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Direct oceanic trade between China and Europe began during the sixteenth century. At first it was dominated by the Portuguese and the Spanish, who brought silver from the Americas to exchange for Chinese silks. Later they were joined by the British and the Dutch. Initially trading took place at several ports along the Chinese coast, but gradually the state limited Western trade to the southern port of Canton (Guangzhou).

Here there were wealthy Chinese merchants who had been given monopoly privileges by the emperor to trade with foreigners. Merchant guilds or firms trading with foreigners were known as "hongs," a Westernization of the word hang (meaning "street"--originally, in Tang dynasty marketplaces, merchants grouped by streets ).

The merchants of the selected hongs were also among the only Chinese merchants with enough money to buy large amounts of goods produced inland and have them ready for the foreign traders when they came once a year to make their purchases. The Chinese court also favored trading at one port because it could more easily collect taxes on the goods traded if all trade was carried on in one place under the supervision of an official appointed by the emperor. Such a system would make it easier to control the activities of the foreigners as well. From roughly the 1750s until the 1840s, foreign trade was restricted to the hongs in Canton, and foreigners coming to China in their sail-powered ships were allowed to reside only on the island of Macao as they awaited favorable winds to return home.

(The above is adapted from the unit "Macartney and the Emperor" in the section on Modern History, for which the consultants were Drs. Madeleine Zelin and Sue Gronewold, specialists in modern Chinese history.)