The history of foreigners in imperial China is not only a history of missionaries, diplomats, explorers, and adventurers. It is also the history of extraordinary commercial organisations whose names became familiar from Canton and Shanghai to London, Bombay, New York, and Singapore. During the eighteenth and nineteenth centuries these merchant houses became known in English as hongs, a term derived from Chinese commercial usage that was eventually applied especially to the great foreign trading firms of the China coast. Jardine Matheson, Dent and Company, Russell and Company, Butterfield and Swire, Augustine Heard and Company, and numerous lesser houses operated within a commercial world that connected Chinese tea gardens, silk producers, merchants, bankers, dock workers, and compradores with ships and markets across the globe. Later, institutions such as the Hongkong and Shanghai Banking Corporation provided the financial machinery needed to support this enormous trade. Steamship companies carried cargo along the Chinese coast and deep into the Yangtze basin. Insurance companies protected vessels and merchandise. Telegraphs accelerated communication. Warehouses, offices, docks, banks, and factories transformed waterfronts from Canton to Shanghai. By the final decades of the Qing dynasty, the foreign hong had evolved from a merchant partnership into something resembling the modern multinational corporation.
The word hong itself requires some explanation. Originally it referred to Chinese commercial establishments and merchant organisations rather than specifically to foreign companies. Under the Canton system, Chinese merchants authorised to conduct business with Western traders became known to foreigners as Hong merchants, and collectively their organisation became known as the Cohong. Foreigners nevertheless adopted the term, and during the nineteenth century great expatriate merchant houses were frequently described as hongs as well. A foreign hong might have its headquarters in Hong Kong while maintaining offices in Shanghai, Canton, Hankou, Tianjin, Fuzhou, Xiamen, and ports elsewhere in Asia. It might own ships, warehouses, docks, factories, and property, employ hundreds or thousands of Chinese workers, use Chinese commercial agents to penetrate markets far beyond the treaty ports, and maintain corresponding offices or partners in London, India, Japan, Southeast Asia, and the United States. The resulting organisations were not simply shops buying and selling exotic goods. They were international networks through which money, information, commodities, technology, and political influence moved.
Canton and the Birth of the Great Hongs
Before the Opium Wars, the most important centre of Western commerce with China was Guangzhou, commonly called Canton by Europeans. Qing authorities concentrated most Western maritime commerce there under a highly regulated system. Foreign merchants were confined largely to a district beside the Pearl River and conducted their business through authorised Chinese Hong merchants. They could accumulate enormous fortunes, but they remained dependent upon Chinese intermediaries for access to the interior. Tea, silk, porcelain, and other Chinese commodities flowed outward, while silver, Indian cotton, and increasingly opium flowed toward China. This system produced a small but exceptionally ambitious community of foreign merchants who lived between worlds. Their homes, ships, commercial partnerships, and fortunes might connect Britain, India, China, Southeast Asia, and the Americas at the same time.
Among the companies that emerged from this environment, none would become more famous than Jardine Matheson. William Jardine and James Matheson formed Jardine, Matheson and Company in Canton on 1 July 1832. The timing was important. The commercial monopoly of the British East India Company was nearing its end, creating opportunities for private merchants prepared to take greater risks. Jardine had previously worked as a surgeon for the East India Company before entering private trade, while Matheson had accumulated substantial experience in Asian commerce. Together they created a business that would become one of the dominant British firms in East Asia. The partnership was formed in Canton in 1832, purchased its first Hong Kong land at East Point in 1841, and opened a Shanghai office in 1844.
Opium was fundamental to the early fortunes of Jardine Matheson. The firm also traded tea, silk, cotton, and many other commodities, but opium provided exceptionally large profits and helped solve one of the central problems facing Western merchants in China. European consumers wanted enormous quantities of Chinese tea and other products, while demand in China for British manufactured goods remained comparatively limited. This created a persistent need for silver to finance purchases from China. Indian opium provided British and other merchants with a commodity for which there was considerable Chinese demand despite Qing prohibitions. The trade became one of the most profitable and politically explosive elements of the entire nineteenth century China trade.
