IT has been shown in Chapter II that the expansion of Western commerce with China was from the beginning closely linked with the activities of foreign ships in Far Eastern waters. The links were not only those created by a mutual dependence of ships and trade, but at times they took the form of an integration of shipping and trading functions in the same firms. Both the East India Company and some of the merchant houses that succeeded to its empire were shipowners as well as traders, and their success in the buying and selling of goods was in a large measure dependent upon their capacity for organising the means of carriage over oceans and inland waters. The great shipping lines which, after the middle of the nineteenth century joined Europe and America with the Far East, generally owed their origins to the initiative of merchants, and some of them have retained associations with particular mercantile houses down to the present time. In the coastal and inland waters of China, the merchants' part in the inception and development of services was predominant.
In the early years of the modern era the ships that carried the cargoes between China and the West were sailing ships. This was, to later eyes, the romantic period when the great tea clippers made their easting and then raced home to London with each new season's crop. They survived until the opening of the Suez Canal in 1869 conferred a decisive advantage on the steamers, since sailing ships were not allowed through it. By then, however, steamship companies had long been competing for the trans-ocean trade. The first of these was the Peninsular and Oriental Steam Navigation Company, which came into being after protracted negotiations among the interests concerned with Oriental trade and communications, namely the British Government, the East India Company, and the merchant houses of London, Liverpool and Calcutta. In 1840 the P. and O. agreed to conduct a regular service to India with the aid of annual subsidies from the British Government and the East India Company, and in 1844 it signed a contract with the former to carry mails between Suez and Hongkong. This led to the institution of a steamer service between Ceylon and Hongkong to connect with the monthly service from Suez to Calcutta, with the result that the time taken for mail between England and China was reduced from five months to eighty days. In 1850 the service was extended to Shanghai,