Houqua in Chinese and Global History (p.6~13)
Through the lens of a single prominent merchant house and its leading figure, this project explores the economic dynamism in early-19th-century Canton. This study of Houqua and the Canton trade system adopts a global perspective. Such a global approach, overlooked by previous generations of scholars, seeks to underscore the commercial vitality and transnational exchange during the era of the Canton trade.6 Each generation of earlier scholars of the Canton trade has focused on the decline of the Qing by interpreting historical issues through the lens of scholars of the respective eras. In the early part of the 20th century, when China was struggling to find its footing on the international scene, research began to chronicle the rise and fall of various Hong families, but without capturing the dynamic economic exchanges in which they participated.7 Similarly, scholars who wrote before China’s recent economic takeoff have focused on the cases of insolvency among the Hong merchants as their studies reflected on China’s prolonged economic struggles.8 Balanced assessments of the Canton system have only begun to appear more recently.9 Extending the analysis to the China trade of the 19th century as the impact of geopolitical forces escalated, through the individual stories of Houqua and his partners this study explores the dynamic global networks of commerce in the decades prior to the Opium War. 10
Known today as Guangzhou, the Chinese city of Canton served as a dynamic node for transnational commerce until the demise of the Canton System in 1842. Tracing the footprint of its trading networks, this study includes archival work in Guangzhou, Hong Kong, Macao, Bei-jing, Taipei, Singapore, Boston, Providence, England, and India. The investigation covers genres of literature ranging from business records, family papers, personal correspondence, gazetteers, genealogies, government documents, travelogues, and anthologies of literary works. These sources are highly complementary. Whereas the Chinese court documents explain the Qing bureaucratic mechanisms of the Canton trade and the British East India Company (EIC) databank chronicles the ascending commercial prowess of England, the American records shed light not only on the business transactions but also on the personal stories of the individual traders. The genealogies of Houqua’s family, in addition to tracing the lineage of the Wu clan, also detail Houqua’s strategy for business succession. As the scattered historical records are reconnected, the emerging picture demonstrates the success of Houqua and his trading partners in sustaining their economic exchange on a global scale long before Western imperialism ushered in the era of international trade in the Euro-centric modern world at the turn of the 20th century.
In the early 19th century, certain economic actors in Qing China, especially those in Canton, had become so involved in the world of commerce and finance that it is impossible to isolate their “Chinese experience" from the development of global processes. Their stories, however, reflect not only the “impact of the West," as these Chinese traders were not passive reactors to Western forces; rather, they were enterprising strategists furthering their economic interests in view of the shifting geopolitical landscape. To appreciate the interactions among the various players in this dynamic, multipolar trading world, one needs to go beyond not only the Fairbank model of the “Western Impact-Chinese Response" but also the later paradigm of “China-centered history,"11 The ever-evolving equilibrium in the 19th-century Canton system pivoted precisely around the traders’ ability to navigate the turbulent waters brought about by the colliding regimes. As a central player in the world of commerce and a crucial figure in the geopolitics of the first half of the 19th century, Houqua offers a unique perspective on global development at the decisive juncture when China’s fortunes began to diverge. His story allows us to explore how the divergence of business development on a macroeconomic scale pivoted around the talents and inclinations of specific individuals. Of course, even the most successful entrepreneur had to function within the geopolitical context of his times, but the fortunes of empires were contingent on the strategies of exceptional individuals in charting their course of business.
This analysis of Houqua’s enterprise intervenes in the major debates that have preoccupied economic historians. Much has been written about the Canton system as a precursor to the Opium War and the subsequent demise of China. These scholarly analyses, usually privileging political and diplomatic developments, highlight the mounting incompatibility of Western and Chinese models of interaction and the reversal of the silver flows to which the Chinese merchants supposedly succumbed.12 The story of Houqua and the Canton trade makes it clear that the Chinese economy did not merge with the routes of international trade with the advent of the Opium War. By the time of Houqua’s rise to prominence at the beginning of the nineteenth century, the merchants in Canton had already weathered half a century of geopolitical turmoil around the globe. 13 Through the work of the sophisticated Hong merchants operating under the Canton system, China became integrated into the global economy well before the arrival of the gunboats that altered the terms of transnational engagement. Houqua’s ability to sustain his interactions with global players for decades in the field of commerce defies the conventional assumption of an ossified Chinese system that failed to adjust to international developments and that doomed Chinese participation in the integration of the world. By reviving this story of economic vibrancy, we return to the juncture when the commercial equilibrium fell apart with the collapse of the Canton system. The focus on this moment of historical contingency reshapes our understanding of China’s critical role in the formation of a global network of trade and finance prior to the Opium War.