Jardine Matheson was therefore not simply an observer of the crisis that produced the First Opium War. William Jardine returned to Britain shortly before the conflict and became involved in discussions concerning British policy toward China. The company’s commercial interests were closely connected to the confrontation over Qing attempts to suppress opium imports. This does not mean that the entire war can be reduced to the interests of a single firm, since questions of diplomacy, sovereignty, legal jurisdiction, trade, and imperial prestige also mattered, but Jardine Matheson occupied a prominent position within the commercial pressure for a more open Chinese market. The importance of opium in the firm’s early history should not be softened when discussing its later achievements. Jardine Matheson ultimately became a diversified commercial and industrial organisation, but a significant portion of the capital and influence that supported its early rise came from a trade prohibited by the Qing government.
Dent and Company
Jardine Matheson had powerful rivals, and one of the greatest was Dent and Company. The competition between the major Canton firms could be intense because the rewards were enormous. Dent and Company participated extensively in the China trade and became one of the principal British merchant houses operating alongside Jardine Matheson. Like Jardines, it was deeply involved in opium during the period before the First Opium War. Lancelot Dent became a particularly prominent figure during the crisis of 1839, when Imperial Commissioner Lin Zexu arrived in Canton determined to suppress the illegal trade. Foreign merchants were eventually forced to surrender large stocks of opium, which Lin had destroyed at Humen.
Dent and Company survived the conflict and entered the new treaty port world that followed. It established itself in Shanghai after the city opened to foreign commerce and participated in the rapidly expanding trade in silk, tea, finance, insurance, and other sectors. For a period it stood alongside Jardine Matheson among the leading British commercial houses of East Asia. Yet its fate also revealed that even a great hong could collapse. International finance was volatile, and the failure of the London financial house Overend, Gurney and Company in 1866 helped trigger a credit crisis that proved disastrous for Dent. The disappearance of one of the most prestigious names in the China trade demonstrated that size, political connections, and decades of commercial experience offered no guarantee of survival.
Russell and Company and the American Hongs
British firms did not possess a monopoly over the foreign trade. American merchants arrived in China soon after independence and built large businesses of their own. Because they were not operating through an organisation equivalent to the British East India Company, American China traders often relied upon private partnerships and family networks. One of the greatest was Russell and Company, established in Canton by Samuel Russell in 1824. After merging with Perkins and Company in 1831, Russell and Company became the largest American commission house in China and remained a major presence for much of the nineteenth century.
Russell and Company participated in many of the same commercial networks as its British rivals. Tea, silk, opium, shipping, bills of exchange, and financial services tied American merchants to Chinese and international markets. Other American houses included Augustine Heard and Company, Olyphant and Company, Perkins and Company, and Wetmore and Company. These companies developed extensive relationships with Chinese merchants and intermediaries while maintaining connections with Boston, New York, and other American commercial centres. Their surviving commercial archives reveal businesses built upon invoices, freight arrangements, insurance, correspondence, credit, and the daily administration of a genuinely international trading system.
Russell and Company also illustrates how the hong evolved beyond the traditional commission trade. By the early 1860s its older merchant business was under pressure. Edward Cunningham, a partner in Shanghai, pursued an ambitious alternative by creating a steamship company that could exploit the newly opened Yangtze trade. The resulting Shanghai Steam Navigation Company became a major commercial force. Cunningham raised capital in China and constructed an enterprise that became profitable while also generating commission business for Russell and Company.
The Shanghai Steam Navigation Company
Steam power changed the geography of foreign commerce in China. Sailing ships remained important for oceanic trade, but steamships could operate regular services on rivers and along the coast with a reliability that transformed transport. The Yangtze River was particularly important because it offered access deep into one of China’s wealthiest and most populous regions. Once treaty arrangements permitted greater foreign commercial penetration, control of river shipping became a lucrative prize.
