China, Foreign Trade

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China, Foreign Trade

China undertook extensive forms of foreign trade from the creation of a unified state under the Han dynasty until the fifteenth century, when a change in direction saw the country increasingly isolated from its neighbors and a continual downgrading of the importance and value of trade. Much of the early forms of trade were conducted under the guise of collecting tribute from vassal, or nominally vassal, states. At sea, foreign trade became dominated by Chinese junks, which were of a size and scope that greatly exceeded any international competition, including Arabian and Javanese rivals. Chinese maritime domination reached its apogee under Admiral Zheng He's (1371–1433) journeys, by which time Chinese trade reached from Madagascar to perhaps as far as the Americas. Chinese porcelain was then unparalleled and represented the dominant export good.

By land, the various routes that together constituted the Silk Road further linked the Chinese market with the Arab, Indian, and Mediterranean markets to the west. This led to the presence of extensive communities of foreigners in cities and towns in prominent positions along the Silk Road and to sophisticated methods of regulating trade. However, periodic outbreaks of xenophobia by some of the Chinese and perennial complaints by foreigners of having to provide economic rents to local officials were the causes of tension and occasional conflict.

However, Confucianist thought, which has been influential in China throughout history, considered trade to be the province of inferior people and the ability of local officials (or mandarins) to squeeze taxes on foreign imported goods further brought the names and reputations of merchants into disrepute. Nevertheless, overseas goods continued to move in and out of fashion throughout history, even if the central government saw little of value in Western merchandise and preferred exotic goods from Southeast Asia and elsewhere.


The closing of China's markets roughly coincided with the arrival of Europeans wishing to trade and ultimately to colonize Asia. While the Europeans recognized the Chinese achievements in building and technology, as expressed by the wonderment of the author Marco Polo (ca. 1254–1324), they resented being told what to do and how to conduct their trade. The emperor permitted only one legal outlet for international trade with the Europeans, and their traders were obliged to remain within their enclave, which was a place forbidden to women and generally a much less pleasant posting than Southeast Asian markets. Further, all trade was to be conducted with a court-appointed monopoly known as the cohong system.

The opening of trade routes between the Philippines and Spain and between Spain and the New World enabled almost all the global distribution of products. The silks produced in China were cheaper than those of Spain and the Spanish found themselves being priced out of their own markets in Mexico and Central America. This led to a ban on sales of Chinese products in the New World, which was enforced after 1604. Control of the Chinese market, it was felt in Europe, was essential for stability and imperial development. However, the Chinese state was not prepared to make any compromises with Europeans, who were considered to be essentially unimportant. It was a different situation where Russia was concerned, as its eastward expansion collided with Chinese territory and represented a definite threat. This led to a treaty demarcating borders and the installation of a Russian ambassador to Beijing, the only foreigner to be given this privilege.

Nevertheless, the pressure for increased trade led inevitably to open confrontation. The British took position as the most important mercantile presence in the region from the Portuguese and Dutch and found their home market increasingly dependent on a Chinese commodity, tea, not the silks and porcelains that had been of so much demand elsewhere. The demand for tea in Britain grew at an enormous rate, but there was little that the China market wanted from Britain in return, which led to a steady transfer of silver from west to east. Considering this to be destabilizing, the British cast around for a suitable export to China and eventually decided upon opium.

When the British colonized India, a three-way trade was established in which British-grown opium was exported from India to China in exchange for tea. The demand for opium grew very rapidly and led to considerable social disorder in China, whereas previously it had been of very limited impact. However, when the Chinese authorities banned the trade, the British were quite prepared to continue on an illegal basis by smuggling. Nevertheless, determined efforts by some Chinese officials to end the trade by destroying stocks of opium led to inevitable confrontation. In the two resulting so-called Opium Wars (1839–1842 and 1856–1860), European technology and organization defeated outmatched Chinese methods, and British naval vessels dominated both rivers and seas. The Chinese were obliged to sign a series of unequal treaties with not just Britain but also France, the United States, and other powers. These treaties ceded the treaty ports, including Hong Kong and Shanghai, where foreign trade was to be permitted and enabled the Western merchants to benefit from extraterritoriality, which meant they would no longer be subject to Chinese law or justice in their enclaves.


Beijing was thoroughly looted during the Opium Wars and its government was forced to stand by while the population was introduced to the dubious pleasures of a debilitating and addictive narcotic on an industrial scale. Capital now flowed from East to West as a result of this trade and the extraordinarily heavy reparations regularly laid upon the Chinese state were intensified with every outbreak of antiforeigner unrest. Free traders, glorified pirates, traveled up and down the coast and rivers to spread trade further through China, while central authority broke down in many provincial areas. While not formally colonized by Europeans, most of China's significant decisions were made by cabals of external powers, whose primary interest was in extracting resources at as great a rate as possible.

The final phase of colonization involved the physical conquest by the Japanese, whose brutal assaults remain an open wound in diplomatic relations decades later. Once again, the Chinese economy was subjected to the needs of conquerors rather than being allowed to develop itself and industrialize. The victory of the Nationalists of Jiang Jieshi (1887–1975) and the Communists led by Mao Zedong (1893–1976) restored independence but forced the country into a new period of comparative economic isolation in which Chinese society and industry was deprived of useful imports. As such, their technology remained far below international standards.


For approximately fifteen hundred years the Chinese have been traveling overseas to make their homes there. Although few countries these days do not have a Chinese community of some sort, most of this migration has involved Southeast Asian countries. Overseas Chinese have historically felt a strong loyalty to their original home and continued to conduct many economic transactions with it. This ranged from exporting unmarried women for overseas workers, to remittances to complex social organizations linking home villages with expatriates. Much of this trade and investment took place informally, or at least without official records. It continued at a high level between Taiwan and the mainland during years of tension between the two states, whereas much of the high level of trade registered in Hong Kong has been a form of round-tripping that saw money invested in the mainland with some incentives actually having originated there.


Intense negotiations preceded China's entry into the World Trade Organization (WTO), which will require more open markets for trade and investment and will lead to considerable structural change in the Chinese economy as workers are moved out of noncompetitive industries into others that are competitive. The low wage cost of manufacturing goods that has played such an important part of China's economic growth at the end of the twentieth century will increasingly be supplemented by advanced electronics and telecommunications products and services.

see also China, after 1945; China, First Opium War to 1945; China, to the First Opium War; Compradorial System; Guangzhou; Opium; Opium Wars; Treaties, East Asia and the Pacific.


Brook, Timothy. The Confusions of Pleasure: Commerce and Culture in Ming China. Berkeley, CA: University of California Press, 1998.

Curtin, Philip D. Cross-Cultural Trade in World History. Cambridge, U.K.: Cambridge University Press, 1984.

Hodder, Rupert A. Merchant Princes of the East: Cultural Delusions, Economic Success, and the Overseas Chinese in Southeast Asia. Chichester, U.K.: John Wiley and Sons, 1996.

Pomeranz, Kenneth. The Great Divergence: China, Europe, and the Making of the Modern World Economy. Princeton, NJ: Princeton University Press, 2000.

Zhaojin, Ji. A History of Modern Shanghai Banking: the Rise and Decline of China's Finance Capitalism. Armonk, NY: M. E. Sharpe, 2003.