A better appreciation of how the system unraveled provides a new perspective to examine China’s economic divergence from the West during the subsequent period. Economic historians have debated how the West escaped stagnation whereas China lagged behind, primarily from the perspective of industrial development. 14 Some studies have linked the issue of economic growth to the role of the Chinese state, but few have constructed a comparative analysis of this early period to explore how different configurations in the alignment of the interests of the state and the business sectors led to economic divergence. In studies of the British experience, early scholarship focused on the role of finance as a facilitating device, but more recent analyses highlight finance and commerce as independent activities that contributed to economic growth independent of domestic industrial expansion. 15 This realization of the contribution of finance and commerce to the British imperial enterprise redirected scholars’ attention to the social networks of bankers. 16 It was precisely in the successful redeployment of capital by “gentlemanly capitalists" to generate healthy investment returns that the financial sector earned its prominent position in the economics of the British Empire. Such a revelation of the contribution of finance and services independent of industry should have invited comparisons with the East Asian experiences. But thus far comparative analyses involving East Asia have seldom extended beyond Japan and such comparisons have been limited to assessments of the role of finance in the successful transformation of Japan into an industrial power. 17
As this study extends its focus on the role of merchants in facilitating China’s exchange with the outside world, it also highlights their relations with the state. Existing scholarship on this topic shows that the court in Qing China, preoccupied with its imperial expansion along its northwestern frontier, adopted a continental posture that promoted property rights more actively in the landbound regions where the state had to open up territories rather than along the maritime frontier of the southeast coast.18 Zelin and others demonstrate a clear definition of property rights in China and the state’s role in enforcing these rights.19 However, except in cases in which assurances of no state appropriations served the needs of the Qing state for land reclamations along its expanding land-bound frontier, 20 the state safeguarded property rights among its subjects but not between the state and its subjects. Although the state facilitated the use of contracts in the vibrant markets along the southeastern coast, protection of private wealth from the confiscatory state remained weak. 21 The constant pressure from the state and the ill-defined financial obligations to national and local needs engendered among successful traders deep-rooted suspicion of any gains from investing alongside the state. Such misgivings deterred cooperation between the Chinese state and the wealthy merchants in redeploying capital toward economic development in a manner that would have generated financial returns to the investors and that would have remained consistent with the Qing’s imperial agenda. In this respect, the experiences of Houqua and the other Hong merchants contrast sharply with those of Western financiers, such as the Rothschilds.22 This contrast underscores the potent power of financial resources for the political expansion and economic growth of empires, power unleashed most effectively when those with financial capital can maintain a certain level of autonomy from the state. The reluctance of the Hong merchants to redeploy their capital in conjunction with the Ding court’s economic initiatives lends support to institutional theories of economic divergence. 23
Houqua’s story extends beyond the scope of the existing literature that has predominately highlighted economic activities within China proper, His extensive and complicated global transactions required an elaborate system of trade that defies any simplistic analysis of business organization. Not only did Houqua have to structure his business in China in the idiom of Chinese family relations,24 but he also had to engage his international partners in Canton according to Western conventions and to extend his reach overseas by developing networks of trust.25 This study demonstrates that a large measure of Houqua’s success stemmed from his ability to maintain an intricate balance between his commercial interests and those of his Western counterparts, all during an era of transnationalism before the imposition of a Western world order.
Houqua’s business dealings also shed light on the macroeconomic issue of silver flows. This analysis of the business of individual merchants enhances understanding that has hitherto been confined to macroeconomic investigations of the trade balance and Western accounts of the galleon trade.26 Silver was not simply a form of payment; it was also a trading commodity that generated tremendous profits. Houqua’s business dealings show that different forms of silver provided arbitrage opportunities for transnational traders. In challenging simple assumptions of stocks and flows of silver, the analysis also extends to the credit market. Compared to simple aggregations of data at a national level, Houqua’s financial dealings across time and space provide the basis for a more nuanced understanding of global economic development prior to the period when Western systems came to dictate the terms for the accounting and clearance of international trade and credit.
