BOOK REVIEWS

Alain Le Pichon, Aux origines de Hong Kong—Aspects de la civilisation commerciale à Canton: le fonds de commerce de Jardine, Matheson & Co., 1827-1839

Given the close connection between Jardine, Matheson & Co. and the history of Hong Kong, one might think that this book will recount the beginnings of the British colony. Not at all. Rather, the author has chosen to cover the period from 1827 to 1839, a time of close co-operation between William Jardine and James Matheson, the company’s two founders. We are therefore presented with an account of the first steps, faltering and difficult, of a company that would later become a symbol of stability and strength, and we thus discover what could be called the prehistory of Hong Kong. Right up until 1840, there were just a few fishing villages on the island and trade between the West and China was taking place some 80 km to the north, in a small area belonging to the city of Canton (Guangzhou), the only place where the “Western barbarians” had been authorised by the Emperor to conduct their business. This magnanimity was accompanied by a number of constraints, notably the obligation to trade through the intermediary of a dozen or so Chinese merchants who were licensed and brought together in an association known as the cohong, that in theory had an absolute monopoly on trade. Foreigners could only contact the Chinese administration by going through one of the members of the cohong (or Hong merchants) and were not permitted to leave their neighbourhood or to take “barbarian” women there. This “Cantonese system” continued to operate, taking one year with another, for more than a century. It was essentially based on an understanding between two monopolies i.e. the cohong and the East India Company, the “honourable company”, which was the only company authorised by the British government to control trade with India and all of East Asia. Alain Le Pichon’s book covers the period when this system began to break down. It is only in this regard that the book talks about Hong Kong, as the official transfer of the “fragrant harbour” to the British crown through the Treaty of Nanking in 1842 was to provide the strongest and most durable solution to the problems caused by the disappearance of the outdated system of international trade that Canton stood for. The British dominated trade with China at that time. Not only because Britain was then the most powerful trading country in the world and had a particularly strong presence in Asia through the East India Company, but also because during the seventeenth and eighteenth centuries, Britain had acquired a taste for tea, which at that time was grown only in China. Taxes on imported thea sinensis accounted for approximately 10% of the British government’s revenue, and therefore justified keeping tight control on its trade.

The period covered by Alain Le Pichon’s book is particularly interesting from the point of view of China’s history and international relations, as it covers the latter years of the closing down of this vast empire, following the failure of both Lord Macartney’s, and later on, Lord Amherst’s diplomatic efforts. Fairbank and other specialists in Chinese affairs have already tackled this subject from this angle of the opening up of China, an opening up which would eventually be accomplished by force, when the first “opium war” led to the Treaty of Nanking. But this great story that has already been told by others, is not the subject of Alain Le Pichon’s work. His book, a slightly reworked version of a thesis, is interested only in the story of the firm that assumed the name of Jardine, Matheson & Co. only in 1832, even though the two men had worked there together since 1827, when it was still called Magniac & Co. The author’s principal source is the company’s archives, which were laid down at Cambridge University in 1934. Alain Le Pichon is not the first person to go through these archives, but he does claim to be the first to do it with the intention of understanding and describing the company, and through the company, an aspect of the “commercial civilisation” in this pivotal era of its development. The reader learns how the company is run, the networks that it establishes, from Canton to Calcutta, Bombay, London and Singapore among other places, the skills that it must master, its financial concerns, efforts made to improve product quality and to respond better to customers’ needs, and the dangers that lie in wait for it. The most serious consequences can arise from unforeseen administrative decisions, but above all, when debtor companies go bankrupt or when distant business partners default and must be replaced rapidly, a difficult task in times when transport and communications relied upon sailing ships. One understands that in times of financial hardship, the survival of a company can depend on human factors that can be as uncertain as the strength, big or small, of a commercial friendship. Specific information on the accounting management, the various payment methods used at the time, the running of the tea trade by the Chinese, the relationship between the collapse of the indigo business in Calcutta and the increase in opium sales to China are very useful and, as far as we are aware, original. Through Jardine and Matheson, the author also presents us with two entrepreneurial individuals of the time, very different from each other, but incredibly complementary and very supportive of each other. Jardine, the elder of the two, was a Scotsman from a modest background and was naturally very careful with money. After spending 15 years as a doctor’s assistant on East India Co. boats, he decided to try his luck in business. Matheson, also Scottish, was from a more well-to-do family and had been a student at the University of Edinburgh. (though he did not complete his studies). Matheson is a better fit for the image of an opium merchant and adventurer. He was dynamic, creative and often rebellious, but not as good a manager as his associate.

