Learning to do business in China: The evolution of BAT's cigarette distribution network, 1902-41

Business History

Volumn 39, Issue 3, 1997, Pages 30-64

  Cox, Howard ^a  

^a LONDON SOUTH BANK UNIVERSITY   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0002173411     PISSN: 00076791     EISSN: 17437938     Source Type: Journal    
DOI: 10.1080/00076799700000098     Document Type: Review

References (122)

1. For a review of the early international growth of BAT Co. as a whole, see H. Cox, 'Growth and Ownership in the International Tobacco Industry: BAT 1902-27', Business History; Vol.31 No.1 (1989), pp.44-67.
2. S. Cochran, Big Business in China: Sino-Foreign Rivalry in the Cigarette Industry, 1890-1939 (Cambridge, MA, 1980); idem, 'Economic Institutions in China's Inter-regional Trade: Tobacco Products and Cotton Textiles, 1850-1980', Conference on Spatial and Temporal Trends and Cycles in Chinese Economic History, 980-1980, Bellagio, Italy (1984); idem, 'Commercial Penetration and Economic Imperialism in China: An American Cigarette Company's Entrance into the Market', in E.R. May and J.K. Fairbank (eds.), America's China Trade in Historical Perspective: The Chinese and American Performance (Cambridge, MA, 1986), pp. 151-203. Expanding on these findings has been possible due, in part, to the access granted by the company to various sources of information, most particularly at the company's library in Southampton. In addition, access has been gained to materials which the company was forced to abandon when it finally withdrew from China in the early 1950s. These papers are held at the Centre for Chinese Business History at the Shanghai Academy of Social Science; hereinafter referred to as BAT Archive (SASS). A four-volume account of BAT's activities in China based on these papers has been published in Chinese: Shanghai shehui kexueyuan jingji yangjiusuo [Economic Research Institute at the Shanghai Academy of Social Science] (ed.), Ying Mei Yan Gongsi zai Hua qiye ziliao huibian [Documents on the Enterprises of BAT in China] (Beijing, 1983); hereinafter referred to as Shanghai (ed.), Ying Mei.
3. S. Cochran, Big Business in China: Sino-Foreign Rivalry in the Cigarette Industry, 1890-1939 (Cambridge, MA, 1980); idem, 'Economic Institutions in China's Inter-regional Trade: Tobacco Products and Cotton Textiles, 1850-1980', Conference on Spatial and Temporal Trends and Cycles in Chinese Economic History, 980-1980, Bellagio, Italy (1984); idem, 'Commercial Penetration and Economic Imperialism in China: An American Cigarette Company's Entrance into the Market', in E.R. May and J.K. Fairbank (eds.), America's China Trade in Historical Perspective: The Chinese and American Performance (Cambridge, MA, 1986), pp. 151-203. Expanding on these findings has been possible due, in part, to the access granted by the company to various sources of information, most particularly at the company's library in Southampton. In addition, access has been gained to materials which the company was forced to abandon when it finally withdrew from China in the early 1950s. These papers are held at the Centre for Chinese Business History at the Shanghai Academy of Social Science; hereinafter referred to as BAT Archive (SASS). A four-volume account of BAT's activities in China based on these papers has been published in Chinese: Shanghai shehui kexueyuan jingji yangjiusuo [Economic Research Institute at the Shanghai Academy of Social Science] (ed.), Ying Mei Yan Gongsi zai Hua qiye ziliao huibian [Documents on the Enterprises of BAT in China] (Beijing, 1983); hereinafter referred to as Shanghai (ed.), Ying Mei.
4. S. Cochran, Big Business in China: Sino-Foreign Rivalry in the Cigarette Industry, 1890-1939 (Cambridge, MA, 1980); idem, 'Economic Institutions in China's Inter-regional Trade: Tobacco Products and Cotton Textiles, 1850-1980', Conference on Spatial and Temporal Trends and Cycles in Chinese Economic History, 980-1980, Bellagio, Italy (1984); idem, 'Commercial Penetration and Economic Imperialism in China: An American Cigarette Company's Entrance into the Market', in E.R. May and J.K. Fairbank (eds.), America's China Trade in Historical Perspective: The Chinese and American Performance (Cambridge, MA, 1986), pp. 151-203. Expanding on these findings has been possible due, in part, to the access granted by the company to various sources of information, most particularly at the company's library in Southampton. In addition, access has been gained to materials which the company was forced to abandon when it finally withdrew from China in the early 1950s. These papers are held at the Centre for Chinese Business History at the Shanghai Academy of Social Science; hereinafter referred to as BAT Archive (SASS). A four-volume account of BAT's activities in China based on these papers has been published in Chinese: Shanghai shehui kexueyuan jingji yangjiusuo [Economic Research Institute at the Shanghai Academy of Social Science] (ed.), Ying Mei Yan Gongsi zai Hua qiye ziliao huibian [Documents on the Enterprises of BAT in China] (Beijing, 1983); hereinafter referred to as Shanghai (ed.), Ying Mei.