(Continue…Outline of the Chapters)
6 A recent publication, Eric Jay Dolin, When America First Met China: An Exotic History of Tea, Drugs, and Money in the Age of Sail (New York: Liveright, 2012) brings to the attention of the popular reader the global dimension of this exchange. The present study will extend beyond the oft-cited anecdotal examples based on Dolin’s selected memoirs with a view toward building a critical understanding of the business dealings of these global traders. In a recently published monograph, Frederic Delano Grant Jr., The Chinese Cornerstone of Modern Banking: The Canton Guaranty System and the Origins of Bank Deposit Insurance 1780-1933 (Leiden: Brill Nijhoff, 2014), introduces a different dimension of the global influence as he traces the origins of modern banking insurance across time and space to the Canton Guaranty System.
7 Liang Jiabin, Guangdong shisanhang kao (An Investigation into the Guangzhou Hong Merchants) (1937; rpt., Guangzhou: Guangdong renmin chubanshe, 1999).
8 See Dilip Kumar Basu, “Asian Merchants and Western Trade: A Comparative Study of Calcutta and Canton 1800-1840″ (PhD diss., Department of History, University of California, Berkeley, 1975) and Kuo-tung Anthony Ch’en, The Insolvency of the Chinese Hong Merchants, 1760-1843 (Taipei: Institute of Economics, Academia Sinica, 1990).
There is a similar trend in the scholarship on the Western traders. Reacting against Western imperialism, Jacques M. Downs depicts the American traders operating in the Canton system by highlighting their role as traffickers in the illicit and immoral opium commerce. See Jacques M. Downs, The Golden Ghetto: The American Commercial Community at Canton and the Shaping of American China Policy, 1784-1844 (Bethlehem, PA: Lehigh University Press, 1997).
9 Paul A. Van Dyke, Merchants of Canton and Macao: Politics and Strategies in Enghteenth-Century Chinese Trade (Hong Kong: Hong Kong University Press, 2011) and Paul A. Van Dyke, The Canton Trade: Life and Enterprise on the China Coast, 1700-1845 (Hong Kong: Hong Kong University Press, 2007). Van Dyke views the Canton system as a sophisticated arrangement through which the Qing court managed the growing trade and generated significant revenue for the court, succumbing to Western imperialism only after the arrival of Western steamships and gunboats.
10 With respect to writings on Houqua, there has been surprisingly little scholarly coverage.
Ch’en, in The Insolvency of the Chinese Hong Merchants, refers to Houqua, but he does not prominently feature this successful merchant, largely because his focus is on the insolvency of many other merchants. As for Chinese-language materials, until recently writers have shunned Houqua as a politically problematic individual. His connections with Western traders called into question his political allegiance. His family’s financial contributions to the Qing state’s suppression of the Taiping Rebellion, which many Communist historians view as a harbinger of the peasant revolution spearheaded by the Chinese Communist Party in the mid-twentieth century, rendered Houqua an enemy of the masses. In contrast, English-language coverage has celebrated Houqua’s accomplishments, perhaps too much so when written from the romanticized perspective of the Old China Trade. See, for example, W. Cameron Forbes, “Houqua, the Merchant Prince of China, 1769-1843," Bulletin of the American Asiatic Association 6, no. 6(1940): 9-18.
11 For an extended discussion of this historiography, see Paul A. Cohen, China Unbound: Evolving Perspectives on the Chinese Past (London: Routledge Curzon, 2003).
12 The Cambridge History of China on this period, for example, focuses on political developments and emphasizes the system of power in which the merchants were supposedly subordinate to a “corrupt" official hierarchy. See Frederic Wakeman Jr., “The Canton Trade and the Opium War," in The Cambridge History of China, eds. John K. Fairbank and Kwang-Ching Liu, vol. 10, pt. 1 (Cambridge: Cambridge University Press, 1978), 163-212. Although the hierarchy in which the merchants operated under the auspices of the officials nominally underwrote the system of exchange, the trade in Canton entailed a pragmatic exercise of constant negotiations among merchants and bureaucrats over the ever-changing practices in global trade against the backdrop of the constantly shifting geopolitical landscape.
13 In 1757 Canton became the sole legal port of call for China traders arriving from the West. This system persisted until the conclusion of the Opium War in 1842, when the era of the Treaty Ports was introduced.
14 See, for example, Mark Elvin, The Pattern of the Chinese Past (Stanford, CA: Stanford University Press, 1973); Philip C. C. Huang, The Peasant Family and Rural Development in the Yangzi Delta, 1350-1988 (Stanford, CA: Stanford University Press, 1990);
R. Bin Wong, China Transformed: Historical Change and the Limits of European Experience (Ithaca, NY: Cornell University Press, 1997); Kenneth Pomeranz, The Great Divergence: China, Europe, and the Making of the Modern World Economy (Princeton, NJ: Princeton University Press, 2000); Kent G. Deng, “A Critical Survey of Recent Research in Chinese Economic History," Economic History Review, new series, 53, no. 1 (February 2000): 1-28.