Beyond the footnotes of history of the early days of a trading house that this monograph offers us, the reader will undoubtedly be more interested in the big story of the opening up of China, even if it is grasped here only from the limited point of view of the author. Alain Le Pichon introduces us to the various players in the Cantonese commercial system – the Chinese and the British monopolies, and the foreign independent traders who, little by little, under the leadership of Jardine and Matheson and thanks to the growth in ideas in Britain of commercial freedom, would eventually see the end of the British monopoly. And so, to use Tocqueville’s expression, we find ourselves in an atmosphere of “revolution without violence”, symbolised by the 1832 Law on Warehouses (which abolished the warehouse monopoly for products to be exported), followed later that same year by the Electoral Reform Law that sanctioned the sharing of power between the landed aristocracy and the rising industrial and commercial bourgeoisie. The book shows the “marketing” work that was undertaken, in both Canton and in Britain, to bring down the monopolies that “undermined freedom”. Even though the need to replace that of the East India Co. provided the opportunity in 1833 to put an end to the British monopoly, it was the Chinese monopoly that was particularly targeted and caused most resentment. The “displeasure” (the title of a major article published in the Chinese Courier in 1832 and quoted by Le Pichon) was derived not so much from the cohong monopoly but more from the Cantonese system as a whole. The residential district for foreigners in Canton was likened to a “big monastery”, a prison even, because of the restrictions described above. (This area was not unlike the luxury ghettos that the Chinese communist party has tended to confine foreigners to since the 1950s.) But it was the arbitrary nature of the rules, and the Mandarins’ arrogance and greed that the merchants considered most intolerable.

The foreign merchants did not have the necessary means to fight against the Chinese monopoly alone, but the author clearly demonstrates how the disappearance of one of them led rapidly to the collapse of the other. When approached directly by the foreign merchants, the Chinese wholesalers came to understand the importance of their role and of the parasitic nature of the Hong merchants. These Chinese merchants transformed themselves into modern traders, and the Hong merchants were obliged to do the same or to risk going bankrupt. This development entailed administrative and political consequences that were all the more delicate since a large portion of all trade concerned a product that was illegal in China: opium. The author begins by providing us with a detailed account of this trade, because at the beginning, i.e. right up to 1834, the year in which the monopoly of the “honourable company” was abolished, opium was the only product that the independent traders were able to sell.

The debate on the more or less immoral nature of this trade has continued since this time, and it is not possible to either resolve it or to consider it fully here. Alain Le Pichon asks the reader not to judge the situation based on modern-day criteria, but to bear in mind that this trade was legal during the British rule of India as well as in Britain itself. Even in China, where officially it was banned, it represented half of all trade in Canton, thus implying that it was effectively tolerated by the Chinese authorities who took their share from this traffic. The author’s conclusion on this matter is that opium had a role to play in the development of free trade and against the mercantilist monopolies - a positive role in history, even though the product concerned was a drug that had pernicious effects (p. 56). He also recounts how the larger-than-life German pastor Carl Gutzlaff, one of the few foreigners in Canton who spoke Chinese, agreed to act as interpreter on a boat that Jardine and Matheson had decided to send up to the northern Chinese coast with the aim of finding new outlets for their opium. At each port, after helping to complete the deals, the reverend disappeared into the countryside to distribute thousands of his evangelistic leaflets. One must wonder if his compatriot Karl Marx had been inspired by this adventure when, some time later, he likened religion to the “opium of the masses”.

Unlike the tobacco ban, the ban on the opium trade in China, decreed by imperial edict at the beginning of the seventeenth century, had never been properly implemented. But a new edict in 1729, whilst not disrupting consumption on a long-term basis, did have the effect of convincing the “honourable company” to cease this trade in China. Alain Le Pichon shows however that the company continued to benefit from it, not only because it was the largest seller of opium in India, but also because it lent some of the cash it derived from this traffic to the independent traders in Canton, in exchange for bills payable in London or Calcutta. The company thus avoided having to ship quantities of hard cash, which was not only costly but also very risky, to pay for its purchases of tea and silk.

