The World Economy by the OECD Development Centre
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The trading world of china, japan and the philippines

Trading conditions were very different in Asia east of the Malacca straits. Establishment of trading relations with China and Japan was a much more difficult proposition than with countries in the Indian Ocean. Requests for access to China in 1513 and 1521–22 were rejected. It was not until 1557 that Portugal acquired Macao though it participated earlier in clandestine trade off the Chinese coast. Contact was made with Japan in 1543 and trade started there in earnest in the 1550s from the base in Macao.


China had withdrawn from an active role in Asian trade in the fifteenth century, imposed tight controls on private trade, and an embargo on trade with Japan. In view of the historic importance of this withdrawal, it is worth retracing Chinese experience from the 1100s to 1433 when it was the most dynamic force in Asian trade.

China’s exposure to world trade had been greatly enhanced when the Sung dynasty were driven out of North China and relocated their capital at Hangchow, south of the Yangtse. It was a prosperous and densely populated region of rice cultivation. It was not necessary to bring food supplies from distant areas. They relied more heavily on commercial taxes than most Chinese dynasties and fostered the development of ports and foreign trade. Their major port was Ch’üan–chou, about 600 kilometres north of Canton. They developed large scale production of ceramics for the export market, and the kilns of Ching–te–chen (in Kiangsi) prospered greatly.

In order to defend the Yangtse and coastal areas against Mongol attacks the first Chinese professional navy was created in 1232. Within a century it had grown to 20 squadrons with 52 000 men, with its main base near Shanghai. The ships included treadmill operated paddle–wheelers with protective armour plates, for service on the Yangtse. These were armed with powerful catapults to fling heavy stones or other missiles at enemy ships.

After the Sung were defeated, the Mongol (Yuan) dynasty continued with even larger scale shipbuilding activities for foreign trade, for grain transport to Peking (their new capital) in North China, for maritime commerce with Asia and for naval operations. In 1274 and 1281, two massive fleets were assembled in an unsuccessful attempt to invade Japan. The first fleet included 900 ships, the second was much larger and carried an invasion force of quarter of a million soldiers. They reopened overland commerce to Europe and the Middle East on the silk route.

As in the Sung, a large proportion of the trading community in the Yuan dynasty were from all parts of the Muslim world. This is clear from the observations of Marco Polo, the Venetian who came to China in the last quarter of the thirteenth century, and Ibn Battuta from Morocco more than 50 years later. Both left striking testimony to the vigour of the international trade of China at that time.

In the early years of the Ming, the Yung–lo emperor embarked on a series of naval expeditions outside the area of the “Eastern Oceans” which were the traditional Chinese sphere of interest. These expeditions were massive exercises whose basic motivation was political, though they did include an important element of state trading.

Yung–lo was a usurper, who had deposed his nephew in a successful military rebellion. The naval ventures were intended to display China’s power and wealth and enhance his own legitimacy. They were also intended to extend Chinese suzerainty over a much wider area. Korea was a permanent member of this system of tributary relationships and Yung–lo persuaded Japan to accept a similar status in 1404 (which lasted with a brief interruption until 1549). In the tribute system, there was an initial exchange of “gifts” (consisting on the Chinese side of specialties such as silk, gold, lacquer and porcelain) and the other side would reciprocate. These exchanges were renewed at intervals of a few years, and in the past had been followed up by private trade relations. However, Yung–lo prohibited private trade.

These tributary relations were conceived as a vehicle for assertion of China’s moral and cultural superiority, to act as a civilising force on barbarians at the frontiers, and thereby enhance China’s security. For this reason the government expected to play a leading role in developing and supervising the trade relationships. The underlying idea was not to create a colonial empire, but to assert Chinese hegemony. This traditional view of Chinese relations with the outside world was very different from that of the Mongol dynasty whose objective was world conquest, and Yung–lo probably felt the need to re–establish a more attractive image of Chinese civilisation.

