Piaohao (

Traditional Chinese A tradition is a system of beliefs or behaviors (folk custom) passed down within a group of people or society with symbolic meaning or special significance with origins in the past. A component of cultural expressions and folklore, common examp ...

: , literally 'draft banks'), also known as (), (), or (), in

Mandarin Chinese Mandarin ( ; zh, s=, t=, p=Guānhuà, l=Mandarin (bureaucrat), officials' speech) is the largest branch of the Sinitic languages. Mandarin varieties are spoken by 70 percent of all Chinese speakers over a large geographical area that stretch ...

, or ''

Shanxi Shanxi; Chinese postal romanization, formerly romanised as Shansi is a Provinces of China, province in North China. Its capital and largest city of the province is Taiyuan, while its next most populated prefecture-level cities are Changzhi a ...

banks'' () or ''Shansi banks'' in

English English usually refers to: * English language * English people English may also refer to: Culture, language and peoples * ''English'', an adjective for something of, from, or related to England * ''English'', an Amish ter ...

, were a type of bank that existed in

China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

during the

Qing dynasty The Qing dynasty ( ), officially the Great Qing, was a Manchu-led Dynasties of China, imperial dynasty of China and an early modern empire in East Asia. The last imperial dynasty in Chinese history, the Qing dynasty was preceded by the ...

until approximately 1952. The were started by merchants from the province of Shanxi who were often originally engaged in other businesses before they entered finance. The were mostly active in

northern China Northern China () and Southern China () are two approximate regions that display certain differences in terms of their geography, demographics, economy, and culture. Extent The Qinling, Qinling–Daba Mountains serve as the transition zone ...

while the ''

qianzhuang Qianzhuang () were local independent Chinese banks in the early modern period, as distinguished from the nation-wide bank networks headquartered in Shanxi province called the "Shanxi banks" (票號, ''piaohao''). Also known by a variety of reg ...

'' were mostly active in the

south South is one of the cardinal directions or compass points. The direction is the opposite of north and is perpendicular to both west and east. Etymology The word ''south'' comes from Old English ''sūþ'', from earlier Proto-Germanic ''*sunþa ...

. The continued to be the dominant financial institutions of China until 1900 when more modern

commercial bank A commercial bank is a financial institution that accepts deposits from the public and gives loans for the purposes of consumption and investment to make a profit. It can also refer to a bank or a division of a larger bank that deals with whol ...

s started being created by both the imperial and provincial governments, and the benefitted more from their close ties with foreign banks operating in Chinese

treaty port Treaty ports (; ) were the port cities in China and Japan that were opened to foreign trade mainly by the unequal treaties forced upon them by Western powers, as well as cities in Korea opened up similarly by the Qing dynasty of China (before the ...

s. During their heyday the had over 400 branches operating across the territory of the Qing dynasty and branches in other countries like

Japan Japan is an island country in East Asia. Located in the Pacific Ocean off the northeast coast of the Asia, Asian mainland, it is bordered on the west by the Sea of Japan and extends from the Sea of Okhotsk in the north to the East China Sea ...

Korea Korea is a peninsular region in East Asia consisting of the Korean Peninsula, Jeju Island, and smaller islands. Since the end of World War II in 1945, it has been politically Division of Korea, divided at or near the 38th parallel north, 3 ...

Russia Russia, or the Russian Federation, is a country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...

India India, officially the Republic of India, is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area; the List of countries by population (United Nations), most populous country since ...

, and

Singapore Singapore, officially the Republic of Singapore, is an island country and city-state in Southeast Asia. The country's territory comprises one main island, 63 satellite islands and islets, and one outlying islet. It is about one degree ...

. After 1912 practically all either closed or were transformed into more modern types of banks. They continued to exist during both the early Republic of China and the

People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

until they were all finally

nationalized Nationalization (nationalisation in British English) is the process of transforming privately owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization contrasts with priv ...

alongside the and the rest of the Chinese financial industry in 1952.

Structure and business strategies

All were organized as single proprietaries or

partnership A partnership is an agreement where parties agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations ...

s, where the owners carried

unlimited liability An unlimited company or private unlimited company is a hybrid company (corporation) incorporated with or without a share capital (and similar to its limited company counterpart) but where the legal liability of the members or shareholders is not ...

. They concentrated on interprovincial remittances, and later on conducting government services. From the time of the

Taiping Rebellion The Taiping Rebellion, also known as the Taiping Civil War or the Taiping Revolution, was a civil war in China between the Qing dynasty and the Taiping Heavenly Kingdom. The conflict lasted 14 years, from its outbreak in 1850 until the fall of ...

