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When the war went badly for the Guomindang gov-
ernment in Nanjing, the navy was also used to help ship
the retreating armies, senior members of the government
and some of the country™s national treasures to Taiwan.
But the end of foreign presence in China™s inland waters
was near. The last British naval encounter with Commu-
nist Chinese troops was the so-called “Amethyst” inci-
dent on the Yangzi. The British may stress the digni¬ed
retreat and the courage of the sailors involved and the
Chinese their indignation at residual British presump-
tions, but it truly brought to a close the “¬ghting” phase
of encounters begun with the “Opium War” 109 years
earlier.27 No naval forces were employed by the PLA
To ¬ght 37


because it had no navy. But the incident provided its
Eastern China Command with the impetus to establish
its ¬rst naval force. The new headquarters of the virtual
navy was located at Baima temple in Taizhou, Jiangsu,
just north of where the Amethyst was ¬rst attacked. This
Command was to get a substantial start soon afterwards
when it received the surrender of Nationalist gunboats
of the Second Fleet and the Fifth Patrol ¬‚eet.
By December 1949, Xiao Jingguang had been made
Admiral and Head of the Navy and it was soon decided
that the PLA would have to learn from the Soviet navy.
Xiao Jingguang was a Huangpu Academy graduate, with
no naval background but with eight years™ experience
in the Soviet Union. His main deputy, however, was
trained in the Voroshilov Naval Academy from 1953
to 1957, and so were most of the active commanders
who succeeded them. The Russians were invited to send
hundreds of of¬cers and experts to serve in China and,
between 1951 and 1953, the PLA also sent about 150
of¬cers to Russia for training.
This was another new beginning for China™s navy.28
The communists™ armies were modern peasant rebels
hardened by guerrilla tactics, inspired by fervent politi-
cal ideals, and their ¬ghting ability enhanced by modern
weaponry and training. Their victory in 1949, except
for the crossing over to Hainan Island, was won en-
tirely on land. They did inherit some of the naval craft
from the defeated Nationalists, but they were totally cut
off from Anglo-American and Japanese naval traditions
and skills. Their most powerful ally, Soviet Russia, was
not renowned for its naval prowess. But these Russians
would have to do. Their eastern ¬‚eet in Vladivostok
could provide help, and other ships were for the key
38 Anglo-Chinese Encounters


early years actually in Chinese ports like Port Arthur
on the Liaodong peninsula. But that is another story. In
the face of the new Anglo-Chinese relationship form-
ing across the Taiwan Straits, one in which naval forces
would play an increasingly important part, the People™s
Republic of China (PRC) would come to experience
both frustration and challenge.
After its withdrawal from the Yangzi, Britain adopted
a neutralist role in Hong Kong. Waiting to observe if the
Chinese navy would stay loyal to the Guomindang gov-
ernment, to see how many ¬ghting ships would actually
follow the regime offshore, was one of the dramas of the
day. It was understandable that Britain would wish to re-
strain naval actions off the southern Chinese coast in the
face of the petty rivalries within the Chinese navy and
the Nanking government™s distrust at the time of many of
its naval of¬cers. Too many of them had gone over to the
communists and it took years for a new trusted genera-
tion to be trained. Nevertheless, what China™s small naval
units, now on both sides of the Taiwan Straits, were able
to do marked a turnaround in modern Chinese history.
Not since the exploits of Zheng Chenggong (Koxinga),
the Fujian trader-sailor who created China™s ¬rst offshore
navy in the seventeenth century and based it in Taiwan,
had Chinese naval power been so effective. The retreat to
Taiwan opened a new opportunity for seaborne ¬ght-
ing for the Chinese. At long last, the Anglo-Chinese
connection could focus on the greatest strength of the
British heritage, which the Americans also share, and
lead the Chinese to rethink security and strategy in a
fundamentally different way.
But here is the greatest irony. After the British had
stopped ¬ghting the Chinese for decades, after their
To ¬ght 39


American successors had helped to strengthen Chinese
armies to ¬ght the Japanese as well as other Chinese,
the opportunity and need had ¬nally come for Chinese
on the mainland to take naval power seriously. The very
untidiness that left the Nationalists on islands like Matsu
and Quemoy symbolises that new start. The PRC™s fail-
ure to take both these islands underlined the urgency to
produce new plans to take Taiwan. This had to include a
modern navy. After the Korean War, with the stationing
of the Seventh Fleet in the Taiwan Straits, the Americans
had become a direct threat to the new regime of Mao
Zedong. The heightening of Cold War tensions around
the globe led the United States to make the China seas
and their outreach southwards the new front line that
encompassed Southeast Asia and Australia.
The People™s Liberation Army did indeed learn much
from Soviet Russia where air force designs, missile
weaponry and the products of nuclear engineering were
concerned. The Sino-Soviet connection was, for at least
one decade, greatly valued. But as two major continental
powers with different national interests in Eurasia and the
world™s longest land borders, the friendship was too good
to last. Within a decade, the two sides found the innate
contradictions too dif¬cult to live with. As a superpower,
the Soviet Union had other regions to satisfy and China™s
particular concerns did not always serve the Russian
cause. As long as Russia was the stronger of the two,
but not overwhelmingly dominant, the break between
the two communist powers was inevitable.29 In any
case, China™s ability to ¬ght was greatly weakened by
the Soviet withdrawal of technology and vital skilled
personnel in 1960. It was not until after Deng Xiao-
ping™s reforms following the Cultural Revolution that
40 Anglo-Chinese Encounters


the PRC could start again to think about how the
country could be defended in the future.
This is not the place to dwell on China™s mili-
tary history. I only wish to highlight, where ¬ghting
was concerned, the complex Chinese responses to the
Anglo-Chinese experience. Britain was the ¬rst modern
enemy, but the Qing court was willing to learn from the
British how to strengthen its armed forces, including
the navy. But that failed, and China was forced to en-
dure desperate measures barely to survive for at least the
next sixty years. Having failed to ¬nd a new attitude
towards naval strength from the years when Britain was
at the height of its powers, the Chinese then saw the
growing irrelevance of Britain to their ¬ghting ability.
One might conclude that this fact would end our story,
but two reasons lead me to suggest that there has been a
new beginning. The image of China™s navy, its feeble rise
and precipitous fall, its virtual disappearance, and then its
rebirth since 1949 in both Taiwan and in the PRC, cap-
tures the layers of ¬ghting encounters which we should
not neglect. It tells us something about the ambiguities
that China has been, and is still going through, but it also
tells us something about the ambivalence in Britain™s
position between the continent and the beckoning
Atlantic.
Perhaps the most important question is whether, as
a result of this two-stage Anglo-Chinese relationship,
leaping from an Atlantic Britain to a Paci¬c United
States, the Chinese government will fundamentally shift
away from its continental traditions to embrace naval
power and the multiple challenges posed by the sea.
The issue of reunifying the province of Taiwan with the
mainland is a vexatious one. Increasingly, China may
To ¬ght 41


