1

TheEvolutionofDomesticTradeFlowsWhenForeignTradeisLiberalized:

EvidencefromtheChineseMaritimeCustomsService1

WolfgangKeller2UniversityofColorado,CEPR,andNBER

BenLiBostonCollege

CarolH.ShiueUniversityofColorado,CEPR,andNBER

Abstract

The impact that international trade has on domestic trade is especiallysignificant in the case of China in the 19th century when the British forced theopening of China to international trade. In this paper, we demonstrate how theinformationcollectedbytheChineseMaritimeCustomsService(henceforththeCMC)can be used to study trade flows and the relationship between domestic andinternational trade. This paper focuses on three main treaty ports: Shanghai,Hankou, and Guangzhou. We examine the geographic flows of domestic goodsdestined for foreign markets, and, the port‐to‐port distribution of foreign goodswithin China. We find that different markets responded quite differently to theopening of trade. During the 1870‐1900 period, 40% to 50% of the importedChinese‐produced goods to Shanghaiwere re‐exportedabroad. InGuangzhou, bycontrast, most of the imported Chinese‐produced goods were locally consumed.Overtime,netimportsofforeigngoodstrendedupwardsinShanghai,whilethenetimports of Chinese goods trended downward, and this effect appears to bemorepronouncedinShanghaithanintheothertwoports.

JELN45,F13,N25,N75,F15

Keywordstreatyport,tradeopenness,colonialism,China,entrepôt,re‐exports

                                                       1WethankTimurKuran,DebinMa,aswellastheparticipantsandtheaudienceatoursessionoftheIEAWorldCongressinBeijing(July2011)forusefulcommentsonanearlierversionofthispaper.PartofthisresearchwasdonewhileKellerandShiuewerevisitingtheEconomicsdepartmentatPrinceton,whosehospitalitytheygratefullyacknowledge;theyalsobenefitedfromNSFsupport(grantsSES0453040and1124426).ExcellentresearchassistancewasprovidedbyXavierGitiaux.2DepartmentofEconomics,UniversityofColorado,Boulder,CO80309.Phone:+1(303)7355507,email:Wolfgang.Keller@colorado.edu

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1Introduction

Little is known about the interaction between domestic and international

tradebecauseofthepaucityofdataondomestictrade.Theopeningofinternational

trademaychange, forexample, theextentofdomesticmarket integrationasmore

domesticgoodsaremovedtoportsthatserveforeignmarkets.Inaddition,domestic

infrastructure and market networks can also be expected to adapt as a greater

volume of foreign goods are imported and subsequently distributed to different

domesticmarketlocations.Furthermore,asnewgoodsareintroducedbydomestic

producers to the foreign market, these Chinese‐produced goods (what are

commonlytermed‘nativegoods’)mayoccupynewandseparatetradingnetworks.3

The impact that international trade has on domestic trade is especially

significant in the case of China in the 19th century when the British forced the

openingofChineseportstoWesterntraders. AlthoughChinawasnotincomplete

autarkyatthetime, foreigntradewasseverelylimitedbyimperialdecreeandany

trade that did take place between Britain and China was not free trade, but a

meeting of national monopolies. While the British East India Company lost its

monopoly,theTreatyofNanjing(1842)begantotransformthetradeenvironment

in China. The treaty abolished the co‐hong system that limited trade to guild

merchants operating out of Guangzhou. In addition, four additional treaty ports

(that is,ports thatwerepermittedby treaty to tradewith foreigncountries)were

opened:thesewereXiamen,Fuzhou,Ningbo,andShanghai.Thetreaty,inaddition,

stipulatedthattradedutiesonforeigngoodsshouldbelimitedto5%advalorem.

TheTreatyofTianjin(1858)withBritain,theU.S.,France,andRussiaopened

yetmore treaty ports, and it also laid the foundation for foreign trade policies in

China inessentialways. Themost importantof the clausesof theTreatyallowed

duties to be collected in the same system across all treaty ports. In theory, this

implied that foreign goods would be taxed only once upon entry into China and

                                                       3ArecentcontributionisHolmesandStevens(2010)whodistinguishbetweeninternalandexternalflowsusingtheU.SCommodityFlowsSurvey.Ourapproachisdifferent,aswedonotexaminefirm‐leveltradeandfocusonthegeographicalorganizationoftradewithinacountry. 

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thereafterbeexemptfromfurtherdutiesevenifthegoodsweretransportedfurther

inland.Amongotherrightsgrantedtoforeigntradersandresidents,foreignvessels

were permitted on the Yangzi River and foreign merchants could also employ

Chineseshipstocarrytheirgoods.

In this paper, we consider the opening of China to trade and demonstrate

howtheinformationcollectedbytheChineseMaritimeCustomsService(henceforth

theCMC)canbeusedtostudytrade flowsandtherelationshipbetweendomestic

and international trade. The CMC emerged in the aftermath of the SecondOpium

War (1856‐1860)andpolitical chaos inChina. AlthoughChinahadapre‐existing

customs revenue system, a different organizationwasneeded in order to enforce

thenewinternationaltradeagreements.