5. S. Cochran, Big Business in China: Sino-Foreign Rivalry in the Cigarette Industry, 1890-1939 (Cambridge, MA, 1980); idem, 'Economic Institutions in China's Inter-regional Trade: Tobacco Products and Cotton Textiles, 1850-1980', Conference on Spatial and Temporal Trends and Cycles in Chinese Economic History, 980-1980, Bellagio, Italy (1984); idem, 'Commercial Penetration and Economic Imperialism in China: An American Cigarette Company's Entrance into the Market', in E.R. May and J.K. Fairbank (eds.), America's China Trade in Historical Perspective: The Chinese and American Performance (Cambridge, MA, 1986), pp. 151-203. Expanding on these findings has been possible due, in part, to the access granted by the company to various sources of information, most particularly at the company's library in Southampton. In addition, access has been gained to materials which the company was forced to abandon when it finally withdrew from China in the early 1950s. These papers are held at the Centre for Chinese Business History at the Shanghai Academy of Social Science; hereinafter referred to as BAT Archive (SASS). A four-volume account of BAT's activities in China based on these papers has been published in Chinese: Shanghai shehui kexueyuan jingji yangjiusuo [Economic Research Institute at the Shanghai Academy of Social Science] (ed.), Ying Mei Yan Gongsi zai Hua qiye ziliao huibian [Documents on the Enterprises of BAT in China] (Beijing, 1983); hereinafter referred to as Shanghai (ed.), Ying Mei.
6. S. Cochran, Big Business in China: Sino-Foreign Rivalry in the Cigarette Industry, 1890-1939 (Cambridge, MA, 1980); idem, 'Economic Institutions in China's Inter-regional Trade: Tobacco Products and Cotton Textiles, 1850-1980', Conference on Spatial and Temporal Trends and Cycles in Chinese Economic History, 980-1980, Bellagio, Italy (1984); idem, 'Commercial Penetration and Economic Imperialism in China: An American Cigarette Company's Entrance into the Market', in E.R. May and J.K. Fairbank (eds.), America's China Trade in Historical Perspective: The Chinese and American Performance (Cambridge, MA, 1986), pp. 151-203. Expanding on these findings has been possible due, in part, to the access granted by the company to various sources of information, most particularly at the company's library in Southampton. In addition, access has been gained to materials which the company was forced to abandon when it finally withdrew from China in the early 1950s. These papers are held at the Centre for Chinese Business History at the Shanghai Academy of Social Science; hereinafter referred to as BAT Archive (SASS). A four-volume account of BAT's activities in China based on these papers has been published in Chinese: Shanghai shehui kexueyuan jingji yangjiusuo [Economic Research Institute at the Shanghai Academy of Social Science] (ed.), Ying Mei Yan Gongsi zai Hua qiye ziliao huibian [Documents on the Enterprises of BAT in China] (Beijing, 1983); hereinafter referred to as Shanghai (ed.), Ying Mei.
7. Cochran's main study of BAT in China, Big Business in China (see note 2 above), is concerned primarily with a detailed assessment of BAT's competition with its main Chinese rival cigarette manufacturer, the Nanyang Brothers Tobacco Co.
8. The production machinery that BAT brought into its China factories was leading-edge technology and its engineering workshop in Shanghai was a centre of excellence and innovation within the organisation. See, for example, BAT Archive (SASS), Document Nos.12-C-106 to 107. For the best attempt to assess the various aspects of BAT's performance in China see Cochran, 'Commercial Penetration'.
9. Backward integration into the provision of support for farmers engaged in leaf production began to take shape after 1913 when agricultural support and advice was provided to encourage farmers in Shandong (Shantung) and Hubei (Hupeh) provinces to grow tobacco suitable for use in cigarettes. The difficulties involved in buying land in rural China, on which to build reception stations for the leaf, for example, was overcome through the creation of the Hong An Real Estate Company, a Chinese-registered company under the nominal ownership of nine of BAT Co.'s Chinese agents.
10. According to a Chinese source, BAT's reported profits from China for the period 1902-41 amounted to approximately £50 million. However, it suggests that, taking into account such things as inflated raw material imports, excessively high salaries paid to the Western managers, unrealistically high depreciation, and the reserves retained as cash, the actual level of profit amounted to something more in the region of £82.5 million for the period. Shanghai (ed.), Ying Mei, p. 1536. What is not in dispute is that BAT's operations in China provided a mainstay of the company's income, particularly after the first ten years. Duke himself is reported by the trade press as stating in 1915 that 'It has taken many years to build up our business in China. It is only now being put on a paying basis. We were willing to take a loss there for ten years because we saw great possibilities in the country'. Tobacco, No.410 (Feb. 1915), p.37. Of course, his reported losses are likely to be partly designed to deter rival tobacco firms in the USA, which had gained their independence following the dissolution of the American Tobacco Company a little over two years earlier, from emulating BAT's strategy in China.
11. S.D. Chapman, 'British-based Investment Groups before 1914', Economic History Review, 2nd series, Vol.38 No.2 (1985), pp.230-51; idem, Merchant Enterprise in Britain: From the Industrial Revolution to World War I (Cambridge, 1992); C. Jones, International Business in the Nineteenth Century: The Rise and Fall of a Cosmopolitan Bourgeoisie (Brighton, 1987); M. Wilkins. 'The Free-Standing Company, 1870-1914: An Important Type of British Foreign Direct Investment', Economic History Review, 2nd series, Vol.41 No.2 (1988), pp.259-82.
12. S.D. Chapman, 'British-based Investment Groups before 1914', Economic History Review, 2nd series, Vol.38 No.2 (1985), pp.230-51; idem, Merchant Enterprise in Britain: From the Industrial Revolution to World War I (Cambridge, 1992); C. Jones, International Business in the Nineteenth Century: The Rise and Fall of a Cosmopolitan Bourgeoisie (Brighton, 1987); M. Wilkins. 'The Free-Standing Company, 1870-1914: An Important Type of British Foreign Direct Investment', Economic History Review, 2nd series, Vol.41 No.2 (1988), pp.259-82.