have to look beyond simply strengthening its navy and
preparing to use ballistic missiles to overcome its intrin-
sic naval weaknesses. But, even if that should happen, it
is unlikely that the recent efforts to develop a blue water
navy will slow down. In the long run, with the country™s
long coastline, China cannot do without a credible naval
defence capability. As this capability grows, more Chi-
nese naval vessels can be expected to use the sea-lanes of
the South China Sea. This will have an impact on how
the control of the Spratly Islands might eventually be
shared. There is no real alternative to this development
because the Chinese cannot now unlearn the lesson the
British had taught them that they should never again
leave the soft coastal underbelly vulnerable to external
invasion.30
There is ample evidence that, when they have the
need to, Chinese people can turn to the sea. It is a
matter of whether they can make a national commit-
ment. There have been signi¬cant numbers of navy
of¬cers who were recruited from north, central and
western China to dispel the view that sailors have to
come from the coastal regions. Nevertheless, there is
ample evidence of keen response to naval careers among
the young people in Taiwan as well as among the Chinese
Singaporeans who command and man that republic™s
small but ef¬cient navy. Many of them have ancestors
who came from southern Fujian, the area from which
intrepid sailors had ventured north and southwards for
centuries.
It is not too fanciful to compare the Hokkiens, in their
southeastern corner of the continent, with the Dutch
and the Portuguese during the sixteenth and seventeenth
centuries. Their destinies were to look seaward and they
42 Anglo-Chinese Encounters


could have evolved systematically in that direction had
they not been so grounded by an orthodox agrarian
worldview that was ¬rmly rooted on land. The resource
the Hokkiens offered was relatively untapped by the im-
perial authorities in the past, although their contribution
to coastal defence had always been appreciated. Of¬cial
neglect of their talents, however, had not prevented these
Hokkiens from honing their skills for overseas trading
purposes.31 Here they have had more in common with
the commercial traditions of the British. Perhaps in this
realm, Anglo-Chinese relations might have been more
fruitful. This leads to the second of Waley™s four words,
“to trade”.
3 “To trade”
Towards the end of chapter two, I painted a picture of
British naval power in retreat and the rise of American
power in the Paci¬c on the eve of the Second World
War. This did not represent a sunset phase for the Com-
monwealth™s links with China. It may have seemed like
that where military involvement was concerned, but it
was certainly not so with trade. On the contrary, there
was a new beginning for other parts of the Common-
wealth like Australia and residual colonies like Hong
Kong and Malaya (including Singapore), plus the new
economic power of English-speaking North America.
British traders and of¬cials had left structures around
the Asia-Paci¬c region that were ready to take over and
continue their globalising missions. The question was
how China would respond.
Let me begin by juxtaposing two historical notes.
First, the continental Chinese could not be more differ-
ent from the island British. It is not surprising that they
should develop their trading methods differently. But
there were Chinese who were more like other Europeans
from the point of view of geography, of the response to
political conditions, and of human resources. For ex-
ample, in my earlier writings, I drew a comparison be-
tween the Hokkiens in southeastern Fujian (and one
44 Anglo-Chinese Encounters


might include the Cantonese of the Pearl River delta)
and the Dutch and Portuguese during the sixteenth and
seventeenth centuries. Their respective destinies for
some centuries had been to look seaward from the edge
of a continent. The Dutch and Portuguese rulers freed
themselves from control by their land-based neighbours
to send out overseas merchants with naval backing. The
enterprising traders of Fujian and Guangdong, however,
set out to take great risks overseas while being con-
strained by rulers and mandarins who held an ortho-
dox agrarian worldview that was ¬rmly rooted to the
soil.1
The Hokkiens and Cantonese did nevertheless de-
velop maritime and trading skills and offered their tal-
ents to their imperial authorities whenever these were
needed. But the skills were relatively untapped by the
dynastic authorities. Such of¬cial neglect did not pre-
vent them from drawing on their experiences in the
region to deal with the Portuguese and the Dutch.
These foreign protagonists off the China coast were, like
themselves, edge-of-continent peoples who had over-
come their handicaps on land by becoming masters
of the oceans. Centuries earlier, in the tenth century,
beginning with their respective independent southern
Han (917“971) and Min (909“944) empires, both the
Cantonese and Hokkien had shown their strength in
long-distance seaborne trade. They were able to match
the Indians, Persians and Arabs by trading beyond the
South China Sea into the Indian Ocean and were even-
tually stopped from doing so only by the continental
policy introduced when the Ming dynasty (1368“1644)
reuni¬ed the empire.2 This new policy was based on the
idea that China™s markets were so attractive to foreign
To trade 45


rulers and merchants that it was safer for the empire, and
more pro¬table for the of¬cials concerned, to restrain
their own coastal traders and let the foreigners come to
China and shoulder all the risks. This way, the mandarins
could also better control all the troublesome people,
Chinese and non-Chinese alike, who were motivated
merely by trading pro¬ts.
My second historical note brings us to the present
and relates to the description of China as the last mar-
ket frontier during the debates on admitting China into
the World Trade Organisation. This was when the US
Congress ¬nally overcame strong moral and political re-
sistance to vote for permanent normal trading relations
with the People™s Republic of China. That description
reminds me of the perennial image of China as a country
of “400 million customers”. The famous book of that
title may have appeared only in 1937, but the image of
a vast virgin market for the industrialised West had been
around for at least a hundred years before that.3 Now that
the population of China has tripled (to 1.3 billion), this
powerful call to cross the last frontier sounds more attrac-
tive than ever. When one traces decisions made to open
up the China market back to all those centuries when
foreign traders knocked on the door of China, it is no
wonder that Chinese coastal peoples expected maritime
trade to pro¬t them and Chinese governments believed
that trade was too important to leave to merchants. It is
a reminder that it took more than 320 years, from the
Portuguese arrival to the Opium War, before the West
could push themselves into the China market, a little
more than 100 years after that for the market to close
down again in 1949, and then another 22 years for the
doors to reopen after 1978. Behind all the debates over
46 Anglo-Chinese Encounters


the centuries, we should remember that China™s trade
has never been far from issues of power and security and
that it does not take much for that trade to be shut down
again. This is also the reason why the market reopened
guardedly after 1978 and through the 1990s, and why
it still sometimes resembles the controlled trading sys-
tem that the British found so irksome in the nineteenth
century. With China™s entry into the WTO, of course,
a new chapter begins. But it may be a long while be-
fore China will allow its economy to be as open as some
businesses want.
It is with that background in mind that we turn to the
words, “to trade”. The desire “to trade” has always been
more central to British interests than the readiness “to
¬ght”. Here is a paradox. On the one hand, the British
carried the burden of having started the modern round
of wars in China. On the other, the record shows how
hard the British tried to stop any ¬ghting that would
inhibit their trade in China. The contrast has not been
lost among the Chinese. The dichotomous image meets
both the need for a symbol to unite an easily divided
population and for a spur to Chinese businessmen to beat
the British peacefully with China™s own long-established
business skills and networks. Certainly, Chinese traders
saw how much they could have had in common with
the commercial traditions of the British. Unlike that of
¬ghting, this is a realm where Anglo-Chinese relations
could have been much more fruitful. Chinese of¬cial
classes were struck by the wealth that overseas commer-
cial enterprises could produce, and this prepared them
to review the lowly status of their merchants and seek
to rede¬ne the roles that these merchants could play in
China™s national development.
To trade 47