TheCMCassessedandmonitoredthe tariffsdueongoodsshippedthrough

thetreatyports.Theseincludedimportdutiesonforeignvessels,exportdutieson

Chineseproducedgoodsshippedabroad,anddutiesonforeignandChinesegoods

passingthroughordeliveredattreatyports.TheCMCemployedaChinesestaff,but

itcametobedominatedbyforeign,andinparticular,Britishnationals.Thus,itwas

a western organization providing the functions of tariff revenue assessment for

China, whose approach to collecting tariffs had the advantage of being more

systematicandlessarbitrarythanitspredecessor.

TheCMC’sstatisticalrecordsontradearecontainedprimarilyintheReturns

ofTrade,with additional statistics andmore descriptive accounts available in the

TradeReportsandSpecialCollections.FromthestartoftheCMCin1859toitsend

in1948, recordson tradewereenteredannually.Thenumberof treatyportsand

Customs houses expanded until there were over 40 by the year 1907. Previous

studieshaveoverviewedtheinstitutionalfeaturesoftheCMCorganizationandhave

providedbroadoutlinesofsomeofthecontentsintheCMCtradedata.4Nostudy,

however,hasyetbeenable to fully capture thedetailedcomplexities contained in

                                                       4Lyons(2003)outlinesthecontentsoftheCMCdataandalsopaintsadetailedportraitoftheteatradeatseveralChineseports.OntheinstitutionalhistoryoftheCMC,seevandenVen(2004),Brunero(2004),andBickers(2008).

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thesetradedata,andmuch lesshasbeendoneintermsofattemptingto interpret

whatthedataactuallyrevealabouteconomicconditions.

ThispaperattemptstosetthestageforourongoingresearchontheCMCby

exploringtheconnectionbetweendomesticandinternationalnetworksoftradeat

timesoftradeliberalization5.Themaincontributionistoshowthatthesedatacan

potentially be used for this purpose. We focus on just three ports, Shanghai,

Guangzhou,andHankou,buttheapplicationcanbeinprincipleextendedtoinclude

manymoreports. This typeofquantitativeanalysis canusefully complement the

manydescriptiveaccountsoftheperiodthatcurrentlyexist.6

Theremainderofthispaperisorganizedasfollows.Section2discussesthe

tradedataintheCMCrecords.Section3presentssomestatisticsfromtheCMCthat

sheds light on the organization of foreign and domestic trade in China. Section 4

summarizesourkeyfindingsandproposesavenuesforfutureresearch.

2TradedataintheCMCRecords

Perhaps themostnotableaspectof theCMCtraderecords is that theycapture

trade flows that are usually difficult or impossible to obtain even in developed

countries today. Mostdataon international trade treat the countryas theunitof

observation.Bycontrast,theCMCrecordedinformationnotonlybycountry,butby

port. That is, the unit of observation is not country‐to‐country trade, but rather

countrytoport‐of‐entrytrade,wheretheportistreatedindependentlyasifitwere

acountry.Thisallowsforinterpretationsthattakeinternationaltradeflowstothe

intra‐national level because the data effectively integrate domestic trade with

internationaltrade.Thisuniqueperspectiveofthemovementofgoodshadmuchto

dowiththepoliticalcircumstancesatthetime,whenthetreatyportsofChinawere

treatedlikeanenclaveoverwhichcertainforeigncountrieshadtradingrights.

                                                       5SeealsoKeller,Li,Shiue(2011). 6SeeMorse1926andFairbank1978onthehistoryoftheopeningofChinatoforeigntrade.SeealsoMizoguchiandUmemura1988ontheCMCarchiveandthehistoryofTaiwan;andKose1994,2005ontheemergenceofChinaintheearly20thcentury.

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Thefollowinggraphillustratesthenatureoftheinformationcontainedinthe

CMCreports inmoredetail.Figure1showsthetrade flowstoandfromShanghai,

for example, that were reported by the CMC. We have decomposed and labeled

these flows from one to nine. A first distinction is by type of good; flows 1 to 4

concerngoods thatareproducedabroad(foreigngoods),while flows5 to9show

tradeingoodsthatareproducedinChina(Chinese‐producedgoods).Flow1gives

the imports of goods from Japan to Shanghai. Other imports of foreign goods to

ShanghaiconsistofthosecomingfromotherChinesetreatyports;inthefigure,Flow

4 is foreign goods reaching Shanghai via Xiamen. Once imported into Shanghai,

these foreign goods may be re‐exported. The CMC data allow us to distinguish

betweenre‐exportsofforeigngoodstoforeigncountriesflow2)ortoothertreaty

portswithinChina(flow3).