, when transportation routes between the capital and the provinces were cut off, began involvement with the delivery of government tax revenue. grew by taking on a role in advancing funds and arranging foreign loans for provincial governments, issuing notes, and running regional treasuries. The business model of the gave very little protection to the capital of the shareholders; furthermore, the imposed a highly centralized management structure, and a tenure- and performance-based incentive structure which was used to discipline distant employees in faraway branches. The history of the dominant houses in the Shanxi banking shows that it was merchant families who originally began engaging in the monetary business, and they did this often without giving up their original trade. The Shanxi merchants conducted trade in

Chinese tea Chinese teas can be classified into six distinctive categories: White tea, white, Green tea, green, Yellow tea, yellow, Oolong tea, oolong, Black tea, black and Post-fermented tea, post-fermented. Others add categories for scented and compressed t ...

and would travel north through

Siberia Siberia ( ; , ) is an extensive geographical region comprising all of North Asia, from the Ural Mountains in the west to the Pacific Ocean in the east. It has formed a part of the sovereign territory of Russia and its predecessor states ...

to cities like

Moscow Moscow is the Capital city, capital and List of cities and towns in Russia by population, largest city of Russia, standing on the Moskva (river), Moskva River in Central Russia. It has a population estimated at over 13 million residents with ...

and

St. Petersburg Saint Petersburg, formerly known as Petrograd and later Leningrad, is the second-largest city in Russia after Moscow. It is situated on the River Neva, at the head of the Gulf of Finland on the Baltic Sea. The city had a population of 5,601, ...

; it is suspected that the Shanxi merchants had observed how

Western Western may refer to: Places *Western, Nebraska, a village in the US *Western, New York, a town in the US *Western Creek, Tasmania, a locality in Australia *Western Junction, Tasmania, a locality in Australia *Western world, countries that id ...

banking works there and attempted to emulate it, but the remained quite unique. Most were founded based on a joint investment, or (). Only a small number of only had a single investor. The shares held by managers carried non-binding votes that were cast exclusively in management meetings; meanwhile, the shares of the shareholders (or owners) carried votes which were cast only on Grand Assessment Days. These days were generally held after each fiscal cycle (typically three or four years) and allowed the shareholders to fire or retain managers and reallocate their shares. The shares that were inherited through death or retirement were made into a special non-voting class of shares with an expiration date that were only paid out divided. This was done to motivate long-term thinking and to keep the heirs of shareholders outside of the decision‐making process. A major difference between the and the ''

'' was the fact that the banking companies grew out of the money-changing businesses known as the and would engage in business typical of banks such as providing loans, savings accounts with interest, and so forth, while the would primarily facilitate the sending of remittances, that is, the sending of money, across the Chinese realm.Lloyd Eastman, Family, Fields, and Ancestors: Constancy and Change in China's Social and Economic History, 1550-1949, Oxford University Press (1988), pages 112-114. Furthermore, tended to be very locally run operations and were typically run only by a single family, or a close set of associates. In contrast, the maintained branch offices across China. This allowed money to be paid into one branch office and withdrawn from another branch office—essentially sent—without having to arduously transport actual physical silver

sycee A sycee (;.. from Cantonese , zh, j=Sai3 Si1, y=sai-sī, ). or yuanbao ( zh, t= 元寶, s= 元宝, poj=Goân-pó, j=jyun4 bou2, p=yuánbǎo, l=primary treasure, first=t) was a type of gold and silver ingot currency used in imperial China from ...

s or strings of copper-alloy cash coins under heavy guard across great distances, bringing many risks. The height of the capital stock of the ranged from about 20,000 to as much as 500,000

tael Tael ( ),"Tael" entry
at the

silver Silver is a chemical element; it has Symbol (chemistry), symbol Ag () and atomic number 47. A soft, whitish-gray, lustrous transition metal, it exhibits the highest electrical conductivity, thermal conductivity, and reflectivity of any metal. ...

