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(seriously impressive as that reflection undoubtedly is,) there is a more extensive
consideration leading to general conclusions which will probably occasion Her
Majesty's Government far more anxiety upon the whole subject.
It is to be found in the unavoidable inference that the altered manner in
which this great trade is conducted upon our side must render these grave
embarrassments more frequent of occurrence than they have ever yet been, till
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276

some suitable modification has been made upon the part of the Chinese Govern
ment. Neither does it seem to be doubtful that failing such needful adaptation
of system, the difficulties of adjustment will be enhanced at each succeeding
crisis ; and that the growing general complication of the Hong merchants'
affairs, and the utter destruction of confidence in their stability, will inflict, at no
distant date, excessive injury on commercial and financial interests of great
moment.
Mindful of the position of British creditors upon the Hong merchants, I
will not proceed to the length of formally calling upon them to decline to accede
to any period, either yet offered, or likely to be offered for the complete liqui
dation of their present claims. But at this earliest conjuncture that the subject
h?s been officially drawn under my notice, I feel it my duty as the Superin
tendent of the British Trade, with this Empire, to record my opinion that the
determination of a just period had better be left open for arrangement between
the two Governments.
I shall beg leave to express my own conviction, that the creditors would
be taking a sound course both as respects their own, and the permanent interests
of the Trade, in steadily declining to have any further concern with these matters
than to receive the whole or such instalments of their claims upon the Chinese
Government as the Provincial Authorities may think fit to pay.
This view is founded upon the best consideration which it has been in my
power to give to the Correspondence on the Hing-tae Bankruptcy, and upon the
posture into which circumstances have now fallen upon that subject.
I have, &c,
(Signed) CHARLES ELLIOT,
Chief Superintendent.




Inclosure 5 in No. 117.

The Chinese Security Merchants in Canton, and their Debts.

Canton, 1838.
THE following exposition of the state of the Chinese Hong merchants in
Canton, is designed to make known in England, what is believed to be the ill-
understood conditions upon which the British and other foreign merchants who
reside there, conduct their trade, with the hope to interest the public of Great
Britain, especially the mercantile part of it, in the case, and to induce Her
Majesty's Government to interpose with the Imperial Government of China, in
order to procure payment of certain debts owing by the Hong merchants to the
foreigners, which the latter have incurred almost necessarily, under the condi
tions of the trade.
It must be generally known, that the Chinese Government has prescribed to
the foreign merchants of Canton, to confine their trade solely to twelve or thirteen
licensed persons called Security or Hong merchants. In their collective capacity
they are commonly called the Co-hong, and they have a place of meeting called
the Consoo Hall, for the general purposes of their guild, and their deliberations
held there, are called in the jargon of' Canton, Consoos. They all hold nominal
rank under their own Government, and they are the actual police magistrates over
the foreigners, and have been so styled in some of the orders of government, and
in this capacity they are held amenable for the conduct of the foreigners. In
their mercantile capacity they trade separately ; but they are made mutually
responsible, by their own' government, for the debts which each may incur, either
with their government for duties, or with foreigners, in prosecution of their
trade. Under the latter condition, they are at this moment indebted several
millions of dollars to the foreigneis, chiefly British, who have repeatedly demanded
payment of their claims, and petitioned the local government of Canton concern
ing them, during the last ten months. The remonstrances of the claimants have
hitherto had little effect, and it is apprehended that without aid from their own
governments, their debts will either never be paid, or else liquidated at so
remote a period, as to amount to a total loss of their immediate trading capital.
It is to procure this aid that the following statement is drawn up ; which, (o
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explain clearly the circumstances under which the debts of the Hong merchants
have been incurred, is divided into the following heads.
1. The past and present state of the Chinese Hongs, and the relations of
the foreign merchants with them.
2. The altered situation of the British merchants, under the free trade,
which has deprived them of the means they possessed previously, to recover
their claims.
3. The altered circumstances of the Hong merchants, owing to the free
trade, and other causes, which offers them no longer, the same means to meet
their engagements.



1 .— The Past and Present state of the Chinese Hongs, and the relations of the
Foreign Merchants with them.

