Wakeman, Frederic Jr.. "The Canton Trade and the Opium War", In The Cambridge History of China, Vol.10, Late Ch'ing, 1800-1911, Part 1, edited by Denis Twitchett and John K. Fairbank. Cambridge: Cambridge University Press, 1978.

Wakeman, Frederic Jr.. "The Canton Trade and the Opium War", In The Cambridge History of China, Vol.10, Late Ch'ing, 1800-1911, Part 1, edited by Denis Twitchett and John K. Fairbank. Cambridge: Cambridge University Press, 1978.

• The goal of the canton system in China, which regulated trade with Europe between 1760 and 1834, was the imposition of hierarchy into the trading process. The system was meant to guarantee European subordination to Chinese monopolies, or Gonghang 公行, and the subordination of gonghang to imperial officials in Guangzhou (163).
• The canton system also maintained distance between the Chinese government and European merchants, as most orders and directives to Europeans were transmitted and enforced by the gonghang on behalf of the Qing government rather than the government directly (163).
• Officially, the reason for the cantonment of Europeans in Guangzhou, and the Russians in Kyaxta, was to limit the influence of foreigners in an autarkic China. The system as existed, however, remained an important revenue source for the royal household and elites in those regions, encouraging the continuation of the trade (163).
• The trade between European and the Qing was financed in large part by silver from the Americas. European traders did sell some goods to China, especially cheap manufactured cloth, but this only made up half of the trade; the other half of payment for Chinese exports had to come from silver (164).
• Although officially disinterested in the conduct of the trade, both the Qing Emperor and his officials benefited personally from the Canton Trade. Over the course of the trade less and less money was actually going towards official duties and taxes and more was lining the pockets of the Emperor and his officials, largely because the Emperor directly appointed customs officers in Guangzhou (164).
• The corruption and extractive tendencies of the Qing government were severe enough that by 1775, the gonghang had set up a Gongsuo fund 公所, consisting of a tenth of all profits from trade, to meet new bribes by officials. By 1780 the fund had been discovered and was subject to taxation (165).
• The Gongsuo fund was used as a tool from the 1780s onward to extract income from wealthy merchants, who had to cover the immense costs of putting down rebellions during this period and repairing necessary infrastructure. Moreover, payments by the fund did not prevent officials from demanding income directly from the merchants (165-166).
• China experienced massive social turmoil after 1796, largely driven by pervasive corruption in the imperial administration: high offices were sold, army registers were padded with fake names to save on troop payments, and taxes were embezzled. After a series of floods and famines, Central China from Sichuan to Hubei erupted in a millenniarian movement called the White Lotus from 1795 to 1803, prompting similar revolts by the 'Triads' in Guangdong in 1802, and a breakdown of order in the region as the Pearl River delta was ravaged by piracy (165).
• The vast and arbitrary taxation of the gonghang by the Qing government destabilized the credit relations of the monopolies with their inland dealers. Their credit with tea and silk merchants in the interior demanded almost exclusively on the advances of the East India Company paid a year in advance, often to the tune of 50% to 90% of the total price (166).
• The ability of the gonghang to pay for any of their goods depended more and more on the annual advances of the East India Company, without which they were unable to meet their current contractual obligations to the British merchants (166).
• This system also tied the interests of the British to the economic success of the gonghang, as they had invested so much money in advances to each gonghang that its bankruptcy would result in immeasurable losses of goods by the British investors. As a result, the Qing government increased its taxation of gonghang, knowing that the British would never let them actually go bankrupt (166).
• Among other factors, the system of indebtedness between gonghang and the East India Company made the tea trade unprofitable for the Company, which barely registered a 5% profit in the 1780s and 1790s (166-167).
• By this period, the British had stopped competing with the gonghang, as both companies sought to protect their monopoly on the tea trade against foreign merchants and the taxation of the Qing officials (169).
• Much of the actual trade with China was undertaken by 'agency houses' licensed by the East India Company, essentially trading outfits run by former Company employees using the salaries they earned in civil service. They acted as banks and insurance companies, investing heavily in plantation industries in India (167).