13. S.D. Chapman, 'British-based Investment Groups before 1914', Economic History Review, 2nd series, Vol.38 No.2 (1985), pp.230-51; idem, Merchant Enterprise in Britain: From the Industrial Revolution to World War I (Cambridge, 1992); C. Jones, International Business in the Nineteenth Century: The Rise and Fall of a Cosmopolitan Bourgeoisie (Brighton, 1987); M. Wilkins. 'The Free-Standing Company, 1870-1914: An Important Type of British Foreign Direct Investment', Economic History Review, 2nd series, Vol.41 No.2 (1988), pp.259-82.
14. S.D. Chapman, 'British-based Investment Groups before 1914', Economic History Review, 2nd series, Vol.38 No.2 (1985), pp.230-51; idem, Merchant Enterprise in Britain: From the Industrial Revolution to World War I (Cambridge, 1992); C. Jones, International Business in the Nineteenth Century: The Rise and Fall of a Cosmopolitan Bourgeoisie (Brighton, 1987); M. Wilkins. 'The Free-Standing Company, 1870-1914: An Important Type of British Foreign Direct Investment', Economic History Review, 2nd series, Vol.41 No.2 (1988), pp.259-82.
15. For a review of British business enterprises that operated in China during the nineteenth century, see J. Osterhammel, 'British Business in China, 1860s to 1950s', in R.P.T. Davenport-Hines and G. Jones (eds.), British Business in Asia since 1860 (Cambridge, 1989), pp.189-216. In the case of American firms, see M. Wilkins, 'The Impacts of American Multinational Enterprise on American-Chinese Economic Relations, 1786-1949', in May and Fairbank (eds.), America's China Trade, pp.259-92.
16. For a review of British business enterprises that operated in China during the nineteenth century, see J. Osterhammel, 'British Business in China, 1860s to 1950s', in R.P.T. Davenport-Hines and G. Jones (eds.), British Business in Asia since 1860 (Cambridge, 1989), pp.189-216. In the case of American firms, see M. Wilkins, 'The Impacts of American Multinational Enterprise on American-Chinese Economic Relations, 1786-1949', in May and Fairbank (eds.), America's China Trade, pp.259-92.
17. For a discussion of the extent to which British firms, including BAT Co., conducted business in China beyond the treaty ports, see J. Osterhammel, 'Imperialism in Transition: British Business and the Chinese Authorities, 1931-37', China Quarterly, Vol.98 (June 1984), pp.260-86.
18. B.W.E. Alford, W.D. & H.O. Wills and the Development of the U.K. Tobacco Industry, 1786-1965 (London, 1973), pp. 139-57.
19. The story of James Duke's creation of the American Tobacco combine has been recounted on numerous occasions, most recently by R. Kluger, Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris (New York, 1996), pp.20-26. Other academic accounts are P.G. Porter, Origins of the American Tobacco Co.', Business History Review, Vol.43 No.1 (1969), pp.59-76, and R.F. Durden, Duke's of Durham, 1865-1929 (Durham, NC, 1975), pp. 26-55.
20. The story of James Duke's creation of the American Tobacco combine has been recounted on numerous occasions, most recently by R. Kluger, Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris (New York, 1996), pp.20-26. Other academic accounts are P.G. Porter, Origins of the American Tobacco Co.', Business History Review, Vol.43 No.1 (1969), pp.59-76, and R.F. Durden, Duke's of Durham, 1865-1929 (Durham, NC, 1975), pp. 26-55.
21. The story of James Duke's creation of the American Tobacco combine has been recounted on numerous occasions, most recently by R. Kluger, Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris (New York, 1996), pp.20-26. Other academic accounts are P.G. Porter, Origins of the American Tobacco Co.', Business History Review, Vol.43 No.1 (1969), pp.59-76, and R.F. Durden, Duke's of Durham, 1865-1929 (Durham, NC, 1975), pp. 26-55.
22. On the strategies employed by Duke's firm see PG. Porter, 'Advertising in the Early Cigarette Industry: W. Duke, Sons & Company of Durham', The North Carolina Historical Review, Vol.48 No.1 (1971), pp.31-43; on Wills see B.W.E. Alford, 'Penny Cigarettes, Oligopoly, and Entrepreneurship in the U.K. Tobacco Industry in the Late Nineteenth Century', in B. Supple (ed.), Essays in British Business History (Oxford, 1977), pp.49-68.
23. On the strategies employed by Duke's firm see PG. Porter, 'Advertising in the Early Cigarette Industry: W. Duke, Sons & Company of Durham', The North Carolina Historical Review, Vol.48 No.1 (1971), pp.31-43; on Wills see B.W.E. Alford, 'Penny Cigarettes, Oligopoly, and Entrepreneurship in the U.K. Tobacco Industry in the Late Nineteenth Century', in B. Supple (ed.), Essays in British Business History (Oxford, 1977), pp.49-68.
24. By 1900, ATC's London depot was actually beginning to incur losses for the American firm. See Bureau of Corporations, Report of the Commissioner of Corporations on the Tobacco Industry, Part I (Washington, 1909), p. 166.
25. M. Corina, Trust in Tobacco: The Anglo-American Struggle for Power (London, 1975), pp.65-108.
26. A number of American firms had developed a significant export trade in hand-rolled cigarettes from the beginning of the 1880s. Duke's company followed these pioneers a little later and a contemporary report in the tobacco trade press indicated that in 1886 Duke's firm already claimed to possess a large trade for their still mainly hand-rolled cigarettes in China. Tobacco, Vol.6 No.67 (July 1886), p. 156.