So early as the year 1702, we read of an attempt to confine the whole
foreign commerce of Canton to one individual who was called " the Emperor's
merchant." Upon enquiry, two years afterwards, it was ascertained that this
merchant had no goods himself, whilst he debarred others from traffic The
English determined in consequence, not to advance money, upon which the
Emperor's merchant agreed to allow other merchants to participate in the trade,
upon payment to him of nearly 5,000 taels per ship. These others, however,
showed an equal disposition to monopolize the trade which the foreigners con
tinued to resist with various success, down to 1720, when the Chinese merchants
formed themselves into a Co-hong, for the purpose of agreeing upon the prices
at which they should sell their goods. The British supracargoe3 refused to trade
with the Chinese monopolists, and remonstrated upon the subject with the Vice
roy, who undertook to abolish the Co-hong. It would appear that the practice
of making two Chinese merchants security for each foreign ship, had arisen con
currently with the Co-hong, and the English supracargoes continued to protest,
against the one and the other, down to 1754, at which time they gained no other
satisfaction, than the assurance " that any deficiency of duties upon a ship, would
be levied upon the whole body of Hong merchants,"—the Co-hong, in fact,
instead of upon the paiticular securities. A few years after, (25th year of Keen-
lung.) a series of Imperial Edicts were promulgated, to re-establish and confirm
the Co-hong, in consequence of a petition from the Security merchants to the
Viceroy, claiming, that the trade carried on with foreigners, " ought of right to
be their sole province." The East India Company's records state, that at this
time, there were only ten Security merchants, of whom half were of no consider
ation, or dependent upon the others. " The substance of either the Security
merchants, or the shopmen," says the records, " is little known, and if it were so,
it might probably appear in favour of the shopmen." The supracargoes appre
hending that the edicts would " open a way to a monopoly which must entirely
destroy commerce," opposed the Co-hong, to the utmost of their power, and
eventually effected an apparent dissolution of it, as appears by the Viceroy's edict
of February, 1771. 'lhe head Hong merchant, Paunkhequa, claimed the merit
of achieving this measure, and represented that it cost him 100,000 taels (about
30,000/. sterling,) which the East India Company's supracargoes repaid him ;
but the dissolution of the Co-hong appears to have been nominal only, for in 1777,
a mandate appeared which declared, that the foreign trade could only be con
ducted with the ten Hongs, and the system of Security merchants, with slight
variation in the number of the Hongs, has continued ever since.
The first notice we find of debts owing by a security merchant to foreig
ners, occurs in 1 774, when Seunqua, a Hong merchant, became bankrupt, and
his affairs were submitted to the investigation of the Mandarins. The foreign
creditors petitioned the Viceroy and Hoppo upon the subject, which led to an
arrangement for paying off the debt, as it then stood, amounting to 266,672
dollars without interest, by ten annual instalments. The amount of one only of
these instalments, however, was realized in the three following years, and the
remainder of the debt was merged in the large claims of which mention will be
made immediately. A representation was made to the Court of Directors in
London, 1779, concerning debts owing by the Chinese merchants to British
subjects in China, amounting to 1,000,000 sterling, and the Court consented to rj
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allow tlieir Supracargoes in Canton to endeavour to effect an adjustment No
part of this debt was owing to the East India Company, but all to private traders
or other parties, and chiefly for money loaned to the Chinese at a high rate or
interest■ After investigating the claims, the Select Committee of the East India
Company's Factory declared, that of the 4,000,000 dollars alleged debts, not
more than 1,078,976 dollars appeared to have been received by the Chinese in
goods or cash ; the balance was accumulated interest : one claim alone had
grown in this way, from 9,609 taels to 81,900 dollars. Some of the bonds
outstanding were for more than triple the principal, and the names on them
quite illegible ; on some the original sum lent had been paid; yet, by accumu
lated interest, the bonds were still outstanding to a large amount. Some of the
bonds, however, were for goods.
The Select Committee seem to have entered upon the task of demanding
payment of the claims with considerable reluctance, from apprehension that their
liquidation would embarrass the solvent Hongs, and occasion the imposition of
further burthens upon the Company's trade.
The Chinese merchants, who become indebted to their Government for
duties, and are declared bankrupt in consequence, are liable under their laws, to
be punished by banishment. There appear to have been only eight Hongs at
this time, of which four were in the above predicament, and the Committee
feared that the banishment of those four would reduce the rest to a close mono
poly. The difficulties attending the claims protracted their settlement, until
some of the creditors, who resided at Madras, made representations upon the
subject to the Government of that Presidency, and to Sir Edward Vernon, the
Admiral on the station, in consequence of whieh the latter sent on the Sea-horse
frigate to China.
Captain Panton, the Commander, on his arrival at Canton, proceeded, con
trary to the advice of the Select Committee, but in conformity with his orders, to
deliver in person the letter from the Admiral to the Viceroy, of which he was
the bearer, and to urge payment of the claims. It appeared, in the course of
the negociations and discussions which followed, that the Imperial Edicts of the
twenty-fifth year of the reign of Keenlung had based the foreign trade upon a
system of mutual security. The shopkeepers, for example, who were allowed to
sell certain articles only to foreigners, were bound to ship them off through the
Hong of a security merchant; and every series of five shopkeepers became joint-
security to a Hong merchant for payment of the duties in their trads. The
Hong merchants were, in turn, bound mutually to the Government, for the
duties owing by them individually, and also for their respective debts incurred by
their legitimate trade to the foreigners, for which the Government became
guarantee. But the Emperor, at the same time, prohibited the foreigners to
lend money upon interest to the Chinese merchants, and ordered all such loans
to be confiscated, and the borrowers to be declared criminal. As the Co-Hong,
established by the Edicts, had subsequently (1771) been nominally dissolved at
the foreigners' request, it now became a question, how far the system of mutual
security was still applicable to foreigners, and if it were, how far they had reason to
expect debts to be paid of the nature of those described above, which had been
incurred in direct opposition to the Imperial mandate. Captain Panton was able
to effect nothing on his first visit; but he went to Madras, and returned again to
China; whilst, during his absence, frequent communications took place between
the creditors, the Select Committee, and the civil authorities of Canton, who had
lately submitted the case to the Emperor. The debts on the 31st December, 1779»
with the accumulation of interest, were as follows : —
Dollars;
Owing by the Hong merchant . Yngshaw . 1,354;713
Coqua . . 1,151,29:)
Seunqua . 634,784
Kewshaw . 438,785
Munqua . 141,112
Conqua . 81,9-14

Under 208 bonds ...... 3,802,587
Owing by shopkeepers, under forty-one bonds . . 494,063

Total 4,296,650
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The Emperor's will was communicated by the Viceroy of Canton to
Captain Panton, in his second visit, in October, 1780. It referred to the former
Edicts respecting loans of money to the Hong merchants, and described several
of the above debts as coming under this head, and being, moreover, made up of
usurious interest. Others, as Coqua and Seunqua's, were owing by men long
since bankrupt, upon whose debts there could be no accumulation of interest
allowed. It finally selected Yngshaw and Kewshaw's debts as the only ones
entitled to consideration, on the ground that these parties acknowledged to have
received to the extent of 136,700 and 165,600 taels respectively in money, in
the 23rd year of Keenlung, prior to the Edicts of the 25th year. One-half only
of their accumulated debt, in December, 1779, was therefore ordered to be
paid, namely 600.000 taels in ten annual instalments of 60.0U0 each. The
distinction of bond debts, and trading debts, is distinctly preserved in the reply,
by which the mutual guarantee system is tacitly admitted to be still in force, and
we shall see that it has been acted upon ever since. The mode of paying the
debts was not prescribed by the Emperor, but left to the local officers of
Canton, between whom and the Hong merchants it was arranged, the following
year, to impose a duty of 1 tael and 2 mace per pecul, upon green tea, 6 mace, 2
candarin upon black tea, and 6 per cent, upon raw silk.
The condition of the Hongs is thus described in the East India Company's
Factory Records, in the beginning of 1780.
" Coqua is entirely ruined.
" Seunqua's brother was declared a bankrupt in 1774, and the Mandarins
undertook to settle his debts with the English. According to their decision, the
Hong still owes about 222,000 dollars.
" Kewshaw is much involved.
"Yngshaw's debt amounts, by his own account, to nearly a million of
dollars. Yet he still does business, hut no confidence can be placed in him.
"Chowqua and Shykinqua are, we believe, very clear of debts, and are
people of property.
" Munqua owes a great deal, but is not supposed to be in immediate
distress.
" Puankhequa's debts to the English do not amount to more than 80,000
dollars ; with a little management, he is the merchant most to be depended on.
"These merchants," the Committee add, "have been ruined in part by
their own vanity and extravagance. Money became so plenty here, and was
offered to them with so seeming a liberality, that they could not withstand the
temptation of borrowing it ; but, although much may have been expended by
their vain and expensive way of living, the greatest part has, we believe,
been extorted from them by the oppression of the Mandarins."
By the Hoppo's order of the 17th April, 1782, the following five new Hongs
were established, viz. : Sinqua, Gewqua, Pinqua, Seequa and Seenshaw, and
two extra Hongs were contemplated, Exchin and Sinchong. But the new
Hong merchants are described to be forced into the business, and to be men of
no substance. The old Hong merchants refused to be security for them, and the
five new were ordered to be mutual security for each other. In the following
year we find the following recorded by the Select Committee. " Yng>haw and
Kewshaw are on the point of being sent into banishment. Coqua's Hong is long
before bankrupt ; Seunqua's nearly in the same situation, and Munqua too much
embarrassed to be of any consequence ; so that the whole trade is in a manner
confined to Puankhequa, Shykinqua and Chowqua, and the new Hongs." In
allusion to the settlement of the debts, we find the following remark, which is
worthy of attention. " It seems to be an established maxim amongst the
Mandarins at this place, to discourage, as much as possible, all applications to
the Emperor, both as they may prove dangerous to their persons and derogatory
to their consequence : except in circumstances that cannot be concealed, as in the
case of Captain Panton, without whose interference, we are well assured, no
representation from the creditors or any other body of men, could ever have
reached the court. Much less can we expect the assistance of the Hoppo, through
whom it must necessarily pass in the first instance.
No instance of debts owing by Hong merchants after the foregoing, are
found until 1793, when claims upon the security merchant Eequa, chiefly put in
by Parsees, were paid in one year by the Co-hong, under orders from Govern
ment, amounting to 300,000 taels. In 1796, Shykinqua had become heavily
indebted to the East India Company's Factory, which, however, held security,
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apparently in mortgage, to the extent of 280,000 taels. The Co-hong purchased
the security, and the balance of the debt, amounting to 600,000 taels, was paid
by six annual instalments.
In 1793, according to Milburn, there were twelve Hongs, and in 1808
fourteen, viz. :
Puankhequa, Ponqua, Manhop, Fatqua,
Mowqua, Gnewqua, Poonequa, Fonqua.
Puiqua, Consequa, Lyqua,
Cliunqua, Exchin, Kinqua,
Of the eight Hongs spoken of by the Select Committee as in existence in
1780, we find in 1808, only Puankhequa, and none of the new Hongs, said to
have been established in 1782, except Exchin. As a Hong-merchant is never
allowed to forsake his calling during his life, and his son or relation is always
made to succeed him, and there is besides some pride in keeping up the name of
a Hong, we may suppose that all the other Hongs of J 790 had become extinct
through bankruptcy.
In 1810, the Select Committee had to enforce payment by the Co-hong, of
debts owing by Gnewqua and Goqua, amounting to 1,400,000 taels, which were
arranged for liquidation in ten years, and the former's final dividend was paid in
March, 1821. In 1813, debts owing almost entirely to private British traders or
others were recorded against five Hongs, including the above Goqua, as follows :
Consequa ...... 822,806
Exchin 820,610
Manhop 1,237,681
Poonequa 741,147
Goqua 341,953

