planters have made a personal study of all the conditions of tea-culture, have selected their plants, invented machinery to do all that the Chinese have done for centuries by manipulation, have put ample capital into the enterprise, and used the utmost skill in adapting their product to the taste of their customers. Moreover, they have by dint of advertising all over the world, attending exhibitions, and many other devices, forced their commodity into markets which would never have come to them. There was, on the other hand, no one interested in the success of Chinese tea-growers, whose plantations are in the interior of the country, subdivided into garden-plots, with no cohesion among their owners for aggressive purposes. For though the Chinese can and do combine, it is usually in a negative sense, to obstruct and not to promote action, whereas the tea-growers of India have shown examples of intelligent co-operation of the aggressive and productive kind, not wasting power in seeking to impede rivals, but devoting their whole energies to the prosecution of their own business. And they have their reward.

The short-sightedness of the Government has no doubt contributed to the decline of the Chinese tea trade, through the excessive duties of one kind and another which they have continued to levy on the article from the place of growth to the port of shipment. It is fair to remember, however, that their exactions bear most heavily on the low grades, which, notwithstanding, continue to be shipped in quite as large quantities as is desirable in the interest of consumers; while the superior qualities, which are quite able to bear the taxes, have almost ceased to be imported into Great Britain, the whole supply finding its way to Russia. That country has long been celebrated, and justly so, for the excellence of its tea, for which fantastical reasons are wont to be given. The true reason is very simple. Russian merchants purchase the fine Chinese teas for which no market can now be found in England, the public taste having run so exclusively on the product of India and Ceylon that a cup of good Chinese tea has become a luxury reserved for those who have facilities for obtaining the article outside the ordinary channels of trade.

II. SILK.

Balance of trade adjusted by Shanghai silk trade -- China the original silk country -- Silk chiefly exported from Canton -- Advantages of the new port of Shanghai -- Disease attacks the silkworm in Europe -- Shanghai supplies the deficit -- Efforts in Italy and France to obtain healthy seed from China and Japan -- Disease overcome by M. Pasteur -- Renewed prosperity of the European producers shared by the Chinese.

Within six years of the time when the merchants of England were earnestly seeking a remedy for the crying evil of the balance of trade against China, the whole difficulty had disappeared through the operation of natural causes. The great factor in bringing about the change was the rapid growth of the trade of Shanghai, and more particularly the large exportation of raw silk from that port. "The noble article," as the Italians fondly call it, already in 1853 represented a larger value than the tea exported; the turn of the tide had come; the balance of trade had shifted; and in a very few years silver flowed into the country more copiously than it had ever flowed out.

Of all the materials of commerce silk is perhaps the most classical. A fibre so lustrous, so pure, and so durable, has been the desire of all nations ancient and modern, and the peculiar interest excited by its humble origin enveloped the subject in myths and legends during the earlier intercourse between Europe and Asia. China was known to the ancients as the cradle of sericulture, deriving, in fact, from its most famous product the name Serica, by which it was known to the Greeks and Romans. There is not a silk-producing country in the world which is not directly or indirectly indebted to China for the seed of the insect, if not also for the introduction of the white mulberry-tree, upon the leaves of which the caterpillar is fed. Though rivals have sprung up in many countries both in Europe and in Asia, China has not lost its reputation, or even its pre-eminence, as a producer of the article.

The vicissitudes of the silk trade and cultivation would afford more varied interest than the comparatively simple annals of the displacement of tea. Though the subject falls outside the scope of the present work, the changes that have taken place in Chinese commerce cannot be intelligently followed without some reference to the animated competition which has been going on for more than forty years among the great silk-producing countries. The first in rank among these was Italy, France following at a considerable distance. The wants of Europe had been mainly supplied during centuries by the product of these countries, India and the Levant and some others contributing also their share. Japan had been growing silk for her own use during all the time that intercourse with the rest of the world was prohibited by severe laws, and she came later into the field as an exporter.