• When the indigo industry in particular went into a slump in 1801, many of the agency houses diversified and began providing the same services for cotton and opium producers, providing the capital needed for these goods to be exported to China (167).
• Since the East India Company monopolized the export of tea from China, the agency houses importing cotton and opium into China were unable to receive profitable goods in exchange. Instead, the agency houses often received either low-value goods like sugar, or Chinese currency (167-168).
• The vast sums of Chinese currency acquired by agency houses proved to be incredibly useful to the East India Company, which was extremely dependent on physical cash to pay its enormous advances on tea and silk imports to the gonghang (168).
• Although the East India Company sometimes purchased Chinese currency for rupee or pound notes, a system also developed whereby the gonghang purchased cotton or opium from the agency house traders so those traders would pay their debt to the East India Company with the currency reserves of the agency house (168).
• In 1813, the British parliament abolished the East India Company's monopoly on India trade, and decreed that the monopoly in Guangzhou would also expire in 1833. This led to a vast increase in the number of agency houses in India and the sale of Indian products in China (170).
• This boom in trade rapidly collapsed in 1828, when many indigo plantations in India were forced out of business by a decisive switch in European dyeing from indigo towards synthesized Prussian Blue. During that same time, the Indian cotton crop had been pushed out of the Chinese market by cotton from Nanjing. This market collapse caused the agency houses to focus on currency trading and, more importantly, the opium trade (171).
• Following their independence from the UK, American traders entered into the tea market in Guangzhou, beginning in 1785. Compared to the inefficient and corrupt trade carried on by the East India Company, American merchants were able to drastically undercut British shipping costs and thus undersell British tea prices. They, along with the East India Company and the agency houses, dominated trade from Guangzhou by 1820 (169).
• Americans, however, remained at a disadvantage in the trade as the gonghang and East India Company conspired to remove the American merchants from the market. Although Americans were still able to undercut British prices, after the 1810s, British bribery of the Qing officials had made it impossible to trade with anyone other than the gonghang, forcing the Americans to pay the same high prices for tea (169-170).
• The enormous British demand for tea had introduced major changes into the Chinese tea markets, as cultivation rapidly spread to new areas and the number of wholesalers diversified. In 1818, the East India Company decided that this new situation meant that tea supplies were guaranteed and advances to gonghang were no longer necessary. The British continued paying bribes on the behalf of the gonghang until 1825, but then left the gonghang to fend for themselves in an environment with more tea supplies and much lower interest rates (170).
• This solved the problems that the East India Company had been facing and alleviated some issues of debt to inland producers for the gonghang, but it did not prevent the gonghang from being indebted. Even in the era of free trade following 1833, the gonghang regularly preferred smaller payments in hard cash to larger payments in credit, showing to what degree they remained close to insolvency (176).
• Opium had been used medicinally in China since at least the Tang Dynasty, but had only become an addictive drug in the 1620s on Taiwan. This led to the illegalization of opium in 1729, although a small illicit trade was still run by Portuguese merchants. In 1773, the East India Company decided to actively compete with the Portuguese for control over the opium trade, causing so much anger from the Qing government that they abandoned their monopoly by 1796 (171-172).
• In 1819, however, the opium trade suddenly expanded, possibly driven by increased consumption and a price war between British and Portuguese smugglers. A crackdown by the Qing governor of Guangdong on the trade revealed that it was enabled by bribery of a number of key officials. Despite the governor's attempts, the opium trade continued to expand rapidly to $18 million in 1836 (172).
• The opium trade was illegal, so sales could not occur in China proper. Instead, the British deposited the opium on a Portuguese-controlled island off the coast, then sold the opium to criminal gangs and Triads, who distributed the opium from gang hideouts along the Pearl River and southern coast (172).
• The opium trade was immensely profitable for the British Empire, and opium represented the first British product for which China was actually willing to pay. Compared to the net inflow of $26 million in revenue to China between 1800 and 1810, the 1830s saw the opium trade reverse the trade balance to a $38 million net outflow (173).
• After the abolition of the East India Company's monopoly on trade in Guangzhou in 1833, the expanded British merchant class sought to remove the last additional impediments to free trade in China, a goal that they believed the Chinese would also share. Many different sectors believed that war was necessary to 'rationalize' trade with China and open the market to British commerce, for the benefit of China and Britain (173-174).