Dollars . 3,964,197
An attempt was made, on this occasion, by four of the solvent Hongs, to
monopolize the whole business, which was evaded by the Select Committee obtain
ing permission for the five bankrupt Hongs to continue their business under a
trust-deed, and the following minute was entered in their records on the occasion.
" The European creditors of the Hongs, Consequa, Exchin, Mauhop, Poo-
nequa, and Goqua, have at length come to a conclusive arrangement respecting
the debts due by those merchants, and have resolved to await the payment of their
claims by such profits as may arise from the commerce carried on by the Hongs,
in preference to making any application to Government for the payment of their
debts, and which, of course, would occasion those Hongs being declared bank
rupts. With the exception of Consequa and Goqua, whose debts to the Com-
pany are not considerable, these Hongs have cleared off their debt with the Com
pany, and all have a balance to receive this season, when all the teas are
delivered."
In 1821, we find the following memorandum in the books of a private cre
ditor. " If the liquidation of these merchants' (Exchin, Manhop, and Poonequa)
debts, were to proceed merely in the same ratio that they have done for the last
eight years, the creditors must see at once the necessity of an appeal to Govern
ment, taking all chance of the issue; but hopes are held out of a more rigid sys
tem of management being observed than hitherto, and the merchants being sub
jected to fewer demands on them."
Manhop's final dividend, however, was paid in December, 1823, and Exchin's
in March, 1826. The others are accounted for in the following list of insolvencies
recorded subsequently—-which was recently laid before the Chamber of Commerce
in Canton.
CONSEQUA died insolvent in 1823, dollars. dollars. dollars.
owing foreign debts . . . 171,091 Drs. 8,090
PACQUA failed about 1823 to
1824 . . . . . 671,463 do. 132,467
POONQUA died insolvent in 1827 122,211 do. 226,905
MANHOP failed in 1828 . . 1,125,538 do. 385,148
CHUNQUA failed in 1829, owing
869,763 dollars less proceeds of his Hong
property .... 290,570 579,193 do. 41,226

Drs. 2,669,496 Drs. 793,836
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Paid as follows : Foreign. Duties. Total in each.
dollars. dollars. dollars.
In 1825 34,218 6,360 40,578
„ 1826 34,218 129,337 163,555
„ 1827 166,777 4,858 171,635
„ 1828 207,516 164,662 372,178
1829 406,962 241,897 648,859
„ 1830 362,618 196,548 559,166
„ 1831 321,882 8,948 330,830
„ 1832 378,435 38,965 417,400
„ 1833 378,435 2,261 380,696
„ 1834 378,435 378,435

2,669,496 793,836 3,463,332
Add portion of Chun-
qua's debts liquidated
from Hong property 290,570