Seven expeditions between 1405 and 1433 penetrated very deep into the “Western Oceans”. They were commanded by Admiral Cheng–ho, a member of the emperor’s household since he was 15 years old who had become a comrade in arms. Cheng–ho was a eunuch. There were thousands of them in the Ming imperial household. Emperors of this dynasty used them as a trusted and loyal counterweight to the power of the bureaucracy. Most of the latter regarded the expeditions as a waste of money, at a time when there were very large commitments in moving the Ming capital from Nanking to Peking and in rebuilding the Grand Canal. They involved very heavy fiscal burdens, and special levies on the coastal provinces. Yung–lo augmented his revenues by printing massive quantities of paper money. The resulting inflation (see Table 2–12) led to a disappearance of paper money transactions in the private economy. From the 1430s, silver became the predominant instrument of exchange and tax payments.

Under the Yung–lo emperor, the Ming navy “consisted of some 3 800 ships in all, 1 350 patrol vessels and 1 350 combat ships attached to guard stations or island bases, a main fleet of 400 large warships stationed near Nanking and 400 grain transport freighters. In addition there were more than 250 long–distance Treasure–ships” (Needham, 1971, p. 484). The treasure ships were the most important vessels in the maritime expeditions to the Western Oceans. They were five times as big as any of the ships of da Gama, 120 metres long and nearly 50 metres broad.

Chinese ships differed substantially from those in the Indian Ocean or Portugal. The treasure ships had nine masts, and smaller ships also had multiple masts. Transverse laths of bamboo attached to the sail fabric permitted precise and stepwise reefing. When sails were furled, they fell immediately into pleats. If tears developed in the sail, the area affected was restricted by the lathing. Big ships had 15 or more watertight compartments, so a partially damaged ship would not sink and could be repaired at sea. They had up to 60 cabins so the crew quarters were more comfortable than on Portuguese ships.

Table 2–11 shows the characteristics of the six naval expeditions of the Yung–lo emperor, and the seventh which was sent after his death. The fleets were very large and the big ships were intended to overawe the rulers of the countries which were visited. The intentions were peaceful but the military force was big enough to deal effectively with attacks on the fleet, which occurred on only three occasions. The first had India and its spices as their destination. The rest explored the East Coast of Africa, the Red Sea and the Persian Gulf.

A major purpose of these voyages was to establish good relations by presentation of gifts and to escort ambassadors or rulers to or from China. There was no attempt to establish bases for trade or for military objectives. There was a search for new plants for medical purposes, and one of the missions was accompanied by 180 medical personnel. There was also an interest in types of African livestock which were unknown in China. The expeditions brought back ostriches, giraffes, zebras, elephant tusks and rhinoceros horns. However, these were exotica, and there was no significant replication of the international interchange of flora and fauna which the European encounter with the Americas inaugurated.

After the death of Cheng–ho, support for this distant diplomacy faded very quickly. The broadening of China’s tributary relations with countries of the “Western Oceans” did not enhance China’s security and the cost of the naval expeditions had exacerbated a situation of fiscal and monetary crisis. The meritocratic bureaucracy had always opposed a venture which promoted the leverage of the eunuch interest. They consolidated their gains by destroying the official records of the overseas expeditions. There was increasing concern to defend the new northern capital against potential invasions from Mongolia or Manchuria. The new capital’s food supply was guaranteed by the Grand Canal which had been reopened in its full length in 1415 (2 300 kilometres — equivalent to the distance from Paris to Istanbul). It functioned better than ever before because of new locks which made it operational on a full–time basis. Grain shipments by sea to the capital had already ceased and sea–going grain ships were replaced by canal barges.

As the oceanic diplomacy had been ended, there was no longer a need for Treasure ships, coastal defences had been reduced and there was strong pressure to reduce the hard core of the navy. By 1474 the fleet of large warships had been cut from 400 to 140. Most of the shipyards were closed, and naval manpower was reduced by retrenchment and desertions.

The tributary arrangements for countries within the Eastern Ocean continued, e.g. ships from Japan were able to come at intervals of several years, but the Yung–lo ban on private trade continued, and sea–going junks with more than two masts were prohibited.

This regime of interdiction and regulation eventually sparked large scale development of illicit private trade and piracy. The coastguards were open to bribery. By the time the Portuguese established their base in Macao in 1557, they were fully aware of the trading situation and had easy contacts with Chinese and Japanese pirates.

In 1567, the Chinese authorities ended the prohibition on private trade but banned trade with Japan. This gave the Portuguese an unbelievably favourable window of opportunity.