The quantity obtained from China previous to the opening of the five ports was all derived from the southern provinces, and was exported from Canton. In nothing was the pre-eminence of the new port of Shanghai over its older rival destined to be more marked than in the development of the silk trade. Its position within an easy canal journey of the richest silk-growing districts in the whole empire gave to the northern port advantages which were promptly turned to account in co-operation between the foreign and the native merchants, resulting before many years in the growth of a healthy and most satisfactory trade. The supply of the article having up to that time been regulated by the home demand, the entry of an outside customer had a very stimulating effect upon the Chinese growers. Some years elapsed before the product of the newly opened districts could be fully tested and appreciated by the manufacturers in Europe. This time was well employed by the Chinese cultivators and traders in maturing their arrangements for bringing larger supplies to the foreign market, suited to the requirements of the new purchasers, as far as they were understood. The supply and demand had progressed evenly, admitting of good profits to both sides, until a stage was reached when the trade and cultivation were both ready to respond to a new stimulus, and just then the new stimulus was applied.

Disease began to attack the silkworms in Europe; the production of Italian and other silk became precarious, and inadequate to the demands of the manufacturing trade. Into the vacuum thus created supplies from China were ready to pour in, and highly remunerative prices awaited them. The export from Shanghai for the year 1856 was very large, and the result encouraged growers and native and foreign merchants to put forth still greater efforts in the following year, when the shipments from that port reached 90,000 bales, worth probably £10,000,000 sterling. These shipments, thrown on the market during the money panic of 1857, resulted disastrously, but the impetus given to the trade continued to be felt during many subsequent years.

The Italians in the meanwhile, driven to their wits' end to save so valuable an industry, tried first to obtain healthy seed from China and Japan. The first experiments being unsuccessful, the eggs having hatched during the voyage, steamers were specially chartered and carefully fitted up with conveniences for preserving the precious commodity. Experiment was also made of sending the seed by the caravan route through Siberia to save the risk of premature incubation. In fact, Jason's quest of the Golden Fleece was scarcely characterised by more varied adventures than that of the Italians--the French also joining to a certain extent--after a healthy breed of silkworm. After many years of anxious and almost desperate efforts, some success was obtained in introducing Chinese and Japanese seed into Europe; but the produce of the exotic seed also in time became liable to attacks of the parasite, and it was not till science came to the aid of the cultivators that the true remedy was finally applied, and an important item in the national wealth of Southern Europe was saved. It was M. Pasteur who eventually furnished the means of detecting in the egg the germ of the destructive parasite; so that by sorting out the infected eggs and destroying them the race was purified. Thus the way was opened for the restoration of European culture to more than its pristine prosperity; for the many valuable lessons which the cultivators learnt in the school of their adversity have stood them in good stead now that fortune has again smiled upon them.

Notwithstanding the revival of European silk-culture, the silks of China and Japan and other Eastern countries still hold their own in the Western markets, and continue to form an important constituent of the export trade of the Far East.[22] The European markets to which they are consigned are no longer indeed English, but French, German, American, and others, the last forty years having witnessed a revolution in the silk industries of Great Britain, and a virtual transference of the old industries of Spitalfields, Norwich, Macclesfield, and other districts to her manufacturing rivals.

III. OPIUM.

The largest and most interesting Chinese import -- Peculiarities of the trade -- Nominally contraband -- But openly dealt in -- Ships anchored in the Canton river -- Or near the trading-ports -- Wusung -- Opium cargoes discharged into old hulks before entering Shanghai port -- Importance of the opium traffic as a factor in foreign intercourse -- The opium clippers -- The opium market liable to much variation -- Piracy -- The clippers were armed -- Occasionally attacked -- Anomalous position -- Alcock's aversion to the opium traffic -- His reasons -- Experience at Shanghai modifies his opinion -- The trade being bound up with our Indian and Chinese commerce -- No attempt to stop it could do other than aggravate the mischief -- Still wishes to see the trade modified or abolished -- Despatch to Sir J. Bowring -- His desire to devise some scheme -- His last proposal of 1870 -- Ambiguous attitude of the British Government -- Inheritors of the East India Company's traditions -- These forbad the carrying of opium in their ships -- Question of legalising the traffic -- 1885 Chinese Government trebles the import duty and asks the help of the Hongkong Government for its collection.

The most interesting constituent of trade in China has always been opium, especially since the product of British India was so much improved and stimulated by the Government as practically to supersede in the China market the demand for the production of other countries. The value of the opium imported exceeded that of all other articles, the figures being returned at $23,000,000 and $20,000,000 respectively for the year 1845. As the exports of Chinese produce were at that time estimated at $37,000,000, it is evident that opium played a most important part in the adjustment of the balance of trade; and as it came from India and the returns from it had to go thither, opium and raw cotton, which also came from India, formed the pivot of exchange. As the opium was paid for in silver and not by the barter of produce, it was natural to charge it with the loss of the silver which was annually shipped away from China, and which was assumed to reach the amount of £2,000,000 sterling, though that seems to be an exaggeration.

