Captain Elliot and the Founding of Hong Kong

by Captain Elliot

  In 1557 Portuguese traders, who for some twenty years had conducted their business from offshore locations, were allowed by the Chinese to establish a base at Macao, on the western side of the Pearl River estuary. There was no transfer of sovereignty – the Portuguese were required to pay rent, and their activities were restricted, but the territory constituted an important foothold from which to conduct commerce and in which to set up education and training facilities for the promotion of Roman Catholicism. Inevitably, other European powers showed an interest in Macao for its trading possibilities. An attempt by the Dutch to capture it in 1622 was repulsed, largely due to the loyalty to the Portuguese of resident African slaves. Fifteen years later the first British approach to Macao was made, by four ships commanded by Captain John Weddell.

  Weddell was a seasoned sea captain whose buccaneering career had involved several brushes with the law. He was now under contract to William Courten, a wealthy London merchant and energetic entrepreneur who was also no stranger to litigation. Weddell’s visit to the south coast of China was significant not only because it was the first by a British expedition, but because in its contacts with the Chinese it foreshadowed the difficulties of British-Chinese interaction for over 200 years to come. Like his more official British successors on the China coast, Weddell’s object was trade, and like them, his dealings with the Chinese were characterised by misunderstanding and ignorance on both sides.3 He kept at first to the required procedure by applying through the Portuguese for permission to go to Canton, but after broken promises and repeated delays lost patience, first sending a boat and then proceeding upriver, in stages, with all his ships. Weddell received mixed messages from the Chinese, compounded by a duplicitous intermediary, and lukewarm civility from the Portuguese at Macao. He could not have known of the agreements and informal understandings between the Chinese and Portuguese, which sanctioned Portuguese residence in Macao and monopoly of maritime trade there with China provided the Portuguese did China’s bidding, not least in keeping other Europeans away from the Pearl River. The several pauses for exchange of communication allowed, almost by accident, a small amount of trade to be done, but overall, the expedition was not judged a success. Obliged to promise to leave as the price for the release of some of his compatriots being held in Canton, Weddell and his ships departed the China coast after six months. Peter Mundy, a diarist and commercial agent on the voyage, was not impressed with their treatment,‘...having been for these 6 Monthes variously Crosed in our Designe, our lives, shipping, goodes etts., Molested, endaungered, Dammified, Our Principalls with Much Meanes Deteyned att Canton.’4

  British trade in the east at this time was the monopoly of the English East India Company, but Courten was permitted to commission an expedition to China because the Company did not (yet) operate there. The Company of Merchants of London Trading into the East Indies, which had been granted its Royal Charter in 1600, had been formed from merchants and financiers to provide an organised focus for competing against other European trading powers as they sought to develop new markets in India and the Southeast Asian archipelagos. Chief among those powers were the Portuguese, who in the sixteenth century had established a sequence of trading bases between Europe and China, of which the largest concentration was on the west coast of India, and the Dutch, whose efficient and productive financial system enabled them to fund commercial expansion on an increasingly dominant scale. After three costly Anglo-Dutch wars, stemming from intense mercantile competition, the accession of William of Orange to the English throne in 1688 set the scene for Anglo-Dutch business collaboration from which the British would learn much, and finalised a rationalisation of British and Dutch trading arrangements in the east.5 The Dutch retained Malacca (which they had wrested from the Portuguese in 1641), the Moluccas and parts of modern-day Indonesia, while the British would develop commerce in India, where the prominence of the Portuguese had faded. This apportionment was not, though, a peaceful process; it had ended with the British in 1684 being driven by the Dutch out of Bantam, the commercial base at the western end of the north coast of Java which had been the Company’s first settlement in the East Indies.

  During the eighteenth century the English East India Company greatly expanded its reach and influence in India. By 1805 it controlled (either directly or through local alliances) nearly all the coastal regions, especially in the east, much of the interior, and most of the fertile plains and more temperate hill areas of the northeast. It would be misleading, however, to imply that this was the result of a concerted, coordinated plan to expand; it was rather a consequence of the Company’s determination to protect its own trading interests and revenue and of the personal ambitions of a number of its servants.

