The case thus bluntly stated by Mr Gregson was not such a temporary phase as might naturally have been concluded. The same remarkable features continued for many years afterwards more or less characteristic of the China trade, so that had another commission been appointed to consider the subject they would have been surprised to find the old riddle still awaiting solution, Why so regular and simple a trade should be carried on apparently without profit? The data of supply and demand being well ascertained, prices remunerative to the merchant might have been expected to arrange themselves automatically. Further explanations seem, in fact, required to supplement Mr Gregson's, and some of these must appear somewhat whimsical and farfetched to the general reader. The peculiar method in vogue of stating accounts was not perhaps without its influence in obscuring the merchants' perceptions of the merits of their current operations. The trade being virtually conducted by barter, the sale of a particular parcel of goods did not necessarily close the venture. A nominal price was agreed upon between buyer and seller for the convenience of account-keeping, but this almost always had reference to the return investment in tea or other produce. So that British goods were regarded as a means of laying down funds in China for the purchase of tea, while tea was regarded as a return remittance for the proceeds of manufactured goods, and as a means of laying down funds in England for further investments in the same commodity for shipment to China. The trade thus revolving in an eternal circle, having neither beginning nor end, it was impossible to pronounce definitely at what particular point of the revolution the profit or loss occurred. A bad out-turn of goods exported would, it was hoped, be compensated for by the favourable result of the produce imported, and vice versâ, ad infinitum. Thus no transaction stood on its own merits or received the unbiassed attention of the merchants. Their accounts did not show the actual amount of loss or gain on a particular invoice, the formula simply recording the price at which the venture, as an operation in exchange, "laid down the dollar." The par value of that coin being taken at 4s. 4d., the out-turn of a sterling invoice which yielded the dollar at any price below that was of course a gain, or anything above it a loss. But the gain or loss so registered was merely provisional. The dollar as such was never realised: it was but a fiction of the accountant, which acquired its substantial value only when reinvested in Chinese produce. The final criterion, therefore, was how much the dollar invoices of Chinese produce would yield back in sterling money when sold in London, and how that yield compared with the "laid-down" cost of the dollar in China. But even that finality was only provisional so long as the circuit of reinvestment was uninterrupted.
Merchants were not called upon to face their losses as they were made, nor could they realise their profits as they were earned. Long before one year's account could be closed, the venture of one or two subsequent years had been launched beyond recall, and the figures of the newest balance-sheet related to transactions which, having already become ancient history, were but a dry study compared with the new enterprises bearing the promise of the future and absorbing the whole interest of the merchant. Business was thus carried on very much in the dark, the eyes of the trader being constantly directed forward, while past experience was not allowed its legitimate influence in forming the judgment. A blind reliance on the equalising effect of averages was perhaps the safest principle on which such a commerce could be carried on. The merchants themselves were wont to say that after drawing the clearest inferences from experience, and making the most careful estimates of probabilities, the wisest man was he who could act contrary to the obvious deductions therefrom. Business thus became a kind of concrete fatalism.
The China trade was, moreover, much hampered by certain traditions of the East India Company which long clung to its skirts. One of these relics of conservatism, transmitted from the days of the maritime wars, was the principle of storing up merchandise at both termini. It was an understood thing that the Company should never keep less than two years' supply of tea in the London warehouses, and long after the Company ceased to trade stocks of that commodity often amounted to nearly twelve months' consumption. Similarly, manufactured goods were accumulated, whether of set purpose or from the mere force of habit, in the China depots. The merchant seemed to have inherited the principle of holding merchandise for some ideal price, locking up his own or his constituents' capital, incurring cumulative charges on commodities which were all the while deteriorating in value, and eventually perhaps selling under some financial or other pressure. A certain satisfaction seems to have been derived from the contemplation of a full "go-down," as if the merchandise there stored had been realised wealth instead of a block to such realisation.
That primitive state of affairs is now a thing of the past, since the progress of the world during the last thirty years has revolutionised not the foreign trade of China, but the peculiar system on which it was carried on. The distribution of capital and the services of Exchange banks exploded many conservative doctrines. The first merchants who, perceiving the necessity of reforming the habits of the trade, boldly resolved to "sell and repent" on the arrival of their merchandise, were pitied by their more antiquated neighbours, and thought to be likely to stand much in need of repentance. But in their case wisdom has been justified of her children.
