In the 17th century, the Chinese coast experienced a surge in maritime trade, but the weakened Ming navy allowed pirates to control this commerce. Prominent pirate leader, Zheng Zhilong, utilizing European technology, dominated the Fujian coast. In 1628, the declining Ming dynasty decided to recruit him. Meanwhile, the Dutch, aiming for free trade in China, initially established a position on the Pescadores. However, after a defeat by the Ming, they moved to Taiwan. Zheng, now a Ming admiral, allied with the Dutch governor of Taiwan, Hans Putmans, to combat piracy. Still, tensions arose over unfulfilled trade promises by Zheng, culminating in a surprise Dutch attack on Zheng's base in 1633.

Zheng's fleet, heavily influenced by European design, was caught off-guard by the Dutch attack, thinking them allies. Most of the fleet was destroyed, with only a few workers aboard, who fled the scene. After this assault, the Dutch dominated the sea, plundering villages and capturing ships. They even formed a pirate coalition. However, their aggressive tactics united Zheng with his political adversaries. Preparing for retaliation, Zheng rebuilt his fleet and, using stalling tactics, awaited the perfect opportunity to strike. In October 1633, a large-scale naval battle ensued at Liaoluo Bay. The Ming fleet, utilizing fireships, inflicted significant damage on the Dutch. The latter's superior sailing technology allowed some to escape, but the overall victory went to the Ming.

The Ming's triumph at Liaoluo Bay reinstated China's authority in the Taiwan Strait, causing the Dutch to halt their piracy along the Chinese coast. While the Dutch believed they had shown their strength, the Ming felt they had achieved a significant victory. Zheng Zhilong's position was elevated after the battle, and he utilized his influence to grant the Dutch the trading privileges they sought. As a result, while Zheng chose not to rebuild the European-styled ships lost in the 1633 attack, he consolidated power over the overseas Chinese trade, becoming one of the wealthiest individuals in China.