27. The origins of Mustard & Co. can be dated back to at least the early 1870s. An obituary of Mr Yao Ching Yung in the BAT house journal in 1925 indicates that the deceased had been hired by Mustard & Co. in 1871 as assistant storekeeper and, as a result of his longevity, had become something of a celebrity within the BAT organisation. BAT Bulletin, Vol.17 No.73 (1926), p.95.
28. Ying Mei Yien Kung Ssu Yueh Pao [British American Tobacco Co. Monthly Journal] (Sept. 1923), p.2. The Yueh Pao was BAT Co.'s house journal in China. The edition of September 1923 was a special commemoration number produced to celebrate the 21st anniversary of BAT's formation. The publication gives synoptic outlines of many of BAT's Chinese dealers, as well as the most important 'foreigners', i.e. Westerners, employed by BAT in China.
29. According to the Yueh Pao account, 'Pin Head' were the first machine-made cigarettes to be sold in Shanghai. 'Pin Head' were the first cigarettes to be manufactured mechanically by Duke's company, in 1885, but the brand did not become very popular in the United States; see B.W.C. Roberts and R.F Knapp, 'Paving the Way for the Tobacco Trust: From Hand Rolling to Mechanized Cigarette Production by W. Duke, Sons and Company', The North Carolina Historical Review, Vol.69 No.3 (1992), pp.256-81.
30. For a brief summary of Wright's career see W.S. Powell (ed.), Dictionary of North Carolina Biography, Vol.6 (Chapel Hill, NC, 1996), p.279. His relationship with the Dukes is discussed in Durden, Duke's of Durham, pp.19, 28-35, 39-43 and passim.
31. For a brief summary of Wright's career see W.S. Powell (ed.), Dictionary of North Carolina Biography, Vol.6 (Chapel Hill, NC, 1996), p.279. His relationship with the Dukes is discussed in Durden, Duke's of Durham, pp.19, 28-35, 39-43 and passim.
32. According to the account in the BAT house journal, Andersen had been the first to manufacture cigarettes in Shanghai using a plant that was driven by a small gas engine. BAT Bulletin, Vol.17 No.73 (1926), pp.30-31.
33. A brief obituary of E. Jenner Hogg indicates that he had settled in Shanghai in 1857 at the age of 20 and lived there continuously until his death in 1920, aged 83. It does not mention his involvement with the American Cigarette Co. See F.L. Hawks Pott, A Short History of Shanghai (Shanghai, 1928), pp.246-7. See also E.G. Hauser, Shanghai, City for Sale (New York, 1940), pp.99-100.
34. A brief obituary of E. Jenner Hogg indicates that he had settled in Shanghai in 1857 at the age of 20 and lived there continuously until his death in 1920, aged 83. It does not mention his involvement with the American Cigarette Co. See F.L. Hawks Pott, A Short History of Shanghai (Shanghai, 1928), pp.246-7. See also E.G. Hauser, Shanghai, City for Sale (New York, 1940), pp.99-100.
35. BAT's own account of the development of the China market indicates that the American Cigarette Co. had also used the Mustard agency to market its products. BAT Archive (SASS), Documents 2-C-39 and 2-C-58.
36. Letter from R.H. Wright to the American Trading Company, Shanghai, 5 Dec. 1898, in the Richard H. Wright Papers, Special Collections Department, William R. Perkins Library, Duke University (hereafter Wright Papers).
37. In response to a letter from Collins complaining that the cigarettes produced on the machines were developing a yellow stain, Wright wrote to suggest that either the company was using an inferior glycerine, accusing the firm of changing to different suppliers in order to save money, or that they were incorrectly processing the tobacco and not taking into account the effect of the local climatic conditions. See Wright Papers, letter dated 2 Jan. 1899 from Wright to the American Trading Company, Shanghai. The American Trading Company seems to have played an important role as intermediator for US tobacco firms in the Far East generally.
38. Wright Papers, Wright to the American Trading Company, Shanghai, 5 Dec. 1898.
39. The BAT house journal states that the factory in Pudong was 'not a success, and was shut for some time prior to Messrs W.D. & H.O. Wills acquiring same in 1901'. BAT Bulletin, Vol.17 No.73 (1926), p.31. In fact, Wills did not acquire the factory until 1902. The agreement for the sale of the premises to Wills includes provision for various supplies on order, suggesting that it was certainly in operation at that time. BAT Archive (SASS), Document 13-C-177.
40. Cited in Alford, W.D. & H.O. Wills, pp.218-19.
41. The transliteration of this firm's name using the conventional pinyin system is Yong Tai He. However, in order to maintain consistency with archival references, the old transliteration of the Cantonese name is utilised in the text.
42. The Wing Tai Vo warehouse in Shanghai had been set up to import and distribute cigars from the Philippines. Chen Ren Jie, 'Ying Mei yan gong si mai ban Zhen Bo Zhao' [The Comprador of the BAT Co.: Zheng Bo Zhao], Wenshi ziliao xuanji [Selection of material relating to culture and history] Zhong guo renmin zhengzhi xieshang huiyi (ed.), [Consultative Political Conference of the Chinese People] (Shanghai, 1978), pp. 157-77; BAT Archive (SASS), Document 13-C-188.
43. BAT Archive (SASS), Documents 13-C-176 to 178.
44. BAT Archive (SASS), Documents 13-C-174 to 181: H. Roberts to C.E. Roach, 14 May 1902; Agreement between E. Jenner Hogg and H. Roberts dated 14 May 1902; Rex & Co. to J.S. Fearon, 9 July 1902; J. Taylor (Inspectorate General of Customs, Shanghai) to A. Rex, 10 July 1902; Notice of Extraordinary General Meeting of the American Cigarette Co., posted by C.E. Roach by Order of the Board, dated 11 July 1902; Rex to Fearon, 11 July 1902; Fearon to Rex, 11 July 1902. The American Cigarette Co. was formally transferred to Wills on 13 Aug. 1902. BAT Archive (SASS), Document 2-C-58.
