The trade patterns of the canton system were developed in the 17th and 19th centuries by Chinese and foreign, mainly British merchants in the southern Chinese trading city of Guangzhou (Canton). The main feature of the canton system which was developed between 1760 and 1842 was that foreign trade to China was limited to the canton and foreign traders who came to Guangzhou were subject to a number of regulations imposed by the Chinese government. The system regulated foreign trade in China with a restrictive design that restricted foreigners to small business districts in cantons (known as factories) and prohibited direct contact between foreigners and Chinese.
During this period known as the Canton Trade System (1757-1842), Hong Kong traders acted as an exclusive link between American traders and the Chinese. After the British won the First Opium War (1839-42), Britain and China forced the Chinese to abolish the cantonal system and replace it with five treaty ports where foreigners could live and work under Chinese jurisdiction and trade with whomever they wished. Moreover, Article V of the Unequal Trade Treaty abolished the system and allowed British and foreign traders to deal with whomever they wished in the newly opened ports.
The canton system did not affect Chinese trade with the rest of the world, and Chinese traders were still involved in world trade with their large three-masted junks. Hong Kong merchants who brought Chinese goods into the cantonal trade had to negotiate prices, organize pilotage services for foreign ships that were brought into the port, provide linguists, and organize food. The system was not the result of treaties or diplomatic restrictions, but the result of China’s unilateral foreign trade policy.
The cantonal trading system regulated foreign trade with China and functioned for more than 150 years, from the late 17th century until the war with England, which brought it to a standstill in 1842. Local Chinese merchants acted as guarantors for foreign merchant ships entering the ports of Canton and took full responsibility for them, their crews, captains, and supercargoes. The Chinese government, increasingly alarmed by the opium epidemic, took stringent measures to restore control of trade in Canton, which had degenerated into a criminal world of foreign smugglers and corrupt Chinese officials.
Under this system the Emperor of Qianlong limited trade with foreigners on Chinese soil to licensed Chinese traders in the Cohong and the British government in turn issued monopoly contracts for trade with the British East India Company. With the development of canton trade, the Cohongs, the monopolistic guilds of Hong Kong merchants, assumed an increasing role as agents of the Chinese government. The loss of the autonomy of the Qing Dynasty during the Opium Wars, the development of photography, foreign access to China itself, and the increasing representation of China in Western images changed the way we were given views of Paris and Perdue, and are valuable not only for studying a particular time and place but also for locating the canton’s trading system within larger global factors that raised questions about cultural relations and imperialism.
The first European warehouses in Canton were opened on the waterfront, and many small Chinese boats supported foreign trade. On the Chinese side, a special merchants’ guild, the Co-Hong, acquired a monopoly on trade with foreigners. The latter found China’s unilateral foreign trade policy towards traders, as it was then, irritating.
Chinese and foreigners began to negotiate regular trade terms between different ports. Westerners came to China for trade in the 18th century and joined many foreign people. In 1741 the Qing government tightened controls by requiring foreigners to leave the canton and return to Macau after the end of the trade season and further restricted trade outside the canton in 1757.
After paying Hoppo a considerable sum for the privilege of trading with foreigners, Hong Kong traders benefited from their access to foreign trade. In the eyes of the West, the cantonal trading system has become a source of romanticized images of Western trade activity in China itself.
When the ships arrived and departed, Chinese merchants were involved in visiting maritime trading houses and paying taxes and duties. Foreigners and Chinese shared the profits of the trade, but there were dangers in the larger cities. In response, Qing officials stopped the trade and convened the first Chinese court proceedings with foreigners present. A new law obliging the canton to offer Swiss and foreign companies the same corporate tax rates came into force on 1 January 2020. Another problem is the impact of tighter Chinese regulations on foreign traders.