, yet because most of the reserved an amount of capital protected, known as () or (), the operative capital of the banks was much less. The bank reserves were kept in the head office, known as the (). This was also the place where the household of the bank owner was registered. The tended to have branches, (), in every large Chinese city. This made the remittance of money easily possible between the head office and all of its branch offices. The had branches throughout China, but the core area of operation was

. Every three or four years, an account known as the () was provided to the shareholders of the , and dividends were then distributed among them. The most common form of shares was money (), but some shareholders would guarantee their shares with their office and their expected salary in a system that was known as a person-based share; in

this was called () or (). The operated in daily business, mainly with monetary remittances. The remittance fee, known as () or (), depended on the distance of the transaction, the urgency, and the quality of the silver that was paid to the remitting bank. The remittance fee that was to be paid by the remitter was known as (). It was either 2 taels () per 100 taels of silver that was being remitted, or only 1 tael (). Local differences in the value of silver ingots could be used by the for profits by arbitrage businesses; this was known as (). Another important part of the business model was the assaying of silver and the production of silver ingots (); these silver ingots are commonly known in English as sycees. Because the shareholders shared unlimited liabilities, when these changing market forces materialized, many of the shareholders of the went bankrupt, while some shareholders would turn to investments elsewhere and abandoned the model altogether. The had a system of shares known as dual class shares. These let the owners vote only on insiders' retention and compensation every three or four years. The shares of the insiders had the dividend plus votes in meetings advising the general manager of the on their work such as lending or other business decisions, and were swapped upon the death or retirement of the holder for a ⅓ inheritable non-voting equity class, dead shares, with a fixed

expiry date An expiration date or expiry date is a previously determined date after which something should no longer be used, either by operation of law or by exceeding the anticipated shelf life for perishable goods. Expiration dates are applied to some f ...

. These shares were augmented by contracts that would allow the enslavement of insiders' wives and their children, as well as their relative's servants as hostages. These governance mechanisms prevented insider fraud and propelled the to gain an empire-wide dominance over the Chinese financial sector. Due to this system, the remained fraud-free during their entire existence. An assortment of rules prevented abuses of power by branch insiders such as self-dealing, having side interests which could become a

conflict of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple wikt:interest#Noun, interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates t ...

, or even engaging in any other business interests. Neither were insiders allowed to lend their savings to anyone. Branch employees were also not granted any leave with the notable exception being the

funeral A funeral is a ceremony connected with the final disposition of a corpse, such as a burial or cremation, with the attendant observances. Funerary customs comprise the complex of beliefs and practices used by a culture to remember and respect th ...

s of their parents; furthermore, branch employees were forbidden from taking their family members with them or marrying while on duty. Severe restrictions were also placed on communication as branch employees were only allowed to write a single letter home each month, but the letter was to be reviewed by the head office of the in Shanxi before it was forwarded to the family of the branch employee. During the height of the , 1880 to 1900, their paid out dividends averaged 12,000 taels (or 18,000

Spanish dollars The Spanish dollar, also known as the piece of eight (, , , or ), is a silver coin of approximately diameter worth eight Spanish reales. It was minted in the Spanish Empire following a monetary reform in 1497 with content fine silver. It wa ...

) per fiscal cycle. These dividends were huge fortunes for China at the time—comparatively, a county administrator, or , would earn an annual salary of 45 taels of silver (or $67.50 in Spanish dollars). During this time, the province of Shanxi's best and brightest men were well-advised to forsake the Confucian civil service for careers in the banking sector because of this. Unlike shares, securities did not expire: they passed to the owners' heirs and paid interest rather than dividends. These policies may well have sharpened incentives to help the banks succeed, but they also showed that the voting rules employed by the could change over time.

History

Early history

The were an early Chinese banking institution were known as Shanxi banks by foreigners because they were owned primarily by Shanxi merchants. The exact origins of the remain unclear, and money-order services or remittance banks may or may not have existed in one form or another, at least in some regions of China, as early as the

Ming dynasty The Ming dynasty, officially the Great Ming, was an Dynasties of China, imperial dynasty of China that ruled from 1368 to 1644, following the collapse of the Mongol Empire, Mongol-led Yuan dynasty. The Ming was the last imperial dynasty of ...

period. The were, despite China's long economic history, the first institutions to offer a full range of banking services. Shanxi became a banking centre during this era. The arising of a banking centre in a remote northern inland Chinese province is akin to the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

' financial centre being in remote Fargo,

North Dakota North Dakota ( ) is a U.S. state in the Upper Midwest, named after the indigenous Dakota people, Dakota and Sioux peoples. It is bordered by the Canadian provinces of Saskatchewan and Manitoba to the north and by the U.S. states of Minneso ...

, rather than in

Manhattan Manhattan ( ) is the most densely populated and geographically smallest of the Boroughs of New York City, five boroughs of New York City. Coextensive with New York County, Manhattan is the County statistics of the United States#Smallest, larg ...