45. Wright, as a shareholder in the American Cigarette Co., is likely to have been very supportive of the decision to sell the Bonsack patent to Wills rather than his old rival Duke. Wright had already engaged in discussions with the Wills company in 1898, when it appeared that Duke's firm might invade the British market. See Wright Papers, Wright to Hugo Cunliffe-Owen, London, 3 Dec. 1898.
46. Companies Registration Office, Document No.74974/14, Agreement between the Imperial Tobacco Company and others dated 27 Sept. 1902.
47. For the purposes of the Agreement, the term 'United States' was taken to include Cuba, Puerto Rico, the Hawaiian Islands and the Philippine Islands.
48. It should be noted also that Hugo Cunliffe-Owen, BAT Co.'s Secretary, worked in both London and New York and thus provided an important link between the two groupings of directors before the First World War.
49. Although Cochran suggests that BAT Co. inherited Mustard & Co.'s old factory, as well as the American Cigarette Co's Pudong plant, the company's own Chinese in-house magazine indicates that during the company's first five years in Shanghai its actual operations there consisted only of 'a small factory at Pootung employing a few hundred Chinese'. Cochran, Big Business, p.14; Yeuh Pao, p.18. On Keily see idem, p.8.
50. Although Cochran suggests that BAT Co. inherited Mustard & Co.'s old factory, as well as the American Cigarette Co's Pudong plant, the company's own Chinese in-house magazine indicates that during the company's first five years in Shanghai its actual operations there consisted only of 'a small factory at Pootung employing a few hundred Chinese'. Cochran, Big Business, p.14; Yeuh Pao, p.18. On Keily see idem, p.8.
51. Although Cochran suggests that BAT Co. inherited Mustard & Co.'s old factory, as well as the American Cigarette Co's Pudong plant, the company's own Chinese in-house magazine indicates that during the company's first five years in Shanghai its actual operations there consisted only of 'a small factory at Pootung employing a few hundred Chinese'. Cochran, Big Business, p.14; Yeuh Pao, p.18. On Keily see idem, p.8.
52. BAT Archive (SASS), Document 3-A-5.
53. Yueh Pao, p.100.
54. It is clear from the writings of James Thomas that Duke continued to take a close interest in BAT's development in China even after handing over control to Harris. See J.A. Thomas, A Pioneer Tobacco Merchant in the Orient (Durham, NC, 1928), pp.38-63.
55. BAT Archive (SASS), Documents 2-E-56 to 59.
56. BAT Archive (SASS), Documents 13-C-182 to 195: H. Cunliffe-Owen to Rex & Co., 21 June 1904; A. Rex to H. Cunliffe-Owen, 22 June 1904; Mustard & Co. to A. Rex, 23 June 1904; A. Rex to Mustard & Co., 23 June 1904; Cunliffe-Owen to Rex, 28 June 1904; Cunliffe-Owen to BAT Co., London, 28 June 1904.
57. This was formally agreed on 28 June 1905, less than one month after Thomas' arrival in Shanghai. BAT Archive (SASS), Document 2-C-59; Yeuh Pao, p.10.
58. The other five were Fu He, Qian Kun He, Ye De Xing, Yong Shen Chang and Shun Xia Yuan. See Chen Ren Jie, 'Ying Mei', p. 157.
59. Cochran mentions the work of the Shanghai Tobacco Guild in various places, cf. Cochran, Big Business, pp.29-33; idem, 'Commercial Penetration', p.171. See also idem, 'Economic Institutions', p.10.
60. Cochran mentions the work of the Shanghai Tobacco Guild in various places, cf. Cochran, Big Business, pp.29-33; idem, 'Commercial Penetration', p.171. See also idem, 'Economic Institutions', p.10.
61. Cochran mentions the work of the Shanghai Tobacco Guild in various places, cf. Cochran, Big Business, pp.29-33; idem, 'Commercial Penetration', p.171. See also idem, 'Economic Institutions', p.10.
62. M.-C. Bergère, The Golden Age of the Chinese Bourgeoisie, 1911-1937 (Cambridge, 1989), pp.50-51, notes that the campaign of May 1905 was the first occasion in which boycotting had been used for explicitly political purposes and that it spread to all the merchant communities of the treaty ports.
63. Chen Ren Jie, 'Ying Mei', p.157; Cochran, Big Business, pp.45-53, notes that around 20 new Chinese-owned cigarette companies were formed during this time, but that few survived much beyond the duration of the boycott. For an example of such a rival concern, the Peiyang Tobacco Company, see W.K.K. Chan, Merchants, Mandarins, and Modern Enterprise in Late Ch'ing China (Cambridge, MA, 1987), pp. 104-6.
64. Chen Ren Jie, 'Ying Mei', p.157; Cochran, Big Business, pp.45-53, notes that around 20 new Chinese-owned cigarette companies were formed during this time, but that few survived much beyond the duration of the boycott. For an example of such a rival concern, the Peiyang Tobacco Company, see W.K.K. Chan, Merchants, Mandarins, and Modern Enterprise in Late Ch'ing China (Cambridge, MA, 1987), pp. 104-6.
65. Chen Ren Jie, 'Ying Mei', p.157; Cochran, Big Business, pp.45-53, notes that around 20 new Chinese-owned cigarette companies were formed during this time, but that few survived much beyond the duration of the boycott. For an example of such a rival concern, the Peiyang Tobacco Company, see W.K.K. Chan, Merchants, Mandarins, and Modern Enterprise in Late Ch'ing China (Cambridge, MA, 1987), pp. 104-6.