This bald sketch of the trade customs inherited from the East India Company, though typical, is by no means exhaustive. There were, both before and after the treaty of Nanking, many byways and specialities and exceptions by which the vicious circle was broken with happy results to the individuals. Indeed at all points there have been collateral avenues to fortune, contributory enterprises more profitable than those which were purely commercial. The various ways of taxing commerce, as by insurance, freightage, storage, lighterage, packing, financing, &c., have afforded, on the whole, safe and good returns on capital. In countries where family improvidence is prevalent, and where capital is scarce and dear, as is the case generally in the Far East, both the opportunity and the inducement to invest in real estate are afforded to those who are in a position to take advantage of them,—for the same conditions which bring property into the market provide the tenants for the new proprietors. By following with that singleness of purpose which distinguishes all their proceedings the line of financial policy so obviously suggested by this state of things, the Jesuits, Lazarists, and other religious orders have gradually accumulated in every locality where they have settled a very large amount of house property in and around populous centres. By this means they have laid whole communities of natives, and even foreigners, under permanent tribute to the Church, and have thereby rendered their missions independent of subventions from Christian countries. Many of the foreign merchants, following this worldly-wise example, have in like manner rendered themselves independent of mercantile business.
The American trade was for the most part exempt from the drawbacks as well as the advantages of the circuit system. The similarity of currency helped to simplify American commerce with China, and though from an early period the United States exported manufactures to that country, these went but a little way in payment for the products which they imported from China. Hence large shipments of specie had to be made to purchase their cargoes. No statistics exist, but Mr Hunter incidentally mentions one ship carrying amongst other cargo $350,000, and three other vessels carrying between them $1,100,000, which may be taken as typical of the course of trade prior to the abolition of the East India Company's monopoly. This mode of paying for produce was succeeded in after-years by credits on London banks, drafts under which supplied the most convenient medium of remittance to shippers of opium and other produce from India. The circuit was trilateral, and to a considerable extent remains so.
I. TEA.
Causes of bad state of trade—Failure of hopes built on "free" trade—Efforts for improvement—Select Committee of 1847—Excessive duties in England—Irregularities in valuation—Annual consumption at this time—Revenue from the duties—Beginnings of the India tea trade—Mr Robert Fortune—Lord William Bentinck, Governor-General, introduces tea culture, 1834—Assam Company founded 1839—Fortune's missions to China—Tea-plant indigenous in India—Progress of scientific culture—Vicissitudes of the trade—Ultimate success of the India and Ceylon trade—An example of Western as against Eastern methods—Tea-planting introduced in Ceylon—Rapid increase there—Why China has been supplanted in the market—Ingenuity and enterprise of the Indian planters—A victory of race and progress—Obstructive measures of the Chinese Government.
There was an apparent inconsistency in the outcry for larger quantities of Chinese produce to balance the trade, while the small quantity that did come forward could only be sold at a loss. The explanation may partly be found in the "boom" which naturally ensued on the emancipation of the China trade from the oppressive monopoly of the East India Company, and in the disappointment which, no less naturally, succeeded the boom. To some extent also the onerous imposts laid upon the principal article of export—tea—by the British Exchequer might be held responsible for the anomaly; for the English duties were a mechanical dead-weight on the trade, impeding the free play of the other economic factors. There was a practically unlimited supply of tea in China, and a growing demand for it in England, and yet some £2,000,000 in specie was annually sent away from China as the balance of trade. How to commute that amount of silver into tea for the benefit of both countries might be said to be the problem before the merchants and their Governments.
The only means which appeared to them feasible to effect this object was to lower the British import duty. Among many interesting particulars concerning the actual state of the Chinese trade at that time, we get from the report of the Select Committee of the House of Commons on "Commercial Relations with China," of 1847, an insight into the difficulties, such as in our day can scarcely be imagined, which stood in the way of any reduction of the tea duties.