The trade in this commodity differs from all ordinary commerce in the conditions under which it has been carried on, and in the sentiments which have grown up concerning it. Until the treaty made by Lord Elgin in 1858 the importation of opium had been for many years nominally contraband, while yet the trade in it was as open as that in any other commodity and was as little interfered with by the Government. Laxity and connivance being the characteristics of Chinese officialdom, there would be nothing extraordinary even in the official patronage of a traffic which was forbidden by the State, so that it would not be safe to infer from the outward show what the real mind of the responsible Government was on that or any other subject. The necessity of saving appearances, an object always so dear to the Chinese heart, necessitated a special machinery for conducting the trade in opium. Before the war, as has been already said, the ships carrying the drug anchored at certain rendezvous in the estuary of the Canton river, where they delivered their goods on the order of the merchants who were located in Canton or Macao. The vessels also made excursions up the coast, where they had direct dealings with the Chinese, the master acting as agent for the owners. And when the northern ports were opened, after the treaty of Nanking, the opium depot ships were stationed at convenient points on the coast in the vicinity of the trading-ports. The most important of these stations was at Wusung, on the Hwangpu river, nine miles by road from Shanghai. There were sometimes a dozen, and never less than half-a-dozen, hulks moored there, dismantled, housed-in, and unfit for sea. The supply was kept up in the earlier days by fast schooners and latterly by steamers, which in the period before the treaty of 1858 discharged their opium into these hulks without surveillance of any kind, and then proceeded up the river to Shanghai with the rest of their cargo, which, though often consisting of but a few odd packages, was taken charge of by the custom-house with the utmost punctilio, while the valuable cargo of opium was ignored as if it did not exist.

The opium trade was a ruling factor in the general scheme of foreign intercourse and residence in China. The postal communication, for example, on the coast and between India and China was practically dependent on it; for, being a precious commodity, it could afford to pay very high charges for freight, and the opium clippers could be run regardless of expense, as will be more fully described in the Chapter on "Shipping."

The high value of the article influenced the conduct of the trade in a variety of ways, one in particular being that the vessels carrying it had to go heavily armed. The coast of China before the war and after swarmed with pirates, to whom so portable an article as opium offered an irresistible temptation. The clippers on the coast were usually small schooners from 100 to 200 tons burthen, and though with their superior sailing powers they could always take care of themselves in a breeze, they would have been helpless in a calm unless prepared to stand to their guns. It was sometimes alleged by those opposed to the traffic that these vessels were little better than pirates themselves, inasmuch as they were forcing a trade prohibited by the laws of the empire, and were armed to resist the authorities. The opium-carriers were not unfrequently attacked by pirates, sometimes captured and destroyed by them; but there never seems to have been any interference or complaint on the part of the Government, even when prompted thereto by British consuls. Nevertheless it was an anomalous state of things, though one far from unusual in the first third of the century, that European vessels should ply their trade armed like privateers.

The attitude of Consul Alcock towards the opium trade was, from the earliest days of his consulship in Foochow until his final departure from China in 1870, one of consistent aversion, so decided, indeed, that in some of the arguments adduced in his Foochow reports against the trade the conclusion somewhat outran the premisses, as he in after years acknowledged by marginal notes on those earlier despatches:--

A trade prohibited and denounced alike as illegal and injurious by the Chinese authority constitutes a very anomalous position both for British subjects and British authorities, giving to the latter an appearance of collusion or connivance at the infraction of the laws of China, which must be held to reflect upon their integrity and good faith by the Chinese.

No small portion of the odium attaching to the illicit traffic in China falls upon the consular authorities under whose jurisdiction the sales take place, and upon the whole nation whose subjects are engaged in the trade; and the foundations of the largest smuggling trade in the world are largely extended, carrying with them a habit of violating the laws of another country.

The opium is of necessity inimical and opposed to the enlargement of our manufacturing trade.

That which has been said of war may with still greater force apply to the illicit traffic in opium, "It is the loss of the many that is the gain of the few."

Whichever way we turn, evil of some kind connected with this monstrous trade and monopoly of large houses meets our eye.