2,960,066 Total foreign debts in ten years.
" Consequa died insolvent in the Autumn of 1823, owing foreigners
171,091 Spanish Dollars.
" His foreign creditors made incessant demands for the settlement of their
claim, which the Co-hong, at length, with the sanction of Government, arranged
for payment in five annual instalments. But the amount being small, the
foreigners insisted on a shorter period being fixed, and a party of them in the
autumn of 1824, presented a petition at the City Gate, where they were deter
mined to remain till better terms were granted. They maintained their post
during the whole of one night, and till midnight of the second, when Howqua,
after various unsuccessful attempts to drive them away by intimidation, expressed
his readiness to agree to whatever terms might be demanded. On which the
foreigners consented to receive payment in three annual instalments, in lieu of
five as fixed by the Government.
" Pacqua, Hong merchant, had for several years been in a tottering con
dition, and various compromises had been made of his debts, from time to time,
notwithstanding which, however, they continued constantly on the increase.
And after a protracted negociation, the Hong was finally broken in 1825, and he
himself banished to Ele ; for which destination, however, he does not appear to
have started till 1828. His debts, then adjusted, amounted to 671,463,38
Spanish dollars.
" His death at Ele was noticed in the Canton Newspaper three or four
years ago.
" Poonqua, Hong merchant, died insolvent in January, 1827, owing to
foreigners 122,210,80 dollars, which were agreed to be paid by the Co-hong, in
three annual instalments, commencing in February, 1828.
" Manhop, Hong merchant, failed early in 1828, say in January, after
having been several months in a very tottering condition. His debts to foreigners
amounted to 1,125,538 Spanish dollars. Petitions for a settlement were imme
diately presented, which however was not arranged till December, 1828. In
February, 1829, the first dividend of one-sixth was paid, and the whole completed
in six instalments in February, 1834.
" Chunqua, Hong merchant, failed in 1829—the senior partner having
retired to Nankin, carrying off all the property in charge of the Hong, which
he left, in debt, under the management of a stupid younger brother. His debts
to foreigners amounted to 869,762,32 dollars. The first petition for a settlement
was in September, 1829. The subject was pressed on the Government and
Hong merchants during the whole of 1830. It was not, however, till March 10,
1831, that the first dividend was paid of twenty- three per cent., 198,150,29
dollars. In July, ll£ per cent., 99,075,10 dollars, both arising from the Hong
property. In February, 1832, 190,845,64 dollars. In 1833, 190,845,64 dollars.
In 1834, 790,845,64 dollars. Total 869,762,32 dollars, the three last from the
Consoo fund."
The nature of the above debts will be explained by the fact, that bonds or
chops, as they are commonly called in Canton, were lodged by private individuals
2 O
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in the hands of ons- house of agency to the amount of 746,000 dollars on the
1st January, 1824, all bearing interest at rates of 10 to 15 per cent.
The whole of these bonds were liquidated, prior to the expiration of the
East India Company's charter. No other failure has occurred since Chunqua,
except Fatqua, who owed nothing to foreigners, but was indebted for Government
duties, for which his Hong was closed and he himself put in prison, where he
died last year, until Hingtae's bankruptcy, which is the more particular cause
and subject of this publication.
In the beginning of 1837 there were thirteen Hongs, viz :
Howqua, Hingtae, Samqua,
Mowqua, Mingqua, Kwanqua, [Footae]
Puankhequa, Saoqua, Lumqua,
Goqua, Punhoiqua, Takqua.
Kingqua,
Of these, Howqua's Hong is the same as Puiqua [his brother] mentioned in 1808.
Mowqua, Puankhequa, Goqua, are sons of the Hong merchants of that date, and
the old Kingqua died a few months ago. The acting members of Howqua and
Puankhequa's Hongs are both wealthy men, but they do little or no business
directly with foreigners. Goqua's Hong is clear of its former embarrassments
and doing business ; as is also Mowqua, who is however, still in debt. Kingqua
has never recovered embarrassments of old standing. Mingqua, Saoqua, Samqua,
and Footae, are Hongs of about five to nine years' standing, and doing active
business. Punhoiqua, Lumqua, and Takqua, are all nearly or entirely extinct for
want of credit.
Hingtae suspended payment towards the end of 1836, and a petition was
sent by foreigners to the Viceroy, to demand payment of his debts in the April
following. Atfer some delay, a Committee was appointed, consisting of the three
senior Hong merchants and three foreigners, to examine the claims which were
put in at 2,738,708 dollars, and were eventually passed by the Commitee at
2,261,439 dollars; the amount curtailed being chiefly surcharges for interest, or
unadmitted claims for bad goods ; but the whole of the debts appeared to have
incurred in actual legitimate trade.
The case was again referred to the Viceroy, and has since been repeatedly
urged on him ; who has engaged that " the debts shall be paid to the uttermost
mite [Edict, 1st December, 1837,] and has enjoined the Hong merchants to
make arrangements for that purpose. They purposed to pay the claims by
instalments, beginning in the shipping season of 1838 and 1839, at first in
twenty years, then in fifteen, and lastly in nine years. The claimaints,
however, have not only objected to such a distant liquidation of the debt, with
out interest, but they have required that Kingqua shall also be included in any
arrangement that is made, whose debts to foreigners are said to amount to about
one million of dollars. This Hong has long been considered insolvent ; but the
foreigners have forborne to press their claims out of respect to the late father of
the family, an old man of eighty years of age, for whose sake it was hoped his
countrymen would find the means to carry on the Hong, and not expose him to
the penalty and disgrace of a public bankruptcy. Since his death, which, as
before noticed, occurred a few months ago, it has become necessary to put in the
claims against the Hong. This is the more requisite, as it is understood that in
some of the Consoos or consultations of the Hong merchants, legal difficulties
have been started to making any private arrangements through the Co-hong for
payment of the debts, without the sanction of Government. The question is,
however, still under consideration by the Hong merchants, and propositions have
been made amongst themselves to impose additional duties on articles of trade
with the foreigners to liquidate all the claims ; but it seems doubtful whether in
the present state of trade they have either the power or the will to proceed
further without an order from the Emperor, and still more doubtful if the
British claimants have the means to bring the matter, with hopes of favourable
notice, to the attention of His Majesty.
It may be here noticed that accusations were made against Shykingqua in
1796, and afterwards against Chunqua in 1829, of having abstracted large sums of
money from their Hongs for their family use, which was never brought to account
of their assets. The same accusation is now made against Hingtae by his own
countrymen, the truth of which the foreigners have no means of ascertaining,
Mowqua's elder brother is said to have been mulcted some hundred
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thousand taels for indulging his vanity in an illegal attempt to exalt his father's
name by posthumous honours; and both Howqua and Tinqua are known to
have expended very large sums to obtain their son's promotion in the public
service. The vanity of raising their families into consideration is, indeed, the
only inducement that can be imagined, for men to become Hong merchants.
It must also be noticed, that a nominal fund, called the " Consoo Fund,"
is said to have been formerly instituted by the aid of certain duties upon
foreign commerce, in order, as some suppose, to pay off the debts owing by the
Co-hong to foreigners ; but it is stated in Lord Macartney's instructions to have
arisen in a measure from demands by the Emperor on the merchants, to support
his wars, &c, and it was one object of the Envoy's embassy to enquire into the
fund. The Court of Directors gave orders also in 1807, to remonstrate against
it, and attempts have several times been made to enquire into it and abolish it ;
we have seen that a duty was laid on Chinese staples in 1781, with the Hoppo's
sanction, to pay the Co-hong's dnties, and similar duties have been imposed
since, and are, without doubt, collected on some such pretexts to this day;
but there seems no reason to believe that such duties have ever been funded.
As the foreigners have never been consulted as to the mode of levying this
fund, supposing it to exist, nor had any controul over its appropriation, they
can in no way be responsible for its misapplication, and they ought not to suffer
for any failure in its means to liquidate their claims or any other demands
upon it.
It must further be noticed that the Emperor's Edict of 1782, which ordered
the bankrupt merchant's debts to be partly paid, desired certain Mandarins
to be appointed, through whom future dealings between the foreigners and the
Hongs are to be carried on, to prevent future debts being contracted by the
latter. The Hoppo accordingly appointed one of his subordinates to super
intend the deliberations of the Co-hong, and to fix the prices of exports and
imports ; and this officer, Wei-Yuen, actually set in committee with the principal
Hong merchants, and it was he who fixed the extra duties to pay the debts.
This practice appears soon to have fallen into disuse.
From the foregoing history of the Hongs, we deduce, that the conditions
under which foreigners have traded in China for the last fifty years, at least,
are:—
That the Chinese Government gives them no benefit of the laws nor
institutions under which its own subjects live; but that they are subjected to a
body of men, called security merchants, who hold nominal rank from the
Emperor, and who are a peculiar police for the controul of foreigners and their
trade.
That the Chinese Government gives no pay to the security merchants for
performing this office, but recompenses them by a monopoly in the foreign trade
of all the great staples of foreign commerce.
That to recompense the foreigners for the disadvantages of their situation,
the Government guarantees to them the payment of the debts which they must
unavoidably incur in such a limited trade.
If these deductions be correct, it rests, as a matter of course, with the
Chinese Government, so long as it shall be pleased to preserve the Hong
system, to find the proper men to become security merchants and to devise
the means to pay the debts which those merchants shall contract. Had the debts
of 1 780 arisen out of the above condition of trade, Captain Panton would cer
tainly have been justified in insisting upon their immediate payment, or, at all
events, that interest should be paid upon them until liquidated ; and it is pro
bable that his demand, if duly supported, would have been complied with, and be
come the precedent for similar transactions in future. The Emperor of China
may be pleased to lop off the interest, or to wipe off the half, or any portion of
debts incurred under the above conditions, and the foreign creditors, if unsup
ported by their own Governments, have nothing for it but to submit. But their
right to the whole remains the came, unless it can be shown that the debts are
fraudulent or the interest usurious. Any evasion of the condition which leaves
the foreigners' capital in the hands of the Chinese Government monopoly for its
benefit, whether for one year or for twenty, is clearly an infraction of the Empe
ror's pledge. It may not have suited the East India Company to work out the
correct principle, because the debts were in almost all cases due to persons whose
interests they have admitted to be opposed to their own. Former creditors mav,
2 O 2
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moreover, have been content to compromise their claims, for reasons we shall pre
sently show ; but their reasons do not apply to the creditors of the Hongs in 1838,
nor would the latter admit them, if their objections were likely to be heard in any
quarter.