. The first documented , Rishengchang, originated from Xiyuecheng Dye Company

Pingyao Pingyao, officially Pingyao Ancient City, is a walled city in central Shanxi, China, famed for its importance in Chinese economic history and for its well-preserved Ming and Qing urban planning and architecture. Administratively, it comprise ...

in central

. The Rishengchang was founded in 1823 by Li Daquan, the owner of the Xiyucheng, a dyed goods company that would purchase raw materials in the province of

Sichuan Sichuan is a province in Southwestern China, occupying the Sichuan Basin and Tibetan Plateau—between the Jinsha River to the west, the Daba Mountains to the north, and the Yunnan–Guizhou Plateau to the south. Its capital city is Cheng ...

and ran stores in the cities of

Beijing Beijing, Chinese postal romanization, previously romanized as Peking, is the capital city of China. With more than 22 million residents, it is the world's List of national capitals by population, most populous national capital city as well as ...

Shenyang Shenyang,; ; Mandarin pronunciation: ; formerly known as Fengtian formerly known by its Manchu language, Manchu name Mukden, is a sub-provincial city in China and the list of capitals in China#Province capitals, provincial capital of Liaonin ...

Tianjin Tianjin is a direct-administered municipality in North China, northern China on the shore of the Bohai Sea. It is one of the National Central City, nine national central cities, with a total population of 13,866,009 inhabitants at the time of the ...

, and others. Lei Lvtai, also from Pingyao, observed expensive shipments of silver often would pass each other, going in opposite directions for vast distances; this inspired Lei to see a business opportunity. Lei suggested to his boss, Li Daquan, around the year 1823 that this presented an opportunity to replace expensive private security, wagons, and pack animals with a clearing house for the interregional transfer of money, the settlement of accounts, deposit accounts, loans, and

currency exchange A bureau de change (plural bureaux de change, both ; British English) or currency exchange (American English) is a business where people can exchange one currency for another. Nomenclature Originally French, the term () is widely used thro ...

services. The Rishengchang was capitalized with 300,000 taels of silver (or about 450,000

dollars Dollar is the name of more than 25 currencies. The United States dollar, named after the international currency known as the Spanish dollar, was established in 1792 and is the first so named that still survives. Others include the Australian d ...

) by Li Daquan. It is possible that Lei Lutai had added 20,000 taels of silver. Lei was the first general manager of the Rishengchang, with Mao Hongsui and

Cheng Dapei Cheng may refer to: Chinese states * Chengjia or Cheng (25–36 AD) * Cheng-Han or Cheng (304–338) * Zheng (state), or Cheng in Wade–Giles Places * Chengdu, abbreviated as Cheng * Cheng County, in Gansu, China * Cheng Township, in Malacca, Ma ...

as the bank's assistant managers. After a few years Mao Hongsui ran into some disagreements with Lei Lutai over business strategy and within a couple of years Mao had organised five more banks. In turn, the managers of these banks also started leaving and creating their own banks. From 1823 to the early 1840s, the would experience rapid growth by providing bank drafts as a service for traveling Chinese merchants. These bank drafts could be obtained if a merchant deposited money in cash at a local branch office. The draft was then ripped in half and one half was given to the seller as an

IOU An IOU (Abbreviation, abbreviated from the phrase "I owe you") is usually an informal document acknowledging debt. An IOU differs from a promissory note in that an IOU is not a negotiable instrument and does not specify repayment terms such as th ...

and the other to the branch of the bank of the seller. After the buyer confirmed the receipt of the goods, the seller could then claim the missing half of the bank draft that was issued to join at his branch office and effect the transfer of monetary funds into his account there. 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 were established in Shanxi province, including

and the neighboring counties of Qi County, Taigu, and

Yuci Yuci District () is a district in Jinzhong, Shanxi, China. Administrative Divisions Subdistricts: * Beiguan Subdistrict (), Jinlun Subdistrict (), Xinhua Subdistrict (), Xinan Subdistrict (), Luxi Subdistrict (), Anning Subdistrict (), Jin ...

. By the end of the nineteenth century, thirty-two with 475 branches were in business covering most of China, and the central Shanxi region became the '' de facto'' financial centre of Qing China. During stable times the were based on

Confucianist Confucianism, also known as Ruism or Ru classicism, is a system of thought and behavior originating in ancient China, and is variously described as a tradition, philosophy, religion, theory of government, or way of life. Founded by Confucius ...

hierarchical structures and imperial edicts. Usually disputes were not brought to any formal courts and the act of taking someone to court was not only ineffective but was considered shameful in traditional Chinese culture. The insider laws of the were based on Confucian traditions and the laws themselves can be described as "a game of ritual formalism". Because the descendants of merchants (a class which includes bankers) were not allowed to take any civil service examinations for three generations, the majority of the Chinese magistrates came from other classes of the

four occupations The four occupations (), or "four categories of the people" (),Hansson, pp. 20-21Brook, 72. was an occupation classification used in ancient China by either Confucian or Legalist scholars as far back as the late Zhou dynasty and is considered a ...