In order to do justice to the agents in the traffic, he adds in the same report on the trade for 1845--

While the cultivation and sale of opium are sanctioned and encouraged for the purposes of revenue in India, and those who purchase the drug deriving wealth and importance from the disposal of it in China are free from blame, it is vain to attempt to throw exclusive opprobrium upon the last agents in the transaction.

These were the impressions of a fresh and presumably unprejudiced mind taking its first survey of the state of our commercial intercourse with China. They were reflections necessarily of a somewhat abstract character, formed on a very limited acquaintance with the actualities of a trade which did not yet exist in Foochow. A few years' experience at the great commercial mart of Shanghai widened the views of the consul materially, and showed him that there was more in this opium question than meets the eye of the mere philosopher. A confidential report on the subject made in 1852 treats the matter from a more statesman-like as well as a more businesslike point of view. In that paper he does more than deplore the evil, and while seeking earnestly for a remedy, fully recognises the practical difficulties and the danger of curing that which is bad by something which is worse.

The opium trade [he observes in a despatch to Sir John Bowring] is not simply a question of commerce but first and chiefly one of revenue--or, in other words, of finance, of national government and taxation--in which a ninth of the whole income of Great Britain and a seventh of that of British India is engaged.

The trade of Great Britain with India in the year 1850 showed by the official returns an export of manufactures to the value of £8,000,000, leaving a large balance of trade against that country. A portion of the revenue of India has also to be annually remitted to England in addition, for payment of the dividends on Indian stock and a portion of the Government expenses. These remittances are now profitably made _viâ_ China, by means of the opium sold there; and failing this, serious charges would have to be incurred which must curtail both the trade and the resources of the Indian Exchequer.

In China, again, scarcely a million and a half of manufactured goods can find a market; yet we buy of tea and silk for shipment to Great Britain not less than five millions, and the difference is paid by opium.

A trade of £10,000,000 in British manufactures is therefore at stake, and a revenue of £9,000,000--six to the British and three to the Indian Treasury.

Which of these is the more important in a national point of view,--the commerce, or the revenue derived from it? Both are, however, so essential to our interests, imperial and commercial, that any risk to either has long been regarded with distrust and alarm, and tends to give a character of timidity to our policy and measures for the maintenance of our relations with China--the more disastrous in its results, that to the oriental mind it is a sure indication of weakness, and to the weak the Chinese are both inexorable and faithless.

That the opium trade, illegal as it is, forms an _essential element_, interference with which would derange the whole circle of operations, must be too apparent to require further demonstration.

Reference to the practical details of the colossal trade in which it plays so prominent a part shows that it is inextricably mixed up with every trading operation between the three countries, and that to recognise the one and ignore the other is about as difficult in any practical sense as to accept the acquaintance of one of the Siamese twins and deny all knowledge of his brother.

_No attempt of the British Government to stop or materially diminish the consumption could possibly avail_, or be otherwise than productive of aggravated mischief to India, to China, and to the whole world, by giving a motive for its forced production where it is now unknown, and throwing the trade into hands less scrupulous, and relieved of all those checks which under the British flag prevent the trade from taking the worst characters of smuggling, and being confounded with other acts of a lawless and piratical nature affecting life and property, to the destruction of all friendly or commercial relations between the two races. It is also sufficient to bear in mind that it is a traffic, as has been shown, which _vitalises_ the whole of our commerce in the East; that without such means of laying down funds _the whole trade_ would languish, and its present proportions, colossal as they are, soon shrink into other and insignificant dimensions; that the two branches of trade are otherwise so _inextricably interwoven_, that no means could be devised (were they less essential to each other) of separating them. And finally, although Great Britain has much to _lose_, China in such a quixotic enterprise has little or nothing to _gain_.

Notwithstanding all these weighty considerations, Mr Alcock never swerved in his desire to see "the opium trade, with all its train of contradictions, anomalies, and falsifying conditions," modified, if not done away with. In a careful despatch to Sir John Bowring dated May 6, 1854, reviewing our whole position in China, he thus expresses himself:--

Any modification for the better in our relations must, I believe, begin here. We must either find means of inducing the Chinese Government to diminish the evil by legalising the trade, or enter the field of discussion ... with a stone wall before us.... The legalisation would go far to diminish the obstacle such an outrider to our treaty creates; but far better would it be, and more profitable in the end in view of what China might become commercially to Europe, America, and to Great Britain specially, if the Indian Government abandoned their three million sterling revenue from the cultivation of opium, and our merchants submitted to the temporary prejudice or inconvenience of importing silver for the balance of trade.