Today, Chinese businessmen are listed among the
world™s billionaire entrepreneurs. Many of the most suc-
cessful are socially respected and popularly admired.
They have greatly improved their access to power and are
even regularly consulted by political leaders both within
and outside their countries. It is hard to believe that,
not that long ago, merchants in China were despised
by those in power. For hundreds of years, they were
carefully controlled and denied entrance into the politi-
cal establishment. A remarkable change occurred during
the twentieth century. The entrepreneurial class has now
established a role in politics unthinkable at the beginning
of the millennium. Many have become essential to sys-
tems of power where they had once been subject to the
whims of rulers, courtiers and the literate elites. After
centuries spent struggling vainly for status, the merchants
began in the twentieth century to transform their rela-
tions with those in power. Many still start from humble
beginnings, but more are now better educated and have
received various kinds of formal training. They are in-
creasingly expected to play public roles, some of which
would prepare them to be partners in the power struc-
tures of the new millennium.
Why, then, did I start with ¬ghting and not with
trade? After all, the British and the Chinese traded for
at least two centuries before they went to war. Did the
British, with their East India Company, not have some-
thing to teach the Chinese decades before the end of the
eighteenth century? Were they not better traders from
at least that time? If the Chinese had learnt to trade like
them earlier, perhaps they would not have had to ¬ght.
The simple answer is that this was not how the Chinese
saw it before the second half of the nineteenth century.
48 Anglo-Chinese Encounters


It was not until late in that century that they began
to acknowledge that there was something about British
methods of trading that was worth learning. And even
till this day many have argued that the learning that had
to be done was not all one way. The Chinese experience
itself has much to offer the modern trading world.4
No one doubts today that where ¬ghting is con-
cerned, China has had to learn from the Anglo tradi-
tions and will have much more to learn, especially from
English-speaking Americans, for a long while to come.
But where trading was concerned, Chinese merchants
did not think that they were in any way backward, espe-
cially those hardy ones of the southern coasts who traded
overseas in Southeast Asia without of¬cial approval.
I mentioned that Chinese mandarins were impressed
that British merchants could produce so much wealth
through overseas enterprises. Insofar as these mandarins
saw that trade as the work of a dominant monopolistic
company like the East India Company, this conformed
to their view that all foreign trade was best conducted by
the rulers in a similar monopoly through their control-
lable merchants. For the Chinese merchants, the fact that
the English company had naval support was proof that
of¬cial endorsements made all the difference. What was
new for the Chinese court was the idea that these for-
eign rulers would ¬ght for their merchants so that they
could trade successfully. This was something inconceiv-
able to them.5 And Chinese historians to this day remain
sceptical of the idea that the British used force for the
opening of China merely for a free trade ideal in sup-
port of merchants and not because they wanted more
pro¬ts for their ruling classes by selling opium to the
Chinese.
To trade 49


The British have always insisted that the issue was the
protection of the new progressive ideas of open trading
rights. The history of the English East India Company
is a story of how the British sought to compete with its
European rivals, notably the impetus following the de-
feat of the Spanish armada and the success of the Dutch
against the Portuguese in India and the East Indies.
Trade supported by the state arose in response to political
conditions in Western Europe. The rise of the London
merchant in English politics led to the use of armed
trading vessels backed by the state. Although this may
have seemed, at the beginning, little more than sanc-
tioned piracy that enriched rulers and merchants alike,
the armed merchant ships were ultimately regulated in
order that they performed only defensive tasks. Thus, in
British eyes, their ships bringing goods to Chinese shores
were not evidence of a sudden exercise of naval power
but of a search for normal trading rights.6 If this forced
the Chinese rulers to do the necessary economic engi-
neering to preserve the livelihood of their merchants,
that was part of progress.
If we look at the way the Chinese entrepreneurs use
their extensive networks today, we would not say that
the British model of the global trading company has
anything to do with Chinese business ways. Indeed, the
roots of trading among the Chinese go back a long way.
At the heart of their learning experiences was the fact
that they were a despised class in the eyes of imperial
mandarins and had to make their way without any help
from the authorities. If anything, the tradition was that
their activities were permitted by the court only be-
cause some trade was necessary, but the court reserved
the right to restrain them whenever it decided that what
50 Anglo-Chinese Encounters


the merchants did was not helpful to the realm. In the
meantime, they could be exploited by the ruling elites
for defence, philanthropic and revenue purposes. This
was especially true of foreign trade, which the emperors
sought to control throughout the centuries.7 When trad-
ing with foreigners, the rulers assumed that they were
dealing with the agents of foreign rulers. Therefore, they
thought it natural that the court should determine the
limits of that trade in the interests of national security.
This had always been so along the land borders of the
empire where tribal kingdoms wanted more trade than
China was prepared to allow, and Chinese emperors de-
cided to ¬ght them and drive them away. This was no
less true of the coastal regions.
In other words, the Chinese court always understood
that foreign rulers wanted trade and, therefore, chose
to treat all merchant ships as trading on behalf of their
rulers. The matter, therefore, was one between rulers
and could be dealt with as one concerning ruler-to-ruler
relations. Each ruler was then placed in a hierarchy of
relationships in a tributary system the Chinese devised in
which the emperor placed himself at the top, above the
rest. The foreign rulers were allotted positions relative to
their location and distance from China, to their size and
wealth and to their importance to China™s diplomatic
and defence needs.8
Thus, to the Chinese rulers, the English East India
Company was no different from earlier traders, and its
agents were treated as representatives of the king of
England. The idea that they could trade directly with
private Chinese merchants was unacceptable. And, had
they been seen as mere representatives of a group of
merchants in London, their status would have been
To trade 51


even lower. Therefore, a group of Chinese merchants in
Canton, licensed as the gonghang or Cohong (which
meant that the group operated a court-devised trading
system), was assigned to deal with them under close
of¬cial supervision.9 When Lord Macartney was sent
as a representative of the king of England, the Chinese
assumed that he wanted the status of the trade raised so
that England™s rights under the tributary system could
be improved. Recent research has shown that the Qing
emperors were not anti-merchants and did have practical
ideas about raising revenues through domestic trade and
thus developing the national economy. But this was not
extended to trade with foreigners. What the Qianlong
emperor could not accept was that the system of foreign
trade should be changed to enable private merchants on
both sides to trade freely, with only customs of¬cials in
charge. He had dif¬culty understanding that these for-
eign rulers would protect the interests of traders as a
matter of policy, even of principle. And the hardest part
for the Chinese to believe was that a country would go
to war for trade, for the sake of merchants.10
It would be wrong to say that the Chinese did not
have a strong trading tradition at sea. But this trade was
carried on under extremely dif¬cult conditions. For the
Chinese and the British to trade freely, there had to
be more independent maritime activity on the part of
the Chinese. To appreciate the extent to which the
Chinese changed their attitudes towards foreign trade,
and to see the British contribution to that change, we
need to present a fuller picture here.
I have noted how maritime China was constrained
by the tributary system of a continental empire. The
system was based on the idea of concentric circles,
52 Anglo-Chinese Encounters


