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Published online by Cambridge University Press: 24 July 2012
Having solved the initial problems of raising capital for its steamship venture on the Yangtze (Business History Review, June, 1954), the Boston trading firm of Russell & Co. then faced operational difficulties of a formidable nature. Fluctuating local trade, recurrent scarcity of working capital, and the presence of an outnumbering fleet of competing vessels provided a severe test of the resident-partner system of administration. Russell & Co.'s Far Eastern affiliate rode out the lean years, profited handsomely in the fat years that followed, and then liquidated its investment. This account of the Yangtze steamship venture further illuminates the methods and policies of American commission houses in the nineteenth-century China trade and has implications of interest to modern managers of foreign investments.
1 See Liu, Kwang-Ching, “Financing a Steam-Navigation Company in China, 1861–62,” Business History Review, XXVIII (June, 1954), 154–81CrossRefGoogle Scholar. I am deeply grateful to Mr. F. Murray Forbes for the privilege of reading the family collection of the papers of the late Mr. Frank Blackwell Forbes.
2 Forbes, Robert B., Personal Reminiscences, 2d ed. rev. (Boston, 1882), p. 366Google Scholar.
3 A major steam-navigation interest in the Chinese waters in the 1860's was the British transoceanic enterprise, the Peninsular and Oriental Steam Navigation Company. Since the 1840's the P. & O. had entered the local carrying trade in China by running extra steamers without mail contract between Hong Kong, Shanghai, and the intermediate ports. In 1864, the P. & O. scheduled three departures a month from Shanghai, one of which regularly called at Swatow. By 1869, P. & O. departures from Shanghai increased to four each month. (Cable, Boyd, A Hundred Years History of the P. & O., 1837–1937 [London, 1937]Google Scholar, chap. 16; North-China Herald, Shanghai, hereafter NCH, 1864 and 1869, shipping intelligence tables.) In the 1860's, the senior British firm in China, Jardine, Matheson & Co., still concentrated its steamers on the route between Calcutta, Singapore, and Hong Kong. In 1864, Jardine's operated two steamers on the Yangtze and a small boat between Shanghai and Ningpo; but its two sea steamers made no more than eight trips between Shanghai and Hong Kong. In 1867, Jardine's attempt to set up a regular Shanghai-Hong Kong line lasted only a few months. After 1868, the firm employed one to two steamers in the North China and the Foochow lines; but it was not until 1872–73, when it organized the China Coast Steam Navigation Company with a capital of Tls. 325,000, that Jardine's took up the steam carrying business in China seriously. (Michie, Alexander, The Englishman in China During the Victorian Era [London, 1900], I, 216–17Google Scholar; NCH, 22 Oct. 1874, pp. 399–400.)
4 NCH, 1864. The Fire Dart and Kiangse were diverted to the Shanghai-Ningpo route in the latter half of 1864; the Fire Cracker and Chekiang were lost in accidents during the year. The figures shown in this table are for gross tonnage, except in the case of the Fusiyama and the Express, where the type of measurement is not identified. The tonnage of the Rona is according to British measurement. That of the remaining steamers is U. S. registered tonnage (old measure) and is official, except in the case of the Fire Queen. Cf. the shipping lists in NCH, which give sometimes net and sometimes gross tonnages, the latter according to various rules of measurement. Except for the two steamers of Jardine, Matheson & Co., all the boats in our table are American-built; the Fusiyama and the Kiangloong were planked in China, but their skeletons and machinery were American. I am very grateful to Professor E. K. Haviland of Johns Hopkins University, author of an article on American steamboats in China soon to be published, for sharing with me the results of his authoritative research.
5 Russell & Co., in the role of agents, actually managed and controlled the S. S. N. Co.; see the discussion in Liu, op. cit., 175–79. The officers of the ownership organization (S. S. N. Co.), 1862–66 were as follows. (Italics indicate members of Russell & Co.)
6 All the statistical data in this article concerning the Shanghai Steam Navigation Company, unless otherwise indicated, are taken from the reports of the S. S. N. Co.'s Board of Directors (Widener Library).
7 “Report of the Board of Directors for the General Meeting of the S. S. N. Co.” (hereafter “Report”), 10 Feb. and 7 Aug. 1863; NCH, 9 Jan. 1864, supplement.
8 U. S. Congress, House Miscellaneous Documents, 45th Cong., 2d Sess., No. 31 (Washington, D. C., 1878), part 2, pp. 219–20 and 867Google Scholar; “Report,” 10 Feb. 1863; George Farley Heard to Albert Farley Heard, 5 May 1863, Heard Collection (Baker Library, hereafter HC), HM-19; Warren Delano, Jr., to Paul Sieman Forbes, 19 Aug. 1864 and George Tyson to P. S. Forbes, 19 June 1865, Forbes Collection (Baker Library, hereafter FC).
