During the 18th century, the Chinese city of Canton (Guangzhou) became a strategic hub for the global tea trade, a beverage particularly in demand by the British, represented by the renowned East India Company. In 1757, Chinese Emperor Qianlong ordered the closure of all customs offices except for the one in Canton. Canton was not chosen by chance: due to its geographical location, the Canton region (also known as Guangdong) had highly advanced port infrastructures that not only connected it to other Asian ports but also to its hinterland. Consequently, given the high demand for tea in Europe, many European trading companies were forced to establish themselves in Canton, inaugurating a system that lasted until the First Opium War (1839-1842). 

First of all, the Chinese, despite being suspicious of the growing number of European merchants stationed in Canton, were aware that tea was crucial to their economy; therefore, their goal was to maintain strict control over the area. To achieve this, a dedicated district was built between the city walls and the Pearl River: the buildings where the merchants lived were called 'factories,' an English term that translates to 'warehouse,' as they were used to store supplies and raw materials for trade. Each of these 'factories' (or, in Chinese, Shisanhang) was identified by the flag of the nation represented there: among them were not only the EIC but also American, French, Dutch, Danish, and even Swedish companies. This system was therefore designed to limit as much as possible the influence of foreign merchants in direct transactions. Overseeing this system and ensuring its proper functioning was an official called the Hoppo, who was in contact with the Chinese merchants' guild and supervised negotiations with European trading companies.