, mostly from the land-owning classes. Because the merchant class could not rely on the magistrates for fair justice, they had to create their own system of enforcing contracts—this system included a general manager chosen by the shareholders. These general managers usually had a team of vice presidents that were tasked to supervise the clerks and other bank employees. During their early years, the would pay depositors interests of 0.2% to 0.3% per month and lend out money at an interest rate of 0.6% to 0.7% per month. The biggest clients of the were merchants and various wealthy individuals, especially the

nobility Nobility is a social class found in many societies that have an aristocracy. It is normally appointed by and ranked immediately below royalty. Nobility has often been an estate of the realm with many exclusive functions and characteristics. T ...

with whom the had connections. The would also record loans made from one party to another. The society of the Qing dynasty was one where the general population tended to have a mistrust of outsiders. Usually, people only trusted their direct family members or people with whom they had established longstanding ties. In this society large business enterprises that were run by professionals were largely disfavored. Despite these societal factors, Chinese merchant

guild A guild ( ) is an association of artisans and merchants who oversee the practice of their craft/trade in a particular territory. The earliest types of guild formed as organizations of tradespeople belonging to a professional association. They so ...

s, which were monopolistic in nature, had found a way to circumvent these issues by vouching for traveling merchants who were paying members. Some Chinese merchant guilds would accept members from many regions of China. The Shanxi Dyed Goods Guild, of which the Rishengchang was a member, was restricted to families that originated in Pingyao county, Shanxi; these types of restrictions would also later be adopted by other for their hiring practices. Many would only hire people from the province of Shanxi while other would completely restrict their hiring to only a single county. For their hiring practices, the would check an applicant's family background for three generations—this was because families rarely moved to distant places in China and old neighbors intimately knew each other's families as well as each other's family histories. The background check and guarantor from the applicant's native county ensured both the loyalty and total honesty of the employees that were hired by the '','' but this system also protected them. If a dispute arose between the employee and the , the guarantor undertook negotiations with the to make sure that the manager was not impugned unjustly. The decision to completely limit the fulfillment of staff to only people from the same region or whose ancestral roots lay in the same region proved to be a rather powerful governance mechanism. The dividend paid out to the managers was allocated to their blood relatives back in the Shanxi province, which meant that the social and economic status of their families depended on their performance, and any malfeasance from these managers would endanger not just their families' economic and social status back home, but also their freedom and lives. A potential employee with a clean background would present a personal guarantee letter from an eminent personage in his native county for the bank.

Rise of the

From the 17th century onwards, China experienced a growing business of interregional trade which required a more elaborate system of credit, exchange, and remittance than that which was already in place. This demand was behind the early success of the as interregional banks. Paramount to this development were local banks in the districts of Pingyao, Qixian, and Taigu, all in the province of Shanxi. Because the credit business was overwhelmingly controlled by the merchant banks from the province of Shanxi, they were also commonly known as (), which is how they came to be known as the ''Shansi Banks'' to foreigners.

Shanxi merchant Shanxi merchants, also known as Jin merchants (), were the group of merchants from Shanxi province, China. ''Jin'' is an abbreviated name of Shanxi. Even though the history of noticeable Shanxi merchants can be dated back to as early as the Spri ...

s were so intertwined with the financial business that they received nicknames like (, 'changers') or (, 'moneylenders'). The helped promote interregional trade in China. The most important of the three banking groups or () in Shanxi were the Pingyao-based Rishengchang Bank (), the Pingyao-based

Five United Weizi Banks 5 (five) is a number, numeral and digit. It is the natural number, and cardinal number, following 4 and preceding 6, and is a prime number. Humans, and many other animals, have 5 digits on their limbs. Mathematics 5 is a Fermat pri ...

