China faced a great time of turmoil in the twilight of the Ming dynasty. Europeans from the West encroached on imperial power while war with Manchuria emptied the coffers and piracy limited trade that would produce tax-income. If Emperor Chongzhen were going to win the war in the north, he needed to secure the seas to the south.
This event would be a boon for Chinese business, but the monopoly would challenge the lucrative Dutch control of trade with Japan. Hans Putmans, governor of Formosa (Taiwan), decided to end the Emperor's action before it could be started and launched a sneak attack on Zheng's fleet in harbor. On July 7, 1633, he destroyed much of the fleet.
Zheng reacted with a cunning plan to rebuild his fleet: use locals. He set up recruitment with two pieces of silver for each man volunteering for service, five if the battles with the pirates and Dutch went long. Though not expert sailors, they were organized into 16-man fire-boats that were easily maneuverable and sailed. For each Dutch ship destroyed, the boat would be given a bounty of 200 silver pieces. Each Dutch head brought in would be traded for 50 silver pieces.
With more than one hundred fire-boats on the prowl, Putmans and his pirate allies faced gradual attrition over the summer and into fall. By October 22, Putmans' fleet of twenty warships had been dwindled to nine. When he and his fleet spotted the Chinese warships approaching, Putmans made the split decision to retreat to the safety and regroup. While he might have won the battle, the war was against his favor.
Instead, Putmans decided to fight fire with fire: this was to be an economic war. He took on volunteers at three silver pieces each and promised bounties half-again as much for destroyed Chinese ships and heads of Chinese crew. Through the rest of fall, the south sea turned into a bloodbath, attracting pirates from as far away as Arabia. The Dutch East India Company questioned Putmans' wild expenses, but the governor assured stockholders that the small debt would be a valuable investment. By the time shipping slowed for winter, the war had become a stalemate.
Putmans and Zheng both rebuilt their fleets and launched into one another early in 1634. While the Chinese had English-made cannon, the Dutch ships had been able to produce more firepower from their Formosan smiths. On April 2, 1634, the fleets met in a decisive battle that ended with the capture of Zheng. Rather than execute the enemy, Putmans offered to hire Zheng away. Zheng said that he would only join the Dutch if given an exorbitant ten million pieces of silver, but Putmans surprised him by agreeing. The Company balked, but Putmans silenced them with promise to pay out of his own earnings in addition to yearly installments.
Zheng came to dominate trade while Putmans worked to develop Formosa, building plantations and settlements. He set up a “blood tax”, forcing natives to give up children as slaves, which produced profitable cheap labor for the Company. In 1644, the Ming Dynasty fell to the uprising of Li Zicheng, and Putmans made his move. Using Zheng's connections, the two masterminded a Dutch invasion of the south of China, establishing a huge new sphere of influence. Zheng was made the governor of the land, becoming almost a king as he worked to improve profits for the Company.
The Dutch came to control the Far East, while the French and, especially, English attempted to challenge their power, but fast alliances with Zheng and his legacy of pirates made the Dutch all but invincible there. Over the next century, great wealth poured into the Netherlands from the East, which they in turn invested back into imperial growth. Despite attempts to keep the locals under thumb, Japan would eventually come to their own industrial revolution and challenge Dutch authority in the Dutch-Japanese War through the 1930s. The carefully cultivated resources came under Japanese control, though fleetingly as their choice of allying with Hitler's Axis would end in surrender under atomic barrage.
In reality, Putmans' fleet met with that of Zheng Zhilong and was destroyed. Zheng ordered his crews to focus on the more threatening Dutch ships and, once those were defeated, to mop up the rest of the pirate menace. Three Dutch ships were lost, forcing Putmans to retreat and surrender the strait to Chinese control. He continued his governorship of Formosa, developing the island at the cost of native lives. Zheng, meanwhile, gained enormous wealth from his victory and would gain further wealth by switching allegiances to the Manchu in 1646. He would later be executed by the Qing.