After their ouster from the coastal ports of China, Japanese and Portuguese traders collaborated with illegal smugglers on island ports along the Zhejiang and Fujian coast. Among these ports, Shuangyu on Liuheng Island  off the coast of Ningbo emerged as the primary emporium of clandestine trade. At first, Shuangyu only had temporary mat-sheds for the smugglers to house themselves and their goods during the trading season. In 1539, Fujianese traders started to guide foreign traders from Patani and Malacca to barter in Shuangyu and started to occupy the island. They were soon joined by the Fujianese merchants Jinzi Lao  and Li Guangtou , who led the Portuguese and assorted adventurers to Shuangyu. Attracted by the growing trade on the Zhejiang coast, the Xu brothers' syndicate moved their base of operations from the Malay Peninsula to Shuangyu. The existing clout of the Xu syndicate and its close partnership with the Portuguese made it the foremost smuggling bloc by 1542 after a series of mergers among the merchant-pirates in Shuangyu. The Ming navy began to clamp down on smuggling activities in 1543, but the Xu syndicate was able to repulse the Ming attacks in Shuangyu with the aid of Portuguese firepower. Hardened by their victories against the Ming navy, the smugglers expanded their network of activities down the coast of China all the way to Guangdong and inland to the metropolis of Nanjing, with Shuangyu being their hub. In 1544, this network was further expanded when Wang Zhi joined the Xu syndicate, bringing along his Japanese connections to Shuangyu. Thus Shuangyu reached its zenith as the biggest entrepôt in maritime East Asia trading goods from Europe and Asia until its downfall in 1548.

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