• Qing foreign policy during the early 19th Century rested on three assumptions: Chinese military superiority, the ability of China to 'civilize' outside populations, and the Chinese monopoly on rare goods that would force foreigners into adopting 'tributary' status (174).
• When the monopoly of the East India Company was abolished in 1833, the company representative in Guangzhou was replaced with a British superintendent of trade, for whom they selected Lord William John Napier. Despite his orders to maintain peace, he was also instructed to deliver a letter directly to the Qing governor, something previously forbidden. When he refused to return to Macau after his audience with the Governor was refused, the Qing blockaded the factories and sparked a minor naval skirmish. He eventually did leave after catching malaria and died days later (175).
• The 'Napier Affair', as the incident was called, convinced the Qing government that it was able to pacify the British through a simple naval blockade, and the British government that any trade issues with China would lead to war (175). 
• The Napier Affair was a point of national pride for the British, especially those merchants in Guangzhou, and they became more fervent in arguing for war afterward (176).
• The new Foreign Secretary, Lord Palmerston, was bellicose and imperialist, but felt that he could not pursue war without reason in light of strong domestic British condemnation of the opium trade. He appointed Captain Charles Elliot as superintendent, but urged him to be more assertive of British privileges (176-177).
• Capt. Elliot initially followed Qing petitionary procedure, but was then instructed by Lord Palmerston to be more assertive and less deferential. The Qing governor, Deng Tingzhen 鄧廷楨, refused to accept a more assertive Britain, saying that it would, "Allow the barbarian nation to rival the Celestial Empire" (177).
• In July 1838, some warships from the Indian Fleet arrived outside Guangzhou as a show of force, which caused the Qing government to reopen communications with the British. Besides mildly damaging relations and making the British feel like they done something, nothing else resulted (177).
• By 1836, China imported roughly 1,820 tons of opium a year. These imports fed millions of addicts. Although the actual addiction rate was below 1%, it was concentrated among nobles, Qing officials, clerks, and high-ranking soldiers. As such, the Qing government saw it as a major social ill that damaged their government institutions (178).
• The Qing also feared the payment for opium imports with silver, which was following out of the country at high rates. Rising silver prices had already skewed the exchange rate and artificially increased 'real' tax rates, and the further export of silver worsened this effect (178-179).
• Because opium was imported by foreigners and grown abroad, the use of opium was attached to the same connotations of foreignness corrupting China, where opium was placed alongside Christianity as a corrupting and foreign influence (179),
• The opium trade was also seen as damaging because it created profit motives and connections between Qing officials and criminal gangs. Many officials from all mercantile sectors helped smugglers sell opium for a cut of the gains or access to the drug. The anti-smuggling patrols in Guangdong quickly collapsed for this reason, as Qing captains used the opportunity to extort fees from the smugglers or demand opium instead of stopping them (179-180).
• Largely because enforcement of the prohibition of the opium trade had failed so enormously, from 1836, there was a discussed in the Qing court about whether opium should be legalized. The legalizers argued that legalizing opium would increase imperial revenues and stop the corruption proliferating from the trade. The moralists argued that economic reasons were not enough to abandon morals. Emperor Daoguang eventually sided with the moralists (180-181).
• In 1837, Emperor Daoguang ordered even stronger measures against the opium trade, leading to the abolition of nearly all traffic and the arrest of over 2,000 smugglers. Despite the arrest of some European smugglers, the British were generally unwilling to stop the trade, believing that eventually the Qing would side the trade's profitability (181).
• In June 1838, the debate on the opium trade ended a new phase as questions of punishing addicts were raised. One faction argued for the death penalty on opium addicts, whereas the other faction said that that would just open more opportunities for corruption among police forces (181-182).
• In July, the Emperor finally sided with a line of thought proposed by Lin Zexu 林則徐, which stressed the danger of addiction and need to rehabilitate addicts. Under Lin Zexu's suggestion, sanatoriums were opened across the country and the crackdown on smuggling further intensified. He was appointed an imperial commissioner in December to personally oversee the program in Guangdong (184).