with the centre made up of the lands of the Son of
Heaven. Next in order of proximity were Chinese feu-
dal lords and princes, followed by minor chieftains on
the Chinese borders. These were followed by more dis-
tant rulers of kingdoms who wanted a relationship with
China and who were prepared to send tribute to the
emperor. When the Chinese reached the whole length
of the coasts from the Liaodong peninsula to the Gulf of
Tongking, they expanded the system to include rulers
who were prepared to send ships to open relations and
trade with China.11 Thus they used the one formula to
serve both land and sea relationships.
In practice, there were differences, the most impor-
tant of which was that it became accepted wisdom that
those who came by sea could occasionally create trouble
but were no real threats to the empire. The sea bor-
ders were easier to defend than the overland routes into
China, the foreign ships were small, the trading ¬‚eets
carried more goods and merchants than armed soldiers
or sailors, and these were not capable of endangering
the throne. In this system, maritime China was that seg-
ment of the imperial realm dedicated to naval defence,
diplomatic relations and merchant control. The people
concerned were mainly mandarins, military of¬cials and
select merchants as well as their foreign counterparts.
This maritime trade grew during the ¬rst millennium
and became important during the Song and Yuan dy-
nasties. By that time, the Chinese had a large and power-
ful navy and this enabled the Mongol Yuan to organise
world-conquering forays across Asian waters to Japan
(1274 and 1281), to the Indo-China coasts (1283“1287)
and then to Java (1292“1293).12 Although ultimately un-
successful, they encouraged many more Chinese to be
To trade 53


drawn into larger maritime enterprises. This was often
done together with those Muslim traders who had been
drawn to China by land and by sea because of the Pax
Mongolica that the Yuan emperors extended to all of
China. The climax of this development saw the ¬tting
out of the seven voyages of Admiral Zheng He during
the early half of the ¬fteenth century (1405“1433). The
expeditions made regular visits to key rulers in South-
east Asia and the southern coastal kingdoms of South
Asia. At least four of them reached the Red Sea port
cities of West Asia and the coast of East Africa. At their
strongest, the expeditions involved over 27,000 men in
62 large ships accompanied by hundreds of smaller ves-
sels. The impact of this spectacular display of naval power
was largely symbolic and political and was not directed
to enhancing Chinese trade in the region.13
What might have been a natural progression to more
maritime commitments did not happen. The voyages
were stopped in 1433. The founder of the Ming dynasty
had, in 1368, after recovering Han Chinese control from
the Mongols, restructured the tributary system to control
all foreign trade more tightly than ever before. Maritime
China thus became a segment of a carefully regulated
security system. In this context, the Zheng He expedi-
tions might not appear to accord with the new policy,
but they were of¬cial missions and there were no con-
cessions made to private overseas trade. By the end of
the Xuande reign (1424“1435), the policy laid down
by the founder of the Ming dynasty was clearly reaf-
¬rmed. During the next century, the coming of the Por-
tuguese and the Spanish and the activities of the Wako
(gangs of Japanese and Chinese pirates) along the whole
China coast did draw fresh imperial attention to coastal
54 Anglo-Chinese Encounters


defence. There was some relaxation of merchant control
after 1567 and this stimulated a burst of trading activ-
ities.14 What was signi¬cant, however, was that Ming
China maintained its tribute-centred maritime policy
and that the successor Qing rulers adopted the essentials
of a similar policy.
Qing of¬cials were more ¬‚exible towards foreign
traders, but there was no shift away from the forms of the
tributary system. Even after it became clear by the end of
the eighteenth century that the English East India Com-
pany had become the dominant trading power in the
region, the Qing mandarins recommended no change
to the trading structure. This position continued until
past the Treaty of Nanking of 1842. Even then, many
of¬cials continued to adopt a negative policy towards
foreign trade, but some had begun to recommend that
the Qing court adopt a more proactive policy. But the
rhetoric employed made it clear that maritime China
remained a small segment of a larger system of defence,
diplomacy and trade.
The people of the coastal provinces had been pushing
out seaward despite this inward-looking centripetal pol-
icy and were eager to trade with foreign merchants com-
ing by sea. They had built networks linking them to vari-
ous Muslim groups from the Indian Ocean, to Japanese,
Indians and some Southeast Asians. When the Dutch
and the English arrived, it coincided with a weakening
of central authority. The court in Beijing was distracted
by vicious political in¬ghting and widespread internal
rebellions. These were followed by the Manchu inva-
sion. It was not an easy time for of¬cials to retain con-
trol of an increasingly disorderly and boisterous coastal
China. Hence the rise of Zheng Zhilong (d. 1661) and
To trade 55


his son, Zheng Chenggong (Koxinga), and their many
rivals, and the intensi¬cation of Iberian-Dutch compe-
tition at Macau and then in Taiwan. Although Ming
of¬cials were alerted to such dangers to their traditional
policy, there was little they could do to curb the increas-
ingly violent activities along the whole length of their
coastal domains.
Undoubtedly, when the centre was weak, the periph-
ery thrived. For more than half a century, from the 1620s
to 1684, maritime China could be described as a re-
gion in ¬‚ames. The Zheng family built up their armed
trading ¬‚eet, one of the most powerful in the world
at the time and more than a match against the navies
of the Spanish and the Dutch far from their bases at
home. The Zheng naval forces were raiding freely along
the coasts and stimulating Chinese-led trade on a scale
never seen before. This was a chance for maritime China
to become a major player in Asian history. From foreign
records, like those of the Japanese, the Dutch and the
Spanish, it looked like the beginnings of a new era for
the maritime peoples of China.15 But this was not to
be. The major difference was that the Chinese armed
merchants were themselves a serious danger to Chinese
imperial authority, and the rulers, whether Han Chinese
or Manchu, were determined to destroy them. In addi-
tion to ¬ghting their European rivals, the Zheng forces
had to defend themselves against the triumphant Qing
forces after 1644. The Qing court eventually defeated
the Zheng regime in Taiwan and brought the region
¬rmly under central control. There was thus a complete
restoration of a continental normalcy. But neither main-
land Fujian Chinese, nor those who survived in Taiwan
and those who went there in the following centuries,
56 Anglo-Chinese Encounters


were to forget that they once had a naval tradition that
served them well both in war and commerce.
What of the century from 1750 to 1850, the ¬rst half
of which saw the Qing empire at the peak of its power
while the second saw it weaken rapidly? Conventionally,
the rebellions of the 1800s could be interpreted as mani-
festations of downturn in the dynastic cycle. But this was
also a time when foreign trade continued to grow. For
example, the bulk seaborne trade in rice was ¬‚ourishing,
the ¬‚uctuations in the price of overseas silver were nor-
mal, there was steady growth in transactions using the
of¬cial Canton trading system at the expense of Macau,
and the peopling by Chinese of Taiwan and Southeast
Asian ports continued apace.16
The English East India Company (EIC) and the
country traders whom it spawned had become domi-
nant groups on the China coast. The country traders, in
particular, had learnt to deal with the growing number
of their Chinese counterparts, what Hao Yen-p™ing calls
the “shopmen”, the “outside merchants” who oper-
ated successfully outside the Cohong system.17 Like their
countrymen from the provinces of Fujian and Guang-
dong who ranged widely across the ocean to Japan, the
Philippines, Thailand and the Malay Archipelago, these
coastal traders had shaken off some of the traditional
of¬cial constraints to seek out interlocking relation-
ships with the foreign traders who needed their services.
Unlike in Southeast Asia, however, there were no higher
European authorities on the China coast that could in-
terfere with their commerce. The Chinese merchants,
therefore, had superior bargaining power for several
decades prior to the outbreak of the Opium War. In
the course of these years of cooperation, various kinds
To trade 57