2. —The altered situation of the British Merchants under the free-trade which has
deprived them of the means they possessed previously to recover their claims.

It has been shown, in the previous section, that in none of the cases which
established the precedents for the payment of the Co-hong debts, were any part of
those debts owing to the East India Company. They were due to British mer
chants in India, to the supracargoes and officers of the East India Company's
service, and to other parties who furnished capital to the Hong merchants with
which the latter conducted the Company's trade. These loans to the Hongs bore
various rates of interest from twelve to twenty per cent., and the calculation of
many of the parties who loaned was, that if a Hong in which they placed their
money should last seven years at the first rate of interest, or four at the last, they
doubled their capital by compound interest. Should the Hong break at the end
of these respective periods, and the doubled capital be recovered seven years after
in the one case, or four in the other, after the day of bankruptcy, they were still
as well off as if their original capital had been the longest period of fourteen years
in the English funds at five per cent, interest. The chances were, of course,
very much in their favour ; because, in addition to the possible stability of the
Hongs, they had the means of transferring their bonds whenever they desired to
withdraw their money, and few of them at the time of settlement in 1 780 were
in the first holders' hands.
When a Hong did break the East India Company's Factory were ready to
fight the battle to bring about a settlement of the claims, and their dealings with
the security merehants afforded them the ready means to receive and distribute
the dividends. For although it was not the interest of the East India Company to
push the claims beyond what was barely necessary to satisfy the creditors, it was
entirely their interest to regulate the payments which the clamour of the creditors
rendered unavoidable. The Select Committee desired to maintain the Hongs in
the most effective state in order to preserve as much competition as possible
amongst the Chinese, and prevent too close a monopoly by the Co-hong. They
even went so far, in one case, as to advance the bond-money to the creditors on the
security of the solvent Hongs.
The solvent Hongs, on the other hand, were always too ready to buy up the
debts of the bankrupts, where they had the means, to secure the lapsed shares of
the Company's business.
The creditors of Hingtae's Hong have none of these advantages, and their
claims which appear in every case to be balances of actual transactions of trade,
have all, or nearly all, originated since the opening of the trade ; nor has
interest been charged in any case, apparently, above the market rate of twelve
per cent.
Here it is necessary to digress, to show how certain acts of the British
Government have tended to involve the British merchants in Canton with the
Chinese, at the very time when they were taking from them the means to recover
their money. Those acts were:—the permission to the East India Company to
continue an agency in China, for the purpose of passing their funds from India
to England; the retension of the stock of tea in England in the East India
Company's hands after the expiration of their charter ; and the sudden, and to
the merchants in China, unknown alteration of the tea duty in 1836. The effect
of the first of these causes may easily be made apparent. The currency of
Canton is confined to the old Spanish Carolus and Ferdinand dollars, which,
being no longer coined, are becoming scarce every where. The expedients
devised to obviate a restricted currency, occasion about a fifth part only of the
mercantile transactions of the place to be exchanged by actual cash payments.
The whole foreign exports and imports of Canton, amount together to about
sixty millions of dollars, and taking this as the amount of exchangeable property, a
fifth, or 12,000,000 dollars, only is required for cash transactions. But as the same
dollar may be made to perform more than one payment in a day, and the absence
of banks occasions every one to keep unemployed money in his chest for emer
 285

