From the book : The gems of the East; sixteen thousand miles of research travel among wild and tame tribes of enchanting islands
Author: Landor, Arnold Henry Savage
Collection: Southeast Asia Visions New York and London: Harper and brothers, 1904
pg. 191 ... These sons of the Heavenly Empire flew a yellow flag over their settlement, and seemed to live on friendly terms with the Sulus...
NOTE : Obviously the chinese yellow flag had the dragon on it because the chinese community looked to the mother country as the only true ruler to answer, the flag was a naval flag because the Chinese traders were great navigators.
CHINESE MERCHANT FLAG
The chinese communities in Sulu also adopted a chinese merchant flag, it was red with a yellow gold circle on it; red was and is the color of the Han, the most important chinese ethnic group; the yellow gold color was the color of the Emperor of Qing or Ch'ing Dinasty, the Manchese dinasty.
Maybe the meaning of the flag and its symbol can be the following : the chinese people (red color ) surround and protect the yellow disk representing the Qing Dinasty .