Nearly twenty years afterwards we find Mr Alcock still engaged on the problem how to diminish the trade in opium without dislocating both the trade and finance of India, his last act on retiring from China in 1870 having been to propose a fiscal scheme of rearrangement by which the opium trade might undergo a process of slow and painless extinction.[23]

The attitude of the British Government towards the opium trade has always been ambiguous. Succeeding to the inheritance of the East India Company as the great growers of opium, they had to carry on its traditions. These had led the Company in its trading days into some striking inconsistencies, for though they cultivated the poppy expressly for the China market, employing all the intelligence at their command to adapt their product to the special tastes of the Chinese, they yet refused to carry a single chest of it in their own ships which traded to China. By this policy they thought they could exonerate themselves in face of the Chinese authorities from participation in a trade which was under the ban of that Government. The importation of the drug was thus thrown upon private adventurers, and whenever the subject was agitated in Canton and Macao, none were so warm in their denunciations of the trade as the servants of the East India Company. This was notably the case with Captain Elliot, who, after leaving the Company's service and becoming representative of the Crown, never wearied in his strictures on the opium traffic.

The question of legalising the traffic had frequently before been considered by the Chinese Government,[24] and it was fully expected that this was the policy which would prevail in Peking in 1837. The pendulum swung to the opposite side, namely, that of prohibition, and legalisation was not adopted until 1858. But once adopted, the idea made such progress that in 1885 the Chinese Government made a successful appeal to the British Government to be allowed to treble the import duty authorised in 1858, and that the Colonial Government of Hongkong should render them special assistance in collecting it.

IV. CHINESE EXPORTS.

Efforts of the consuls to stimulate trade -- Alcock's work at Foochow -- His despatches -- Exhibition of 1851 -- Exhibits of Chinese produce sent by Alcock.

The continuous efforts made by the consuls in the first decade after the treaty to stimulate the action of foreign merchants in laying hold of all the opportunities offered to them for extending their connections with the Chinese trade ought not to be passed over without notice. It was the burden of Consul Alcock's labours while in Foochow to gather information from every source, to digest it as well as he was able, and to lay it before his countrymen; and if he, in his despatches to the plenipotentiary, sometimes reflected on what seemed to him the apathy and want of enterprise of the merchants, that must be set down to a laudable zeal to make his office fruitful of benefit to his country. The same spirit animated his proceedings in Shanghai. The demand made for exhibits for the Great Exhibition of 1851 found Mr Alcock and his lieutenant Parkes eager to supply samples of Chinese products of every kind likely to be of commercial interest. On applying to the mercantile community of Shanghai for their co-operation in collecting materials, he found them not over-sanguine as to the results of such an effort, and in his despatch of December 1850 to the plenipotentiary he remarks that "the British and foreign residents in Shanghai appeared to feel that the impossibility of gaining access to the great seats of manufacture or the producing districts for raw material placed them in too disadvantageous a position to do justice either to themselves or the resources of the empire, which could only be very inadequately represented, and in a way more calculated to mislead than instruct." "The conclusion," he goes on to say, "at which the mercantile community has arrived has gone far to paralyse all exertion on my part." Nevertheless, with the restricted means at his disposal, he set to work to collect specimens of Chinese produce and industry and to transmit them to the Board of Trade for the use of the Commissioners. Of objects of art he sent a great variety in bronze, inlaid wood, porcelain, soapstone, and enamels, and the fancy articles which have since acquired such great reputation in the world that dealers in European and American capitals send out commissions every year to make extensive purchases. Colours used by the Chinese for dyeing purposes in twenty shades of blue, silk brocades, and many valuable products of the Chinese looms, were well represented, and the commoner utensils, such as scissors, needles, and razors, some of which were within the last few years specially recommended in consular reports to the notice of English manufacturers, as if the suggestion were made for the first time. Of raw material, samples were sent of hemp, indigo, and many other natural products; and when it is considered how eager the British mercantile community appeared to be to increase their importation of Chinese produce--be it tea, silk, or any other commodity--in order to balance the export trade, it is interesting to observe that in those early days a number of articles of export were described and classified, with an account of the districts of their origin, which have only taken their place in the list of exports from China within the last twenty years or so. These were sheep's wool of six different descriptions, and camels' hair, which are now so extensively dealt in at the northern ports of China. Perhaps these articles were not seen in bulk by foreigners until after the opening of the new ports in 1861, and it is worthy of remark that even after this discovery, and sundry experimental shipments, many years elapsed before the special products of Northern China became recognised articles of foreign trade. These now include straw plait, sheep's wool, goats' wools, goats' skins, dogs' skins, camels' hair, horses' tails, pigs' bristles, and a number of other articles of export which might perfectly well have been brought to the foreign market of Shanghai even before the opening of the northern ports. What was wanted was the knowledge that such products were procurable and the organisation of a market for their disposal in China, in Europe, and the United States. To stimulate inquiry into these matters was an object of the consular reports of the early days, and the fact that the seed then sown seemed to have been buried in sterile soil for thirty years affords a reasonable prospect that from the more advantageous basis on which commercial men now stand still larger developments of international commerce may be reserved to future adventurers.