(), the Qixian-based Heshengyuan Bank (), a bank based on the Chinese tea trade, or the Taigu-based Zhichengxin Bank (), who were former silk traders. The members of the Pingyao-based Five United Weizi Banks include: * Weitaihou (); * Weifenghou (); * Weishengzhang (); * Xintaihou (), and * Tianchengheng (), a company that was formerly operating in the silk business before it became a bank. The acquired a vast network of customers throughout China by establishing a widespread network of branch offices to provide their services in more places; furthermore, the were responsible for inventing various types of draft and creating more pricing remittance fees based on a diverse range of factors. The would oftentimes only hire people from the province of Shanxi, or only from a single county; for example, the Rishengchang only hired people from Pinyao. This was because in traditional culture outsiders were frowned upon and many people often only preferred to deal with only direct family or people from the same area as them. During the heyday of the there were a total of 32 independent banks in operation, with over 400 branch offices spread throughout China. Some also had branch offices abroad in the

Japanese Japanese may refer to: * Something from or related to Japan, an island country in East Asia * Japanese language, spoken mainly in Japan * Japanese people, the ethnic group that identifies with Japan through ancestry or culture ** Japanese diaspor ...

cities of

Tokyo Tokyo, officially the Tokyo Metropolis, is the capital of Japan, capital and List of cities in Japan, most populous city in Japan. With a population of over 14 million in the city proper in 2023, it is List of largest cities, one of the most ...

Kobe Kobe ( ; , ), officially , is the capital city of Hyōgo Prefecture, Japan. With a population of around 1.5 million, Kobe is Japan's List of Japanese cities by population, seventh-largest city and the third-largest port city after Port of Toky ...

, and

Yokohama is the List of cities in Japan, second-largest city in Japan by population as well as by area, and the country's most populous Municipalities of Japan, municipality. It is the capital and most populous city in Kanagawa Prefecture, with a popu ...

, the cities of

Incheon Incheon is a city located in northwestern South Korea, bordering Seoul and Gyeonggi Province to the east. Inhabited since the Neolithic, Incheon was home to just 4,700 people when it became an international port in 1883. As of February 2020, ...

;

Calcutta Kolkata, also known as Calcutta (List of renamed places in India#West Bengal, its official name until 2001), is the capital and largest city of the Indian States and union territories of India, state of West Bengal. It lies on the eastern ba ...

British India The provinces of India, earlier presidencies of British India and still earlier, presidency towns, were the administrative divisions of British governance in South Asia. Collectively, they have been called British India. In one form or another ...

; or the British

colony of Singapore The Colony of Singapore was a Crown colony of the United Kingdom that encompassed what is modern-day Singapore from 1946 to 1959. During this period, Christmas Island, the Cocos (Keeling) Islands, and Crown Colony of Labuan, Labuan were also ...

. The Beijing branch of the Rishengchang had a large plate () above its main entrance with the text (, 'Financial exchange all over the world'), for many years. In Qing China both the feudal nobility and the government bureaucrats were ''de facto'' above the law. These classes had the ability to confiscate the wealth of the general population, including Chinese merchants, with impunity. Furthermore, because the nobles and government bureaucrats could manipulate the Chinese legal system to their favor, there were no chances for the wronged parties to redress these confiscations. As the grew to become more prominent in the Chinese financial market, they presented a more attractive target for such predation by those in power. Consequently, the , like other Shanxi merchants, sought to ingratiate themselves with important government officials to avoid such a fate. In order to gain more favorable relationships with the government of the Qing dynasty, the would directly finance its expenditures. The also handled "donations" given to the Qing dynasty that bought honorary titles. They also invested in future mandarins by lending them funds for their travels to the capital city of Beijing, where they took the Confucian civil service examinations. The Beijing branches of many would heavily entertain Chinese government officials and feudal nobles. This policy would provide returns in several ways to the , as it not only attracted deposits of wealth from courted Chinese government officials and feudal nobles, but also entire budgets of ministries. The ministries often paid no interest in order for the to stay in the government's good graces.

Role of the during the First Opium War

While the 19th century was a disastrous time period for the Qing dynasty, the managed to turn each and every disaster that China faced into a profitable and lucrative business opportunity. The

Treaty of Nanking The Treaty of Nanking was the peace treaty which ended the First Opium War (1839–1842) between United Kingdom of Great Britain and Ireland, Great Britain and the Qing dynasty of China on 29 August 1842. It was the first of what the Chinese ...

stipulated that the government of the Qing dynasty had to pay the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

a sum of 21,000,000 Spanish dollars in war indemnities. To raise this amount of money, the government of the Qing dynasty issued an order to each Chinese provincial government to transfer a levy of silver to British agents stationed in the assigned

s and enclaves. However, this proved to be a predicament for inland provincial governments as they were unable to transport huge amounts of silver securely from the Chinese interior to the faraway treaty ports. General manager of the Rishengchang, Lei Lutai, saw an opportunity in this crisis. Lei instructed branch managers of the Rishengchang that were situated in the inland provinces of China to offer their Chinese provincial governments bank drafts to transfer the silver to the designated treaty port cities before the deadline with the British was met. In preparation for this move, Lei had ordered the move of large amounts of silver to the port branch offices of the Rishengchang, so that when the provincial government representatives arrived, sufficient quantities of silver would await them there. This plan had proved to work flawlessly for both the Chinese provincial governments and the Rishengchang and they averted an impending disaster.

