Shanxi merchants
Shanxi merchants, also known as Jin merchants (
The Shanxi merchants also operated an early Chinese type of draft bank known as the
History
Shanxi merchants were among the earliest Chinese businessmen and their history could be traced back to the Spring and Autumn Period and the Warring States period. Southern Shanxi first came into commercial prominence due to its proximity to the political and cultural centers of ancient China.
However, it was not until the Ming and Qing dynasties, that Shanxi merchants really stood out among other Chinese merchant groups, built a strong and long-lasting commercial network and accumulated enormous wealth.
At the beginning of Ming dynasty, the newly established government was in constant fighting with the remnant of the expelled Mongolian armies, along the northern border. In order to reduce the cost of logistics to transport food and other essential supplies to the military, the Ming government decided to grant
In Qing dynasty, merchants from central Shanxi basin, including Yuci, Qixian, Taigu, Pingyao, etc. pioneered the first private financial system, so-called draft banks or Piaohao, throughout and even beyond China. By the end of the nineteenth century, thirty-two piaohao with 475 branches were in business covering most of China, and the central Shanxi region became the de facto financial centres of Qing China.[1]
During the Republic of China period, the Qing Shanxi merchants based on conventional draft banks and tea trade had largely fallen. The prominent example of Shanxi merchants during this time is H. H. Kung, who was highly influential in determining the economic policies of the Kuomintang-led Nationalist government.
Legacies
Business and culture legacy
Shanxi merchants were active for more than five hundred years from the early Ming dynasty, creating centuries-old prosperity, leaving significant business and cultural legacies. Among the diverse businesses scope that Shanxi merchants had worked on, there are two main trades, one is the draft bank system, or Piaohao, serving as the main financial institutions, and the other is the tea trade to Mongolia and Russia, in exchange of fur and European goods.
All piaohao were organised as
To successfully run a nationwide financial system, credibility was of paramount importance for the draft banks. There were numerous stories that Shanxi draft banks honored their bank notes even after generations or major disasters. An honorary system to the highest degree was a main legacy of the Shanxi merchants.
They widely employed joint ventures among families living in the same villages or towns, yet they generally avoided using direct relative in the business management, direct relatives could only be owners together but not managers. This way they minimized the interference of personal bias based on kinship with professional business management.
They were the first to separate the ownership and management of businesses, which is crucial for professional business development, such as draft bank financial systems. The professionalism of Shanxi Merchants was also well-known. Their professionalism was characterized by dedication and focus.
The families of Shanxi Merchants were generally different from historically wealthy families, who gained wealth mainly through political privilege with key family members as bureaucrats in the court. A lot of Shanxi merchants tended to run businesses without ambition in politics. Although some of them did eventually seek higher social status by joining the Chinese bureaucratic system, and combined the business network and wealth with political power.
China Central Television created an eight-part documentary about them in 2006.
Architecture legacy
The enormous wealth accumulated from the international trade and the financial institutions had enabled the Shanxi merchants to build luxurious family residences The houses and gardens built by them are culture and architecture heritages now, and most of these buildings are scattered throughout the central Shanxi basin.
The notable architecture complexes are:
- Wang Family Compound in Lingshi, which is the largest of the Shanxi Courtyard Houses.
- Qiao Family Compound in Qi County
- Qu Family Compound in Qi County
- Chang Family Compound in Yuci
- Taigu
- Taigu, where H. H. Kung's family used to live.
- Taigu, later, this private family compound was transformed to the Ming Hsien school (铭贤学校), which is further incorporated as part of Shanxi Agricultural University.
- Shen Family Compound, (申家大院) in Changzhi.