V. BRITISH EXPORTS.

Slow increase -- Turn of the scale by the Shanghai silk trade -- Consequent inflow of silver to China -- Alcock's comment on the Report of Select Committee -- His grasp of the true state of affairs.

This department of trade presents little else but a record of very slow improvement, with some rather violent fluctuations due to obvious and temporary causes. In the first year after the treaty of Nanking the value of shipments to China from the United Kingdom was £1,500,000; in 1852, £2,500,000; in 1861, £4,500,000, decreasing in 1862 to £2,300,000, and rising in 1863 to £3,000,000; after which period it steadily increased to £7,000,000, at which it has practically remained, with the exception of two or three years between 1885 and 1891, when it rose to £9,000,000.

The theory of the merchants who gave evidence before the Committee of 1847, that an increase in the exports from China was all that was needed to enable the Chinese to purchase larger quantities of manufactured goods, has by no means been borne out by the subsequent course of trade. For although the Chinese exports have been greatly extended since then, that of silk alone having more than sufficed to pay for the whole of the imports from abroad, there has been no corresponding increase in the volume of these importations. What happened was merely this, that the drain of silver from China, which was deplored on all sides up till about 1853, was converted into a steady annual inflow of silver to China.[25] Consul Alcock, having been requested by her Majesty's chief superintendent of trade to make his comments on the Report of the Select Committee, dealt comprehensively with the whole question of the trade between Europe, India, and China, and evinced a wider grasp of the true state of the case than the London merchants had done. In a despatch dated March 23, 1848, the following passages occur:--

Nearly the whole of the evidence furnished by the witnesses on our trade is calculated to mislead those imperfectly acquainted with the details. The existence of this relation [the importation of opium and raw cotton from India] is kept out of sight, and conclusions are suggested which could only be maintained if the Indian imports into China did not form a part of our commerce, and did not come in direct competition with the import of staple manufactures.

To counteract as far as may be in my power the erroneous tendency of the partial evidence which the Blue-Book contains on this part of the subject, I have ventured for the information of her Majesty's Government to bring forward such facts and inferences as seem to me to place in the strongest light the fallacy of the argument mainly insisted upon before the Committee--viz., that we have only our own consumption of tea to look to as indicating the extent to which we can exchange our manufactures--that this is the only limit of our imports into China. But imports of what? Not certainly of cotton and woollen goods, for we already export of tea and silk from China to the value of some four millions sterling, and cannot find a profitable market for manufactured goods to the amount of two millions; and a somewhat similar proportion, or disproportion rather, may be traced during the monopoly of the East India Company, during the free-trade period prior to the commencement of hostilities, and since the treaty. Say that from a reduction of the tea duties or any other cause we _double_ our _exports_ from China as we have already done since 1833, from what data are we to infer that in this same proportion the export into China of British manufactures will increase; or in other words, that for every additional million of tea there will be an equivalent value expended upon our cotton fabrics?

The anticipated result is contradicted by all past experience in China, and a moment's reflection must show that the essential elements have been overlooked. 1st, That there is a balance of trade against the Chinese of some $10,000,000, which must adjust itself before any increase of our exclusively British imports into China can be safely or reasonably expected, for which an additional export of 20,000,000 lb. of tea and 10,000 bales of silk is required. 2ndly, That if such increase of our exports hence restored the balance of trade to-morrow, the proportion in which an increased import of our goods would take place must depend upon the result of a competition of cotton goods against opium and raw cotton--all three objects in demand among the Chinese; and the proportion of each that may be taken under the assumed improvement depends upon the relative degree of preference exhibited by our customers for the different articles. The two latter have proved formidable rivals to our manufactures, nor is there any reason to anticipate beneficial change in that respect.