9 NCH, 16 March 1869, 134.
10 NCH, 12 July 1862, 110.
11 The principal items of trade on the Yangtze River, as indicated in the imports and exports of Hankow in the year 1865, were (in the order of their value) as follows: imports — woolen goods, cotton piece goods, opium, copper cash, silk piece goods, sugar, seaweed, pepper, and cuttlefish; exports — tea, wood oil, tobacco, vegetable tallow, raw silk, hemp, beeswax, paper, timber, and cotton. Passenger traffic was of relatively small significance to the Yangtze steamers in this period. The total number of steamer passengers arriving and leaving Hankow in 1865 — not counting those who paid their fare on board — was given as follows: arriving Hankow, 6,692; leaving Hankow, 5,551. (Imperial Maritime Customs, Reports on Trade at the Treaty Ports, 1865 [Shanghai, 1866], pp. 40, 99, and 105.Google Scholar)
12 The following statistics were taken from Reports on Trade, 1864 (Shanghai, 1865)Google Scholar and ibid., 1865:
Since only vessels under a foreign flag are under the purview of the Inspectorate General of Customs, these figures do not take account of Chinese vessels not under a foreign flag. However, because native shipping on the Yangtze had been harassed by the Taiping rebels, who occupied Nanking between 1853 and 1864, many Chinese owners of junks and lorchas operated under the protection of foreign registry. (See ibid., 1864, Hankow, 8; ibid., 1865, 40–41.) The following are available statistics on the relative proportion of sail and steam — sail consisting of junks and lorchas under foreign flags as well as a few Western sailing ships which cleared directly from Hankow to England. (Imperial Maritime Customs, Statistics of Trade at the Port of Hankow, 1863–1872 [Shanghai, 1873], p. 5.Google Scholar)
13 Imperial Maritime Customs, Reports on Trade, 1864, Hankow, 11.
14 C. D. Williams to A. F. Heard, 24 June 1863, HC, HM-52.
15 A. F. Heard to John Heard, 3rd, and Augustine Heard, Jr., 24 Nov. 1863, HC, FM-4.
16 Ibid., 18 Jan. 1864, HC, FM-4.
17 Ibid., 7 Dec. 1863, HC, FM-4.
18 H. G. Bridges to George B. Dixwell, 15 Oct. 1863, HC, EM-13.
19 A table showing the net profits of the various accounts of the S. S. N. Co., 1863–66, is given in the Appendix.
20 “Report,” 18 Jan. 1864, states: “It [the machine shop] has proved to be much more extensive than was anticipated by the Agents [Russell & Co.], and consequently more costly, but the machinery having arrived and the building completed before this became apparent to them, it has been impossible to keep the original intention.”
21 The figure Tls. 41,793 already took account of the earnings of the Chekiang while being chartered by the U. S. government at home before it came to China. According to Albert Heard's information, the total amount of the bill brought by P. S. Forbes was Tls. 80,000. “The bill of Tls. 80,000 was brought by Forbes & has taken the unsuspecting shareholders completely by surprise.” (A. F. Heard to J. Heard and A. Heard, Jr., 18 Jan. 1864, HC, FM-5.)
22 A. F. Heard to E. F. Parker, 6 Jan. 1864, HC, HL-23.
23 Tyson came from a shipping family of New Bedford, Mass. He was clerk of Russell & Co. in China, 1851–54, and partner after 1855. On his later career as a railroad administrator in the United States, see Cochran, Thomas C., Railroad Leaders, 1845–1890 (Cambridge, Mass., 1953), p. 473Google Scholar. F. B. Forbes was the son of the Rev. John Murray Forbes, dean of General Theological Seminary, New York. He went to China in 1857 as secretary to the United States envoy, William B. Reed, and was persuaded by his uncle, P. S. Forbes, to remain with Russell & Co., taking charge of its business at Tientsin at the age of 22. In 1862, in Shanghai, he served as director of the S. S. N. Co. and was admitted partner of Russell & Co. in 1863. (Various references in FC.)
24 A. F. Heard to J. Heard and A. Heard, Jr., 3 Sept. 1864, HC, FM-5.
25 Ibid., 7 Jan. 1864, HC, FM-5; Tyson to P. S. Forbes, 20 July 1864, FC.
26 G. B. Dixwell to A. F. Heard, 22 May 1864, HC, HM-30. Dixwell himself considered reducing the Kiangloong's passenger fare. He wrote in the same letter: “How would it do to run her here merely as a passenger boat — putting the passage money down to 7, 6, 5, or 4 taels and aiming to carry hosts of the great unwashed? doing for the passenger traffic what Dent & Co. are doing for cargo — id est — ruining everybody?”