The Shanghai Steam Navigation Company became the great American player in this new field. Its vessels operated along the Yangtze and connected Shanghai with ports farther inland. Steam navigation allowed foreign firms to move manufactured goods upriver while bringing tea, agricultural products, raw materials, and other cargo toward Shanghai. The business required considerably more capital than the traditional commission trade, which made it an early example of the increasing scale of corporate enterprise in China. It also intensified competition among foreign companies. When Swire established the China Navigation Company in 1872, the Shanghai Steam Navigation Company was its principal American rival on the Yangtze.
Shanghai and the Transformation of the Hong
The opening of Shanghai after the First Opium War created conditions in which these firms could become far more powerful than they had been under the Canton system. Shanghai’s location was exceptional. It sat near the mouth of the Yangtze and offered access to a vast commercial hinterland containing important agricultural, manufacturing, and population centres. British settlement began there during the 1840s, followed by American and French areas. Foreigners acquired land, constructed offices and warehouses, and created institutions that increasingly distinguished the treaty port from the ordinary administrative structures of Qing China.
The Bund became the physical expression of this new commercial order. What began as a riverfront became lined with merchant offices, consulates, shipping companies, insurance firms, and banks. Jardine Matheson established itself in Shanghai in 1844 and purchased a prominent property there. Other hongs followed. Foreign merchants were no longer confined to the old Canton factories. Their businesses could operate through several ports and increasingly reach into China’s interior through shipping and Chinese commercial networks. The great hong now required managers, clerks, accountants, shipping agents, warehouse staff, interpreters, compradores, engineers, and large numbers of Chinese employees. It was becoming an institution rather than simply a partnership between a few merchants.
Swire and the Rise of Taikoo
Swire represented a later generation of the foreign hong. John Samuel Swire’s family business had existed in Britain since 1816, but its direct entry into the China trade came during the 1860s. In 1866 John Samuel Swire established Butterfield and Swire in Shanghai in partnership with Richard Shackleton Butterfield. The company initially traded tea and silk while importing British cotton and woollen goods. It also became an agent for British insurance and shipping companies. In keeping with Chinese commercial custom, the firm adopted the Chinese name Taikoo, meaning roughly Great and Ancient, and that name became deeply associated with Swire throughout East Asia. A Hong Kong branch followed in 1870.
Swire did not attempt merely to imitate Jardine Matheson. Its most consequential move was into steam navigation. In 1872 John Swire and Sons established the China Navigation Company. Its early vessels included paddle steamers designed for the Yangtze trade. From there the company’s network expanded along the Chinese coast and eventually toward Japan, Southeast Asia, and Australia.
Competition between Swire and the Shanghai Steam Navigation Company could be aggressive. River shipping involved more than simply owning vessels. Companies needed wharves, warehouses, repair facilities, agents, reliable schedules, political relationships, access to freight, and connections with Chinese merchants. A steamship sailing half empty could quickly become an expensive liability. The company that captured regular cargo flows could instead create a network in which merchants planned their businesses around its services. Swire succeeded in establishing itself as a major force in this environment, and the China Navigation Company eventually became one of the defining institutions of the Swire empire.
Shipping then encouraged further diversification. Swire’s vessels carried sugar as well as other cargo, and the company invested in industrial enterprises connected to these trading networks. In 1882 Butterfield and Swire acquired waterfront land at Quarry Bay in Hong Kong for the development of the Taikoo Sugar Refinery. Later ventures included the great Taikoo Dockyard. The hong had now evolved far beyond buying tea in China and selling British textiles. It could own steamships, industrial plants, repair facilities, real estate, and complex regional distribution systems.
Jardine Matheson After the Opium Era
Jardine Matheson underwent a similar transformation. The company that had made enormous profits from opium and tea increasingly diversified as the nineteenth century progressed. Shipping became important, followed by industrial and infrastructure ventures. The company opened offices around China and across East Asia and became associated with steamship services, insurance, property, mills, engineering, and railways. Its history also intersects with one of the most famous early railway experiments in China, the Woosung railway near Shanghai.