A century later, when the import of opium was expanding, the Chinese authorities wondered if they should fully implement the ban, or if it would be better to do the opposite and legalise such trade in an attempt to force it to be done on a barter basis, thus avoiding the outflow of local currency that it was causing at that time. The conscience of the opium merchants was salved when they learned that the Emperor intended to legalise their product. Interestingly enough though, Le Pichon notes that Jardine was against this measure as it would have lowered their prices and drained their source of cash. But in the end, following disputes between various Court cliques as described in Polachek’s book, The Inner Opium War, it was the opposite course of action that was decided upon, i.e. to fully implement the ban, and the incorruptible Mandarin Lin Zexu was sent to Canton for this purpose. However, this story is not recounted here and, because of his bias towards bringing his analysis to a halt upon William Jardine’s retirement in early 1839, i.e. just before the outbreak of the tensions whose escalation he has led us through, the author leaves us somewhat hungry for more on this subject.

There are certain events—the effect in Canton of the Emperor’s hesitations on the legalisation of opium, the petitions sent to the British authorities by the independent traders in 1830 and 1834, the abolition of the Company’s monopoly position and the upheavals that followed as a result and which would make the very people who had fought against the old system, Jardine and Matheson included, actually miss it—that only take on their historical significance in the light of events that follow, i.e. Lin Zexu’s confiscation of the opium, the use of force by the British, Captain Elliot’s capture of Hong Kong and its subsequent official transfer at the end of the first “opium war”, and the opening up of other ports.

While Alain Le Pichon does not take us through the birth of Hong Kong, he does however clearly show how the “fragrant harbour” was foreshadowed by these warehouse-ships lying at anchor elsewhere than in Canton, from which Chinese smugglers could get fresh supplies without being subject to any official supervision or levies. When reading this particular passage, modern-day Hong Kong residents may be reminded of certain amusing historical comparisons. And so the first unofficial mooring site, used by Matheson from 1821 onwards, was nothing other than the small island of Lintin (or Lingding), which today still remains a place where theoretically illegal activities take place, but with the blessing of the local authorities of the People’s Republic. The “quick crabs” (faai haai in Cantonese), small boats that were so-called because equipped with twenty to thirty oarsmen each they were able to scurry around faster than the customs boats, are obviously evocative of the “large flying [speedboats]” (daai fei) used by modern-day smugglers. Alain Le Pichon also tells us that from August 1838 onwards, having been subject to renewed attention from the Chinese authorities, Lintin was replaced as the main illegal anchorage by Hong Kong harbour, just across from the Kowloon peninsula, on the site where the Star Ferry pier can now be found.

From the point of view of the general history of this era, the main criticism that could be levelled at Alain Le Pichon’s book is too great a subordination to his principal source, which although interesting, is limited. So we learn little about the way of life of the two main protagonists, particularly their background, and little coverage is given to the intense rivalry with the other large independent trading house, Dent. Even though he dedicates an entire chapter to the bankruptcy of the Hong merchant Hingtai, whose heavy indebtedness to Jardine was to result in him losing a lot of money, the author does not mention Dent’s role in this affair. Nor does he indicate that Hingtai, as guarantor for the boat on which a rebellious director of the “honourable company” had brought his wife to Canton in 1829, an unprecedented scandal that had made the viceroy representing the Emperor extremely angry, had to pay a very heavy fine to the Chinese administration and was even sent to prison. Yet this event did have a part to play, not only in Hingtai’s financial situation, but maybe also in the special friendship that he shared with Jardine.

This subordination to the principal source is surely what leads the author to paint a picture of the two heroes that is without a doubt a little too flattering. it is not without good reason of course that William Jardine was nicknamed “old rat” by the Chinese. But not being a specialist on Chinese culture, what the author does not tell us is that in China, all rats (laoshu) are “old”, but in terms of their slyness rather than their age. Jardine was thus regarded as an “old fox”. Alain Le Pichon himself gives us an example of Jardine’s hard business tactics, when he recounts how he advised the captain of the boat on which he sent his opium to be sold illegally in the coastal ports, to bribe the Chinese officials to fire upon any rival boats that may be around. Jardine added that if that did not work, then he should systematically moor next to such boats and sell the goods at a loss so as to dissuade the competition from continuing to seek their fortune outside Canton. Nor does Alain Le Pichon indicate that Jardine was also nicknamed “iron head”, following a fight during which he remained unshakeable despite having received a severe blow to the head. In our opinion therefore, the portrait painted on pages 505 to 507 deserves to be a little more balanced, even if one can go along with the author in his description of a trader who was conscientious in his work and faithful to his word.

Beyond these criticisms of certain details, we must recognise the contribution that Alain Le Pichon’s thesis makes to our understanding of an important period in the history of international trade. Furthermore, this serious and well-documented book is written in a pleasant and accurate style (despite a fair number of typographic errors, which is typical of this particular publisher). 

Translated from the French original by Bernie Mahapatra