Origin of Shanxi Banks
There is still no consensus on the details of origin of Shanxi Banks. Most scholars believe that the Shanxi banks are a native innovation from China,[3] while some western scholars (initially proposed by Randall Morck) hypothesize a potential influence from Russia or Britain.[4]
Rishengchang
Rishengchang, the first draft bank or piaohao (票號), originated from Xiyuecheng Dye Company Pingyao in central Shanxi.[5] Rishengchang was estimated to be founded during the Qing dynasty in 1823. However, the exact founding year remains controversial, some scholars argue it was found in 1797 or 1824.[6] To deal with the transfer of large amounts of cash from one branch to another, the company introduced drafts, cashable in the company's many branches around China. Although this new method was originally designed for business transactions within the Xiyuecheng Company, it became so popular that in 1823 the owner gave up the dye business altogether and reorganized the company as a special remittance firm, Rishengchang Piaohao.
In the next thirty years, eleven piaohao were established in Shanxi province, including
All piaohao were organised as
Geopolitical Background of Shanxi Draft Bank
During the Mongol Empire and Yuan dynasty, the Golden Horde and Chagatai Khanate ruled over the lands of Central Asia and further west, leading to the creation of prosperous business cities like those in Samarkand, Uzbekistan. During this time, the Silk Road was unified under one power, and traders like Marco Polo and Ibn Battuta across Eurasia could travel peacefully. However, after Mongol Empire was succeeded by several smaller states over the centuries, the overland Silk Road had become splintered and less used due to deterioration and political destabilization. Bandits had drained most of the region of commerce, and the subsequent Ming and Qing dynasties of China had overland power struggles with other political powers (the Ming competed with the Northern Yuan, and the Qing declined after the Opium Wars with European powers).[4]
From the late
The quarantine band around the Chinese coast which was marked with signs stating "anyone found over this line shall be beheaded instantly", was thoroughly patrolled by the military of the Qing dynasty and the affected area was widened a total of three times.[4] In the year 1683 the coastal areas of China were allowed to be resettled and in the year 1865 at the port cities of Guangzhou, Zhangzhou, Ningbo, and Yantai a more limited form of international trade was allowed by the government of the Qing dynasty.[4] This very limited form of international trade along some parts of the Chinese coast was ended when, in the year 1757, the Qianlong Emperor had closed off all of these port cities to foreigners once again.[4] Limited trade resumed in Guangzhou following the uninvited arrival of British ships in the year 1759 and the restricted reopening of the city a year later in 1760.[4]
The restrictions placed on foreign trade by the government of the Qing dynasty was known as the cohong system (or the kung hung system),
During this era foreigners doing business in China risked unpredictable fines imposed on them by corrupt government officials, enthusiastic torture, imprisonment based on arbitrary accusations, and instant death until the year 1842, this was when the British were victorious in the
As the piaohao came into existence during this period of xenophobia, they were an independently formed Chinese parallel to the European banking system created by the Shanxi merchants and because trade along the Chinese coastlines was so restricted the Shanxi merchants managed to form international trade networks across different routes.[4]
Trade with the Russian Empire
During
The trade routes between imperial Russia and the Qing dynasty was known as the "
Initially, the imperial Russian state maintained a complete monopoly on the lucrative trade with China, furthermore the government of the Qing dynasty required a prior preclearance of all exported goods in its capital city of
The Shanxi province itself did not plant tea itself, but the Shanxi merchants sold Chinese tea around the world through the route. The Tea Road route along which the old Shanxi merchants were the major force behind the international Chinese tea business started from the
Possible Russian and British influence on modern piaohao
While the Shanxi merchants entered Russia, banks in imperial Russia took deposits, they made loans, exchanged different currencies, and let merchants and traders transfer funds to each other, though they primarily only made loans to noblemen they favoured.[4] Furthermore, the banks in Russia were constantly unstable and felt high pressure to lend money to court favourites.[4]
The imperial Russian capital city of St. Petersburg was the westernmost known location of a Shanxi merchant operation, furthermore the city was also the doorway of Russia to the rest of Europe.[4] Because of its status, St. Petersburg also housed many branch offices of Western European banking and financial companies, Thompstone in 2004 described the city as being "a 'City of London' in miniature" due to the huge influence of British merchants and their banks over the city of St. Petersburg.[4]
The 2010 paper "The Shanxi Banks" by Randall Morck and Fan Yang claimed that it was plausible that Shanxi merchants could have been inspired by these British banks to create the modern piaohao.