The diversification of Jardines helps explain why the term hong came to signify much more than a trading house. A large firm possessed several advantages. It could obtain information from many ports, spread risk across different commodities, mobilise large pools of capital, own transportation, insure cargo, and use relationships with banks and political institutions. Its managers could watch movements in tea prices in Shanghai, cotton markets in India, interest rates in London, and shipping conditions in Hong Kong as parts of the same commercial calculation. This ability to combine information, capital, and transportation gave the largest hongs considerable power.
HSBC and the Financial Machinery of the China Trade
The transformation of the China trade also produced a demand for a new kind of bank. Merchants needed to move money rapidly between Hong Kong, Shanghai, London, India, Japan, Southeast Asia, and eventually North America. Traditional banking institutions and merchant credit remained important, but the scale of nineteenth century commerce required larger and increasingly specialised financial organisations. The Hongkong and Shanghai Banking Corporation, later universally associated with the initials HSBC, emerged directly from this environment.
The bank was conceived by Thomas Sutherland, a Scottish businessman associated with the shipping industry. It opened for business in Hong Kong on 3 March 1865 and in Shanghai one month later. An office in London followed. Support came from merchants who wanted a locally managed bank able to respond quickly to Asian commercial conditions. International trade stood at the centre of the bank from its beginning, and its early network financed import and export businesses across Asia.
HSBC rapidly became part of the connective tissue holding the treaty port economy together. Tea exporters required financing before their cargoes reached overseas buyers. Silk merchants needed credit. Shipping companies required capital to acquire vessels and maintain operations. Traders needed foreign exchange between currencies. Businesses needed bills, remittances, deposits, and reliable methods of transferring money across continents. HSBC expanded through ports including Yokohama, Calcutta, Saigon, and Manila and developed a network connecting Asian commerce with Europe and North America. It financed exports including Chinese tea and silk while linking the China coast to an increasingly integrated international financial system.
The Shanghai office became particularly important. HSBC began operating there in April 1865 from premises on the Bund. The business expanded substantially during subsequent decades, reflecting Shanghai’s rise as one of Asia’s major commercial cities. By the end of the Qing period, a foreign merchant in Shanghai could operate within an economic environment unimaginable to his counterpart a century earlier. He could communicate through telegraph networks, finance cargo through international banks, insure shipments, place goods aboard regularly scheduled steamships, maintain accounts in several currencies, and coordinate operations between offices thousands of miles apart.
The Compradores Who Made the Hongs Work
Yet none of these firms could function effectively without Chinese intermediaries. Among the most important were the compradores. The comprador is sometimes presented simply as a Chinese employee who translated for a foreign firm, but this description dramatically understates his role. A powerful comprador could be a financier, negotiator, recruiter, guarantor, commercial intelligence source, purchasing agent, and entrepreneur simultaneously. Foreign managers often lacked the language skills, family connections, regional knowledge, and commercial relationships necessary to operate effectively within Chinese markets. The comprador supplied them.
Compradores formed sophisticated networks linking foreign houses with Chinese merchants and officials. Tong Mow Chee, for example, served Jardine Matheson while developing a much wider network of commercial and political relationships. Other compradores associated with firms such as Dent and Company, Russell and Company, and Jardine Matheson became important entrepreneurs in their own right.
A comprador could arrange purchases from Chinese suppliers, evaluate creditworthiness, manage employees, negotiate debts, and guarantee transactions. British firms often depended so heavily upon comprador relationships that disputes involving Chinese vendors could create direct liabilities for the foreign house. These intermediaries stood at the centre of relationships between foreign firms and Chinese suppliers and helped translate not only language but also commercial expectations, credit practices, and personal networks.
These intermediaries demonstrate why describing the treaty port economy simply as foreign capitalism imposed upon passive Chinese society is insufficient. Military power and unequal treaties created major advantages for foreign nationals, but the actual operation of commerce required continuous collaboration with Chinese merchants, workers, investors, brokers, bankers, interpreters, and officials. Some Chinese businessmen used their comprador positions to accumulate capital and knowledge before launching enterprises of their own. Foreign firms therefore became one of several environments in which a new Chinese commercial elite gained experience with international accounting, shipping, banking, industrial management, and overseas markets.