The argument, therefore, that the only limit to our imports into China is the consumption of tea and silk in Great Britain, if meant to be applied, as it appears to be in the evidence, exclusively to British imports--that is, to cotton and woollens--is fallacious, and can only be sustained by dropping the most important features of the import trade, by treating opium and raw cotton as though they had neither existence nor influence upon our British staple trade.

The influence of this mode of reasoning is calculated to be the more mischievous that it comes from gentlemen of practical mercantile information, and purports to suggest a remedy for an evil which is, in truth, of our own creating, and must recur as often and as certainly as the same causes are in operation. The trade in China during the last three years has been a losing, and in many instances a ruinous, trade, not because the English do not drink more tea, or the Chinese do not find it convenient to wear more cotton of our manufacture, but simply because in such market the supply has not been carefully regulated by an accurate estimate of the probable demand. Our merchants at home have unfortunately been led by such reasoning as I have quoted to assume that in proportion as we purchase more tea the Chinese would lay out more money in cotton goods, and that the one might be taken as a true estimate of the other. Hence came shipments after the treaty so disproportioned to the actual wants or state of demand in the Chinese market that an immediate glut, with the consequent and necessary depreciation in price, followed. Nor did the evil end here: a return was of necessity to be made for this enormous over-supply of goods, hence more tea was shipped than the legitimate demand of the English markets would have suggested or justified, and at the other end of the chain the same depreciation and ruinous loss was experienced....

I have submitted in this and the preceding Reports my strong conviction that other conditions than a mere increase in our exports hence are essential. Of these I have endeavoured to show the principal and most important are access to the first markets, the removal of or efficient control over all fiscal pretexts for restricting the free circulation of our goods in the interior and the transit of Chinese produce thence to the ports, and, finally, the abolition of all humiliating travelling limits in the interior, which more than anything else tends to give the Chinese rulers a power of keeping up a hostile and arrogant spirit against foreigners, and of fettering our commerce by exactions and delays of the most injurious character.

The conditions of the trade were, in fact, simpler than the merchants had imagined. The Chinese entered into no nice estimates of the balance of imports and exports, but purchased the goods which were offered to them so far as they were adapted to their requirements--and there is no other rule for the guidance of foreign manufacturers in catering for the great Chinese market.

VI. NATIVE TRADE.

Inter-provincial trade -- Advantages of the employment of foreign shipping -- China exports surplus of tea and silk -- Coasting-trade -- Salt.

The great reservoir of all foreign commerce in China is the old-established local inter-provincial trade of the country itself, which lies for the most part outside of the sphere of foreign interest excepting so far as it has come within the last forty years to supply the cargoes for an ever-increasing fleet of coasting sailing-ships and steamers. This great development of Chinese commerce carried on in foreign bottoms was thus foreshadowed by Mr Alcock as early as 1848:--

The disadvantages under which the native trade is now carried on have become so burdensome as manifestly to curtail it, greatly to the loss and injury of the Chinese population, enhancing the price of all the common articles of consumption: any measures calculated, therefore, to exempt their commerce from the danger, delay, and loss attending the transport of valuable produce by junks must ultimately prove a great boon of permanent value, though at first it may seem the reverse.

In a political point of view the transfer of the more valuable portion of their junk trade to foreign bottoms is highly desirable, as tending more than any measures of Government to improve our position by impressing the Chinese people and rulers with a sense of dependence upon the nations of the West for great and material advantages, and thus rebuking effectually the pride and arrogance which lie at the root of all their hostility to foreigners.

In a commercial sense the direct advantage would consist in the profitable employment of foreign shipping to a greater extent: it would also assist the development of the resources of the five ports--more especially those which hitherto have done little foreign trade. I have entered into some details to show how the carrying trade may work such results, particularly in reference to sugar, which promises to pave the way at this port to large shipments in this and other articles for the Chinese.

A more effective blow will be given to piracy on the coast by a partial transfer of the more valuable freights to foreign vessels than by any measures of repression which either Government can carry out, for piracy will, in fact, cease to be profitable....

