October 4, 2023

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History of Tea in Hong Kong – Tea, Opium and the Balance of Trade

Even the most casual visitor to Hong Kong cannot help but notice what a uniquely vibrant Asian city it is. Hong Kong is exciting, different, exotic and welcoming – all rolled into one. It is basically Chinese (the majority of the residents are Cantonese) but most people speak English and almost all are engaged in some form of commerce.

For most visitors, Hong Kong is a place of beauty and excitement and wonder from the time they arrive until the time they leave.

Hong Kong consists of three parts: Victoria Island and surrounding islands, Kowloon, located on the tip of the peninsula leading up to mainland China and the rest of the peninsula known as the New Territories. Between Victoria Island and Kowloon was a world class harbor that placed Hong Kong on the map as an entry point into China.

The main beverage of choice is tea in one form or another and all meals are usually accompanied by pots of steaming hot black, green or pu-erh tea. Hong Kong has over 13,000 restaurants and tea is the main beverage in almost every one of them.

Tea is more than a beverage in Hong Kong – it is a way of life ingrained in the very essence of the culture. But it must be noted that Hong Kong is not a producer of tea, nor is it merely a consumer of fine Chinese tea.

Hong Kong however, played one of the most important roles in the introduction of Chinese tea to the west in general and Britain in particular, but this role was won at a very high price.

Chinese Tea, Hong Kong and the British Empire

During the 17th century Dutch and Portuguese traders introduced Chinese tea to the European mainland and British traders soon followed this trend.

Tea imports grew slowly in Britain because of high taxes on what was considered a luxury item and monopolistic trading practices of a small number of importers like the John and East India companies. Tea was so popular and demand was so high, however that smuggling and adulteration of tea supplies became rampant.

Eventually, enlightened tax policies and opening of the channels of distribution occurred, smuggling evaporated and all classes of the English population increased the demand for tea, Supplies increased dramatically and tea drinking has been part of English culture until present day.

In the 19th century, China was the main supplier to the British and by 1830 annual imports of Chinese tea into Britain amounted to 30 million pounds of tea or an average of 2 pounds of tea for every citizen.

In addition to its place in British society as the most popular beverage, tea was critical to British wealth because of the tax revenues it generated and the wealth provide to powerful British merchant companies.

British Trade

By the middle of the 19th century Britain was considered the premier mercantile empire and British manufactured goods were sold and traded throughout the world. As a leader in the Industrial Revolution, Britain produced high quality consumer goods that served as trading items through outposts strategically located throughout the world.

Many of these outposts were established and supplied by the quite formidable British army and navy in what would become the key element of British Imperialism.

Because of the imbalance of trade caused by the ever increasing level of tea imports, Britain was anxious to expand trade with China to equalize trade and solve its balance of trade deficit. China was seen by most trade experts as the world’s largest untapped market.

Cultural Differences, the Demand for Bullion and the Opium Wars

While Britain was anxious to trade using its supply of manufactured goods, China was not. Based upon a differing cultural view whereby merchants and traders were viewed as part of a lower caste and with distrust. Foreign traders were particularly suspect. These traders were restricted in what goods they could sell and where they could sell them. High duties were imposed by China and traders were extremely limited in their business activities.

Add to this fact that China was basically a closed society and the result was a Chinese demand that tea sales required payment in silver bullion rather than trade goods. Since Britain did not have enough silver to meet the demands, a conflict arose. To overcome this problem, Britain devised an aggressive strategy that included the importation of opium and eventually outright warfare.

In an attempt to reverse the trade balance, the British imported increasing amounts of opium into China. Opium, a highly addictive drug produced in the Bengal region of India, was controlled by Britain as a result of the British annexation of Bengal in 1757.

As more and more Chinese became addicts, the balance of trade reversed. To pay for the rising volume of opium imports, silver started flowing out of China into British coffers. Britain was still at risk however, because trade was still conducted in mainland China under the control of the Chinese Emperor and bureaucracy.

In the late 1830s, to curb the damage caused by opium on the Chinese population, Chinese officials confiscated and destroyed thousands of chests of opium stored in the English merchants’ warehouses in Canton China. Because of these events on the mainland, Britain required an offshore base of operations under British control and Hong Kong, then a sleepy fishing village whose main export was salt, was an ideal candidate.

Under the directives put forth by Queen Victoria, Britain sent a naval expeditionary squadron to China. This action resulted in the first Opium War (1839-42), which China, faced with overwhelming military force and troops reinforced from India, lost.

The Treaty of Nanking, which ended the war, forced the Chinese to open five ports to foreign commerce, abolish the cohong (state trading monopoly system that restricted imports), sharply limit the amount of customs duty they could charge, pay an indemnity of 21 million silver dollars, cede the island of Hong Kong to Great Britain and grant not only Great Britain, but also its allies, extraterritoriality, which made Westerners immune to Chinese law.

As a result of the First Opium War, Britain not only opened trade with China, but established a base of operations in Hong Kong that would remain until the island was returned to China in 1997.

These terms affected the common people adversely. Unemployment increased substantially, particularly in Canton where tea trading was a major business. Smaller, locally owned industries, unable to compete against the imported factory-manufactured piece goods, declined, depriving many peasant households of an important source of supplementary income. Taxes soared as the government tried to raise sufficient funds to pay the indemnity. And as opium continued to pour into the country, the number of addicts multiplied. Millions of lives were affected and often ruined.

As the British foothold on Victoria Island and Kowloon was consolidated, the British sought to expand their advantageous position and fought the Second Opium War in 1856. Given the overwhelming technological advantage of the British the Chinese were defeated and were forced to accept a humiliating peace.

By the terms of the Treaty of Tientsin (1858) the Chinese opened new ports to trading and allowed foreigners with passports to travel in the interior. The remainder of the Hong Kong peninsula (the New Territories) was ceded to Britain and Christian’s gained the right to spread their faith and hold property, thus opening up another means of western penetration. The United States and Russia gained the same privileges in separate treaties.

Notwithstanding the dislocation and tragedy on the mainland, Hong Kong grew and prospered in a capitalistic world. China continued to suffer under various war lords and revolution and remained a third world country until recently. Hong Kong however became a world center for trade and finance and its citizens prospered. Hong Kong remained under British rule until 1997 when it was returned as part of mainland China.

Hong Kong’s prosperity continues until present day but it got its start with the import and export of tea.