• On the way to Guangdong, Lin Zexu ordered the arrest of 17 known Cantonese smugglers and for an investigation into local government in Guangzhou (185). Upon arrival, he charged the hereditary nobility with running the anti-opium campaign, leading to many false arrests as local squabbles became enforced with false charges of smuggling. This empowerment of nobles led to declining control by the Qing judiciary, limiting government oversight over the program (186-187).
• Lin Zexu also began organizing action against British suppliers of opium, particularly through holding the gonghang accountable for opium transactions with the Europeans. The European smugglers told the gonghang to give up 1,056 chests of opium and believed that this would pacify the Qing for some time (187).
• Instead, on 22 March 1839 Lin Zexu ordered the arrest of Lancelot Dent, the head of the British Chamber of Commerce and the man thought to be behind the opium trade, and threatened to execute two gonghang affiliates if he did not turn himself into the Qing authorities (187).
• On 23 March, Capt. Elliot along with another 350 Europeans were confined to the factories by Qing authorities, and were told on 26 March that they would only be released on the condition that all opium in British supply was turned over to the Qing authorities (187-188).
• Capt. Elliot gladly agreed to turn over all opium stocks for destruction and commanded the agency houses to do so; having not sold opium in months due to the anti-smuggling campaign, the British merchants gladly turned over the opium on the promise of reimbursal by the British government. By 5 May, over 20,000 chests, valued at $9 million, had been turned over the Qing government and were being destroyed (188).
• Commissioner Lin demanded that to continue trading in Guangzhou, the British merchants needed to sign bonds with the Chinese government, in which the merchants pledged not to smuggle opium again and recognized that they would be executed under Qing law if they did so. Fearing death and unwilling to stop smuggling, almost the entire British community left Guangzhou for Portuguese Macau (188-189).
• British concepts of legal jurisdiction caused many issues between the British and Qing governments, as the British government refused to recognize the sovereign right of the Qing government to take legal action against British nationals, whereas the Qing asserted that they did have such a right (188).
• Qing and European law also often conflicted on the appropriate response to accidental death. Whereas manslaughter was recognized under Qing law, they did not believe that Europeans were really innocent, so they often demanded trial for murder. These measures often seemed arbitrary to Europeans (189-190).
• In July 1839, a group of drunk British sailors landed near villages in Jiulong 九龍 and went looting. They sacked a temple and beat peasants with sticks, one of these peasants later died. Commissioner Lin demanded that the offending sailor was turned over to Qing authorities for execution, whereas Capt. Elliot maintained he did not know which sailor had committed the murder (189).
• After the British consistently refused to turn over a sailor, they did not know which one and refused to let an innocent man be killed, Commissioner Lin ordered that they be evicted from Macau. The Qing established a blockade of Macau on 15 August and the Portuguese quickly evicted the British population. On 24 August, the British anchored near Hong Kong, but were refused access to supply ports by the Qing navy (190).
• On 4 September, nearly starved to death from the Qing blockade, Capt. Elliot sailed to Jiulong and demanded that the Qing commander there let him anchor or he would open fire. The Qing refused to let him pass, and the British fleet managed to route the squadron (191).
• Still unable to secure large amounts of provisions, British merchants began breaking lines from Capt. Elliot. Within the first week of September, three ships had signed bonds with the Qing government and resumed trading (191).
• Hearing about the effective exclusion of British merchants from Guangzhou by August 1839, American merchants swooped in to buy up the annual tea contract monopolized by the British. When Capt. Elliot asked the Americans to leave in solidarity, the Americans laughed in their face, said 'fuck off back to your Queen', and traded even harder (191).
• Commissioner Lin believed that the issue of the opium trade was practically settled, as British merchants would eventually break with Capt. Elliot and accept Qing regulation. Approaching the issue of the murder in Jiulong, he decided to send Admiral Guan Tianpei 关天培 to capture a British man as hostage to force Capt. Elliot to turn over the guilty soldier (191).
• Capt. Elliot assumed that the 29 war junks sent to take a captive were sent with the intent to destroy his remaining merchant fleet. He sailed upriver to the Humen strait, where a battle broke out and 4 ships of the Qing fleet were destroyed (192).