66. The factory built by the American Cigarette Co. before 1895 was therefore strictly illegal under the terms of the treaty port agreements. It may be for this reason that the factory was constructed outside of the treaty port territory of Shanghai, on the east bank of the Huang Pu river in Pudong.
67. It is clear that the question of stepping up local production in China was raised with Duke by Harris when he visited Shanghai in 1904. Duke cabled to him, 'If cigarettes can be made properly and more cheaply in China they should be made there.' Special Collections Department, William R. Perkins-Library, Duke University (hereinafter J.B. Duke Business Papers), papers of James B. Duke, coded telegram, J.B. Duke to Harris, dated 17 April 1904.
68. J.K. Winkler, Tobacco Tycoon: The Story of James Buchanan Duke (New York, 1942), pp.150-52. Thomas had first gone abroad in 1888 whilst working for the tobacco firm of Motley & Wright. On Thomas' early travels see his own account, J.A. Thomas, Trailing Trade a Million Miles (Durham, NC, 1931). Between 1897 and 1899 Thomas worked in the Far East, including China, for the Liggett & Myers Co. When ATC bought out Liggett & Myers, in 1899, Thomas worked for Duke's firm in India, Singapore and the Straits Settlements before the move to China; see Thomas, Pioneer Tobacco Merchant, pp.23-4.
69. J.K. Winkler, Tobacco Tycoon: The Story of James Buchanan Duke (New York, 1942), pp.150-52. Thomas had first gone abroad in 1888 whilst working for the tobacco firm of Motley & Wright. On Thomas' early travels see his own account, J.A. Thomas, Trailing Trade a Million Miles (Durham, NC, 1931). Between 1897 and 1899 Thomas worked in the Far East, including China, for the Liggett & Myers Co. When ATC bought out Liggett & Myers, in 1899, Thomas worked for Duke's firm in India, Singapore and the Straits Settlements before the move to China; see Thomas, Pioneer Tobacco Merchant, pp.23-4.
70. J.K. Winkler, Tobacco Tycoon: The Story of James Buchanan Duke (New York, 1942), pp.150-52. Thomas had first gone abroad in 1888 whilst working for the tobacco firm of Motley & Wright. On Thomas' early travels see his own account, J.A. Thomas, Trailing Trade a Million Miles (Durham, NC, 1931). Between 1897 and 1899 Thomas worked in the Far East, including China, for the Liggett & Myers Co. When ATC bought out Liggett & Myers, in 1899, Thomas worked for Duke's firm in India, Singapore and the Straits Settlements before the move to China; see Thomas, Pioneer Tobacco Merchant, pp.23-4.
71. BAT Archive (SASS), Document Nos.2-G-1 to 13.
72. This process of expanding local production in China was disrupted by the outbreak of the war in Europe, when the traffic in machines to the new overseas factories was brought to a halt. L.A. Batchelor-Smith, Loom of Memories: A History of Southampton Branch of British-American Tobacco Co. Ltd. (Southampton, 1969), pp.6-7.
73. Cochran, Big Business, p.15. By 1923, these specialised departments at the Shanghai headquarters comprised Sales, Manufacturing, Leaf, Printing, Engineering, Supply, Accounting, Advertising, Traffic, Insurance, Legal and Order Departments. Yeuh Pao, pp.30-36.
74. Cochran, Big Business, p.15. By 1923, these specialised departments at the Shanghai headquarters comprised Sales, Manufacturing, Leaf, Printing, Engineering, Supply, Accounting, Advertising, Traffic, Insurance, Legal and Order Departments. Yeuh Pao, pp.30-36.
75. G. Porter and H.C. Livesay, Merchants and Manufacturers: Studies in the Changing Structure of Nineteenth Century Marketing (Baltimore, MD, 1971), p.205.
76. A good example is the career of Yuan Yu Shu who was first employed by BAT as an interpreter in 1908. He was appointed as a District manager in 1916, an assistant Territory manager in 1917 and was appointed Territory manager for Tsingkiangpu (Zhenjiang) in Kiangsu (Jiangsu) Province in 1920. Yueh Pao, p.95.
77. Thomas, Pioneer Tobacco Merchant, pp.85-6.
78. According to Thomas, 'We paid a bonus of $1,000 to every American who learned to speak commercial Chinese in four years, and we held examinations every six months to check up on progress. Three out of five of the men that we brought out to China learned to speak fluent Chinese, and four out of every five held their jobs'. J.A. Thomas, 'Selling and Civilization: Some Principles of an Open Sesame to Big Business Success in the East', Asia, Vol.23 No.12 (1923), pp.896-9 and 948-50 (quotation from p.949).
79. J.L. Hutchison, China Hand (Boston, MA, 1936), pp.53, 101-2, 153-5, 171, 177.
80. Similar tours of Chinese towns are described by another early BAT recruit from North Carolina, Lee Parker, who began his first tour of duty in Manchuria in 1909. L. Parker and R.D. Jones, China and the Golden Weed (North Carolina, 1976), pp.20-26.
81. According to Thomas' own recollections, 'This form [163] was made out in Singapore in 1899 by myself, in pencil, and sent to the New York Office to Mr. W.R. Harris, who instantly saw the usefulness of it and had a form printed, which is still in use with the necessary changes made to keep it up to date or in other words adapting the form to local conditions'. Special Collections Department, William R. Perkins Library, Duke University (hereinafter Thomas Papers), papers of James Augustus Thomas, letter from Thomas to C.S. Wolsiffer, Shanghai, 22 April 1923. An example of a completed Form 163, returned from the Luhan Division by Mr W.T. Smith in November 1918, is given in Shanghai (ed.), Ying Mei, p.544.