gency, we may safely suppose that the average actual circulation amongst the
foreigners and the Chinese with whom they deal, is not more than five millions
of dollars. Nearly two millions, or one-third at least of this amount, is sup
posed to have been locked up in the treasury of the East India Company's agents,
for several months prior to the few last weeks, and it is now in the act of being
poured into circulation by means of their advances upon goods. The public
prints which we have lately received from England, teem with complaints against
the Bank of England, for the sudden expansions or contractions of' its issues by
half a million or a million sterling upon its own circulation of sixteen or eighteen
millions. What, then, must be the effect of the sudden expansion or contraction
of our circulation, by one-third of its whole amount ? But the evil of the East
India Company's agency, which we have particularly in view, occurred on the
opening of the China trade, concurrently with the mischief occasioned by the
retention of the East India Company's stock of tea. If upon the expiration of
their monopoly, their teas in England had been thrown at once into the market,
the price would of course have been depressed, and they would have passed at
the low rates, into the hands generally of those who were about to engage in the
China trade. A corresponding depression in price had necessarily followed in
Canton, which would in turn have occasioned diminished production. The
temporary vacuum in the trading capital of the place, in consequence of the
cessation of the East India Company's trade, had they left no agency, would have
allowed little competition, and the India cotton and home manufactures might
easily have been bartered for the low priced staples of China, which would then
have been a safe remittance to Europe. The retention of the East India Com
pany's stock of tea in their hands, on the contrary, by maintaining high prices at
first in England, brought speculators into the Canton market to whom the
East India Company's agency afforded the means to buy teas over the
heads of the resident merchants, the holders of goods. The Hong merchants
took the money in preference to goods, and tempted by the high prices of teas,
they sent it up the country to increase the production for the following year. In
proportion as the Chinese staples were raised in price, so were the foreign imports
depressed. Competition forced them, however, into the market, and the readiest
buyers were the neediest Hong merchants, who purchased them at long credits
to resell them immediately among their own countrymen for cash. Such part
of the imports as were sold by the resident merchants in this way form,,
perhaps, in many cases, the claims now under consideration. Other imports were-
bartered for teas at the prevailing high prices, which being shipped to England,.■
came into contact with the East India Company's heavy stock ; and, in one case,
with the unexpected alteration in the tea duty, by which they incurred losses of
from twenty to fifty per cent. The loss occasioned by the duty was aggravated
too, in some cases, by the capricious valuation of the teas. Documents were for- -
mally attested before the Chief Superintendent last season, and forwarded to
England to prove, that Bohea tea which had been contracted for and supplied by
the same Hong merchant in the same chop name, but shipped to two different ■
ports in England, was at one called Bohea, and at the other Congo, and the
duties, before the equalization, levied accordingly.
It must be remembered that the foreigner in Canton, has not the same
choice in his dealings as merchants in other places. He has barely the ordinary
exercise of prudence. He can sell the bulk of his goods, cotton for instance,
to one of four or five parties only; he has no warehouse to stow it in; no means
to ensure it against fine. Having once landed merchandize, he can get no return
of the duty paid on it, and cannol therefore reship it, whatever be the state of the
market. There may be no alternative, but to sell it to men of dubious credit, or
to barter it for other goods of dubious out-turn in the market they are sent to.
Under such circumstances, it can be no matter of surprise, that nearly every
foreign house of agency in Canton is implicated more or less with the bankrupt
Hongs, and all alike helpless, apparently, in obtaining payment of their debts.
Another circumstance of the foreign trade may be alluded to under this
head, not as applicable to the present engagements of the foreigners with the
Hong merchants; but as very likely to influence them materially hereafter; which
is, the probably altered character of the opium trade.
This drug, which forms about three-fifths of the whole British imports into
China, has hitherto been kept out of the Hong merchants' hands, and has been
the principal means of enabling the free traders to endure the burdens upon the
 286

legal trade. The rapidly increasing introduction of this article into China, not
called for by urgent demand on the part of the Chinese, but impelled by our
fiscal measures in India, threatens to vex and alarm the Chinese Government
beyond endurance. Their recent attempts to check it, have only tended to
remove the smuggling of-the drug from one place to another. The consequence
is, that upon the eastern coast of China, where an occasional vessel only
appeared ten years ago, there have lately been as many as sixteen or eighteen at
one time, and some of them are stationary there.
The contraband trade at Whampoa too, which the Government succeeded in
stopping eighteen years ago, when only 5,000 chests of opium were imported, has
recommenced there now, when the importation is 30,000 chests and upwards.
It is impossible to predict the result of such a trade; but none other can so
easily be imagined, as the legal admission of the drug into port, which has
already been proposed to the Government by some of its own officers. An over
ture was even made, it was said, last year, to the Hong merchants to undertake
the trade. If these merchants are unable to conduct the large commerce which
is already passed through their Hongs, as the facts adduced in this publication
will, it is supposed, make it appear likely to be the case, what must be the effect
upon them of the sudden participation of the valuable traffic in opium, which has
always been the source hitherto, both in India and China, of very hazardous
speculation ? The consequence must be, accelerated ruin to themselves, and
heavy losses to those concerned with them. It is quite in the course of probable
events, therefore, that the legal traffic in opium may one day bring more serious
calamity to the British merchants in India and China who are engaged in it, than
the whole power of the Chinese Empire, apparently, is now able to inflict upon
the contraband trade.


3.—The altered circumstances of the Hong Merchants, owing to the Free- Trade,
and other causes, which afford them no longer the same means to meet their
engagements.

ALL the reasons which the Select Committee assigned for the ruin of the
Hong merchants in 1 780, are true to the letter and applicable at present : in
addition to which it is obvious that the evils arising out of the sudden opening of
the British trade, which has been shown to affect the foreigners, must in turn,
when the reaction arrives, injure the Chinese. They have, accordingly, been
heavy sufferers by the low price of their staples which has prevailed for the few
last months, and are consequently many of them in no condition to pay the debts
which they had previously contracted.
The insolvent merchant Hingtae is the son of a respectable goldsmith who
kept a shop in the neighbourhood of the foreign factories, in which he amassed
perhaps 50,000 or 60,000 dollars to bequeath to his sons at his death. On
occasion of a demand for new security merchants, in 1828 and 1829, Hingtae, a
mere boy, and his brothers set up a Hong. In the course of the few years inter
vening between that time and his bankruptcy, he contrived for a while to transact
a fourth or fifth of the whole legal foreign trade at Canton.
This Hong may be taken, with some exceptions, as a type of the origin of
the Security merchants. With little capital and often with quite insufficient
talent and experience to conduct an extensive trade, can it be surprising if they
either close their career early, or else buy their experience at a cost, which
embarrasses them during the remainder of their lives, and their children after
them. The result of the experience of the two oldest and wealthiest partners of
the existing Hongs, Howqua, and Tinqua, [acting partner of the Puankhequa
Hong] has been, to induce them to withdraw for many years past, even during
the Company's charter, from nearly all direct dealing in imports with the free
traders. This of itself tended to throw the greater portion of those transactions
into the hands of the weaker and now bankrupt Hongs. If the majority of the
Security merchants has become insolvent, as we have seen to be the case, whilst
sharing in the profitable business of the East India Company, and supported by
their influence, what may now be their fate, when opposed to the keen compe
tition and activity of free-trade? If they were ruined in great part before, by
the extortions of the Mandarins, as the Select Committee supposed in 1 780, and
as has been constantly asserted since ; how are they now to supply the ever active
 287