You will see that the company has been making money in spite of low freights and competition: the company is now entirely free from debt & is steadily tho very moderately making money. We can't expect anything better than this — close careful watching over expenses & over earnings are absolutely necessary to keep the business on the profit side of the account & we must hold on with this for better times.
27 A. F. Heard to J. Heard and A. Heard, Jr., 18 Jan. 1864, HC, FM-5; “Report,” 10 Aug. 1864.
28 A. F. Heard to J. Heard and A. Heard, Jr., 15 Sept. 1864, HC, FM-5.
29 Dixwell's diary, 12 and 13 Dec. 1864; Dixwell to A. F. Heard, 19 Dec. 1865, HC, HM-30; Imperial Maritime Customs, Reports on Trade, 1864, Hankow, 11.
30 Tyson to P. S. Forbes, 24 March 1865, FC.
31 F. B. Forbes to W. M. Clarke, 11 July 1868, F. B. Forbes's Letter Books (family collection, hereafter FBFLB).
32 Tyson to P. S. Forbes, 24 March 1865, FC.
33 F. B. Forbes to E. Cunningham, 31 May 1866, FBFLB.
34 Tyson to P. S. Forbes, 20 July 1864, FC.
35 “Report,” 22 March 1865.
36 The trade and tonnage figures of Hankow, 1865–66, are as follows (Imperial Maritime Customs, Statistics of Trade at Hankow, 1863–1872, 5–6):
However, the tonnage for sail declined further in 1865 — as the Commissioner of Customs at Hankow put it — “owing to the average rate of freight by steamers having been very moderate.” (Imperial Maritime Customs, Reports on Trade, 1865, 40–41.) The Commissioner cited the following statistics of sail tonnage in 1864–65:
37 Tyson to P. S. Forbes, 24 March 1865, FC.
38 “Report,” 23 Feb. 1866.
39 It is known, for instance, that in July, 1864, the Shanghai house of Russell & Co. borrowed a sum of Tls. 25,000 at 1 per cent a month. (Tyson to P. S. Forbes, 20 July 1864, FC.)
40 Tyson to P. S. Forbes, 19 June 1865, FC. It seems that in the month following the date of this letter, Tyson did make some remittance to P. S. Forbes in New York to meet part of the cost of two new steamers — the Oriflamme and the Plymouth Rock — both of them largely P. S. Forbes' personal ventures, built to be sold in China or Japan. On 19 July 1865, Tyson wrote Forbes: “The advance on the Oriflamme for your share in her & the unexpectedly heavy remittance we have been obliged to make for the Plymouth Rock have taxed all our energies and compelled us to use our credit & borrow money besides. We must clear ourselves from this position first of all. I have not to borrow money here but they have been compelled to do so in Hong Kong.” (FC.)
41 Dixwell to A. F. Heard, 19 June 1865, HC, HM-30.
42 “Minutes of a General Meeting of the S. S. N. Co.,” 3 Oct. 1864; 23 Feb. 1866; 18 Feb. 1867; “Report,” 23 Feb. 1866.
43 The value of the S. S. N. Co.'s shares (Tls. 1,000 at par) is known to have fallen to Tls. 750 in November, 1863, and Tls. 600 in January, 1864. (A. F. Heard to J. Heard and A. Heard, Jr., 24 Nov. 1863 and 18 Jan. 1864, HC, FM-5.) In November, 1865, the current value of the stock in Shanghai was about Tls. 500, but buyers had increased. On 30 November, Henry Roundy wrote Albert Heard: “They [Russell & Co.] are doing so well that the S. S. N. Co.'s shares are going up, and some of my Chinese acquaintances who tried very hard to get something like a price for their shares last year (at this date) will not sell now at less than 500. Gibb, Livingstons bought recently quite a number of shares from Chinese and others.” (HC, HM-58.)
44 F. B. Forbes to P. S. Forbes, 8 Nov. 1866, FBFLB.
45 Henry Hughes Warden to P. S. Forbes, 15 March 1871, FC.
46 “Report,” 23 Feb. 1866.
47 F. B. Forbes to Cunningham, 31 May 1866, FBFLB.
48 Dixwell to A. F. Heard, 2 Dec. 1865, HC, HM-30; A. F. Heard to J. Heard and A. Heard, Jr., 9 Apr. 1866, HC, FM-6.
49 “Report,” 18 Feb. 1867. The Plymouth Rock figure is for gross tonnage, and is based on American Lloyd's for 1864.
50 F. B. Forbes to Cunningham, 31 May 1866, FBFLB. The figures for the Glengyle and the Tunsin are gross tonnages based on British Lloyd's. The grosstonnage figure given for the Tahwah awaits confirmation; the figure given for the Hirado is for net tonnage and is the only reliable one known. For the other boats listed here, see above, note 4.