• Upon hearing of this incident, Emperor Daoguang decided that the British were too troublesome to be allowed into China, and instructed Commissioner Lin to permanently expel the British from Guangzhou (192).
• "The English were overwhelmingly superior. Their base in India provided ready troops and supplies, and on the China coast they had the newest weapons of the day, shallow-draught iron steamers like the Nemesis, which could easily turn its guns on upriver towns. Their field artillery was accurate, intense and deadly. The infantry's smooth-bore flintlocks, already far more efficient than Chinese matchlocks, were being replaced at that time by percussion-lock muskets. Even their tactics were better. The Chinese, once geniuses at siege warfare, consistently held fixed coastal fortress positions with artillery riveted in place to face massed frontal attacks. [...] the Chinese Army [...] existed in full strength only on paper. Registers were padded with false names, marketplace coolies hastily recruited to pass muster, and periodic military exercises held, of great pomp and little circumstance, [...] Whenever a major campaign was launched, disparate units under jealous local commanders had to be brought together under a single marshal, who was often a civilian with no way of knowing the peculiarities of the troops he led" (192-193).
• The Qing government tried in numerous ways to solve these inadequacies. They tried recruiting militia to make up troop numbers, but many militia members were thugs or bandits, who simply used their rank to prey on local villages. Some Qing commanders turned towards mysticism or magic to defeat the British, with smaller numbers occasionally trying to adopt European weapons, a process harried by prejudice against foreign technology (193).
• "At this stage of the war the English were still narrowly viewed as piratical traders rather than being taken seriously as potential conquerors" (196).
• Capt. Elliot believed, again incorrectly, that Commission Lin alone was behind the sudden measures against the opium trade, and that a military defeat would discredit him in the eyes of the Qing Emperor and led to a normalization of trade (194).
• Following his advice, and urged on by the powerful industrial lobby in Britain and India, Lord Palmerston organized a military expedition to Guangdong to blockade the region and force the Qing government to accept conditions of opium legalization, free trade, and a permanent base in Hong Kong (194).
• Parliament had not been consulted on the issue of military engagement with China, and the Tory opposition spoke out strongly against the imperialist behavior of the current government. Eventually, speaking of British honour, the Whig government managed to pass a war resolution by a mere 5 votes (194-195).
• On 21 June 1840, a British fleet of 16 warships and 4 armed steamers, carrying 4,000 men, assembled off the shore of Macau. A portion of this force stayed and blockaded the port of Guangzhou, while the majority was sent North to Zhejiang to threaten the Emperor (195).
• On 5 July, the main force reached Zhejiang, and demanded that Zhoushan, an island city on the mouth of the Yangtze River. When the city refused, the British bombarded and occupied the town. They then moved up the coast to the mouth of the Hai River, at which point the Qing agreed to meet the British representative (195-196).
• Blaming Commissioner Lin for the presence of British warships on the northern coast, and observing the specific blame placed on Commissioner Lin in Lord Palmerston's letter, the Emperor had Lin Zexu removed from his post and condemned to exile in Ili (196-197).
• Emperor Daoguang replaced Lin Zexu with Qishan of Borjigit, a wealthy Manchu noble and governor of Zhili. He was ordered to prevent further conflict and restore the British to their trading in Guangdong (197). He succeeding in convincing the British to return to Guangzhou on 17 September, then left to conduct those negotiations (198).
• The negotiations in Guangzhou between Capt. Elliot and Commissioner Qishan made little progress, the British still demanded the turnover of Hong Kong to their control. Commissioner Qishan suggested the opening of Xiamen to British trade instead, but the British continued to demand control over Hong Kong and seized the batteries controlling the Tigris Bocca on 7 January 1841 (199).
• With the British fleet becoming more aggressive and the Qing lacking any remaining defenses protecting Guangzhou, Commissioner Qishan felt himself forced to sign the Convention of Chuenpi on 20 January, which gave Hong Kong over to British control, promised an indemnity of $6 million, reopened trade in Guangzhou, and committed the Qing to equal terms of trade with the British (199).