15 For studies focusing on the role of finance as a facilitating device, see R. S. Sayers, Central Banking after Bagehot (Oxford: Clarendon Press, 1957); E. Victor Morgan, The Theory and Practice of Central Banking, 1797-1913 (Cambridge: Cambridge University Press, 1943); C. A. E. Goodhart, The Business of Banking, 1891-1914 (1972; rpt., Aldershot, UK: Gower, 1986). For an analysis highlighting finance as an independent contributor to economic growth, see Michael Edelstein, Overseas Investment in the Age of High Imperialism: The United Kingdom, 1850-1914 (New York: Columbia University Press, 1982).
16 See Youssef Cassis, City Bankers, 1890-1914, trans. Margaret Rocques (1984; гpt., Cambridge: Cambridge University Press, 1994), and P. J. Cain and A. G. Hopkins, British Imperialism, 1688-2000, 2nd ed. (1993; rpt., New York: Longman, 2002).
17 See, for example, Kozo Yamamura, “Japan, 1868-1930: A Revised View," in Banking and Economic Development: Some Lessons of History, ed. Rondo Cameron (New York: Oxford University Press, 1972), 186-197. Although he does not present his test cases as Asian models of gentlemanly capitalists, Richard Grace examines the lives of William Jardine and James Matheson against Cain and Hopkin’s model. See Richard Grace, Opium and Empire: The Lives and Careers of William Fardine and James Matheson (Mon-treal: McGill-Queen’s University Press, 2014).
18 Paul A. Van Dyke argues that the policies of the Qing state inhibited the geographical scope of the Hong merchants’ activities. See Merchants of Canton and Macao: Success and Failure in Eighteenth-Century Chinese Trade (Hong Kong: Hong Kong University Press, 2016), intro.
19 Madeleine Zelin, Jonathan K. Ocko, and Robert Gardella, eds., Contract and Property in Early Modern China (Stanford, CA: Stanford University Press, 2004).
20 Anne Osborne, “Property, Taxes, and State Protection of Rights," in Contract and Property in Early Modern China, ed. Zelin, Ocko, and Gardella, 120-158.
21 Hill Gates, China’s Motor: A Thousand Years of Petty Capitalism (Ithaca, NY: Cornell University Press, 1996).
22 Niall Ferguson, The World’s Banker: The History of the House of Rothschild (London:
Weidenfeld & Nicolson; New York: Viking, 1998).
23 Douglass C. North and Barry R. Weingast, “Constitutions and Commitment: The evolution of Institutions Governing Public Choice in Seventeenth-Century England," Four-nal of Economic History 49, no. 4 (December 1989): 803-832, and Douglass C. North, Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990).
24 David Faure, China and Capitalism: A History of Business Enterprise in Modern China
(Hong Kong: University of Hong Kong Press, 2006).
25 Many scholars who have analyzed trading networks have offered cultural explanations that build on the diasporic employment of social devices as the basis for business inter-actions. See, for example, Avner Greif, “Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders’ Coalition," American Economic Review 83, no. 3 June 1993): 525-548, and G. William Skinner, “Creolized Chinese Societies in Southeast Asia: In Honour of Jennifer Cushman," in Sojourners and Settlers: Histories of Southeast Asia and the Chinese, ed. Anthony Reid (St. Leonards, Australia: Allen and Unwin, 1996), 51-93. The diverse ethnic background of Houqua’s trading network challenges these assertions. By examining the process through which Houqua and his partners transcended cultural barriers and established their system of credit to cope with the risks and uncertainties of long-distance trade, the current research contributes to our understanding of transnational networks.
26 Dennis O. Flynn, Arturo Giráldez, and Richard von Glahn, eds., Global Connections and Monetary History, 1470-1800 (Aldershot, UK: Ashgate, 2003); Akinobu Kuroda, “Concurrent but Non-integrable Currency Circuits: Complementary Relationships Among Monies in Modern China and Other Regions," Financial History Review 15, no. 1 (2008): 17-36; Man-Houng Lin, China Upside Down: Currency, Society, and Ideologies, 1808-1856 (Cambridge, MA: Harvard University Press, 2006); Richard von Glahn, Fountain of Fortune: Money and Monetary Policy in China, 1000-1700 (Berkeley: University of California Press, 1996); William S. Atwell, “International Bullion Flows and the Chinese Economy circa 1530-1650," Past & Present, no. 95 (May 1982): 68-90.