cravings of those officers ? It remains to be shown what the demands upon them
are on this score.
The greatest infliction upon them, of this order, is the Hoppo, or Com
missioner of Customs. This officer, on taking charge of his office, is said to be
often encumbered with debt himself ; and as his possession of the office is limited
to a few years, it is his object to accnmulate as much money as he can within that
period. The payment of foreign claims upon the Hongs is quite adverse to his
interest, because it takes so much from his squeezable material ; but for any
thing else he gains by their insolvency, inasmuch as it begets the necessity of
new Security merchants, for licensing each of which, he exacts, it is said, a
douceur of 30,000 to 50,000 dollars, according to the means of the applicant
who has to pay, besides, about 30,000 more to subordinate Mandarins. In
addition to the Hongs of last year, the present Hoppo has lately licensed two
others, projected by men of no capital nor credit, and he is thought to have
actually received a part of the fees which must have been advanced by other
parties to the speculation. The Viceroy, however, ashamed apparently at the
transaction, would not permit the Hongs to be opened. One of the prominent
parties concerned in them was known to the foreigners as "Tom, the bird-man,"
from his previous dealings in singing birds : another was a tradesman, respectable
in character, but, as has since been proved, a bankrupt, and his stock in trade,
valued, it is said, at about 10,000 dollars, has been seized by one of his foreign
creditors.
Besides the frequent demands which the Hoppo and other Mandarins
exact from the security merchants in the shape of presents, and under
similar pretexts ; the first officer calls upon them, in the name of the
Emperor, for extraordinary contributions on occasion of wars and insur
rections, the irruption of the Yellow River or similar accidents, in addition
to a standing tax of 10,000 taels per annum, in the name of the Imperial
Ginseng monopoly. There is a requisition upon them at present for 60,000
taels on account of the Thibet war of 1826. The contribution was demanded
in this year ; but it appears that they have hitherto fought it off by the plea
of poverty. It is now ordered to be paid by ten annual instalments, begin
ning with next year. They have likewise a Government claim upon them
for the duties owing by the insolvent Hong Fatqua, amounting, accord
ing to the Hong merchants' own account, to 300,000 taels, which is to be
paid in two years, commencing with the present. The Hoppo anxious, no
doubt, to get the start of the foreign claimants, has lately demanded of the
security merchants to pay Fatqua's whole debt immediately, and also that
they contribute three years of the Ginseng tax, or 30,000 taels, by antici
pation, under pretext of an Imperial Order.
The claims upon the Hongs then, not including the Chinese creditors,
who are numerous, but who cannot be paid until] the Government and the
foreigners, for whom the Government is security, are satisfied, may be esti
mated as follows :—
Due to Foreigners. For Duties. Total.
Hingtae debts 2,261,439 100,000 2,361,439
Kinqua do. estimated at . . 1,000,000 240,000 1,240,000
Fatqua do. 300,000, I. E. equiva
lent to .... 418,000 418,000
The Thibet war, 600,000 taels equi
valent to . . . . . 830,000
Three years quota for Ginseng, taels,
30,000 40,000

Dollars 3,261,439 758,000 4,889,439

The above array of figures, in concurrence with the facts previously
detailed, will make it appear hopeless, it is presumed, to most apprehensions,
that the Co-hung, under existing circumstances, will be able to pay its debts
within any period which, if interest be not added, will not be equivalent to
the foreign merchant to the total loss of his trading capital. Some new
machinery is required in the Chinese commercial system to meet the exigen
cies of the British free-trade, and especially to liquidate the first debts
incurred under that free-trade, and establish the precedent for similar emer
gencies in future.
 288

. If the British merchants, aided no longer by the weight of the Es
India Company's influence, are unable to gain their just demands through
the ordinary channels of settlement with their creditors, it is not to be sup
posed that they will be able, single-handed, to put any other instrumentality
in action ; and Her Majesty's Superintendents, like all other foreign autho
rities in China, however good their intentions, are as yet utterly powerless
to assist them.


RECAPITULATION.

Before proceeding to show how the British Government may aid its
subjects in China, it may be useful to recapitulate the preceding facts, and
supply a few omissions to impress upon the mind of the reader.
That the debts now owing by the Hong merchants are a bondfide transfer,
so long as they continue unpaid, of three millions of dollars of capital from the
foreigners, chiefly British merchants, to the Chinese.
That these debts are not the result of speculation upon a high rate of interest,
but are incurred almost necessarily by the conditions of the ordinary trade—and
that another condition of that trade is, that such debts shall be repaid under the
Imperial guarantee.
That the debts being an abstraction from their trading capital, and not a
chosen investment of money, the foreign merchants have no longer the induce
ment to consent to a protracted payment of their claims, which former creditors
had; nor if they had, could they now put the same faith in the fulfilment of the
compromise.
That the British merchantswho have succeeded to the East India Company,
not possessing the advantages of that body's monopoly, and consequent identity
of interest and unity of action, are neither in the position to avoid incurring the
debts, nor to recover them when made; and that the organs of Her Majesty's
Government in China have not as yet possessed the means to acquire moral
weight with the local authorities, or Hong merchants, to replace the commercial
influence of the East India Company's factory.
That whilst deprived of the East India Company's influence, but still
opposed to a monopoly on the part of the Chinese, the foreigners have had to
compete, so far as tea is concerned, with the worst effect of a Government
monopoly in England, viz. : a heavy stock in the hands of parties not personally
interested in its disposal ; and, in one case, with an unlooked-for and arbitrary
change in the duties, having to the British merchant in China all the effect
of an ex post facto law. That these results have, further, been attended with
the introduction of the East India Company's funds into Canton, in a manner to
occasion violent derangement in the currency, and consequent fluctuation in
prices.
That the above circumstances of the free trade have equally injured the
Chinese merchants, and involved them in losses which have reflected upon the
British merchant, in the shape of the debts now in question, and are likely, if no
change occur, to lead to others hereafter.
That the British merchant in China has no choice but to trade with the
Hong merchants, in the bulk of both exports and importi, excepting opium. He
has, moreover, with few exceptions, no warehouses in which to store his goods,
nor, consequently, the means to ensure them against fire or fraud, nor to enforce
his contracts and engagements for them, with the Chinese.
That he has no choice in the nomination of the security merchants, with
whom he is compelled to trade, nor means to ascertain the amount of their capital.
He has still less means to know, if that capital be applied to the purposes of
trade, or if it be abstracted for the demands of the extravangances, or for the
aggrandizement of the Hong merchants' families.
That the new Hongs commence their career with the payment of a tax to
the Hoppo and other Mandarins, of 60,000 to 80,000 dollars, which in most cases
must absorb their whole capital, and compel them to borrow either from the
foreigners, or from their own countrymen.
That new duties have been levied from time to time, under pretext of
paying the debts of foreigners ; but that those duties are not discontinued after
the necessity for them ceases, and the foreigners have no means to ascertain if
 289