Access to new foreign goods to consumers in Shanghai will raise their

standardof living. TheCMCdataallowsus toquantify certaindimensionsof this

access. Specifically, the statistics on re‐exports of foreign goodsprovidenot only

key information on the extent to which foreign imports diffused throughout the

country,somethingthatshouldhaveimportantwelfareimplicationsinthecaseofa

large country such as China; but it also affords us a direct measure of the

consumption of foreign goods in the treaty ports as within‐port foreign goods

consumptionmaybeobtainedbysubtractingre‐exportsfromforeignimports.The

levelofdetailofinformationintheCMCstatisticsvariesovertheperiodof1859to

1948 and across ports. Typically, port‐level imports net of re‐exports to both

domesticandforeigndestinationsareavailableatthecommoditylevel.Inaddition,

for aggregate trade and for key commodities, specific re‐exporting destinations,

whether that is to a Chinese treaty port or to foreign country, are available for

certainyears..

The CMC data also identify, separately from foreign goods trade, trade in

Chinese‐producedgoods.Flow5, forexample,showsChinese‐producedgoodsthat

areexportedfromShanghaitoforeigncountries. Theseexportsaredirectexports

in thesense that thegoodsareproduced in theGreaterShanghaiarea.Thedirect

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exports are to be distinguished from other Chinese‐produced goods that are

exported abroad from Shanghai but were produced elsewhere in China (flow 6).

Both direct exports and re‐exports capture major aspects of the evolution of an

economy. In particular, the size of direct exports demonstrates the change in the

production possibilities of local economies, while the extent of re‐exports sheds

light on the development (and trade integration) of the hinterland aswell as the

capacitiesoftheentrepots(here,Shanghai).

Flow7representsShanghai‐producedgoodsthatareexportedtootherparts

ofChina,whereasflow8givestheexportofChinese‐producedgoodsthatflowfrom

one region of China to another through Shanghai. The information on domestic

exports of Chinese‐produced goods at the port‐level is thus comparable to the

informationonforeignexports.Finally,flow9showsShanghai’simportsofChinese

goods thatwere produced elsewhere in China. The level of detailwithwhich the

Chinese trade in domestic goods is comparable to the trade in foreign‐produced

goodsdiscussedabove.

In this elaborate system, in order to assess trade duties the CMC staff

recorded the quantity (tonnage) and value of the goods carried. For example, in

1881, one can find over 20 different categories of Cotton Goods being imported

(fromVelvetsandVelveteenstoTurkeyRedCloths),atleast10differentvarietiesof

WoolenGoods,andsome70differentSundriesthatincludedWindowGlass,Alpaca

Umbrellas,Needles, andDriedClams. From1875until around1933,valueswere

reportedintermsofsilver,theCustomstael(orhaiguanliang). Ratesofexchange

betweentheCustomstaelandthelocalcurrencyexistedforeachportandwerealso

reportedbytheCMC.7

Thedataonthetotaltonnageofgoodsaredividednotonlybetweenforeign

and native goods, interprovincial goods, but also between ships and steamers, as

well as nationalities. Here, certain qualifications need to be kept in mind. First,

therewasacertainprogressionoflearningonthepartoftheCMC,sothatitwasnot

                                                       7Between1875and1933,thereweremorevariations.CurrencyunitsforvalueincludedtheSpanishdollar,theBritishpound,localcurrency,Goldunits,GoldDollar,andtheChinesedollar.

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until 1867 that more uniform and accurate methods of accounting were put in

place.8 Second, the statisticsdonot refer to all the tradeofChina, butonly to the

tradethroughtreatyports,andofthistrade,onlythatpartofitthatwascarriedon

foreign vessels or on Chinese ships of the foreign type (that is, steamers). The

foreign‐flagvessels includednotonly ships, but also those transportswhichwent

overland to Russia. Initially, the CMC did not attempt to capture any part of the

domestictradethatwascarriedonChinesejunksthroughouttheempire,andwhich

wasnotdestinedforinternationaltrade.However,fromtheyear1901on,theCMC

also took over responsibility of Native Customs stations within 25 kilometers of

openportsandbegantocollectdataontradegoingthroughthosestationsaswell.9

TherecordsonflowsofthoseChinese‐producedgoodswerepublishedinseparate

tables.

