Power, profits and poppies

By Zhang Yu Source:Global Times Published: 2013-5-9 16:48:01

The building on the Bund that once housed Jardine, Matheson & Co Photo: CFP
The building on the Bund that once housed Jardine, Matheson & Co Photo: CFP

Opium, the addictive brownish dream-making drug made from the opium poppy, was one of the driving forces of the good and the bad in Shanghai in the 19th century. Trade in opium, which almost turned much of China into a nation of addicts by the early 20th century, was the reason for Shanghai's unstoppable rise, and the key to the success of many of the lucrative hongs (foreign business houses) and affluent taipans (rich, powerful foreign businessmen).

In those dark days, opium was readily available at teahouses, theaters, entertainment venues, parks and brothels. The most popular places for consuming opium though were the opium dens where rich and poor Chinese lay on couches next to each other, smoking long pipes of the drug. Because it is soporific, most users took the drug lying down.

In 1872 it was recorded that there were more than 1,700 opium dens in Shanghai, and a decade later there were thousands more. One writer observed that there were more stores in Shanghai selling opium than rice, and more opium dens than restaurants.

Away from the dens in the city, the most famous business of the day was Jardine, Matheson & Co, a trading company founded by two Scottish businessmen in 1832 in Canton, today's Guangzhou, which had the only port in China then open to foreign trade. The company's main business was smuggling. It smuggled opium into China and exported Chinese tea and silk to Britain. By 1841, it had 19 inter-continental clippers and hundreds of smaller boats, which it used for coastal and upriver smuggling.

Colonial ambitions

But just one port in China couldn't sate the appetite of the ambitious colonial company. To expand its business in China, Jardine, Matheson & Co was one of the major lobbyists working to persuade the British government to use force to open trade with China in the 1830s. Then something happened that made its wish come true.

In 1839, Emperor Daoguang of the Qing Dynasty (1644-1911) appointed the special commissioner, Lin Zexu, to stop the opium trade. Lin destroyed more than 1.2 million kilograms of opium in Humen, near Canton, a large part of which belonged to Jardine, Matheson & Co. Urged by traders, the British government used this as an excuse to wage war on China.

In 1843, Shanghai opened its port following the Treaty of Nanking, which was signed in the wake of China's military defeat in the First Opium War (1840-42) against Britain. The treaty didn't force China to legalize opium trading, but no foreign company would have worried about the laws and regulations of a defeated and backward nation. Many foreign businessmen, lured by the lucrative business, continued bringing opium to China and the opening of Shanghai was a vital opportunity for the expansion of their business.

After Shanghai's opening, Jardine, Matheson & Co became the first company to register a building lot on the Bund in 1843 where their first premises at No.27 were completed in 1851.

Before its arrival, what was later dubbed the Wall Street of the Far East was merely farmland on the outskirts of the walled Shanghai city, dotted with village homes, graveyards, a cock fighting arena and even an area where criminals were executed. But the Bund would soon become Shanghai's commercial hub. According to a British missionary, Charles Ewart Darwent, the price of the land on which Jardine, Matheson & Co's first building was completed in 1851 was just 500 pounds ($777). By 1900 it was worth 1 million pounds.

Jardine, Matheson & Co was one of the five British trading companies that entered Shanghai in 1843. Over the next 10 years, another 36 foreign business houses were established in Shanghai - 22 British, five American, one French and eight Indian companies.

Most of them earned their first buckets of gold by bringing in opium, and the next half century saw the opium trade surge madly in Shanghai. In 1852, 1,487 tons of opium were imported through Shanghai, accounting for 42 percent of China's total opium imports.

Two decades later in 1871, opium imports had risen to 3,752 tons in Shanghai, accounting for 68 percent of the national volume. Opium was the major component of China's imports, accounting for 54 percent of everything imported to China in 1850, and 48 percent in 1860.

Undisclosed role

These traders played an important, if undisclosed, role in the Shanghai economy. This was recognized by the Shanghai Commissioner for Customs, E. Gordon Lowder, in his report of 1924, where he noted that contraband opium was "undoubtedly of sufficient magnitude to affect the balance of trade in Shanghai."

Apart from opium, the hongs also imported other goods such as cloth to Shanghai. They exchanged these for silk and tea in China, which they sold abroad.

