During the eighteenth century, the market in Europe and America for tea, a new drink in the West, expanded greatly. Additionally, there was a continuing demand for Chinese silk and porcelain. But China, still in its pre-industrial stage, wanted little that the West had to offer, causing the Westerners, mostly British, to incur an unfavourable balance of trade. To remedy the situation, the foreigners developed a third-party trade, exchanging their merchandise in India and Southeast Asia for raw materials and semi-processed goods, which found a ready market in Guangzhou. By the early nineteenth century, raw cotton and opium from India had become the staple British imports into China, in spite of the fact that opium was prohibited entry by imperial decree. The opium traffic was made possible through the connivance of profit-seeking merchants and a corrupt bureaucracy.

When the Daoguang Emperor took the throne in 1820, he walked into an ongoing crisis. From the late 1700s, opium had been leaking into China. In 1839, the trade with Britain, which was mostly handled in Canton, consisted of porcelain, tea, cotton, and silk. When cotton exports decreased, a trade imbalance occurred. Opium was seen as a replacement for it. Opium is addictive (see Opium Addiction), and the British East India Company took advantage of that. The substance was harvested in Bengal, near India, and it would be purchased by the British, who then would trade it with the Chinese. Many eventually became addicted to the drug and needed it to cope with daily life or else suffer from withdrawals. Chinese smugglers brought it farther inland for distribution to the population, causing the problem to grow worse. Americans competed with the Bengal opium by buying it in Turkey and then offering discounted opium at Indian auctions. Chinese smugglers then bought it, and the British East India Company helped by making illicit agreements to distribute it farther inland. Around 40,000 chests of it were brought into the mainland in 1839 alone. Buyers paid silver for it, so the silver stockpiles in China decreased significantly.

The Daoguang Emperor had made the use of opium illegal and wanted it confiscated at Canton. When shipments of opium poured into Canton, he had his minister, Lin Zexu, blockade the harbour. Following the seizure and destruction of opium, the British began shelling Chinese cities from their ships. The British, having a far superior navy eventually caused heavy enough casualties that the Chinese signed the Treaty of Nanking in 1842. The treaty forced China to open up multiple cities for trade, to pay for the cost of the war, and to turn control of Hong Kong over to the British. Rather than having any more destruction occur, the Qing Daoguang Emperor signed the treaty.

The Treaty of Nanking was the first of the "unequal treaties" that China was forced to sign. Although the British had to withdraw their troops, the rest of the terms benefited them over the Chinese. The Qing had to repay the British for the opium Lin Zexu confiscated, release all British prisoners, and cede Hong Kong to the British. In addition to Hong Kong, four other ports were opened to the British.: Xiamen, Fuzhou, Ningbo, and Shanghai. The sale of opium, which was the cause of the war in the first place, was not even addressed in the treaty.

Thus, while in China the use of opium was still illegal, Chinese smugglers continued to distribute opium on the streets to be used at home or in dingy opium dens in secret sub-basements in crowded cities. Authorities were authorized to arrest these people but were generally unsuccessful, mostly due to the fact that local officials were bribed.