Despitethesequalifications,thetradestatisticsarebroadlyconsistent,both

internally to other numbers reported by the CMC aswell aswith foreign partner

traderecords.10 Many treatyportswere locatedalongriversor coastalportsand

most foreigngoodsentered throughoneof the treatyports.11 After theTreatyof

Tianjin(1858)enteredintoforce,theCMCdataaccountedfor80‐90%ofallforeign

tradeinChina,andthecoverageoftheCMCdatabytheyear1904wasessentially

onehundredpercent.12

                                                       8AccordingtoRobertHart,theInspectorGeneraloftheCMCfrom1863‐1911andoneofthemostinfluentialindividualsinthehistoryoftheService,inhisprefacetoTradeStatistics,compiledfortheAustro‐HungarianUniversalExhibition.  9Lyons(p.66):after1900,“[t]radeinforeignflagvessels,Chinese‐flagvesselsofWesterntype,andChinesejunkstradingtoHongKongandMacao;alsooverlandtoRussiaandtoFrenchandBritishpossessionsborderingChina.”After1900,foreignincludesHongKong,Macao,andTaiwan.10 See Lyons, pages.31-32, for further discussion on accuracy and on the relatively modest worry that smuggling might represent.   11Themainexceptionsincludetheentryofopiumpriorto1880sandillegalexportsofgoldandsilverinthe1929‐1930becauseoffluctuationsinworldprices.TheCMCorganizedaPreventiveDepartmentin1931inresponsetopatrolthecoast.12TheannualCMCReturnstoTradereportsrevealthattheonlysignificantportionofforeigntradeinitiallynotcoveredbytheCMCstatisticshadtodowithtrafficonChinesejunksfromtheGuangdongprovincetoHongKongandMacao.WiththeopeningofthecustomsstationsinLappa(nearMacao)andKowloon(oppositeHongKongisland)intheyear1886,thistradewasextensivelyrecordedintheCMCstatistics.Asforitsmagnitude,intheyear1887,forexample,foreignimportsinKowloonandLappaaccountedfor7%ofallimportsofChina(CMC2001,volume14,p.24).HsiaocitesCMC

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Therewere certainly some changes in the coverage and definitions during

the 90 years that the CMC was in operation in mainland China.13 Some of these

changeshavebeenidentifiedinpreviouswork.14Itisworthemphasizinghowever

thatthedifficultyinusingthedatadoesnotsomuchcenteronthequalityofdata,

since the records as such are of high quality, but rather that one must carefully

understand the aims of the compilation and thepurpose forwhich thedatawere

originally intended. The next section gives a brief overview of domestic and

internationaltradeinChinainthelate19thcentury,andthendiscusseshowtheCMC

datalinkstogetherthetwotypesoftrade.

3. DomesticandinternationaltradeinChina(1859‐1900)

Thissectionhighlightsthesizeofforeigntradeandthegeographicalflowsof

domestic trade. From reports of the British East India Company, in 1834 China

importedapproximately6centspercapitaandexportedwerearound3centsper

capita.15 Theopeningof tradeduring thisperiod canbe seen inFigures2 and3.

Figure 2 shows the value16 of British imports to China from 1828 to 1863 using

information from British Parliamentary Reports for the period.17 There were

importsalsofromothercountries,butBritishgoodsoccupiedasignificantshareof

thetotal.Figure3plotstheeffectoftheopeningtotradebylookingatthechangein

thetotaltonnageofBritishvesselsthatwereexportingChinesegoods.

Between1840and1845, importvalue increasedat anaverageof29%per

year,andexporttonnageincreasedatarateof36%peryear.Thegrowthoftradein

thisearlyperiodofopeningwasneithersteadynorlinear.Between1845and1854,

thetrendsappearedtoplateauordecrease incertainperiods. Between1854and

1860, importsgrewatanaveragerateof26%.Figure4showstradeexpansion in

                                                                                                                                                                 documentsstatingthatfrom1904onwardtheCMCdatacovers“practicallythewholeforeigntradeofChina”,Hsiao(1974,p.8).13TheCMCmovedtoTaiwanin1949.14Seeespeciallypages69‐70inLyons(2003).15Greenberg(1851),page21716 The imports are expressed in 1840 British Pound.  17TheseimportsincludethosefromHongKong. 

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China trade stagnated again from 1865 to 1885. Overall trade growth averaged

3.5%peryearforimportsand2.7%forexportsovertheperiod1865‐1900.

Unlike foreign trade, domestic trade in China was not restricted over this

period and experienced no institutional changes comparable to the opening of

international trade. Interregional trade in staples, beans, cotton, animal products

flourished, especially along the coastal and river routes (Myers andWang 2002,

Rowe2009).Fan‐I‐Chun(1992)estimatesthattherevenuecollectedatthecustoms

housesfrombrokersengagedinlong‐distancetradeincreasedatarateof1.6%per

yearfrom1668to1788.Bytheendofthe18thcentury,controllingfordistance,the

extentofdomesticmarketintegrationwithinChineseprovinceswascomparableto

whatwasseenwithinWesternEuropeancountries(ShiueandKeller2007).

Evenbeforethemodernera,ShanghaiandthewiderYangziDeltaareawas

known for its manufactures of non‐agricultural Chinese‐produced goods. The

densityofpopulationinShanghai,togetherwithrelativelyhighpercapitaincomes

alsoimpliedthattherewouldhavebeenhighdemandforgoodsfromotherplaces.