During the Taiping Rebellion

The most important customers of the were the Chinese merchants who conducted interregional trade, known as (). This changed following the large Taiping Rebellion which affected Chinese society and its government immensely. The began to be trusted by the government to take over various tasks. These included the remittance of funds known as () to other Chinese provinces, in a process known as () or (); providing services such as the advanced payment for imperial troops, known as () or '' junxiang'' (軍餉); or providing funds for the infrastructure of the local Chinese governments. These funds were known as the (). The Taiping Rebellion had a major impact on the ability of the government of the Qing dynasty to collect taxes. The loss of many of its

southern provinces The Southern Provinces or Moroccan Sahara are the terms used by the Moroccan government to refer to the occupied territory of Western Sahara. These designations encompass the entirety of Western Sahara, which spans three of Morocco's 12 top- ...

to rebel forces deprived the Qing of millions of taxpayers and it also cut Beijing off from the remaining provinces and their resources in

Southwest China Southwestern China () is a region in the People's Republic of China. It consists of five provincial administrative regions, namely Chongqing, Sichuan, Guizhou, Yunnan, and Xizang. Geography Southwestern China is a rugged and mountainous region, ...

. In order to help transfer funds and government revenues through rebel territory, the government of the Qing dynasty sought the help of the ; the again used bank drafts for these monetary transfers. Thereafter, the military budget (), poll tax (), sales tax (), and provincial indemnity levies () all moved about the territory held by the Qing through interest‐free accounts at the , which lent at seven to eight . The also received many other beneficial business deals from the Chinese government during the Taiping Rebellion. The offered the deposit of funds, which were known as (), and credits, which were known as (), to the local government, which were then called the (), state officials, or private persons. The reputation of the during this era was very high and they greatly profited from this reputation. A huge number of people deposited their money and

savings Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an ...

. This was done in spite of the low interest rates given by the ; these low percentages were in contrast to the very high interest rates that they placed on credits. Credits were also given to smaller banks in

southeast China The points of the compass are a set of horizontal, radially arrayed compass directions (or azimuths) used in navigation and cartography. A ''compass rose'' is primarily composed of four cardinal directions—north, east, south, and west—each ...

that were known as the ''qianzhuang'', pawnshops that were known as (), and the great merchant houses of China. Finally the took over the office selling business—the purchase, or (), of Qing dynasty brevet titles (), or they advanced money for the purchase of a vacancy, known as (). At the height of the Taiping Rebellion, the business of transacting funds and revenue became even more dangerous for the Chinese government. In order to overcome these new difficulties, the existing were greatly expanded to accommodate this demand. The principal function of the under normal circumstances was to send currency to more distant places in payment for traded

goods and services Goods are items that are usually (but not always) tangible, such as pens or Apple, apples. Services are activities provided by other people, such as teachers or barbers. Taken together, it is the Production (economics), production, distributio ...

. For this service the remittance banks charged a fee, which ranged from 2% to 6%. During the usual course of business, these banks also held Qing Chinese government funds for disbursement. As the were strongly represented in the north of China, the Chinese government saw it as only natural that these banks would be chosen to disburse the

Hubu Guanpiao The Hubu Guanpiao (Traditional Chinese: 戶部官票, "Ministry of Revenue Government notes") is the name of two series of government notes produced by the Qing dynasty, the first series was known as the ''Chaoguan'' (鈔官) and was introduced ...

tael notes through their services.Pomeranz K (1993) ''The making of a hinterland: state, society and economy in inland North China'', 1853–1937.

University of California Press The University of California Press, otherwise known as UC Press, is a publishing house associated with the University of California that engages in academic publishing. It was founded in 1893 to publish scholarly and scientific works by faculty ...

Berkeley Berkeley most often refers to: *Berkeley, California, a city in the United States **University of California, Berkeley, a public university in Berkeley, California *George Berkeley (1685–1753), Anglo-Irish philosopher Berkeley may also refer to ...

. The were often active in the assigned

treaty ports Treaty ports (; ) were the port cities in China and Japan that were opened to foreign trade mainly by the unequal treaties forced upon them by Western powers, as well as cities in Korea opened up similarly by the Qing dynasty of China (before th ...

cultivating the business of both Chinese merchants and foreigner traders alike. The tended to be very competitive by nature and cooperated extensively with other branches of banking corporations within their own sphere. They would often send crucial banking-related news to member banks by

carrier pigeon The homing pigeon is a variety of domestic pigeon (''Columba livia domestica''), selectively bred for its ability to find its way home over extremely long distances. Because of this skill, homing pigeons were used to carry messages, a practic ...