• Lord Palmerston was extremely disappointed at the terms of the Convention, as he viewed Hong Kong as essentially useless, especially compared to the island city of Zhoushan, which the British currently controlled (200). Accordingly, Lord Palmerston replaced Capt. Elliot with Sir Henry Pottinger, who arrived in May 1841 and was instructed to demand the legalization of opium, larger indemnities, at least 4 new ports, and control over other islands in addition to Hong Kong (201).
• Hearing that the Emperor had decided to go another way only after signing the Convention, Commissioner Qishan frantically attempted to backpedal and justify his actions. Ultimately, however, dissident officials told the Emperor that he had been bribed to cede Hong Kong, resulting in his arrest on 13 March (200).
• During the period of negotiations between Capt. Elliot and Commissioner Qishan, Emperor Daoguang had been convinced that a military response to remove the British from China was the best solution and had assembled an additional 4,000 soldiers led by his cousin in Guangdong to exterminate the British presence (200).
• From February onward, the Qing set out fortifying Guangzhou, building up defenses, recruiting local militias, and blocking strategic waterways. Despite these preparations, the military situation was pathetic, with the navy destroyed, current fortifications crumbling, and the army a fraction of its alleged size (201).
• Despite warnings, the Qing attacked the British fleet anchored off Huangpo on 21 May, losing most of their fleet and prompting the British to seize the heights and threaten to bombard Guangzhou. Threatened with the destruction of Guangzhou, the Qing military agreed to vacate the city and pay a $6 million indemnity (202).
• The Qing defeat at Guangzhou had massive consequences for the future of South China, as the withdrawal of military command from the area allowed river pirates to run amok and precipitated the disordered which drove future rebellions. Also, the defeat led to a profound racism and xenophobia in Qing society, directing resentment against both foreigners and the 'weak' government that surrendered to them (202-203).
• Sir Pottinger took over command of a secondary expeditionary fleet, carrying 10,000 men, in August 1841, and sailed to Xiamen. On 26 August, British marines stormed the coastal forts and soon occupied the heights surrounding the city. The fleet then sailed North and reoccupied Zhoushan (203-204).
• After an extended naval bombardment of surrounding forts, the British occupied first Shanghai and then Ningbo in October. Then decided to wait out the winter until reinforcements could arrive, at which point they would blockade the grand canal and starve out the North (204).
• The Qing readied a massive, and poorly fed, army under the command of Emperor Daoguang's cousin outside of Nangbo, prepared to attack on 10 March 1842. Among other issues, around 60% of the army was attached as personal bodyguards to nobles, leaving only small contingents for actual attacks. Accordingly, the attack on Ningbo failed horribly (205-206).
• Most of the Qing army sent to surround Ningbo and Shanghai fled after hearing cannon fire, largely encouraged by the disappearance of their commanders. The Qing marines sent to recapture Zhoushan continually sent in false reports and never actually attacked. Thus, the entire campaign was a farcical failure (206). 
• In May 1841, the British started their Yangtze campaign; capturing Zhapu and Zhenjiang in May and June, respectively. With these cities, the British managed to blockade the canal and threaten the invasion of Nanjing (206).
• The British advance was followed by looting and mass chaos. Although the British tried to organize the process by giving 'immunity cards' to Chinese farmers, these usually did nothing to prevent soldiers from pillaging shops, forcing men into labor duty, and raping local women. The soldiers were accompanied by local criminals (206-207).
• Although initially disgusted by British behavior and determined to fight on (209), Emperor Daoguang agreed in June that a peace treaty with the British was necessary to avoid the capture of Nanjing (210).
• On 29 August 1841, without questionable consent from the Emperor, Qing emissaries signed the Treaty of Nanjing aboard the HMS Cornwallis. The treaty called for an indemnity of $21 million, the opening of trade in Guangzhou, Xiamen, Fuzhou, Ningbo, and Shanghai, equal relations between China and Britain, British consuls at each port, the abolition of the gonghang monopolies, and the cession of Hong Kong (212).
• The Qing strongly resisted the implementation of many of these provisions, particularly the opening of additional ports and the pretense of equality. It would take decades for the ports to actually become open, and the Chinese still made it obvious that they would not treat British officials on the basis of equality (211).