From the 1860s, foreign monopolies established companies in Shanghai which soon became a more powerful force than their predecessors, the foreign trading houses, in influencing local trade and economy. Exxon Mobil, for example, set up its Shanghai branch in 1900 and began importing and selling oil in China, followed by Britain's Asiatic Petroleum Company and the Texas Fuel Company of the US. Together the three oil companies established a sales network in China and dominated China's oil market.

The Treaty of Shimonoseki was signed in 1895 following the First Sino-Japanese War (1894-95) and allowed foreign companies to open factories in China. This saw the hongs in China transform into more diversified businesses. They began trading a wide variety of imports and exports, investing in factories, railways and other much needed infrastructure projects in China. They founded banks and insurance companies as the country moved towards modernization. By 1914, foreign company investment in Shanghai totaled $291 million. Many industries and products, like matches, buttons and cosmetics, were for a long time controlled by foreign companies.

Companies like Swire and David Sassoon & Sons, for example, started to invest in shipping, shipbuilding and real estate. Jardine, Matheson & Co opened more than 30 factories, banks and companies in Shanghai and its investments topped $40 million. In 1876, it formed the Woosung Road Company and built China's first railway from the British Concession to Wusong town. The railway was purchased by the Qing government soon after it opened. The government said it hadn't approved the railway and dismantled it just a year after it was built.

In 1936, 561 companies from 28 Western countries and 114 companies from Japan were thriving in Shanghai. The total number dropped to 491 in 1946 and to 370 in 1947. After the founding of the People's Republic of China in 1949, the number plummeted again and only 34 remained in 1954. Many of these were purchased or taken over by the Chinese government. By 1959, there were no foreign businesses operating in Shanghai.

The go-betweens

With the rise of hongs came the compradors. The word comprador comes from the Portuguese word for buyer. A comprador, or maiban in Chinese, was an important Chinese position in foreign hongs, a man acting as an intermediary between foreign businesses and local Chinese governments and merchants.

A comprador was many roles rolled into one and much more than simply a "buyer." He had to work as an agent, a counselor, a translator and even a salesman when necessary. One of his main responsibilities was to sell opium and other imported goods to cities in inland China, and bring silk and tea back to Shanghai. He had to help decide everything related to every deal, including the prices, the number of products to be bought, the contracts and how to ensure the cash flow.

Most of the first generation of compradors in Shanghai were from Canton and had followed their employers to Shanghai to expand business. Shanghai's indigenous compradors were initially longtime employees of foreign firms or people who had received a Western education.

Xu Run, the comprador for Dents, for example, had been apprenticed to the British company when he was 15 and became a comprador at 24. Jardine, Matheson & Co's chief comprador, Tang Tingshu, was a well-educated Christian school graduate who spoke fluent English. Since being a comprador was a prosperous occupation, many compradors' sons followed in their fathers' footsteps.

With good salaries and commission, compradors earned a lot. Many earned a salary of between 200 and 500 taels of silver a month but this included their costs as well. Tang Tingshu, for example, earned an annual salary of 5,744 taels of silver, but when his costs were deducted he made about 1,500 taels.

But this was only a small proportion of their actual income. Their real financial rewards came from commissions, which were usually 2 percent of the total value of imports and 1 percent of exports. Even some foreign merchants envied the amounts compradors could make. A British report in 1864 noted, "While British merchants made losses, the capital of compradors quadrupled and they have become the real managers of our companies."

As compradors became rich and familiar with the market, many of them had their own businesses and investments as well as their work with foreign companies. This was encouraged by the companies that hired them, because the personal businesses of the compradors often acted as important partnerships.

Tang, for example, ran the Xiuhua Cotton Company, an agency where foreign companies could buy Chinese cotton. A 1964 report noted that of the 50 or so cotton companies operating in 1918, about a third were run by compradors.

As many compradors had familiarized themselves with the management and culture of their foreign businesses, some used this experience later to help China's own business development. Tang, for example, quit his job as a comprador and joined the government-owned China Merchants Steamship Company and the Kaiping Coal Mines, turning them into successful national businesses.

Yu Qiaqing, the comprador for a German company, later became a businessman in the national shipping industry and became the first Chinese businessman to have a road named after him in the city's concessions - today's Xizang Road Middle was once named Yuqiaqing Road.

Posted in: Metro Shanghai, Meeting up with old Shanghai

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