The author is an Instructor of History and a Research Fellow of the Center for East Asian Studies, Harvard University. This paper is based on a broader study, first begun as a doctoral dissertation at Harvard.

Besides contemporary newspapers, the English-language sources used include the manuscript papers of two Western firms in China: Russell & Co. (Baker Library, Harvard Business School) and Jardine, Matheson & Co. (University Library, Cambridge, England). I wish to thank Professor F. E. Hyde of the University of Liverpool for information about the British firm of Butterfield & Swire, and my good friend Professor E. K. Haviland of the Johns Hopkins University for invaluable technical advice about steamships in Chinese waters. Among Chinese sources the following are of crucial importance: Chiao-t'ung shih: Hang-cheng pien^a [History of Communications: Shipping], compiled by a committee jointly sponsored by the Ministries of Communications and Railways (Nanking, 1931); Ch'ung-ting Chiang-su-sheng hai-yun ch'üan-an, hsin-pien^b [Complete Records of the Sea Transport of Kiangsu Tribute Rice, revised version, new edition] (ca. 1881); Hsü Jun, Hsü Yü-chai tzu-hsü nien-p'u^c [Autobiographical Chronicle] (postface dated 1927); Li Hung-chang, Li Wen-chung kung ch'üan-chi^d [Complete Papers] (Shanghai, 1921). For this, as for several other topics on nineteenth-century Chinese history, Li Hung-chang's “letters to friends and colleagues” (under the heading of p'eng-liao han-kao^e in his complete papers) are documents of the highest value.

¹ At the time the Bureau for Inviting Merchants to Operate Steamships was created, Li Hung-chang defined its administrative arrangement as follows: “The government shall control the general plan and examine its merits and demerits, while the merchant directors shall be allowed to set up their own regulations and make the merchants submit to control with pleasure.” Li Hung-chang, Li Wen-chung kung ch'üan-chi, I-shu han-kao [Correspondence with Tsungli Yamen], 1.40. For the first ten years of China Merchants history, the company was managed by Tong King-sing and other “merchant directors” (shang-tung). Tong was described by Li as “merchant chief” (shang-tsung), although he was also given the official title of “chief commissioner” (tsung-pan)^l. Chu Ch'i-ang^m and Sheng Hsuan-huaiⁿ, both of official background, were among those appointed by Li as “associate commissioners” (hui-pan)^o. For the reorganization of China Merchants administration in 1885, see below, note 15.

² Li Hung-chang, Li Wen-chung-kung ch'üan-chi, Peng-liao han-kao, 18.27b.

³ Tonnage given in this paper is in every case a net tonnage.

⁴ Cheng Kuan-ying, Sheng-shih wei-yen^p [Warnings to a Seemingly Prosperous Age], 1900 edition, 5.33–34.

⁵ On this guild, sec especially Hsü Jun, Hsü Yü-chai tsu-hsü nien-p'u, 16b-17.

⁶ Under this system, the managers of the branch offices were essentially commission agents. The arrangement was apparently similar to that adopted by foreign companies for their agencies at the various ports. However, in 1879 China Merchants' also introduced a system suggestive of the tax-farming methods of traditional China. In order to ensure the profitable working of the company's warehouses, each branch manager was made accountable for a fixed annual sum, to represent the profits of the company's godowns in his port; the branch manager was allowed to pocket whatever rents he collected above the allocated sum. Later, when Sheng Hsuan-huai was manager of the company (1885–1902, 1907–16), this system was extended to the profits of the steamships themselves.

⁷ After 1885, the rate paid for the shipment of tribute rice fell to around Tls. 0.4 per picul.

⁸ Cheng, Sheng-shih wei-yen, 5.34.

⁹ Up to 1884, the company's financial year began on the first day of the seventh moon (Chinese lunar calendar) and ended on the thirtieth day of the sixth moon of the following year. In 1886 the financial year was adjusted to begin on the first day of the first moon and end on the thirtieth day of the twelfth moon. For the purposes of this paper, mention of a year in the company's accounts indicates the financial year, which includes the spring season of the corresponding year in the Western calendar—the spring being the season when the tribute rice was carried. Thus, “1877” indicates the financial year between August 19, 1876, and August 8, 1877; and “1886” the financial year between February 4, 1886, and February 23, 1887.

¹⁰ In both 1877 and 1878 the value of the company's assets was written up (by the amount of Tls. 190,700 in 1877, and Tls. 47,000 in 1878), although there was no corresponding increase in ships and properties. It was the opinion of foreign experts who studied the published accounts at the time that the capital accounts had been doctored to enable the working account to show a profit. Presumably, this was done by adding some expenses to the value of the fleet, and having them covered on the “liabilities” side by an increase under “due creditors.”

¹¹ The figures for gross receipts (including receipts from shipping, storage and all sources) are taken from a report of Sheng Hsuan-huai to the Imperial Government; those for “net profits before deducting interests and depreciation” are derived from the profit and loss accounts published by the company annually.

¹² The foreign steamship companies in China operated under what is known as the “managing agency system.” Thus, the China Coast Steam Navigation Company and the Indo-China Steam Navigation Company were managed by Jardine, Matheson & Co., and the China Navigation Company by Butterfield & Swire. The firm serving as managing agency obtained immediate profits in the form of commissions (normally 5 per cent upon gross receipts annually) and auxiliary business such as supplying coal and handling insurance. However, it is significant that the managing firm was able to identify its interest with the long-term future of the joint stock subsidiary.

¹³ Although the Indo-China Company's main field of operations was in Chinese waters, it also had a Hongkong-Calcutta service. In the 1880's two ships were regularly employed on this route.

¹⁴ Hsü Jun, 34–36.

¹⁵ In 1885, Li Hung-chang appointed Sheng Hsuan-huai as head of China Merchants', with the title of “director general” (tu-pan) ^r. The new regulations provided for the “complete authority [of the director general] over the disposition of personnel and the management of finances.” Chiao-t'ung shih: Hang-cheng pien, 1.156. The post of “merchant chief” was abolished. “Merchant directors” were now mere employees of the Bureau. Sheng had always been an official and never considered himself a merchant. But he soon became China Merchants' largest stockholder and continued to describe the Bureau's administrative arrangement as “government supervision and merchant operation.” “Merchant operation” plainly meant no more than the retention of a modified, perhaps meaningless, joint-stock form.

¹⁶ The company's payments toward the retirement of government loans were in all cases made from the funds earned for the tribute-rice transport. This in effect served to neutralize the subsidy received by the company through its monopoly of the tribute-rice transport.

¹⁷ The gap of 1884–85 is explained by the fact that the company's fleet was temporarily “sold” to the American firm of Russell & Co. in August 1884, because of the threat of the Sino-French war. The fleet was operated by Russell & Co. under the American flag between August 1884 and July 1885, and was returned to the Chinese company at the latter date.

¹⁸ The company's practice was to insure its own ships. But although there was an “insurance account” in the company's books, funds in the account were not always sufficient to finance the replacement of ships lost in accidents. After 1879 the company's accounting system also allowed for the depreciation of the fleet. But the allowance was not always adequate, and, moreover, there was no effort to devote the corresponding sums entirely to the purchase of new ships.