  In 1686 the Company had been granted a new charter (one of several in its lifetime) confirming powers given in 1661 by Charles II and authorising it to use military force if necessary against, among others, native rulers.6 A military presence, even if modest and not in evidence at the start, became essential to the maintenance of the Company’s main bases in India, at Bombay (acquired from Portugal by treaty in 1661, now Mumbai), Madras (founded in 1639, now Chennai) and Calcutta (1690, now Kolkata).This support typically comprised, under overall British command, a minority of British troops and various categories of native infantry and local militias. At Bombay in the 1670s, for example, the garrison was estimated at the time by the Surgeon to the Company to number around 1,500, of whom only some twenty per cent were British.7 In Madras in 1670 there were some 200 European troops but by 1759, according to a later account, the settlement at Fort St George was protected by five battalions of native infantry, at least 1,500 men, led by European commissioned and non-commissioned officers.8

  The Company’s military resources in the latter half of the eighteenth century were mainly deployed in the prosecution of wars in alliance with local rulers, with the twin objectives of assisting them and of furthering British interests, including territorial expansion. Such conflicts were fought against other native factions, or against other European trade competitors (who themselves formed local alliances). The Moghul Empire, which had held sway over north and central India for more than 200 years, had begun to disintegrate under attack by Maratha warriors from the western Deccan, the great plateau of south-central and southern India. The Marathas fought three wars with East India Company forces and their allies between 1777 and 1818, the last of these resulting in British control of the great majority of the Indian subcontinent.

  From the early seventeenth century the Company’s merchants had opened up new markets in the Bay of Bengal as British trade with the Spice Islands was gradually ceded to the Dutch. (They had also sought, with little success, to initiate trade with Japan and Siam (Thailand).) The founding of Calcutta in 1690 was attributed to Company merchant Job Charnock; it was established on an entirely new site, much as Francis Day, a senior Company man at Masulipatnam on the Coromandel coast of south-east India, had initiated the building of Fort St George close to nearby Madraspatnam sixty-one years earlier.9 In 1756 Calcutta was attacked and captured by the forces of the Nawab of Bengal, Siraj-ud-Daula, the publicity subsequently given to the ‘Black Hole’ incarceration doing much to rally public opinion in Britain in support of Colonel Robert Clive and his army’s vigorous retaliation. Clive’s victory at the Battle of Plassey in 1757, as a result of which the process of establishing Company control over Bengal was begun, was an important turning point in the history of British India. The Treaty of Allahabad in 1765 transferred to the Company from the Moghul Emperor Shah Alam the right to collect tribute, which allowed the East India Company to exploit the agricultural resources of Bengal through land taxes and trade tariffs. The Company’s taxation regime exacerbated the consequences of the disastrous famine afflicting Bengal in 1770. The famine caused the deaths of millions, and was in large part the result of the Company’s policy of clearing land used for food crops, such as rice and grain, to make way for the cultivation of opium. The greater financi
al independence granted under the 1765 Treaty did not last long, however. Concerns about corruption and poor management by the Company’s officers led the British government to legislate, first to enable it to regulate the Company’s affairs, and then to bring its activities under direct British government control – the latter (in 1784)providing, among other things, that the governorships of Bombay and Madras should be government, not Company, appointments, and in effect designating Calcutta the capital of British India.

  Since 1601, when the first voyage by Company ships was made under the command of Sir James Lancaster to the Spice Islands, the Company’s trading priorities had greatly changed. As a joint stock company its directors’ primary responsibility was to maximise revenue for its shareholders, with operational focus intended to change according to wherever the greatest profit was to be made; but in such turbulent times things were never that simple. Local power struggles and the increasingly political implications of the Company’s activities in India obliged its agents to temper their ambition with large doses of pragmatism. Early in the Company’s life Indian cotton and indigo began to be traded as well as spices, but attempts to pay routinely for them in kind with English woollen broadcloth failed, forcing the Company’s ships to carry as payment large quantities of bullion. In the 1680s, gold and silver were much in demand by Moghul India for financing its wars with the Marathas and in Afghanistan, and cotton and silk luxury goods from India were carried to Britain in return. By the turn of the century, however, opposition in Britain to Indian manufactured products because of their effect on domestic industry resulted in legislation restricting imports to raw materials only.