82. J.W. Jenkins, James B. Duke: Master Builder (New York, 1927), pp. 168-9.
83. When visiting a town in China for the first time, Thomas' 'first move was to make a study of the currency and to find the coin of low denomination generally current. Then I could give a man a good smoke for a price that would not necessitate the clumsy making of change'. See Thomas, 'Selling and Civilization', p.897.
84. For a detailed analysis of the traditional trading networks that operated within China, see G.W. Skinner, 'Marketing and Social Structure in Rural China', Journal of Asian Studies, Vol.24 No.1 (1964), pp.3-43.
85. A history of the Chinese company states: 'The original method of distribution from depots established by the Company in various parts of China, to which cigarettes were transported and from which they were distributed to purchasers was not affected by the arrangement with firms known as "distributors" [i.e. independent wholesalers] since in all cases, whether the distribution was handled by distributors or by the Company's branches and sub-branches direct, the property of the goods remained in the Company until sales to dealers were effected.' BAT Archive (SASS), History of YTTC, Document Nos.13-D-1 to 2. YTTC (Yee Tsoong Tobacco Co.) was an identity adopted by BAT Co. in China after 1934.
86. Chen Ren Jie, 'Ying Mei', p.159.
87. The system operated by BAT is described in detail in an internal 'Memorandum on Consignment Delivery System' in the BAT Archive (SASS), Document Nos. 13-D-21 to 25. The system of 15A godowns was also applied to South-East Asia and India. See C. Basu, Challenge and Change: The ITC Story, 1910-1985 (Calcutta, 1988), pp.151-2.
88. J.B. Duke Business Papers, letter from Joseph Hood to J.B. Duke dated 11 April 1912.
89. Chen Ren Jie, 'Ying Mei', pp.157-8.
90. On Wu's relationship with BAT, see an account written by his son, Wu Sing Pang, in BAT News (Spring 1988), pp.10-13. See also Cochran, 'Economic Institutions', pp.170-71.
91. On Wu's relationship with BAT, see an account written by his son, Wu Sing Pang, in BAT News (Spring 1988), pp.10-13. See also Cochran, 'Economic Institutions', pp.170-71.
92. Cochran, Big Business, pp.28-9, 46.
93. BAT Archive (SASS), Document No.2-E-77.
94. Chen Ren Jie, 'Ying Mei', p. 159; BAT Archive (SASS), Document Nos.3-A-5 to 8, summary of legal agreements undertaken by BAT Co. in China, 1902-24.
95. The title of the company was changed the following year to the Union Commercial Company.
96. This statement is taken from a note prepared by R.J.E. Price, a BAT executive in China, written in 1936. See BAT Archive (SASS), Document No.2-C-60.
97. In February 1916, Thomas cabled Wu from the company's New York office, offering his congratulations for selling 446 cases of 'Purple Mountain' the previous month. A few days later, he wrote to Cobbs, his successor in Shanghai, The feeling here is that we should push "New York" cigarettes and enthuse Wu Ting Seng and his people to push "Purple Mountain" all they can now that this brand is made in Pootung'. Thomas Papers, Thomas to Wu Ting Seng, Shanghai, 4 Feb. 1916 and Thomas to T.F. Cobbs, Shanghai, 10 Feb. 1916.
98. Chen Ren Jie, 'Ying Mei', p. 159.
99. During 1914, Wu had been used by BAT's management to engage in discussion with Nanyang on the possibility of a merger. Later, in 1917, soon after Nanyang had began to build a factory in Shanghai and shift its operational base from Guangzhou [Canton], Thomas initiated another unsuccessful attempt to buy out the Nanyang concern in which Wu was again involved. See Cochran, Big Business, pp.28, 84-96, 157-63.
100. Yueh Pao, pp.30, 121.
101. The firm granted the right to manufacture and distribute the products of the Japanese Government Tobacco Monopoly in China was the Toa Tabako Kabushiki Kaisha, which seems to have been registered as the East Asia Tobacco Co. Ltd. See Rea's Far Eastern Manual (Shanghai, 2nd edn. 1924), p.316.
102. The Alliance Tobacco Co. was registered in Shanghai on 28 April 1919 and the majority of the shares were taken up by the British Cigarette Co. BAT Archive (SASS), Document Nos.2-C-169 to 170. Lopato's role as Chairman is corroborated by a report on the tobacco industry in China given by Rea's Manual (see preceding note), p.315.
103. An item on the Alliance Tobacco Co. in the BAT house journal, under the sub-heading 'Associated Companies', states: 'The Alliance Tobacco Company of China Ltd. has its Head Office at Moukden [Shenyang] and is controlled by a Board of Directors there who are entirely independent of the B.A.T. ⋯ [This] will help the Reader to understand why it is that sometimes he finds the Alliance Company doing things differently to the way in which the B.A.T. does them, and why it is that their policy sometimes appears to be directly in opposition. Please remember that competition is a good thing for us all.' Yueh Pao, p.30. In fact, the degree of independence of the Board of Directors seems to have been rather more limited than this account gives credit. Certainly a plan adopted by Lopato to franchise brands to a local Chinese dealer on an exclusive basis met with Thomas' opposition in 1919. See Thomas Papers, letter from Millard, Shanghai, to Thomas dated 13 Oct. 1919.