In 1539, the Chinese had confiscated the cargo of Japanese ships participating in the tribute trade. In 1544 they had turned away Japanese attempts to renew the tributary trade. This was enough to induce Japanese hostility, and enmity was further heightened by political changes in Japan. By the middle of the sixteenth century the Ashikaga shogunate which had accepted nominal Chinese suzerainty was on its last legs. It was succeeded by a series of three ruthless military dictators, Nobunaga, Hideyoshi, and Ieyasu, who created a powerful unified system of government. They completely repudiated the idea of Chinese suzerainty.

These political developments occurred at the same time as Japan became a major silver producer. Rich deposits were discovered in the 1530s. The export potential was very large. The Chinese market was hungry for silver, and the gold/silver price ratio was much more favourable to silver in China than in Japan. As the Chinese would not allow Japanese ships to enter their harbours, the main carriers of Japanese silver to China were Chinese pirates and the Portuguese.

Portuguese ships were able to bring Indonesian spices from Malacca to Macao, sell them in China, buy Chinese silks and gold, go from Macao to harbours in the south of Japan (first Hirado and then Nagasaki), sell these products, buy Japanese silver, sell it in Macao, and buy silk again for shipment to Japan or their depot in Goa.

Portuguese trade was also accompanied by Jesuit missions. Francis Xavier was in Japan in 1549– 51, and Jesuits were very successful in getting converts in the south of Japan. Eventually, the number of Japanese Christians rose to about 300 000 (many more converts than the Jesuits made in Goa or in China). Japanese were interested in Portuguese ships, maps and navigation, and learned something of these two techniques. They were even more interested in guns. Portuguese technology of that epoch was reproduced in Japanese namban (southern barbarian) art which is displayed most clearly in very large multi–panelled lacquer screens. The first Portuguese to arrive in 1543 had firearms which were new to Japan. The potential of this new weaponry was quickly appreciated by the military who managed to copy the guns and manufacture them in Japan. They had an important effect in deciding the outcome of the Japanese civil wars. After 1615, the new shogunate began a successful policy to eliminate firearms and restrict the use of swords to the samurai.

In 1596, the Spanish authorities in Manila tried to replicate Portuguese successes in Japan, and sent a mission of Franciscan missionaries to proselytise. The Japanese got the impression that Spain might want to take over as they had the Philippines, and on Hideyoshi’s order the Spanish missionaries and 19 of their converts were crucified at Nagasaki. From that point on, Japan became increasingly hostile to Portuguese missionary activities, and made contact with English and Dutch traders who had no religious ambitions. Eventually Christianity became illegal, and the Portuguese were expelled in 1639. Henceforth trade with the Japanese mainland was confined to Chinese and Dutch traders.


Fernao de Magalhaes had participated in the first Portuguese expedition to the Moluccan spice islands in 1511, and was disappointed with his pay and prospects when he returned to Portugal. In 1517, he defected to Spain, changed his name to Magellan, and persuaded the Spanish crown to finance a voyage by a Western route. The expedition he commanded (1519–22) was the first to circumnavigate the globe. It established a route around the south of Argentina. Magellan was killed in combat in the Philippines, but the voyage continued to the spice islands and eventually got back to Spain. Fifteen men returned, more than 200 failed to survive the voyage.

Spain surrendered its claim to the Moluccas to Portugal for a cash payment, but gained effective control of the Philippines in 1571. It was the only significant part of the Spanish empire outside the Americas. The route between Acapulco (on the west coast of Mexico) and Manila had a monopoly in trading Spanish silver against Chinese silks and porcelain. Spaniards took little direct part in China trade, which was mainly conducted by Chinese ships, using the large overseas Chinese population of Manila as intermediaries. At the end of the sixteenth century there were 2 000 Spanish living in Manila and 10 000 Chinese.

Relations with China were never very friendly. In 1603, a visit by rather pushy Chinese traders representing the provincial authorities of Fukien gave the misleading impression that China intended to invade the Philippines. The Spanish reaction was to attack and kill most of the Chinese community in Manila. The Chinese Wan–li emperor executed the trader who had provoked the Spanish, and the trade with China managed to survive this incident. However, possession of the Philippines was never a particularly profitable venture for Spain, and the flow of silver from Mexico via Manila to China was a good deal smaller than that from Japan (see Table 2–9).