Canton System - A Complement to the Old China Trade
The Canton System (1760-1842) served as a means for China to control trade with the west within its own country. Seen from the European view, it was a complement to the Old China Trade.
Despite Chinese efforts to keep European traders and citizens within the area of Macau, European trade spread throughout China and threatened to virtually take over the country through the practice of Sphere of Influence imperialism. The Canton System limited the ports in which European traders could do business in China. It also forbade any direct trading between European merchants and Chinese civilians. Instead, the Europeans, generally employees of major trading companies (most importantly the English East India Company) had to trade with an association of Chinese merchants known as the Cohong. The European (soon to include American) presence was restricted to the Thirteen Factories on the harbour of Canton (Guangzhou) during the trading season, but the foreign traders were permitted to remain on Chinese soil at Macau in the off-season (a mitigation of earlier Chinese restrictions on trade, which had banned foreign residence in the off-season).
The first trade that existed with China was for silks, porcelain ("fine china") and most lucratively tea. It was the incredible financial deficit caused by the European demand for tea that spurred the British to begin importing opium (grown in its colonies in India) - the only commodity besides silver bullion that the Chinese merchants would accept in bulk.
Despite Britain's growing apprehension with the Canton System, the selling of opium appeased British resentment for the system, and it remained intact until the Opium Wars, which established "treaty ports" in accordance with the Treaty of Nanjing, which were ruled not by Chinese laws but rather the laws of the specific country that controlled each port.
By the time Hong Kong became a full-fledged British Colony, many of the merchants would be led by a newer generation of western hong merchants. Many of these companies would become the back bone of the young Hong Kong economy.