104. The problem arose due to depreciation of the local copper currency in North China which forced BAT to raise the price of its cigarettes from five to six coppers to retain its profit margin. The Russian manufacturers, on the other hand, were able to maintain the price of their similar quality cigarettes at the lower value, presumably because its prices were a function of the rouble exchange rate which had been less badly affected. The products of the Alliance company flooded into the markets of northern China and, because they passed through different channels to those used by BAT, many of the latter firm's dealers found their sales collapsing. BAT therefore reached an agreement with the directors of Alliance whereby the Anglo-American concern would take over the marketing of all the Alliance Company's brands outside of Manchuria. BAT Archive (SASS), Document Nos. 13-C-51 to 54, Minutes of Meeting of Board of Directors of Alliance Tobacco Co. of China, Ltd., 20 Sept. 1922.
105. The proportion of BAT's exports to China from the company's factories in Britain had steadily grown during the company's first decade in operation, possibly because of the convenience of the bonded factories which British legislation made available. In 1913, a new factory came into operation in Liverpool which began production of Chinese brands such as 'Ruby Queen' and 'Pirate'. J. Jones, Cigarettes - Liverpool 5; The Story of the Liverpool Branch of British-American Tobacco Company Ltd (Liverpool, n.d.), p.11.
106. In December 1920, following a number of requests by the company for him to return to his post in London, Thomas was formally requested by Hugo Cunliffe-Owen to resign from the BAT Co. Board. See Thomas Papers, correspondence from A.G. Jeffress, London, to Thomas dated 23 June 1920 and Thomas to H. Cunliffe-Owen, London, 3 Nov. 1920. On Thomas' work for the bank, see N.H. Pugach, 'Keeping an Idea Alive: The Establishment of a Sino-American Bank, 1910-1920', Business History Review, Vol.56 No.2 (1982), pp.265-93.
107. BAT Archive (SASS), Document No.2-E-32.
108. Thomas Papers, agreement between Mr Cheang Park Chew (Zheng Bo Zhao) and BAT Co. (China) Ltd, dated 16 May 1919.
109. Thomas Papers, letter from H.C. Tan, BAT Co. (China), Shanghai, to Thomas dated 10 June 1920.
110. Thomas Papers, letter from Thomas to A.G. Jeffress, London, dated 24 Aug. 1920.
111. On Wing Tai Vo's competition with Liggett and Myers, see Chen Ren Jie, 'Ying Mei', p. 158. Liggett and Myers had been acquired by ATC in 1899, during the so-called 'Plug War', but had become an independent entity again following the dissolution in 1911. On Liggett and Myers' role in the plug war, see M.R. Bums 'Outside Intervention in Monopolistic Price Warfare: The Case of the "Plug War" and the Union Tobacco Company', Business History Review, Vol.56 No.1 (1982), pp.33-53. BAT bought out Liggett and Myers interests in China in 1927. See BAT Archive (SASS), Document Nos. 2-E-71 to 73.
112. The regional links which were so important to the success of Wing Tai Vo were a characteristic feature of the capitalist bourgeoisie that had emerged in Republican China at that time. These groups, including Zheng Bo Zhao are discussed by Bergère, Golden Age, Ch.4, esp. pp.141-52.
113. Chen Ren Jie, 'Ying Mei', pp.160-61.
114. The cigarettes in question were Wills' 'Pirate', brand. Thomas Papers, letter from C.W. Pettitt, BAT Co.'s China Department, London, to Thomas dated 5 Oct. 1920.
115. BAT Archive (SASS), Document Nos. 2-E-32 to 43.
116. Wills and ATC were not the only cigarette manufacturers who attempted to develop a market for their products in China before 1900. The American firm of Cameron and Cameron, part of long-established group of family firms, began to export cigarettes to China in 1898 using the agency of Messrs. Sylva & Co. which, like Rex & Co., had established a link with Wing Tai Vo. This initiative seems to have foundered following the death of the senior partner of Sylva & Co. the following year. See letters Cameron & Cameron to Messrs H. Sylva & Co., Shanghai, dated 20 Oct. 1898 and 24 Oct. 1899, and to Alfred I. Hart dated 18 Nov. 1899 in the papers of the British-American Tobacco Co. Ltd, Petersburg, Virginia, Special Collections Department, William R. Perkins Library, Duke University.
117. Osterhammel remarks that of the 400 or so British firms which operated in the treaty ports, no more than a handful extended their activities beyond Shanghai and Hong Kong. Osterhammel, 'British Business in China', p.192.
118. For an assessment of these trading networks see G.G. Hamilton, 'The Organisational Foundations of Western and Chinese Commerce: An Historical and Comparative Analysis', in G.G. Hamilton (ed.), Business Networks and Economic Development in East and South East Asia (Hong Kong, 1991), pp.48-65.
119. On returning to China in 1929, James Hutchison had noted: The foreign sales staff was less than half of what it was fifteen years ago and, I soon learned, the men had practically given up travelling. Most of their work now consisted of checking, reading and writing reports and letters. The Chinese staff, mostly clerks, had increased ten times over.' Hutchison, China Hand, p.281
120. Cochran, 'Commercial Penetration', pp.172-6.
121. In his testimony to the Circuit Court in the case of United States v. American Tobacco Co. et al., 25 Feb. 1908, Duke stated: One of the mistakes the ATC made in the beginning [was] that we didn't keep up a separate organisation for all the principal businesses we bought ⋯ we would have got better service and better management; we would have had competition and would have built and extended the business. Q. You mean competition between those various branches of the ATC? A. Yes, sir.' J.B. Duke Business Papers.
122. This westernisation included Zheng Bo Zhao's use of BAT as a supplement to his own patriarchal authority to maintain control of his network of dealers. Chen Ren Jie, 'Ying Mei', pp. 163-4.