  The English East India Company’s ships had visited the China coast since the beginning of the seventeenth century, eventually establishing a base on Formosa (Taiwan) and trading with Amoy (Xiamen), Chusan (Zhoushan) and, from a distance, with Canton (Guangzhou). Their role had frequently been that of freight carrier, transporting from China – and from Siam – goods bound for the islands of the Southeast Asian archipelagos, much as they had earlier done between Persia and India.

  Portuguese Macao had long been used by European merchants as a base from which to conduct trade negotiations with the Chinese, but it was in 1689 that the first Company men were allowed to proceed to Canton itself. They went not by ship but by boat, sedan chair, and boat again; the Company’s ship Defence was subsequently given permission to sail upriver, but her captain, Heath, judged the river approach too risky for navigation by a large vessel.10 The voyage to China had been undertaken on the initiative of Elihu Yale, the American born Governor of Madras,11 who sent in overall charge of the expedition his younger brother Thomas. As with Weddell’s mission more than fifty years before, Yale’s attempt to establish a direct trading link with China was not a success. Captain Heath had provoked a fight in refusing to comply with the demands of Chinese bureaucracy; Chinese ransom demands were refused by Thomas Yale, the Defence sailed, and the prospects for promoting trade were severely set back.

  Following rising discontent in England at the East India Company’s apparent abuse of its monopoly and at allegations of bribery and market manipulation by Sir Josiah Child, a director and then Governor of the Company, a new ‘General Society’ for trade with the east was set up by Parliament in 1698 to re-establish operations on an acceptable basis. It was under the auspices of this ‘New Company’ that a year later the next attempt was made to secure a trading foothold in China. The Macclesfield, at 250 tons one of the Company’s smaller ships, sailed up the Pearl River to Whampoa, the anchorage some five miles east of Canton. The Company’s merchant-in-charge, or supercargo, was Robert Douglas, whose efforts to trade were frustrated by the Chinese authorities, despite being encouraged by the local customs officer (the ‘Hoppo’12). Some trade was nevertheless done, as it was also at Zhoushan, to which Douglas sailed when after many months’ detention he had finally been allowed to leave Canton. Robert Douglas’s expedition has been called the most successful venture to China up to that date (1701).13 After a disastrous attempt to found a settlement on Con Son (Pulo Condore), a small island off the south-eastern coast of Vietnam, in which Company personnel were slaughtered by the garrison, there was no appetite for trying to find another offshore base. In 1711 the Kangxi Emperor, a long-reigning, stabilising ruler who was able to take a long-term view of his country’s interests, granted permission for overseas traders to establish a semi-permanent presence at Canton. Though outside the city walls and to be occupied by the foreigners for only six months each year, the establishment of the ‘factories’ on the waterfront at Canton marked a significant step forward for western merchants in their quest for development of the China trade. The embargo on foreign traders conducting business anywhere in China other than Canton, however, implemented in 1703, remained.