of Anglo-Chinese partnerships were formed, and the
partners found much to learn from each other™s trading
ways. Acting together, each partnership competed with
the EIC and Cohong merchants and others like them-
selves to expand their ventures along the coast. Wher-
ever possible, the country traders could also count on
their “shopmen” links to reach some of the markets in
the interior of China. After the end of the East India
Company™s monopoly in 1833, an even greater variety
of such creative partnerships was established. These prof-
itable experiences laid foundations for the “commercial
revolution” that was to create a new kind of Chinese
merchant class on the China coast. These were men
who understood their Western counterparts, notably the
British and the Americans, and who were not afraid
of the ¬erce competitions that now became the norm.
Beyond the reach of the mandarins in Beijing and the
provincial capitals, they were ready to take full advan-
tage of the new opportunities created by the war of
1840“1842, and the even more extensive ones offered
by the enforced peace of the 1860s.18
The mandarin-dominated system that controlled
commerce ineffectively at the various ports took little
note of the beginnings of the radical change taking
place among the private traders. That system continued
to shackle the Cohong merchants. Malpractices between
them and the mandarins in charge ensured that pro¬ts
were uncertain and that new initiatives were discour-
aged. Neither the Canton authorities nor the EIC mer-
chants were satis¬ed with the conditions. When the
EIC lost its monopoly and ever more foreign traders
sought Chinese partners outside the system, the govern-
ment became obsessed with trade de¬cits and the moral
58 Anglo-Chinese Encounters


rami¬cations of the opium trade. There was little new
thinking about what to do; the emperor and his of¬-
cials thought only of reasserting full control. Clearly, the
breakdown of authority had bred ever more greed. As a
result, southern China became poorer and more disor-
derly, the Canton merchants were continually in debt,
and the imperial and provincial customs of¬ces were
more threatened by corruption than ever. For many,
change was necessary and inevitable.19
Among the Chinese actually living abroad, the com-
munities in Java and the nearby islands were recovering
from the Batavia massacre of 1743. They had adapted
themselves to local conditions with courage and imagi-
nation, notably in West Borneo, in the Riau-Johore em-
pire, in Semarang and Central Java, and even in Melaka
on the Malay Peninsula. In Manila, the Chinese who
survived a brief period of British occupation were at the
mercy of the Spanish once more.20 Nevertheless, the
Chinese records of this period show that these commu-
nities were keenly aware of their positions outside the
emperor™s reach, they were weaned from old habits of
self-restraint, and this enabled them to extend the net-
working that became a major source of their trading
strength.
Two other developments point to even more impor-
tant changes. Firstly, the role that the Chinese played in
the new Siamese power restored at Thonburi-Bangkok
and, secondly, the free trade doctrines that accompa-
nied British advances on the Malay Peninsula, at Penang
and later at Singapore. They provided the framework
for the two dominant patterns of Chinese settlement in
Southeast Asia. The ¬rst advanced the Chinese role in
a new Thai polity, the transition of maritime Chinese
To trade 59


to become Southeast Asian urban and rural settlers, and
their evolution into strong merchant groups who main-
tained special relations with China. The second pattern,
of free trade in Penang and Singapore, saw the estab-
lishment of new kinds of bases for maritime Chinese
commerce. These two ports provided the ¬rst chance
the Chinese had ever had to become majority groups in
territories outside the Chinese empire™s jurisdiction.21
In 1800, no one could have foreseen the era of wars
that was to bring imperial China down later in the nine-
teenth century. But, among those Chinese who were
living outside the empire, they were aware that a new
age was dawning. Also, increasing numbers of southern
coast Chinese understood that, when they could not re-
alise their ambitions on Chinese soil itself, they could
bring their dreams with them overseas. Here the British
contribution was clear. Trading with the Chinese after
the 1840s in ports from Shanghai and Tianjin down to
Singapore and Penang, whether under their jurisdiction
or not, gave the British considerable leverage in the de-
velopments to come.
It may seem, from the above account, that the key
initiatives for action had come from the foreigners trad-
ing in China. But we should note how the Chinese
middlemen and their junks achieved a central position
amongst the foreign traders. They had found new strate-
gies that enabled them to deal with the rapid changes.
They became con¬dent of their importance to the
Europeans when they found the measure of the Dutch
and British merchant administrators. Locally based
Chinese merchants had mastered some Western prac-
tices and their laws. They had worked out the subtleties
between partnership and collaboration, and made their
60 Anglo-Chinese Encounters


newly acquired knowledge the foundations of the trad-
ing ties they needed for dealing with their home ports in
China.22 The half-century before the British opening of
the Treaty Ports in 1842 may be described as the golden
age of “sojourner networking”. During this period, the
Chinese gained an autonomous place under Dutch and
British commercial and naval hegemony. In maritime
Southeast Asia, far from their emperor™s control, these
¬‚oating maritime Chinese had several decades to pre-
pare themselves for the changes to come. They were
ready for the spectacular decade of the 1850s, when the
massive exodus of Chinese occurred, not only across the
South China Sea, but also across the Paci¬c Ocean.
By the time the Treaty Ports were opened to interna-
tional trade, no one doubted that the British were better
¬ghters. But few Chinese would agree that they were
better traders. They would continue to think that the
British navy gave their merchants unfair advantages. This
was a lesson that the Japanese were quick to learn as their
ruling elites wasted little time and trained naval forces to
support their capitalist ventures. The Qing government,
however, in its last days, and the Republic during its
¬rst decades, talked much about adopting the models of
modern enterprises. The models they had in mind were
exempli¬ed by British companies set up in Shanghai,
cross-linked with those in Hong Kong, Singapore or
the ports of India and, ultimately, to the city of London.
Men like Li Hongzhang (1823“1901), Sheng Xuanhuai
(1844“1916) and Zhang Jian (1853“1926) began to
build government-backed companies. The China Mer-
chants™ Steam Navigation Company and the Kiangnan
Arsenal provided early models. Many others were started
in the coal and iron, cotton and textiles, shipping and
To trade 61


transport industries. These evolved into a variety of
mandarin-merchant cooperative ventures, but these new
organisations never overcame some basic limitations.23
They represented an of¬cial Chinese response to the
idea of large joint-stock companies, but the experiments
were always top down and never went much beyond the
direct supervision of merchants.
What also became clear to Chinese entrepreneurs was
that, when China became obviously weaker, they be-
came less able to do business with Western agency houses
on equal terms. By the early 1880s, trading conditions
for the Chinese worsened. After China™s defeat by the
French in 1884, and even more so after the defeat by
the Japanese in 1894“1895, merchants with industrial
and ¬nancial ambitions found that Western ¬rms en-
joyed unfair advantages guaranteed by the Treaty Ports
and by their of¬cial connections with a powerful inter-
national system. This led the Chinese to be increasingly
aware that a supportive state was necessary to enable
them to compete at all. Once the mandarins themselves
realised this as well, the seeds of economic nationalism
were sown. This went hand-in-hand with the national-
ist awakening that accompanied the debates about trade
as an extension of war, about competitive trading as an-
other kind of ¬ghting, and how this new kind of mer-
cantile war (shangzhan) should be fought.
For the Chinese private traders themselves, this re-
mained largely talk and debate. The kind of support
they might have hoped for never materialised. There
was little legal protection for joint-stock companies, and
¬nancing methods through modern banks were slow
to develop. The dif¬culty in ensuring that local capi-
tal be channelled to Chinese businesses became greater.
62 Anglo-Chinese Encounters


