In 1856, a Chinese junk flying a British flag sparked an international incident. The junk was named the Arrow, and it had been used as a pirate ship before being registered as a commercial vessel in Hong Kong. Though it was nominally British, and it was captained by an Irishman named Thomas Kennedy, the junk was owned by Chinese interests and all of its 14 crew members were Chinese. As far as the Chinese government was concerned, that made it Chinese, Union Jack and British captain notwithstanding.
So when the Arrow docked at the port of Canton — now known as Guangzhou — on October 8, it was seized by Chinese marines. As Kennedy watched from a nearby vessel, they lowered the British flag and arrested the Arrow’s crew. When word reached Harry Parkes, the British consul general in Canton, he immediately petitioned Ye Mingchen, imperial commissioner and viceroy of Guangdong and Guangxi provinces (collectively known as Liangguang), demanding the release of the crew and an apology for insulting the flag. Ye released nine of the crew members but dug in his heels on the other demands. Two weeks later, Britain and China were at war.
That conflict was known as the Second Opium War, and its victory by Britain and France — which joined the fight to secure its own commercial interests in southern China — bolstered Western economic dominance over China and accelerated the long decline of the Qing Dynasty (1644–1911). And it all had to do with an essential part of Hong Kong’s raison d’être: river trade.
Guangzhou is more than 2,000 years old, and its success as a city lies in its position at the nexus of an impressive river network that stretches as far inland as Nanning, Guangxi, more than 500 kilometres to the west. (You can trace the flow of goods and people along the river by looking at the reach of the Cantonese language, which was historically spoken in Nanning, but not in the isolated mountainous region just east of Guangzhou.) And if Guangzhou was the heart of this river trade, Hong Kong served as the arms it needed to reach around the world.
Much of that reach had to do with evading taxes. That has been a consistent factor throughout Hong Kong’s long maritime history, from the days when it was a bastion of salt smugglers to the early years of the 19th century, when Lintin Island, just off the coast of Tuen Mun (and now known as Linding Island, administered by Shenzhen) was a hotbed of piracy. “Opium was openly exchanged for silver, which was in turn used to purchase tea,” explains historian Paul Arthur Van Dyke in a 2010 article for the Journal of the Royal Asiatic Society Hong Kong Branch. Lintin became a convenient stopover for any ship looking to avoid the high taxes at Whampoa, the port run by Chinese authorities in Guangzhou.
Hong Kong thrived after it became a British colony in 1842 by replicating and replacing this smuggling network. “The most important influence of Hong Kong to those nearby trade networks was the taxation arrangement,” says Tam Ka-chai, an associate professor of history at Baptist University. After winning the First Opium War, Britain not only gained control of Hong Kong Island, it also won extraterritoriality, making its subjects exempt from Chinese taxes. This applied to anyone whose business was registered in the colony. Many Chinese merchants from Guangzhou relocated or sent delegates to Hong Kong so they could enjoy the benefits of being British subjects. To do this, they had to look the part, cutting their queues (the Manchu hairstyle mandated by Qing rulers) and dressing in European-style clothes, which led American historian John King Fairbank to quip, “the best smugglers were native Chinese in Western garb.”
This meant that much of the supposedly foreign trade being conducted in China was actually domestic Chinese trade – the 19th century equivalent of establishing your company’s headquarters in a tax haven like the Cayman Islands. The tax they were most keen to avoid paying was known as the likin (lei4 gam1 釐金), which was imposed on all Chinese nationals in 1854, initially to pay for the cost of suppressing the Taiping Rebellion (which raged from 1850 to 1864) before being made permanent.
By flying foreign flags, “Chinese junks sailing from Hong Kong became ‘British,’ ‘French,’ ‘American’ or ‘German’ vessels which were exempt from the levying of likin tax and the harassment of the low-ranking likin station officials,” writes Henry Sze Hang Choi in The Remarkable Hybrid Maritime World of Hong Kong and the West River Region in the Late Qing Period, a monograph that explores the intricacies of this river trade system.
Although the late 19th century was the golden age of steamships, traditional Chinese junks had the advantage of being able to access a vast number of waterways throughout the river system because of their relative lightness and agility. They collected raw goods from various river ports — like rice, silk or tea — and delivered manufactured goods like fabric or kerosene. (Those imports dominated the trade; even rice was imported from abroad when harvests were bad or the rivers flooded.) Choi notes that in the late Qing period there were 6,437 kilometres of waterways in China accessible to steamers, compared to 43,452 that could only be navigated by junks and other Chinese vessels.
“Even with the competition from the railways since the 1880s, Chinese junks still enjoyed advantages in inland river trade, because they could access a diverse network of waterways, and could embark and disembark cargoes easily, while the Chinese train service did not always run according to the time schedule,” he writes. “Therefore, despite Chinese junks being slow compared with steamships and railways, they always reached inland water destinations first and were cheaper on freight rates.”
Choi quotes a British rear-admiral named C.C.P. FitzGerald who praised them as “the handiest vessels in the world,” and he devotes several pages of his book to outlining the 30 different varieties of junks that sailed on the Pearl River and its tributaries. (The Arrow was a lorcha, a type of hybrid junk that combined Chinese sails with a European-style hull.) “A thousand years of Chinese junk technology, and the enormous Chinese maritime population, enabled native craft to retain a relative advantage over foreign vessels in the inland river trade of the Canton and the West Rivers in the 19th century,” he writes.
In 1906, nautical expert H. Warington Smyth made the same observation with more colour in his book Mast and Sail in Europe and Asia. He described Chinese as “the Dutchmen of the East” thanks to “a curious and distinctive love of bluff lines, of bright varnish, of deck houses, and of pole masts with long vanes above the truck. Both had an enormous percentage of their water populations directly interested in water transport and trained in the handling of sailing craft. Both know better than their neighbours the value of leeboards.”
Junks registered in Hong Kong didn’t just fly British flags; they often flew those of other countries, like Norway or Germany, in order to evade British taxes as well as Chinese. All of this was quite contentious, and after negotiations between China and Britain, it led to the Mackay Treaty of 1902, which began to dismantle the privilege of extraterritoriality for foreign vessels. With the opening of the Kowloon-Canton Railway in 1910, river trade began a slow decline, compounded by political instability and conflict after the 1911 revolution that overthrew the Qing Dynasty. In 1949, when the Communist Party took power, the border between Hong Kong and China was sealed.
Today, although most goods travel between Hong Kong and China by road, the river trade still exists. In fact, it accounted for 32 percent of the 192,104 tonnes of cargo that passed through Hong Kong’s port in 2022. There’s even a dedicated port facility, the River Trade Terminal, which opened in 1998 in Tuen Mun specifically to handle goods passing between Hong Kong and points upriver. It’s a far cry from the absolutely crucial role the river trade played more than a century ago, but each barge setting sail for the Pearl River is a reminder of what made Hong Kong such a strategic port in the first place.
Correction: An earlier version of this story misattributed Henry Sze Hang Choi’s surname. It is Choi, not Sze. We apologise for the error.