A further extension of the trade between our Australian settlements and China, and our colonies in the Straits with both, may follow as a natural result of any successful efforts in this direction,--the addition of a large bulky article of regular consumption like sugar alone sufficing to remove a great difficulty in the way of a Straits trade....

If this can be counted upon, I think it may safely be predicated that at no distant period a large and profitable employment for foreign shipping will be found here totally exclusive of the trade with Europe.

It has been said with regard to tea that the quantity sold for export is but the overflow of what is produced for native consumption, and to silk the same observation would apply. Essentially a consuming country, it is the surplus of these two articles that China has been able to afford which has constituted the staple of export trade from first to last. It is an interesting question whether there may not be surpluses of some other Chinese products to be similarly drawn upon. If the foreign trade has been distinguished by its simplicity, being confined to a very few standard commodities, such cannot be predicated of the native trade, which is of a most miscellaneous character. It is impossible to give any statistical account of the coast and inland traffic of China. Any estimate of it would be scarcely more satisfactory than those which are so loosely made of the population. In the early days, when the ports opened by the treaty of 1842 were still new ports, great pains were taken by the consuls to collect all the information they could respecting purely Chinese commerce, which they not unnaturally regarded as the source whence the material of an expanded foreign trade might in future be drawn. Especially was this the case at Foochow under the consulship of Mr Alcock and the assistantship of his energetic interpreter, Parkes. We find, for instance, among the returns compiled by that industrious officer of three months' trading in 1846, the quantities and valuations of over fifty articles of import and as many of export given in great detail: imports in 592 junks of 55,000 tons, and of exports in 238 junks of 22,000 tons. Of the sea-going junks he gives an interesting summary, distinguishing the ports with which they traded and their tonnage, with short abstracts of the cargoes carried. These amounted for the year to 1678 arrivals from twenty different places, and 1310 departures for twenty-four places; and this at a port of which the consul wrote in 1847, "No prospect of a British or other foreign trade at this port is apparent in the very remotest degree." Every traveller in every part of China is astonished at the quantity and variety of the merchandise which is constantly on the move. It is this that inspires confidence in the boundless potentialities of Chinese commerce, which seems only waiting for the link of connection between the resources of the empire and the enterprise of the Western world.

Besides the sea-borne trade of which it was possible to make these approximate estimates, there is always in China an immense inland trade; and at the time when piracy was rampant on the coast, and before the aid of foreign ships and steamers was obtained, all the goods whose value enabled them to pay the cost of carriage were conveyed by the inland routes, often indeed from one seaport to another, as, for instance, between Canton and Foochow, Ningpo, Shanghai, &c.; and it is still by the interior channels that much of the trade is done between Shanghai and the provinces to the north of it, which would appear, geographically speaking, to be more accessible from their own seaports.

The relation of the Government to the inter-provincial trade is, in general terms, that of a capricious tax-gatherer, laying such burdens on merchandise as it is found able and willing to bear. The arbitrary impositions of the officials are, however, tempered by the genius of evasion on the part of the Chinese merchant, and by mutual concession a _modus vivendi_ is easily maintained between them.

The item of trade in which Government comes into most direct relation with the trader is the article salt, which is produced all along the sea-coast, and is likewise obtained from wells in the western provinces. Like many other Governments, the Chinese have long treated salt as a Government monopoly. As the manner in which this is carried out illustrates in several points the ideas that lie at the root of Chinese administration, some notes on the subject made by Parkes at Foochow in 1846, and printed in an appendix to this volume, may still be of interest.[26]

FOOTNOTES:

[20] The annual value of the whole foreign trade with China, imports and exports, is now about £70,000,000.

[21] His predecessors had been governors of Fort William in Bengal.

[22] Eastern countries send to Europe half of the whole consumption of the West--China yielding 35 per cent to 40 per cent of the entire supply, Japan 12 per cent.

[23] It is worth notice that this consistent opponent of the opium trade during fifty active years should have come under the ban of the Anti-Opium Society in England when the discussion of this important question degenerated into a mere polemic.

[24] Import duty had been regularly levied on opium for a hundred years, the prohibition of importation having been decreed after 1796 (Eitel).

[25] During the last two decades important factors--such as foreign loans, armaments, and the like--have so influenced the movements of gold and silver that they bear no such simple relation to the "balance of trade" properly so called as was formerly the case.

[26] See Appendix IV.