1. Describe the Canton System and discuss the causes of Sino-British conflict deriving from this commercial arrangement and other disparities.

The Canton System-- From 1757 until the opening of four other ports by the Treaty of Nanking of 1842, Canton was the only legally permissible trading place for foreign traders, including the British. In fact, the Canton System (in connection with Britain) was one of the terminals of the China-India-Britain triangular trade. The chief intermediary agent here was the English East India Company. The EIC's organisation at Canton began to evolve in its permanent form by the 1780s when a Select Committee was set up in Canton to supervise the EIC's affairs in China. This Select Committee had to carry out the Orders from the Court of Directors in London. This company had a strict monopoly on English trade between Canton and London (through India) which included numerous commodities (e.g. lead, tin, copper, woollens and cottons). The largest export from Canton was tea, whose value amounted to 3.6 million pound sterlings by 1800. The balance of trade was always unfavourable to Britain until the British found their opium import into China. This unfavourable condition was somewhat balanced by the so-called 'country trade' which was a transaction between China and India carried out by private British traders licensed by EIC in India. The net profit out of this country trade amounted to one-third of the EIC's fund.

The Cohong-- On the Chinese side, the monopoly of trade resided in a small group of merchants known as the hong merchants. In 1720 they formed themselves into a monopolistic guild known as the Cohong with the function of regulating prices and strengthening their position in the dealing with Chinese government authorities and foreign merchants. In 1760 this system was officially recognised and the Canton authorities had set up the security merchant system. It was instituted that every foreign ship had to find one hong merchant to assume responsibility for its conduct and duties.
The hong merchants were directly supervised by the Superintendent of Maritime Customs for Kwangtung, better known in the West as the 'Hoppo'. The Hoppo was then responsible to collect and levy duties on this Canton trade and send them to the Board of Revenue at Peking. The governor-general of Kwangtung and Kwangsi was also partly responsible in the supervision of this trading system.

Trading Season-- Normal trading commenced in October and ended in March (except for the illegal opium trade). A foreign ship had to obtain a permit and a pilot in Macao before it entered the Bogue. The ship then set sail and anchored at Whampoa where the business transactions were done through the hong merchants. The ship had alsc to pay some specified duties and charges such as the ship measurement duty, the cumsha (present), the charge for the pilotage, and the fees for the comprador and linguist. After the unloading and reloading (if any) of goods, the ship had to obtain a port clearance (ch'uan.p'ai) in order to depart from Canton.

The Canton Factories and the Eight Regulations--The foreign companies leased their factories from the hong merchants. The foreigners had to employ a comprador to supervise the domestic affairs and the procurement of provisions for the factory. The factories were all built in a compound in the southern suburb of Canton near the Pearl River. The foreigners were not allowed to remain in Canton after the trading season had ended. They had to go away or reside at Macao. The foreign traders had also to follow the Eight Regulations which stated:

a. No foreign warship were to enter the Bogue.
b. Foreign women and weapons were prohibited from entering the factories.
c. Foreigners could not employ Chinese servants or learn the Chinese language.
d. Foreigners accompanied by a linguist could enter Canton city at specified dates only and they were not allowed to ride on sedan chairs.
e. All trading had to be made in cash.
f. The Cohong merchants were responsible for the conduct of the foreigners. All communications from the foreigners to the Chinese authorities had to make through the Cohong.
g. All business transactions were to be made through the Cohong only.
h. All foreigners had to apply for passports on arrival, and they had to leave Canton at the end of each trading season.

Some basic conflicts-- It was a fact that increased contacts between the Chinese and the British (apart from commercial transactions) would finally lead to some misunderstandings and conflicts. This was due essentially to the divergent cultural values of China and Britain. In the first place, in a Confucian society and tradition, merchants were the lowest social class in terms of prestige while the great mercantile families of Victorian Britain were the pillars of the British Empire. The Chinese youth aimed himself promotion through success in the civil service examinations. He focused his attention on history and classical studies and had no special likings for things foreign and mercantile. On the contrary, the English youths were eager to make adventures overseas in the hope of making a fortune themselves.
This lack of cultural understanding was made worse by the language barrier. Practically no scholarly Chinese had a mastery of the English language whilst the British interpreters could only handle some commercial language of the elementary Chinese. The subtleties of the Chinese literary traditions which the Chinese cherished were beyond the British comprehension. Hence the Chinese officials had little respect of the foreign barbarian traders. Equally, the British often considered the Chinese mandarins as bigoted and unfathomable bureaucrats.

The problem of tribute-- China before the Opium War would not recognise any other state as equal to herself. Foreign relations (trade or otherwise) were considered as part of an hierarchical order consisting of the 'Middle Kingdom' and the 'barbarians on the periphery'. Barbarian countries were all regarded as tributary states only. The Canton System was in fact the expression of this concept, a concept which denoted inequality in status between China and the West. The EIC was more tolerant toward this scheme because it did not want to jeopardise the existing trade privileges. But when the EIC lost its monopoly, the British free traders were more eager to obtain their diplomatic and commercial equality with China.

The problem of kowtow-- To the westerners, the performance of kowtow in diplomatic intercourse with China was most humiliating. To them, the kowtow was the most striking feature of the Chinese negation of equality. This problem, together with the parallel problem of petitioning to Chinese officials (denoting no equal communications between China and the West), came to play an important role in the conflict between the old Chinese system and the modem international world order championed by Britain.

Differences in legal concepts-- It was a major source of conflict between the Chinese and the foreigners at Canton. The Chinese legal spirit was to discourage law suits. In case of crime, the law considered the man involved guilty unless and until he proved himself innocent. Collective judicial responsibility was also important in Chinese law. All these were highly suspected by the British, especially after the Lady Hughes Case. The British sought most urgently some form of extraterritoriality. In fact, this jurisdiction problem involved sovereignty, the most important attribute of a state.

The end of the EIC monopoly-- Sino-British conflicts were aggravated by the increase in contacts of the two nationals, especially alter the end of the EIC monopoly in 1834. Indeed well before that year, the British private trading firms known as the 'Agency Houses' were taking the lead to expand Sino-British trade. Originally they got they licenses from the EIC but eventually some of them took on some 'speculations' in the handling of opium trade themselves. The most famous of these agency houses was the Jardine, Matheson and Company. By 1834 these agency houses handled more than 50% of Sino-British trade. They were also the spearhead seeking for new markets for their surplus capital. This expansion would certainly conflict with China's policy of self-containment. Few of the new British traders were willing to endure the rules and restrictions of the Canton System. Yet the Chinese remained adhorrent to changes. The free traders were then determined to tear down the undesirable Canton System and to strike away the outmoded tribute diplomacy of China.

The final cause of Sino-British conflict was, of course, the opium issue which ultimately triggered off the war between the two countries.