they are funded for the discharge of future debts, or appropriated to the use of
the Hong merchants or the Mandarins.
That the foreigners are even compelled often to advance those duties
for the Hoppo will not grant a port-clearance for a ship about to leave the port,
until the duties upon her inward cargo are paid, which it is the proper business,
according to the custom of the place, for the security merchant to do ; not
even when the goods are unsold, and the state of the market may keep them on
hand for months. But as the so-called security merchants are not obliged to
secure ships, the two wealthiest seldom or never do, and the duty falls oftener, in
consequence, to the poor Hongs. It constantly happens, therefore, that the
departure of a vessel is delayed, because the security merchant cannot pay the
duties upon her cargo ; and as most vessels are consigned to one party only, and
her cargo to many, it becomes a matter of contention, who is to advance the
duties for the security merchants, and the consignee of the ship is of course
obliged to yield. The sums, which we have seen to be due to Government by
the Hongs, are, therefore, chiefly on account of export duties and amount, pro
tanto, to a remission of duties upon their own staples, at the expense of the foreign
imports.
That when goods are once landed, they cannot be reshipped except upon
payment of the whole import duty again, in the shape of export duty ; how
ever bad the market may have become in the meanwhile, or however doubtful
the credit of the Hong may have become, in which the goods are deposited.


The aid required from the British Government.

It is at all times easier to point out grievances and abuses, than to
devise a remedy for them ; and this is peculiarly the case with regard to
the foreign trade in China. The remoteness of Canton from the seat of
Government, renders it impossible to the foreigners to ascertain the policy
of the Imperial Government with respect to the foreign trade, or to know
if the acts of the local authorities spring immediately from that policy, or
if they are merely the suggestions of their own self-interest or caprice.
Either from one or other cause, the foreigners are, no doubt, subjected
to many annoyances in carrying on their commerce, some of which have
already been submitted to the British Government, and remedies have been
proposed, involving questions attended with remote consequences, which
it does not fall within the province of this enquiry to enter into. Its
object is limited to obtaining payment of the debts owing to British
merchants by the Chinese, and guaranteed by the Chinese Government,
and to lessen the risk, if possible, of incurring similar responsibilities
in future.
These debts constitute a transfer of British capital to the Chinese
Hong merchants, of about 3,000,000 of dollars, which the creditors require,
surely not unreasonably, to be repaid within that time in which that
capital would double itself by compound interest at the usual market rate
of twelve per cent., which time is about six years. Whereas, the C
propose to liquidate the debts in nine years, beginning with next year;
which, in the case of Hingtae, would be ten and a half years from the date
of adjustment of account, and a still longer time in the case of Kingqua.
The British Government may interpose its authority with the Emperor of
China to obtain earlier payment of Hingtae's debts without fear, it is
conceived, of compromising itself, since a committee of foreigners and
Hong merchants, appointed by mutual consent, has examined and
authenticated the debts, and the Viceroy of Canton has declared officially,
that they shall be paid to the uttermost mite ; but without specifying a
period for the liquidation. The demand for payment of the debts, within
a given time, may be met by the Chinese Government with precedents
of former protracted liquidations of debts; but we conceive, that the
justice of their being paid within the time specified above will be found
unquestionable. But, even if the counter objections of the Chinese, or
motives of policy, render it inconvenient to the British Government to
insist upon a definite period of payment for debts already contracte l. it is
humbly submitted, that both policy and regard for the welfare of the
2 P
 290

British subjects in China demand that a definite, if not immediate, payment
shall be required for debts which the Hong merchants shall be found to
owe in future. This alone would be a considerable boon to the foreigners
in Canton, and possibly also to the Hong merchants themselves, by
shielding them awhile from the extortions of the Mandarins, and from the
liabilities which the solvent Hongs become exposed to, by having needy
and incompetent persons thrust into their corporation.
Respect for European international law, as well as common justice,
may also render it expedient to the British Government to dictate to the
Emperor of China, if it have the power, the regulations under which the
commerce of his empire with foreigners shall be conducted; but it may
surely require of him to respect and enforce the rules he has himself laid
down, He has prescribed to the foreigners to trade with the security
merchants only who are nominated by himself or by his delegates ; and,
in so doing, he tacitly engages for their capability and proper conduct.
It is for him to take care that the foreigners' capital, which passes through
the security merchants' hands, be not diverted from its proper use, either
by the folly of those parties, or by the extortions of his own officers.
This duty will, it is conceived, be indirectly but pressingly enforced upon
him, by the British Government insisting upon the debts being paid
immediately, which the culpability of his officers assist in forming. The
mere demand will, at the same time, accelerate the payment of the debt,
sustained, as we believe it to be, by both right and reason; and it may
easily be made in such a way as to compromise the British Government
in no ulterior measures, whilst it may also be readily made the basis of
further requisition, if it be deemed advisable.
Although accidental circumstances of trade have, in some instances,
as at present, conduced to the debts oT the Hongs, it will be seen
throughout the preceding pages, that the exactions of theHoppo and other
Mandarins, are the principal absorbents of the capital of the security
merchants, and, through them, of that of the foreigners.
Their extortions are the necessary and understood consequence of
their small salaries. This state of things belongs to most governments,
perhaps, in a certain stage of their career, and no effectual change in it
by foreign interference can be foreshown short of reform, amounting
almost to a revolution in the government.
So long as this practice exists, any treaty or tariff made with the
Chinese Government will always be evaded or misdirected, like the
supposed Consoo Fund, unless watched over incessantly, and checked by
some more powerful controul than is possessed at present by the British
Superintendent or any foreign Consul in China. But the firm and decided
demand of the British Government for the immediate payment of money
owing to its subjects, which may otherwise be diverted by the rapacity of
the Mandarins, may ensure the temporary exertion, at least, of the
Emperor's power to restrain their extortion.
The alternative may suggest itself to the Emperor, of abolishing the
Co-hong svstem altogether, and this, if it led to unrestricted competition
amongst the Chinese merchants, would be, perhaps, the happiest result
which could be expected ; but caution will be required in admitting the
proposition. If the Co-hong be abolished, the Hoppo's office must be
remodelled, and a host of subordinates, who belong to the system, should
fall with it, else the evil will be shifted merely, and not eradicated. The
exactions of the Mandarins would follow the free-traders as grievously as
it now does the Hong merchants, and the foreigners would have lost the
only check they now have on those exactions,—the necessity of the Hong
debts being repaid.
The abolition of the Co-hong would be totally ineffectual also, unless
attended by a better system of collecting the Customs duties, and the
general acquisition by foreigners of warehouses, in which to store their