Possible reasons for success of Shanxi merchants
There are many proposed reasons as to why the Shanxi merchants found success during the Qing dynasty while merchants from other provinces were generally less successful.[4] One proposition is that the province of Shanxi benefitted from gold and silver that was stolen out of the imperial treasury of the declining Ming dynasty.[4] In the year 2007 a coin board of 1.5 ton pre-Ming cash coins was discovered at a construction site in the province of Shanxi,[12] which gave this proposed reason more credence.[4]
Another plausible explanation for the position that Shanxi merchants had is based on defecting 1640s Ming soldiers reappearing in the Shanxi province acting as
The most plausible explanation of the financial prominence of the province of Shanxi states that its salt works at Xiechi Lake fostered mercantile activity that would ultimately need banks.[4] A state salt monopoly held by the imperial government persisted, with only a few minor interruptions, from the Han dynasty until the year 1370 during the second year of the Ming dynasty. In 1370 the army of the Ming began using its salt rights, known as yan yin, which were initially redeemable only at the Xiechi Lake, to pay for transporting provisions to Chinese soldiers stationed on the Great Wall.[4] As the Shanxi merchants were handling this lucrative business from its very beginnings, they managed to get a piece of the Ming state's monopoly and the imperial government quite likely netted more revenues of the salt monopoly because of higher overall efficiency.[4] This policy that benefited the Shanxi merchants remained in effect long enough for them to accumulate a substantial amount of wealth for themselves.[4] This hypothesis regarding the rise of the Shanxi merchants also accords with evidence that the region comprising the current Shanxi province was not an important commercial centre until the reign of the Ming dynasty.[4]
See also
References
- ^ Shanxi Provincial Academy of Social Sciences, ed., Shanxi piaohao shiliao (山西票号史料) (Taiyuan: Shanxi jingji chubanshe, 1992), pp. 36–39.
- ^ a b R. O. Hall, Chapters and Documents on Chinese National Banking (Shanghai: Shangwu yinshuguan, 1917), p. 3.
- ^ Huang Jianhui, Shanxi piaohao shi (Taiyuan: Shanxi jingji chubanshe, 1992).
- ^ a b c d e f g h i j k l m n o p q r s t u v w x y z aa ab ac ad ae af ag ah ai aj ak al am an ao ap aq ar as Randall Morck (University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governance Institute; Asian Bureau of Finance and Economic Research) & Fan Yang (University of Saskatchewan) (12 April 2010). "The Shanxi Banks". Academia.edu. Retrieved 31 October 2019.
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: CS1 maint: multiple names: authors list (link) - ^ Huang Jianhui, Shanxi piaohao shi (Taiyuan: Shanxi jingji chubanshe, 1992), pp. 36-39.
- )
- ^ Shanxi Provincial Academy of Social Sciences, ed., Shanxi piaohao shiliao (山西票号史料) (Taiyuan: Shanxi jingji chubanshe, 1992), pp. 36-39.
- ISBN 1-58008-745-0. Page 211.
- ^ Wenyon, Charles. Across Siberia on the Great Post-road. Charles H. Kelly, London, 1896, Page 76 (reprinted by Ayer Publishing, 1971).
- ^ Unlisted (10 January 2018). "700 relics bring Shanxi merchants' tea culture to life". www.chinadaily.com.cn/m/shanxi/ (The official website of Shanxi, China). Retrieved 12 December 2019.
- ^ Unlisted (27 April 2016). "Jin merchants of Shanxi province rediscover the old 'tea road'". www.chinadaily.com.cn/m/shanxi/ (The official website of Shanxi, China). Retrieved 12 December 2019.
- ^ "1.5 Tons of Ancient Coins Discovered in North China" People's Daily, Aug 30, 2007, pp. 20‐21.