In addition, the lack of trust beyond strong kinship sys-
tems meant that the new bourgeoisie could not move
away from their traditional family businesses even if they
were convinced that they should to be truly compet-
itive against foreign competition. In order to survive,
they increased the range of their business networks and,
as methods of transport and communication improved,
they further re¬ned and strengthened these through en-
larging their circles of clan or native-place connections.
In short, the Chinese did have something to learn
from the great British companies. The lessons came in
three stages. First, the country needed to see trade as es-
sential to national interest and, therefore, worth defend-
ing and ¬ghting for. This was understood by the second
decade of the twentieth century when of¬cial encour-
agement was given to the large number of modern busi-
nesses established throughout China. Second, new kinds
of institutions were needed to ¬nance and manage com-
plex organisations and ensure their pro¬tability, espe-
cially those that could not depend on traditional kinship
systems. Progress here was desultory and, until the 1930s,
there were still loud calls for the Chinese merchant class
to emulate British and other modern business structures.
But clearly these calls went largely unheeded.
Third, more of¬cials and merchants appreciated the
new sciences of business economics derived from British
and Japanese practices. Many more had worked in for-
eign companies and some had studied in American busi-
ness schools both in China and in the US. They were
fully aware of what was needed for them to compete
at the highest levels of capitalist enterprise. Of¬cials and
merchants as “bourgeois nationalists” spoke of their will-
ingness to cooperate, if not work in tandem, in the
To trade 63


interests of both country and enterprises. But the con-
ditions were extraordinarily dif¬cult. On the one hand,
foreign enterprises had a head start and remained better
organised. On the other, a radical new generation of na-
tionalists was both impatient for dramatic improvements
in the country™s wealth and power and distrustful of the
idea that private pro¬t may be a public good. As ideal-
istic patriots, they often suspected the merchant classes
of collaborating with foreign agencies to pro¬t them-
selves and prevent the economy from prospering for the
bene¬t of the Chinese people.24
Nevertheless, the modernisation of a new Chinese
merchant class was unmistakable. It had begun in Hong
Kong where it found its voice in the writings of Wang
Tao (1828“1897) when he brought his ideas with him
to Shanghai. Others who had settled in Hong Kong
added their voices to what amounted to a call for a
patriotic bourgeoisie. This approach was further devel-
oped by a class of compradores who also moved from
the Hong Kong periphery to the emergent economic
centre of Shanghai.25 The rise of the compradore cap-
italists brought focus to the question as to how much
they had learned from the British merchant houses they
worked for.
They were aware that there must be new kinds of
of¬cially supported enterprises that would be qualita-
tively different from the decrepit system that had failed in
Canton. But, as they were themselves aware, the compo-
nent parts of political power and economic risk-taking
remained similar. Mandarins would emulate British
politicians whom they perceived to have worked closely
with successful men who made their fortunes from trade.
Given the disadvantageous conditions in China under
64 Anglo-Chinese Encounters


the unequal treaties, the mandarins would go further
to supervise active entrepreneurs directly. They offered
protection for these risk-takers so that the entrepreneurs
could compete successfully with the foreign capitalists.
In some cases, retired mandarins became key members
of the enterprises they had helped to form. While they
did not themselves become entrepreneurs, they began
to recognise the advantages in educating their family
members to enter the world of business. This was a
sharp departure from Chinese tradition, in which the
mandarin-scholars were respected but were expected to
despise trade.
There were many-faceted responses to the British
challenge in the China ports, and in Hong Kong and
Malaya (that is, the Malay Peninsula, including Singa-
pore). Here were the trading families on the periphery
of China who mastered modern ideas of production and
marketing. There were two classic examples. The ¬rst,
the Oei Tiong Ham companies of the Dutch East Indies
followed European multinational examples, and spread
themselves into British territories as well. The second
were the Zhongshan Cantonese from Sydney who es-
tablished the Sincere and Wing On department stores in
Hong Kong and Shanghai.26 They created enterprises
that became models of modern business. Others adapted
quickly to the transport trade, notably venturing into
the cargo shipping business in Australia and Malaya, and
learning to compete with larger British companies in the
region. The shipping operations grew in strength with
wider competitive experiences. They were, together
with other industrial enterprises, specially dynamic in
Shanghai to which were attracted the most enterpris-
ing people from neighbouring provinces, if not from all
To trade 65


over the country as well. As they made rapid progress
from the late 1920s, they were confronted within the
country by civil war and then the Japanese invasion,
and externally by the ravages of the Great Depression.
When the war ended in 1945, and the victors looked
forward to a period of post-war recovery and prosper-
ity, the entrepreneurs in China had little time to recover
before the Communists won their decisive victory and
began to implement their plans for the nationalisation
of all industries. Those who managed to re-locate to
Hong Kong were fortunate and had fresh opportunities
to start again. They took advantage of the legal freedoms
and remarkable opportunities created by the Cold War,
and started their new success stories and are continuing
to this day.27
There were other areas of success. Old-style pri-
vate banks in Shanghai, Hong Kong and Malaya trans-
formed themselves into modern ¬nancial organisations.
Although these companies were never able to domi-
nate the ¬nancial markets, they grew quickly and were
valuable for providing capital for small and medium-
sized enterprises. In this way, they created intermediate
Chinese informal networks that paralleled the larger
ones of the British and ¬lled important niches in re-
gional commerce. These laid the foundations for what
came to be seen later as the historical core of “Chinese
capitalism”. How these networks supplemented the
framework of Anglo-American multinationals is being
studied today.28
Why the adjective “Chinese” to qualify the capital-
ism that emerged after the 1960s? Many scholars see it
as rent-seeking and Yoshihara Kunio has linked it to the
“ersatz capitalism” he has found in his notable study of
66 Anglo-Chinese Encounters