Finally, Shanghai’s 19th century treaty port status and coastal location made it a

popular location for exporters of Chinese products. The ease with which goods

couldbetransportedtoandfromShanghaieitherviathecoastaltradeortheYangzi

Rivermayhelptoexplainthedirectionofthetradeflows,buttheport‐to‐porttrade

statisticsprovidesomefurtherevidenceoftheextenttowhichthesegeneralclaims

aretrue.

Table1showsthegeographicalflowofChinese‐produced(native)goods.It

shows the percent of imports of Chinese produced goods arriving in Guangzhou,

Hankou,andShanghai,andthedifferentportsfromwhencethegoodscame.From

1868 to 1888, more than 50% of all Chinese‐produced goods imported to

Guangzhou came from Shanghai. Most of those goods imported to Hankou also

camefromShanghai,specifically57.1%.Hankouwasalsoaveryimportantsource

of Chinese products for Shanghai, accounting for 36.7% of all –Chinese‐produced

imports.ThetablealsosuggeststhatShanghai’simportsofthosegoodscamefroma

moregeographicallydiversesetofcitiesthanwasthecaseforeitherGuangzhouof

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Hankou.Chinese‐producedgoodswereimportedfromall17portsinthelist,while

goodsfromonly12portswenttoGuangzhouand11forHankou.

Figure5givesthevalueoftotalimportsofChinese‐producedgoodsgoingto

eachofthethreeports.Thereisanupwardtrendineachcasefromtheearly1870’s

through to the year 1900,with Guangzhou and Hankou holding to similar levels.

ShanghaiimportedapproximatelyfourtimesmorethanGuangzhouorHankou,and

also experienced a short period of rapid increase at the end of the 19th century.

From1870to1900,importsofChinese‐producedgoodsfromotherChinesecitiesto

Shanghaigrewatanannualrateof10%.This figure is3.7%forHankouand5.5%

forGuangzhou.AsacertainfractionofChinesegoodssentfromport‐to‐portwere

destinedforexport,partofthegrowthindomestictradecanbeultimatelyrelatedto

the opening of international trade in China. The next section examines this

possibility.

i. Relationbetweendomestictradeandinternationaltrade

Theobjectiveofthissectionistolookforevidenceofaconnectionbetween

domestic trade and international trade. Shanghai was an important port for the

exportofChinese‐producedgoodsandadistribution center forChinese‐produced

and foreign products. Goods could be sent downstream to Shanghai along the

YangziRiveranditssmallertributaries.OnceinShanghai,thesegoodscouldbe1)

consumedlocallyinShanghai,or2)re‐exportedtootherChinesetreatyports,or3)

re‐exported to foreign countries. Similarly, imports of foreign goods could be

consumedlocallyinShanghai(netimports),‐re‐exportedtootherChineseports,or

toaforeigncountries(recallFigure1).

Anygrowth in thesizeofdomestic trade toaportsuchasShanghai,which

alsoexported to foreigncountries, couldbe therefore triggeredby the increase in

internationalexportvolume,asChinese‐producedgoodshadtobefirsttransported

to treaty ports before they could be exported abroad. To examine whether this

couldbethecase,Figure5showshow1)—3)evolvedovertimeineachofthethree

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cities. Panel (c) shows that, during the 1870‐1900 period, 40% to 50% of the

imported Chinese‐produced goods to Shanghai were re‐exported abroad. In

Guangzhou,bycontrast,mostoftheimportedChinese‐producedgoodswerelocally

consumed(panel(a)).Hankoufellinbetween,with10%‐20%ofthoseimportsre‐

exported directly abroad (panel (b)). This is some preliminary evidence of a

heterogeneous connection between international trade and domestic trade across

Chineseports.Ontheonehand,inGuangzhouthereisnodirectevidencethatport‐

to‐port imports of Chinese goods were directly related to exports. On the other

hand,almosthalfoftheflowsconvergingtoShanghailikelyhadtodowithforeign

tradeexports.

This analysismightunderestimate the impact of international tradeon the

growthofdomestic trade forat least tworeasons.First, someof there‐exportsof

Chinese‐produced goods towardother treaty portsmaybe eventually destined to

exportsabroad.Of interest is theroleofShanghai in there‐exportsofgoods from

Hankou.InFigure6,Hankouischaracterizedbyincreasingimportanceofre‐exports

toChinesetreatyports.However,mostofthegrowthindomesticre‐exportscanbe

attributed to re‐exports to Shanghai (the sharewas 91% in 1888),where a large

share of re‐exports were exported abroad as shown in panel (c). Secondly, our

simple analysis doesnot account for any indirect effects of international tradeon

transportation infrastructures thatwould facilitatedomestic tradeor theeffecton

economicgrowththatwouldincreasedemandandsupplyoflocalgoods.

ii. Importsofforeigngoods

Theprevioussectionsgiveevidencethattheeffectofinternationaltradeon

domestic trade was fairly heterogeneous across China. We also examine the

consumptionof foreigngoods inaportas total importsnetof re‐exports toother

Chineseportsandto foreigncountries. InFigure7,Panel(a)suggests that foreign

goodsreachedconsumersinShanghai,HankouandGuangzhoutovaryingdegrees.