More Than Jardines and Swire
The treaty port world contained many companies beyond its most famous names. Augustine Heard and Company became a substantial American trading house. Olyphant and Company and other American firms competed for cargoes and commissions. British, German, French, Indian, Jewish, Armenian, Portuguese, and other commercial communities participated in the expanding trade. Merchants from the Sassoon family built important businesses connecting India, China, and Britain. Shipping lines, insurance societies, banks, engineering firms, importers, exporters, and brokers crowded the major ports.
Competition among them transformed commercial culture. Advertising became increasingly important. Foreign enterprises promoted branded products in Chinese newspapers and attempted to distinguish themselves from rivals. The treaty port was not merely a place where Westerners sold Western goods. It became an environment in which Chinese and foreign commercial practices constantly interacted.
Wealth, Power, and the Unequal Treaty System
The achievements of the great hongs cannot be separated from the political structures within which they operated. The First Opium War and later conflicts forced the Qing government to accept treaty arrangements granting foreigners extensive commercial and legal privileges. More ports were opened, foreign concessions appeared, missionaries acquired new rights, and foreign nationals often benefited from extraterritorial jurisdiction. Western powers, and later Japan, acquired opportunities to trade, invest, establish businesses, and exercise influence inside China under conditions that Chinese officials had not freely chosen.
The great hongs benefited from this environment. Jardine Matheson could expand from the old Canton trade into Hong Kong and the treaty ports. Swire could send steamships along the Yangtze. Banks such as HSBC could establish branches in Shanghai and other commercial centres. Foreign firms could own or lease valuable property and operate under legal protections unavailable to ordinary Chinese businesses. Their rise was therefore connected both to genuine entrepreneurship and to an international political system that placed the Qing state under enormous pressure.
Yet the relationship was never entirely one sided. Chinese merchants were indispensable partners and competitors. Qing officials attempted to use foreign technology and capital for Chinese purposes. Chinese entrepreneurs invested in steamships, factories, banks, mines, and modern industries of their own. Foreign firms frequently discovered that success required adaptation to Chinese markets rather than simple domination of them. The late Qing commercial world was shaped by imperial inequality, but it was also shaped by negotiation, competition, imitation, collaboration, and Chinese entrepreneurship.
The Daily World of the Hong
Behind the great company names were thousands of individual lives. A young British clerk arriving in Shanghai to work for Jardines or Swire entered a world far removed from Britain. His day might be spent preparing correspondence, examining invoices, calculating exchange rates, negotiating freight charges, inspecting cargo, or communicating with offices in other ports. Senior managers could become extremely influential members of the expatriate community, while junior employees lived far more modestly. Chinese clerks maintained accounts. Compradores organised transactions. Warehouse workers moved cargo. Boatmen carried people and merchandise between ships and shore. Engineers maintained machinery. Sailors crewed the steamships. Servants maintained expatriate households.
The hong was therefore simultaneously a foreign institution and a Chinese workplace. Its senior ownership might lie abroad, but most of the people whose labour enabled it to function in China were Chinese. The enormous profits associated with international commerce depended upon workers loading tea, silk, cotton, sugar, machinery, and countless other goods at docks and warehouses. They depended upon Chinese merchants advancing credit, rural producers creating export commodities, and intermediaries connecting distant communities to treaty port markets.
That daily interdependence helps explain why the foreign hong became such an enduring institution. Its power did not come simply from possessing foreign capital. It came from its ability to build networks. Jardine Matheson connected producers, ships, insurers, bankers, and buyers. Swire combined trading offices with shipping and industrial enterprises. Russell and Company connected American capital with the China coast and then helped create a major steam navigation concern. HSBC connected all of them to an expanding world of international finance. The comprador connected the foreign office to Chinese commercial society. Each part depended upon the others.