  By the 1760s the balance of the Company’s traded commodities had changed again. Silks and cottons were still much in demand, but proportionately they had been eclipsed by tea from China. Originally brought to Europe by the Dutch, tea was first imported by the Company to London in 1669; such had been the subsequent demand that private merchants, including some of the Company’s own employees acting in that capacity, saw opportunity for enrichment and entered the market. The Company’s response was to outlaw such activity as far as it could and to seek from the government monopoly rights on the import of tea to Britain, which it obtained in 1721 (at a price). When it began importing rapidly increasing quantities of the cheaper bohea black tea, rather than green tea only, the price fell from 16s lb to 7s lb, and by 1770 it was just 3s lb.14 Tea drinking ceased to be a preserve of the fashionable rich and became widely available, hand in hand, conveniently, with plentiful supplies of sugar from the Caribbean. For the Company, the quantity of tea it was importing became a problem. Since 1768 the American colonies had preferred smuggled Dutch tea, not only because it was cheaper but because it was not subject to tax, to payment of which the American colonists took strong objection. By 1773 the Company was in a very poor financial state, largely because of huge stockpiles of tea it could not sell. The Tea Act of that year, which allowed the Company to ship tea directly to North America and undercut the Dutch smugglers, was intended to help the Company out of its difficulties, but since the tea remained taxed it inflamed the colonists’ hostility still further, prompting among other things the Boston Tea Party and becoming one of the proximate causes of the American War of Independence. In 1773 the British Parliament also passed what was known as the Regulating Act, giving the government power to regulate the activities of the East India Company.15

  British attitudes to matters Chinese during the latter half of the eighteenth century had become many and varied, but the mood in government was one of concern and frustration. Tea was now the Company’s most traded commodity, and the tax on tea imports accounted for around ten per cent of British government revenue; but China’s lack of interest in British and Indian manufactured goods meant that Chinese tea had to be paid for in silver bullion, to the extent that the Company’s income from India was barely compensating for this drain on its resources. Added to this economic difficulty were the constraints and obstacles imposed by the Canton authorities in fees which the Company considered vastly excessive, residence restrictions, and the operation of a cartel, known as the Co-Hong, by the Chinese merchants. Further attempts to find a suitable trading base on the China coast were unsuccessful, but through the good offices of Captain Francis Light the island of Penang in the Malacca Strait was ceded to the Company in 1786.

  By the start of the nineteenth century it was clear that the outflow of bullion at the required rate could not be sustained. The solution was to supply China with a commodity for which there was rapidly growing domestic demand which could not be met by China itself: opium. The opium poppy, papaver somniferum, had been grown as early as the fourth millennium BC, and whether or not opium was first imported earlier, there is little doubt that it was brought to China by Arab traders in the seventh or ei
ghth centuries ad. In 1684 it was officially classed as a medicine in China, but for some fifteen years before that had come to be mixed with tobacco and smoked (rather than eaten). Joseph Rowntree later wrote that it was ‘practically certain, from the absence of all mention of any opium habit by the Jesuit missionaries, by travellers, and in the Chinese records, that there was no general consumption of opium [in China] before the introduction of opium smoking’.16 With widespread smoking came widespread addiction and abuse, and in 1729 the Yongzheng Emperor outlawed the smoking of opium and its sale in China. Then as now with banned drugs, the penalties for dealing were considerably harsher than for possession; consumers were flogged or pilloried, dealers were strangled.17 For seventy years the Emperors nevertheless continued, despite the internal prohibition, to allow the importing of opium in order to profit from the resulting tax revenues, an ambivalence towards the drug which was to bedevil future Chinese attempts to control and eliminate it.

  Until 1799 when an imperial edict banned imports of the drug, the supply of opium from India to China enabled the Company to purchase tea for export to Britain. Ever since its early days, the value of its purchases from Southeast Asia was at least three times that of the goods it sold there, the balance being met in bullion and coin. During the period 1710 to 1759 for example, exports to the east comprised goods worth £9,248,306 and bullion and coin amounting to £26,833,614.18 During the later years of the eighteenth century the Company was able to take advantage of the involvement of the so-called ‘Country’ traders to substitute goods for part of the payment in bullion and coin. These India-based British and Indian private merchants – including some current and former Company men acting independently – who over the years had worked the trade routes between India, the Southeast Asian archipelagos and China, were now licensed by the Company (which formally held a monopoly of trade with China) to engage in direct commerce between India and China themselves. Their ships carried mainly opium and cotton, and the arrangement both allowed the Company to reduce the level of payment by bullion and coin and enabled the Country traders to make substantial profits.