Southeast Asia.29 It was recognisably capitalist insofar as
the protagonists institutionalised the use of capital for
pro¬table ends. But what were the qualities that dis-
tinguished this from the capitalism seen as originating
in nineteenth-century London? First, the Chinese who
sought to be industrialists had no secure legal or ¬nancial
base on which to build their industries for the long haul.
Where rent-seeking was possible, even readily available,
it was understandable why most of them were tempted
to take the easy way out.
Secondly, there was, and still is, among Chinese a
predisposition to individual and hands-on risk-taking
on behalf of the family, usually with the full backing
of the family. It followed, therefore, that there was al-
ways the obligation to meet family expectations and not
to trust people outside. This, in turn, discouraged the
entrepreneurs from building formal systems of manage-
ment. The owners invariably valued leadership ¬‚exibil-
ity and responsibility over managerial ef¬ciency. Many of
their companies have become public ones, but even these
are still controlled by the family. As a result, there were
de¬nite limits to the size of the ¬rm. Traditionally, the
solution was to support the initiative of kinsmen to reach
out and help create a network of related enterprises.
When necessary, the networks were extended to link up
with those more distantly connected. In this way, most
businesses remained family-owned and only minimally
adapted themselves to take advantage of the British laws
and regulatory practices available to them.
The adaptability of these small ¬rms and the speed of
their responses to new opportunities have been much
commented on.30 Their methods remained viable in
the midst of revolutionary changes, whether in China
To trade 67


or in the region, and, in more recent decades, even in
global business. They still form the backbone of the
SMEs (small and medium-sized enterprises) that the
Chinese overseas networks have made so formidable.
Their success has been due to the narrow de¬nition
of trading that Chinese businessmen have been content
with, one that could not support large industrial or-
ganisations and was, therefore, not competitive against
publicly ¬nanced multinationals. But their network re-
sponse helped them to escape the fate of similar family
businesses in Britain and they are agile and reinventable,
as are modern American SMEs. Today, we are inclined
to believe that such adaptable approaches may be well
suited for creative entrepreneurship in the new economy
of the twenty-¬rst century.
This brings me back to the American connection.
The British had laid the foundations in eastern Asia for
an increasingly aggressive challenge by American enter-
prises in the twentieth century. Here the indirect in¬‚u-
ences have been particularly fruitful through American
educational institutions. While the Chinese admired the
cultural values and intellectual content of British and
continental universities, the business classes found the
American social science and business school offerings
more directly useful to them. The large numbers of
private missionary colleges in the United States welcom-
ing students from China was a signi¬cant factor in their
popularity. At a time when it was already becoming clear
among most Chinese that the English language was win-
ning out as the language of business, this access to tertiary
business training was widely appreciated.31 It promised
to create an Anglicised class of Chinese functionaries to
serve the China coast communities, but it also inspired
68 Anglo-Chinese Encounters


among them the desire and con¬dence to compete with
the established British ¬rms that dominated the region.
Here, too, the Chinese learnt a mixed set of lessons
from the Anglo-American experience. It may appear
that the main lesson is that free enterprise is best. Among
some of the Chinese overseas, notably those in North
America and Australasia, that may well have been so. But
the more memorable lessons of the past two centuries are
all linked to issues pertaining to political power. When
the use of such power was benign, as it was for British
business in the Treaty Ports and the colonies, trading
was predictable. Risks were more easily calculated,
errors could be legally recti¬ed, and unwelcome com-
petition discouraged. Chinese entrepreneurs, too, could
enjoy the bene¬ts of a supportive of¬cialdom. Two ex-
amples, those of Tan Kah Kee (Chen Jiageng) and Li
Ka-shing (Li Jiacheng), demonstrate the importance of
such symbiotic relationships. They also highlight some
of the changes that have occurred between the ¬rst and
second half of the twentieth century in Anglo-Chinese
business relations outside China.
Tan Kah Kee (1874“1961) was a great believer in
modern education and is famous for being the ¬rst
Chinese to found a private modern university in China “
this was Xiamen University. His son-in-law, Lee Kong
Chian (Li Guangqian, 1894“1967), continued in his
footsteps in supporting education and his grandson, Lee
Seng Tee (Li Chengzhi), has carried on the family tra-
dition as a benefactor of many institutions in Britain
and the United States, including Wolfson College in
Cambridge. Tan Kah Kee was spectacularly successful in
the plantation business in Malaya. When he started his
rubber business at the turn of the century, he received
To trade 69


British appreciation and encouragement. The industry
was new and world demand could not be met without
bursts of energy that men like Tan Kah Kee could pro-
vide. But when restriction schemes were imposed on
rubber production in the 1920s in the face of surplus
supplies, the Chinese felt they were being discriminated
against in favour of British rubber estates. Furthermore,
Tan Kah Kee had ventured into industrial production
and was seen as directly challenging manufacturing in-
terests in Britain. His business eventually failed. His fail-
ure was particularly unfortunate.32 Although he and his
supporters resented the “imperial preference” philos-
ophy that they saw as colonial protectionism, the dis-
criminatory practices were accepted and even shrugged
off. Modern capitalism, it was concluded, was bound
to national interests, and this was comparable to tra-
ditional policies where political power and in¬‚uence
played a powerful role in business. Until the day when
Chinese controlled their own politics, trading was a form
of learning, and adapting to, new political forces.
For Li Ka-shing, the story was different, although
he, too, made a spectacular fortune and founded Shan-
tou University in his home city, Shantou or Swatow,
in eastern Guangdong province. He was, in the 1980s,
one of the several far-sighted entrepreneurs in Hong
Kong. In the eyes of the Chinese, the British were no
longer in control of Hong Kong™s future by that time.
A sign of how things had changed was when Li Ka-
shing took over in 1984 the well-established company of
Hutchison, one of the most venerable of British hongs.
Big players in China were growing in in¬‚uence, espe-
cially following the economic reforms of Deng Xiaoping
(1904“1997). Although China was itself a supplicant for
70 Anglo-Chinese Encounters


foreign skills and investments, its growing presence in the
colony was unmistakable. Also, the geopolitics of Sino-
American and Sino-Japanese relations had marginalised
British interests. With only managerial responsibility and
not political dominance, Britain was only one side of
a triangular if not quadrilateral power equation. And
the Chinese entrepreneurs knew what they had to do
to adjust to the changes. For all the praise for genuine
capitalist freedom by Milton Friedman and his follow-
ers, Hong Kong adjusted to the new power relation-
ships. Businessmen like Li Ka-shing understood how
much those forces had shifted. The multiple possibili-
ties across national borders were matched with the new
political alignments. This was not only because Britain
was a smaller player, although that was relevant, but
also because Sino-American political entanglements, in-
cluding those of the Guomindang and Taiwan in Hong
Kong, began to affect major business transactions. It is
in this context that Li Ka-shing and others could launch
their forays into well-established British businesses in the
colony.33
But Li Ka-shing™s activities were only exceptional in
limited ways. Although his companies are publicly listed,
he remains the dynamic hands-on leader concerned for
his family empire. Like most entrepreneurs in Hong
Kong, the mainstay of his business has been real es-
tate. This is trading in a recognisably traditional form.
Chinese con¬dence and skills in property businesses de-
rive from their agrarian respect for land, and records
dating back at least two millennia show what their con-
cerns have focused on. These skills have spread to every
continent where the Chinese have gone. All other busi-
nesses were always safer when founded on the bedrock
To trade 71