On average over the period 1872‐1900, per‐capita consumption of foreign goods

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was50CustomstaelsinShanghai,17CustomstaelsinHankouand5Customstaels

inGuangzhou.

Withintheframeworkofagravityequation,wemightinterpretthesourceof

these differences as the result of variations either in GDP or in trade frictions.

Shanghai might have been more exposed to foreign goods because of its initial

higher GDP. This might be why Guangzhou lagged so much behind, despite its

coastal location. Shanghai might have been also more exposed to foreign goods

because of the difficulty for foreign traders to penetrate the mercantile Chinese

systemand then to carrygoods inland.This typeof frictionmighthelp toexplain

whyHankou,althoughintegratedintheYangzisystem,didnotbenefitfromforeign

goodsasmuchasShanghai.

Lastly, the per‐capita imports of Chinese goods, net of re‐exports, exhibit

someofthefeaturesalreadyobservedforthenetimportsofforeigngoods.The‘Net

importsofChinese‐producedgoodspercapita’isdepictedinPanel(b)ofFigure7.

Inparticular,Shanghaiwasmoreexposedtoimportedlocalgoods(23Customstaels

per‐capita, on average from 1872 to 1900) than Hankou (9 Customs taels per‐

capita) and Guangzhou (6 Customs taels per‐capita).18 Here, some of the same

mechanisms as for foreign goods might explain the larger exposure in Shanghai.

Additionally,Shanghai'spositionasanentrepotcouldfavortheconvergenceoflocal

goodstowardShanghai.

Overtime,netimportsofforeigngoodstrendedupwardsinShanghai,while

the net imports of Chinese goods trended downward. As net imports capture the

part of imports that are consumed locally in Shanghai, these trends reflect the

relative ‘foreignness’ of average consumption in Shanghai. We might expect the

opening of trade to result in the substitution of Chinese products for foreign

products.However,thiseffectappearstobemorepronouncedinShanghaithanin

theothertwoportsinthesample.

                                                       18PopulationfigurescomefromtheannualCMCReturnstoTrade.

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Toquantifyfurtherdifferencesinregionalresponsestotheopeningoftrade,

weusethedetailedinformationfromtheCMCsourcesandcountthechangeinthe

numberofvarietiestradedovertheperiod1868‐1947.Wedefineasatypeofgood

any variety that is categorized under the same name in the CMC record. For

example,thegroupteain1872includesblack,green,brickandleaftea.Withineach

group,we count thenumber of varieties that differ either by origin or by further

specification. Figure 7 shows the number of foreign cotton varieties available in

Shanghai, Guangzhou and some cities along the Yangzi River (Jiujiang, Yichang,

Wuhu) from1875 to1900.Twoobservationsemerge fromthiscountingexercise:

first, in all ports, therewas an expansion of imported cotton varieties over time;

secondly, there was a heterogeneous penetration of these varieties within the

country.Between1875and1900,thenumberofimportedcottonvarietiesgrewat

anaveragerateof4.5%inShanghai,4.1%inGuangzhouand2.6%inHankou.

Figure8plotsthenumberofforeigncottonvarietiesavailableinGuangzhou,

Hankou, Shanghai, and three other ports. This figure also suggests that

internationaltradeaffecteddifferentportsdifferently.Overtheperiod1875‐1900,

there were twice as many varieties available in Shanghai compared to varieties

availableinGuangzhou,andthreetimesasinHankou.Moreover,thereisnosignof

convergencebetween the threeportsover time.The caseofHankou isnotableas

Hankou and Shanghai werewell connected by a transportation system along the

YangziRiver.TheYangziwasnavigablefromShanghaitoHankoubyoceansteamer

and then by light‐draft steamers to Yichang.19 However, the difference in the

numberofvarietieswidenedovertimebetweenShanghaiandHankou.Bycontrast,

alongtheYangziRiverbetweenHankouandYichang,thenumberofcottonvarieties

convergedtoapproximately30foreignvarieties,availablein1900,inWuhu,Jiujiang

and Yichang, despite the lower quality of waterways on this part of the river.

DifferencesinGDPbetweenShanghaiandupstreamcitiesmaypossiblyexplainthis

sharpdecreaseinthenumberofimportedvarietiesalongtheYangziRiver.

                                                       19 Feuerwerker,1980,page43. 

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iii. OpeningofTrade:AChineseStory?

The comparative lack of penetration of foreign cotton goods in Chinese

marketsbeyondthecoastmaybeduetoanumberofreasons.Theremayhavebeen

weak demand for foreign cotton, cheaper substitutes, the difficulty for foreign

traders to enter the long‐established traditional Chinese trade networks, or other

reasons.Rawski(1970)andMeyer(2000)describehowforeigncompanieshadto

rely on Chinesemiddlemen, so called compradors, to reach Chinesemarkets. The

traderequiredtrustworthyrelationshipstokeepcostslow,andtheseacquaintances

hadtobepreservedinacomplicatednetworkofmercantilerelations.

