The Trade Imbalance and the Opium Solution
In the eighteenth century, China occupied an enviable position in global commerce. European demand for Chinese porcelain, silk, and tea was enormous, but China had little interest in European goods. The resulting trade deficit drained silver from European treasuries at an alarming rate, creating what economists call the "silver problem." The British East India Company (EIC), which held a monopoly on British trade with China, was desperate for a commodity that Chinese consumers would buy.
The solution was opium. Following the conquest of Bengal in 1757, the EIC moved aggressively to control Indian opium production. In 1773, Governor-General Warren Hastings assumed the Company's monopoly over all Bengal opium, farming out cultivation to private contractors under strict regulation. The area under poppy cultivation expanded dramatically: from approximately 36,400 hectares in 1830 to over 71,200 hectares, and by 1900 nearly 500,000 acres were devoted to opium production across British India. By the 1840s, opium had become the second largest source of revenue for the colonial government, surpassed only by land taxes.
Because the Chinese imperial government had prohibited the sale and smoking of opium (the Yongzheng Emperor first banned the substance in 1729), the EIC could not sell directly. Instead, it auctioned opium to private merchants -- known as "country traders" -- who smuggled it into China through networks of corrupt Chinese officials and coastal middlemen. By the 1820s, China was importing 900 tons of Bengali opium annually. By 1838, an estimated four to twelve million Chinese had become addicted.