of land ownership. It is remarkable how strongly this
principle has been adhered to down the ages and how
much it remains one of the pillars of Chinese risk-taking
advances. It puts in context the narrow sense of trading
that the Chinese have been comfortable with. This may
have inhibited them from venturing into the large-scale
enterprises that the Anglo-American industrialists and
¬nanciers have pioneered, but may still be relevant for
the kick-off stage of the new economy that favours dy-
namic and versatile approaches.
It is in this context that the Chinese have never be-
lieved that the British are better than they are in trad-
ing. Fighting, yes, for a century or so, but not trading,
except that they did learn from the British how much
better the British traders fared when they had a sup-
portive government and superior ¬ghting technology
behind them. Now those within China are looking out-
side for the technology and the macroeconomic prin-
ciples that could make China more prosperous quickly.
The Chinese overseas, especially those who do business
in the East and Southeast Asian region, seem more am-
bivalent. Both locally and in their trading relations with
China, they recognise the advantages of global trends
in cross-border business ties, but they also know that
political power remains vital in economic activities.
The state-supervised enterprises in China today may
not be able to compete with strong overseas networks,
whether Chinese or not. There is a pendulum that
swings between excessive public control and too much
private sector freedom. For example, the Guomindang
businesses that dominated Taiwan for three decades re-
laxed their controls but did not succumb to pressures
for a liberal market system. Although the Guomindang
72 Anglo-Chinese Encounters


candidate lost the presidential elections in March 2000,
the ties between business and politics still remain close
and strong. For the Chinese trading in Southeast Asia,
the actual relationships between their business and the
local civilian and military bureaucracies vary greatly
between Malaysia and Singapore and their immedi-
ate neighbours, but the connections have never been
stronger. Many would see the government-linked com-
panies of Singapore as the latest manifestation of what
may still be the most successful formula for state partici-
pation.34 As for Malaysia, the Chinese businessmen, like
those in Indonesia, have learnt to weave in and out of the
new circles drawn together into the National Alliance
(Barisan Nasional). The United Malay National Organ-
isation (UMNO), the country™s leading Malay party, has
held power since the establishment of the Federation of
Malaya in 1948 and controls this Alliance. The Chinese
entrepreneurs have had ample time to locate themselves
pro¬tably in relation to that political body and all its
associated parties.35
I shall not speculate as to how Chinese trading net-
works will evolve as global markets play a bigger part
in national economies. The Chinese have been con-
¬rmed in their belief that trading can never be a non-
political activity. They have seen how the United States
Congress voted every year on their trading relations and
what political deals have had to be made to get out of the
vicious circle that narrow national interest can produce.
They will continue to think that each economy will not
be free from local power structures, and these in turn
are constrained if not determined by elements in history
and culture. Modern economic development may mod-
ify those structures somewhat, but fundamental changes
To trade 73


will need more revolutionary methods and the gener-
ations of Chinese today will not be keen to see such
revolutions for a long time.
This is not to say that the trading Chinese are too con-
servative to change. Events in China during the twen-
tieth century have demonstrated that the Chinese can
endure and survive the most radical of changes when
they have no choice. I certainly do not think that they
are waiting for the Anglo-American global in¬‚uence
to retreat so that they can return to their traditional
ways. Chinese entrepreneurs, with their deep respect for
power concerns, would expect those Anglo pressures on
China and the Chinese to continue as long as the United
States remains as powerful as it now is. They know these
pressures will engender more changes, not only to China
itself but also to the Anglo-Chinese relationship.
Though the Chinese believe that they are as good
at trading as the British, they will probably acknowl-
edge that British organisations, managerial skills and
legal practices have been very helpful as models for
them to reengineer better enterprises for the twenty-¬rst
century. They will not go back to the old Canton system
of state trading, nor will they be content with a mod-
ernised form of the English East India Company. But
they might well, on top of the well-tried use of informal
networks by the Chinese overseas, build not one but
many similar East India companies to meet their ex-
panded multiple needs. The current models would also
have Japanese and Korean elements that have proven to
be successful. The new “Chinese capitalism” may always
be a contradiction in terms, but the special mix of public
and private in the Chinese trading economy is likely to
emerge as a variant of Anglo-American capitalism. The
74 Anglo-Chinese Encounters


trading British did not set out to teach the Chinese their
business. Those who thought they had more than trade
to offer were to follow later. Their efforts “to convert”
were to meet with unexpected responses, and that will
be the subject of the next chapter.
4 “To convert”
The Chinese fought better on land than at sea but they
traded well wherever they went. Losing repeatedly to
foreigners in all their wars in the nineteenth century was
a traumatic experience from which China has yet to re-
cover fully. Learning to trade ef¬ciently in a capitalist sys-
tem was easier, but the political partners whom Chinese
merchants have had both inside and outside the country
were dif¬cult to please. When we come to the words,
“to convert”, however, the picture is different again.
Meeting with a powerful and persistent alien religion
was an experience the Chinese had not had for a very
long time. When Buddhism captured their imagination
nearly 2,000 years ago, it brought a spiritual rhetoric
that ¬lled their lives and, by enriching the Chinese lan-
guage as well, stimulated their minds and earned their
admiration. Digesting that body of texts and their wealth
of ideas for the next millennium seemed to have satis-
¬ed most Chinese until recent times.1 They themselves
remained without an indigenous tradition of religious
conversion. Chinese elites felt a duty to bring their civil-
isation to non-Han minorities from time to time, but the
idea of converting others to a Chinese religion was not
something they readily understood. It is interesting to
note that China, apart from some pantheistic beliefs, did
76 Anglo-Chinese Encounters


not develop a religion of its own. This is unusual for a
continuous historic civilisation. Most Chinese seemed
content to combine imported Buddhism with indige-
nous practices until Confucianism was formalised into
an imperial philosophy to regulate civic lives. For them,
the most permanent consequence of the “Buddhist con-
quest”, besides the religion itself, was its impact on the
Chinese language and art and, consequently, the people™s
thought patterns. That impact provided a useful indica-
tion of the complex process of conversion, and it is one
of the themes that I shall pursue in this chapter.
When Arthur Waley used the word “convert”, he
was primarily thinking of the generations of mission-
aries who had left home to devote themselves to the
Christianisation of the Chinese. One immediately thinks
of pioneers like Robert Morrison (1782“1834), who
went to Malacca early in the nineteenth century and
waited there for the opening of China. His early con-
verts there, and in Hong Kong, helped bring Christian
tracts to Hong Xiuquan (1813“1864), self-proclaimed
brother of Jesus Christ and the founder of the Taiping
Heavenly Kingdom. But the violent consequences of
that rebellion did little to enhance the status of the reli-
gion in Chinese eyes, least of all among the mandarins
and the local literati families who suffered most from that
murderous sweep across half the empire. Although later
missionaries did distance themselves from that unfortu-
nate start with Hong Xiuquan, their task was thereafter
uphill all the way. They met with suspicion almost every-
where. Some of them, as well as their converts, were at-
tacked or killed by local Chinese and, almost invariably,
such attacks and killings were followed by armed retri-
bution by British and French troops. And those, in turn,
To convert 77


were followed by increased hostility towards all efforts at
preaching and conversion.2
It was not surprising that, eventually, actual prose-
lytising was subordinated to a service approach through
building and staf¬ng hospitals and schools. Even these
were not always welcome. A few exceptional mission-
ary scholars writing in English did make a small impres-
sion among the elites. For example, someone like James
Legge (1814“1897), who translated the Chinese classics,
and Young J. Allen (1836“1907), who established news-
papers like Wanguo gongbao (Chinese Globe Magazine,
1868“1883, and A Review of the Times, 1889“1907) in
Shanghai. Others were men like John Fryer (1839“1928)
and W. A. P. Martin (1827“1916), who worked at the

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