Since the CMC reports the citizenship of traders that were carrying the

coastal trade and the transit trade in China, we can examine the nationality of

traders by nationality. Transit passes were instituted by the Treaty of Tianjin

(1858)andwasthefirstamonganumberofsubsequentinternationalnegotiations

exempting foreign merchants from further internal transit tolls after paying the

requiredtariffattheportofentry.Thetransittradeisofparticularinterestforus

asitprovidesameasureofwhocarriedthetradebetweenthetreatyportsregions

ininlandChina,andallowsustoexaminetheregionalrelationshipbetweenforeign

tradeandthenationalityofthetrader.

Figure9decomposes,bynationalorigin,thedifferentoperatorsdoingtrade

inChina from1875 to1900.Panel (a) is for thecoastal tradeandPanel (b) is for

transit trade. The results confirm partly Rawski’s (1970) and Meyer‘s (2000)

descriptionoftheimportanceofChinesemerchantsincarryingforeigngoodsalong

thecoastandwithinChina.By1900,40%ofthetransitpassesand40%ofcoastal

tradewereoperatedby theChinese. By theendof the19th century,most foreign

nationals were not involved in carrying trade inland and along the coast. For

instance, although the shares of U.S. and Japan in China's total imports increased

substantially after the opening of China to trade, reaching respectively 13% and

20%, theirparticipation in coastal and transithaddwindled, suggesting that their

operationswere transferred to Chinese firms. The one exceptionwas the British,

  15

whomaintained their participation in coastal trade at around 50% and in transit

tradearound40%throughoutthelastthirdofthe19thcentury.

Thestrengthoftheforeignpresenceincoastaltradealignswellwiththefact

thatmarketsforforeigngoodstendedtobelocatedthereaswell. However,there

wasanincreaseininternationaltradeonthecoastdespitethefactthattheforeign

presencehardly increased. Overall tradewiththeU.S.andJapangrewdespitethe

fact that the trades were most likely handled by Chinese middlemen. Moreover,

therewasadeclineinthepresenceofforeigntradersintransittrade,eventhough

thepenetrationof foreigngoods in transit trade tended to increase, albeit slowly.

ThedominanceofChinesemerchantsintransittradeprobablyhadsomethingtodo

withthelimitedpenetrationofforeignimports,butotherfactorsthatwehavenot

yetquantifiedwerelikelyalsoimportant.

4. Concludingdiscussion

Undertheinfluenceofforeignpressureovertheperiod1865‐1900,Chinese

importsgrewatanaveragerateof3.5%peryearandChineseexportsgrewatarate

of2.7%peryear.First,inthispaper,weshowthatwhatliesbehindtheseaggregate

statistics is a great deal of heterogeneity in how different markets in China

responded to the opening of trade. It is useful to consider domestic and

international tradeasan integrated concept. For example, theopeningof foreign

tradeinfluencedtheflowsofgoodsbetweenShanghaiandotherportsontheYangzi

River. Thus, once foreign goods arrive in a country, or once a domestic good is

available for international consumption, the two types of trade—domestic and

international—becomefairlydifficulttoseparate.

Secondly, we consider the geographical organization of trade, with Shanghai

playingtheroleofahub,redistributinggoodseithertowardforeigndestinationsor

within China. Not all ports played an equally important role in re‐exports. In

Guangzhou, 90% of the imports of Chinese‐produced goods from other Chinese

portswereconsumedin‐situ.Thirdly,thedataallowsustoexaminethepenetration

  16

offoreigngoodsintoChina.Forexample,two‐thirdsoftheimportedcottonvarieties

remained on the coast in Shanghai and never traveled further along the Yangzi

River.Thatis,theexpansionofnewvarietiesmighthavebeenfairlylocalizedinthe

treatyportregion.Lastly,weprovidefiguresexaminingtheimportanceofChinese

merchantsindomesticandinternationaltransactions.

These conclusions and the CMC dataset used in this paper offer numerous

avenues for future research, which we will only briefly mention. First, we can

explore further the impact of the opening of foreign trade onmarket integration

withinChina.Oneway toproceedcouldbe to relate foreign trade to thepricesof

different commodities in various regions of China and measure whether or not

marketsmayhavebecomemoreco‐integratedaftertheopeningofChinatotrade.

Secondly,itseemsfruitfultoattempttobetterunderstandthejointevolutionofthe

domesticandinternationaltradingroutesovertime.Forexample,isthereevidence

that market networks evolved toward a structure more and more centralized

around Shanghai, or rather is it the case that new centers emerged? Thirdly, one

interpretation of the CMC is that itwas awestern institution placed in a country

dominatedbyChinesemerchants. It remains tobeestablishedwhatprecisely the

relationshipwasbetweentheCMCorganizationandChinesemerchants. . Amore

carefulanalysison theroleof theChinesemiddlemenmerchantscouldrelate toa

burgeoningliteratureontheroleofintermediariesininternationaltrade.20

                                                       20SeeAntrasandCostinot(2010).

