Sunday, December 15, 2013

How Opium Merchants Used Bankers, and Vice Versa

American Merchants and the China Opium
Trade, 1800-1840

Jacques M. Downs

American merchants influenced the increase in opium importations of the 1830's. The great opium merchants, Jardine, Matheson and Company, sent out a circular in 1831 announcing, "It is generally in our power to remit funds to England on more advantageous terms than can be effected in Bombay."

Thus, an American merchant would take out a bill on a London bank permitting him to draw, say 20,000 pounds sterling, payable six months from sight. He would sell the bill to smugglers at Canton (e.g., Jardine, Matheson) for the silver which the latter had acquired from their opium sales. Of course, the bill trade was good for everyone. It freed the Americans from the onerous necessity of a long cruising voyage to amass sufficient specie to finance a China cargo; it released the opium smuggler from burdensome problems of exporting large quantities of valuable metal; and it gave Indian nabobs a convenient method of sending home their fortunes. Since India suffered from a chronically unfavorable balance of trade with England, the American bill trade proved a real boon. Moreover, the bills paid interest. Briefly, opium was balancing East-West trade through the American commerce in London bills.

Thereafter, the opium trade could not be extirpated without seriously damaging world commerce. In fact, there is reason to believe that the bill trade actually stimulated Indian opium exports.
"Bombay merchants annually sent vast amounts, usually in the shape of Malwa opium to Canton for the sake of a favorable remittance to England."[fn]
In this fashion, even the most bitterly anti-opium merchants unwittingly contributed to the growth of the commerce they so strongly detested.

[fn] Michael Greenberg, British Trade and Opening of China, (Cambridge, 1951),164. See also Joseph Archer to G. and S. Higginson, October 21, 1833, Joseph Archer Letterbook, Historical Society of Pennsylvania, Philadelphia.

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