History
Despite Chinese efforts to restrict European traders and citizens to Macau, European trade spread throughout China. The Canton System limited the ports in which European traders could do business with China. It also forbade any direct trade between European merchants and Chinese civilians. Instead, the Europeans, generally employees of major trading companies (most importantly the British East India Company) had to trade with an association of Chinese merchants known as the Cohong. The European (and soon the American) presence was restricted to the Thirteen Factories on the harbour of Canton (Guangzhou) during the trading season, but the foreign traders were permitted to remain on Chinese soil at Macau in the off-season (a mitigation of earlier Chinese restrictions on trade, which had banned foreign residence in the off-season).
The first trade that existed with China was for silks, porcelain ("fine china") and most lucratively tea. It was the incredible financial deficit caused by European demand for tea that spurred the British to begin shipping opium to China from its colonies in India. (While only silver was allowed for trading, opium was initially tolerated. See First Opium War - Background.)
Despite Britain's growing apprehension at the Canton System, revenue from opium eased British resentment, and the system remained intact until the Opium Wars, which established "treaty ports" in accordance with the Treaty of Nanjing. Each of these ports was governed, not by Chinese laws, but rather the laws of the country controlling the port.
Read more about this topic: Canton System
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