  17

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Meyer,DavidR. (2000).HongKongasaGlobalMetropolis. Cambridge:CambridgeUniversityPress,2000Mizoguchi, Toshiyuki and Umemura, Mataji (1988), Basic Economic Statistics ofFormerJapaneseColonies,1895–1938,Tokyo:ToyoKeizaiShinposha.

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  19

Table1:Share(%)oftreatyportsinimportsofChinese‐ProducedgoodstoGuangzhou,ShanghaiandHankou.Average1868‐1888

Average1868‐1888PortofOrigin: Guangzhou Hankou ShanghaiYingkou 7.1 0.7 2.1Tianjin 6.9 0.5 5.1Yantai 1.8 0.1 5.2Yichang 0.0 4.9 0.1Hankou 9.3 * 36.7Jiujiang 0.1 26.8 12.2Wuhu 4.4 1.1 1.6Zhenjiang 6.9 1.8 2.8Shanghai 50.5 57.1 *Ningbo 2.9 6.4 11.8Wenzhou 0.0 0.0 0.1Fuzhou 0.0 0.0 1.9Danshui 0.0 0.0 0.2Dagou 0.1 0.0 0.4Xiamen 0.1 0.0 1.0Shantou 0.0 0.1 8.8Guangzhou * 0.6 4.3HongKong 10.0 0.0 5.7

  20

  21

 

 Figure  1:  British  imports  to  China  1828‐1863,  expressed  in  1840  British pounds 

 

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1825 1830 1835 1840 1845 1850 1855 1860 1865

In 1000 pounds

  22

 Figure 2: Tonnage of British vessels exporting goods from China.

0

20000

40000

60000

80000

100000

120000

140000

1832 1834 1836 1838 1840 1842 1844 1846 1848 1850

In tons

  23

 Figure 3: Chinese foreign trade, 1865‐1900

0

50000

100000

150000

200000

250000

1865 1870 1875 1880 1885 1890 1895 1900

1000 Customs Taels

Imports

Exports

  24

 

Figure  4:  Total  imports  of  Chinese  goods  in  Shanghai,  Guangzhou  and Hankou

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1870 1875 1880 1885 1890 1895 1900

Customs tales (1000)

Canton Hankow Shanghai

  25

Panel(a):Guangzhou

Panel(b):Hankou

 

Figure 5: Re‐exports and net imports of Chinese goods toward Guangzhou, Hankou and Shanghai, 1872‐1900.

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1870 1875 1880 1885 1890 1895 1900

Cusoms taels (1000)

Re‐exports to Chinese ports

Re‐exports to foreigncountries

Net imports

0

2000

4000

6000

8000

10000

12000

14000

16000

1870 1875 1880 1885 1890 1895 1900

Customs taels (1000)

Re‐exports to Chinese ports

Re‐exports to foreigncountries

Net imports

  26

Panel(c):Shanghai

 

Figure 6 (Continued): Re‐exports and net imports of Chinese goods toward Guangzhou, Hankou and Shanghai, 1872‐1900.

0

10000

20000

30000

40000

50000

60000

70000

80000

1870 1875 1880 1885 1890 1895 1900

Customs taels (1000)

Re‐exports to Chinese ports

Re‐exports to foreigncountries

Net imports

  27

Panel(a):Netimportsofforeigngoodspercapita

 

Panel(b):NetimportsofChinesegoodspercapita.

   

Figure  6: Net  imports  of  foreign  and  local  goods  to Guangzhou, Hankou  and Shanghai, 1872‐1900. 

0

5

10

15

20

25

30

35

40

1870 1875 1880 1885 1890 1895 1900

Haekw

an Taels per capita

Shanghai

Guanghzou

Hankou

0

20

40

60

80

100

120

1870 1875 1880 1885 1890 1895 1900

Haekw

an Taels per capita

Shanghai

Gaunghzou

Hankou

  28

   Figure 7: Number of foreign cotton varieties available in Guangzhou, Hankou, Shanghai, Jiujiang, Yichang and Wuhu. 

0

10

20

30

40

50

60

70

80

90

100

1875 1880 1885 1890 1895 1900

Number of varieties Shanghai

Hankou

Guanghzou

Wuhu

Jiujiang

Yichang

  29

Panel(a):Coastaltrade

   

Panel(b):Transittrade

 Figure 8: Share of the carrying of trade, by citizenship of the carrier, 1875‐1900. 

   

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1875 1880 1885 1890 1895 1900

Chinese

Japanese

Continental Europe

American

British

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1875 1880 1885 1890 1895 1900

Chinese

Japanese

Continental Europe

American

British

  30

 Figure 9: Treaty ports along the Yangtze River.