51 Russell & Co., Shanghai, to P. S. Forbes, 6 June 1866, FC.
52 See below, note 62.
53 Cp. Lubbock, Basil, The Opium Clippers (Boston, 1933), pp. 371–73Google Scholar.
54 A. F. Heard to J. Heard and A. Heard, Jr., 10 July 1866, HC, FM-6; see also Dixwell to A. F. Heard, 29 Nov. 1865, ft., HC, HM-30.
55 F. B. Forbes to Cunningham, 11 July 1866, FBFLB.
56 F. B. Forbes to Cunningham, 23 Nov. 1866, FBFLB; cp. Allen, G. C. and Donnithorne, Audrey G., Western Enterprise in Far Eastern Economic Development (London, 1954), p. 35Google Scholar.
57 A. F. Heard to P. L. Everett, 14 Jan. 1867, HC, HL-43.
58 Tyson to P. S. Forbes, 22 June 1866, FC. Referring to his firm's steamnavigation business, James Whittall of Jardine, Matheson & Co. told George Heard in February, 1867, that “he can't cultivate the Chinese as R. & Co. & AH & Co. do!!!” (G. F. Heard to J. Heard and A. Heard, Jr., postscript, HC, FM-9.)
59 Fairbank, John King, Trade and Diplomacy on the China Coast (Cambridge, Mass., 1953Google Scholar), passim. The idea of a combination of the steamer operations of Dent's, Heard's, and Jardine's was first suggested by Henry Roundy of Beverly, Mass., a member of the Heard firm. He wrote Albert Heard on 30 Nov. 1865: “If James Whittall [head of Jardine's in China] and John Dent [head of Dent's in China] favor a proper combination of three houses, or a joint stock company, 'we can defy the world' as the Captain of the Dorchester Militia said.” (HC, HM-58.)
60 Dixwell to A. F. Heard, 2 Dec. 1865, HC, HM-30.
61 A. F. Heard to J. Heard and A. Heard, Jr., 22 June 1866, HC, FM-6.
62 P. S. Forbes to Tyson, 4 March 1866 (copy), FC.
63 F. B. Forbes to Cunningham, 16 Oct. 1866, FBFLB.
64 The S. S. N. Co.'s reserves (Insurance and Depreciation Fund) stood at Tls. 12,532 on 31 December 1865; the net profit of the six months ending 30 June 1866, was 23,753.
65 Tyson to P. S. Forbes, 22 June 1866, FC.
66 “Report,” 18 Feb. 1867.
67 F. B. Forbes to Cunningham, 3 Feb. 1867.
68 F. B. Forbes to Cunningham, 23 Nov. 1866, FBFLB.
69 “Report,” 18 Feb. 1867; A. F. Heard to P. L. Everett, 14 Jan. 1867, HC, HL-43. “Dent & Co.'s boats came into Whittall's hands by way of security for advances made to D. & Co. & W[hittall] proposed the purchase to R. & Co., who accepted his terms after a few days discussion.” (A. F. Heard to J. Heard and A. Heard, Jr., 27 Jan. 1867, HC, HL-43.)
70 “Report,” 18 Feb. 1867.
71 F. B. Forbes to Cunningham, 3 Feb. 1867, FBFLB.
72 Report,” 18 Feb. 1867; A. Heard & Co. to Russell & Co., Hong Kong, 13 Feb. 1867, HC, EL-6. Heard & Co. also bound itself not to return to the Yangtze steam field for 10 years.
73 “Minutes of an Extraordinary Meeting of Shareholders,” 23 Feb. 1867; F. B. Forbes to Cunningham, 15 Oct. 1867, FBFLB.
74 The U. S. N. Co. was formed around July, 1867, operating the Tunsin and Rona, the latter purchased from Jardine's. A copy of the freight-rate agreement between the S. S. N. Co. and the U. S. N. Co. on 17 Sept. 1868 can be found in Russell & Co. Canton Papers (Baker Library).
75 Lindsay, W. S., History of Merchant Shipping and Ancient Commerce (London, 1883), IV, 434–37Google Scholar; NCH, 25 Jan. 1872, 60; Imperial Maritime Customs, Report on Trade, 1875 (Shanghai, 1877), 102Google Scholar.
76 George F. Seward to Hamilton Fish, 30 Jan. 1877, Foreign Relations of the U.S., 1877 (Washington, D. C., 1877), pp. 88–91; “Report,” 23 March 1877.
77 F. B. Forbes to William Howell Forbes, 24 Feb. 1868. In 1867, shipping cotton up the Yangtze alone brought the enterprise a gross earning of some Tls. 240,000. (“Report,” 21 Feb. 1868.)
78 In 1871, the S. S. N. Co. issued an extra scrip dividend of a total of Tls. 375,000, which was converted to stock in 1872, making the total of the company's stock Tls. 2,250,000. Except for conversion of dividends into stock, the S. S. N. Co. never made another issue of stock after 1867. (“Report,” various years.)