The Foreign Hongs at the End of Imperial China
By the time the Qing dynasty collapsed in 1911, the foreign commercial presence in China bore little resemblance to the small collection of merchants once confined to the Canton factories. The hongs had become corporate empires. They owned steamships and warehouses, controlled valuable property, invested in industry, arranged international loans, supported insurance networks, financed trade, and maintained offices across continents. Shanghai had become one of the world’s great commercial cities. Hong Kong, although by then under British colonial rule rather than Qing government, served as one of the essential headquarters and financial centres for companies operating throughout China. The Yangtze carried foreign and Chinese steamships deep into the interior. Banks such as HSBC provided an international financial infrastructure that linked Chinese commerce with markets thousands of miles away.
Jardine Matheson embodied the transition from the old Canton merchant to the diversified corporate hong. Dent and Company illustrated both the wealth and fragility of the early merchant houses. Russell and Company represented the enormous American contribution to the China trade. The Shanghai Steam Navigation Company demonstrated how steam transport changed the scale and geography of commerce. Swire and the China Navigation Company showed how a trading firm could evolve into a regional shipping and industrial organisation. HSBC represented another stage again, the creation of a financial institution designed from the beginning to connect commerce across Asia and the wider world.
These companies left a complicated legacy. Their ships, banks, warehouses, docks, industries, and commercial networks contributed to the transformation of East Asian trade. They introduced or expanded forms of corporate organisation, international finance, steam transportation, insurance, industrial production, and modern communications. At the same time, many prospered within an unequal treaty system created through military force, and several of the greatest early hongs accumulated fortunes through the opium trade. Their history contains entrepreneurship and exploitation, technological innovation and imperial privilege, cooperation and coercion.
The most interesting conclusion, however, may be that the foreign hong was never entirely foreign once it began operating inside China. Its success depended too heavily upon Chinese society. Jardine Matheson needed Chinese merchants and compradores. Swire needed Chinese passengers, cargo owners, employees, and customers. HSBC needed Chinese depositors, merchants, borrowers, and commercial relationships. Steamship companies required Chinese docks, crews, agents, and freight. Even the most powerful foreign firms could not simply impose a business system upon an enormous civilisation and expect it to function automatically.
Instead, a distinctive commercial culture emerged in places such as Shanghai, Canton, Hankou, Tianjin, and Hong Kong. Chinese and foreign merchants borrowed ideas from one another, competed against one another, invested alongside one another, and sometimes attempted to displace one another. The result was one of the most complex commercial environments of the nineteenth century.
The foreign hongs therefore deserve a central place in any history of the final century of imperial China. They were far more than exotic trading houses with grand offices on the Bund. They were the institutions through which much of China’s growing interaction with the global economy was organised. Their managers negotiated with officials and merchants. Their steamships travelled China’s rivers. Their warehouses filled the treaty port waterfronts. Their banks financed cargoes. Their compradores connected them with Chinese markets. Their fortunes rose and collapsed with wars, commodity prices, financial crises, political decisions, and technological change.
To walk along the Shanghai Bund near the end of the Qing dynasty was therefore to see the material evidence of a transformation that had begun generations earlier in the cramped foreign factories of Canton. Jardine Matheson had grown from a merchant partnership founded in 1832 into a diversified commercial institution. Swire had moved from tea and textiles into steamships and industry. HSBC had emerged from the needs of the merchant community to become a major international bank. American houses such as Russell and Company had helped establish the steam navigation systems that opened the Yangtze to new forms of commerce. Chinese compradores had become wealthy entrepreneurs who increasingly entered business on their own account.
Together these people and institutions created a world in which the boundaries between Chinese commerce and international commerce became increasingly difficult to separate. It was a world produced partly by coercion and empire, partly by opportunity and entrepreneurship, and partly by the countless ordinary relationships that develop whenever people from different societies work together for long enough. The great foreign hongs were among the most visible symbols of that world, and their rise tells us as much about the transformation of imperial China as it does about the history of the foreign merchants who came to its shores.