. Prior to the introduction of the

railroad Rail transport (also known as train transport) is a means of transport using wheeled vehicles running in railway track, tracks, which usually consist of two parallel steel railway track, rails. Rail transport is one of the two primary means of ...

to China, the Chinese economy relied heavily on to finance inter-city commerce. In Northern China the preferred method of land transportation was the

camel A camel (from and () from Ancient Semitic: ''gāmāl'') is an even-toed ungulate in the genus ''Camelus'' that bears distinctive fatty deposits known as "humps" on its back. Camels have long been domesticated and, as livestock, they provid ...

due to the fact that these animals could cope with the conditions while many other animals could not. The employed camels in the north for transportation. The and other Chinese banking companies were essential in connecting the various monetary systems that circulated in China at the time by facilitating interregional trade and commerce, providing credit for merchants, and cooperating in times of crisis. It was customary for example for the Shanghai banks to make advances to

junk Junk may refer to: Arts and entertainment * ''Junk'' (film), a 2000 Japanese horror film * '' J-U-N-K'', a 1920 American film * ''Junk'' (novel), by Melvin Burgess, 1996 * ''Junk'', a novel by Christopher Largen * '' Junk: Record of the Last ...

owners who were engaged in the trade of carrying tribute rice to the north, holding their vessels as collateral. These junks, after having unloaded their rice in the port, would return with shipments of oil, peas, bean cakes, and other products for trade. The benefitted greatly from the "great contribution campaign", or the (). The campaign was instigated by the government of the Qing dynasty to cover their military expenses to continue fighting the

Taiping Heavenly Kingdom The Taiping Heavenly Kingdom, or the Heavenly Kingdom of Great Peace (1851–1864), was a theocratic monarchy which sought to overthrow the Qing dynasty. The Heavenly Kingdom, or Heavenly Dynasty, was led by Hong Xiuquan, a Hakka man from Guan ...

. During the campaign the Chinese government managed to advance 2,600,000 taels of silver for the purchasing of offices.

Role of the during the Second Opium War

Following the foreign victory during the

Second Opium War The Second Opium War (), also known as the Second Anglo-Chinese War or ''Arrow'' War, was fought between the United Kingdom, France, Russia, and the United States against the Qing dynasty of China between 1856 and 1860. It was the second major ...

, the Qing retaliated by torturing and killing British envoys; this act added an additional 8,000,000 taels of silver to the war debt of the Qing dynasty to the Western powers. The Qing was forced to legalise both

Christianity Christianity is an Abrahamic monotheistic religion, which states that Jesus in Christianity, Jesus is the Son of God (Christianity), Son of God and Resurrection of Jesus, rose from the dead after his Crucifixion of Jesus, crucifixion, whose ...

and

opium Opium (also known as poppy tears, or Lachryma papaveris) is the dried latex obtained from the seed Capsule (fruit), capsules of the opium poppy ''Papaver somniferum''. Approximately 12 percent of opium is made up of the analgesic alkaloid mor ...

as well as opening more of its ports to foreign traders where extraterritorial rights were granted to foreign enclaves. The were once again tasked with the transfer of funds via bank drafts by the inland provincial governments.

Modernisation of China and the role of the

By the 19th century, the had become quite well-established and widespread, handling as much as half of all banking activity in the Qing Empire; this would last until the establishment of an official modern postal service in the 1890s, which took over the role of the as a remittance service. The were crucial players in the modernization of China during the end of the 19th century. The gave credit for investing in industrialization and infrastructure, such as the construction of factories and railways across China. In fact, Ulrich Theobald from the website

Chinaknowledge Chinaknowledge, with the subtitle "a universal guide for China studies", is an English-language hobbyist's web site that contains a wide variety of information on China and Chinese topics. The site was founded by and is maintained by Ulrich The ...

.de argues that many of these improvements would not have been possible without financial aid from the . The

Shanghai Shanghai, Shanghainese: , Standard Chinese pronunciation: is a direct-administered municipality and the most populous urban area in China. The city is located on the Chinese shoreline on the southern estuary of the Yangtze River, with the ...

offered the subscription, or (), of bonds like the Zhaoxin share from the year 1898, which was also known as the (), or the bonds issued to finance the

Boxer Indemnity The Boxer Protocol was a Protocol (diplomacy), diplomatic protocol signed in China's capital Beijing on September 7, 1901, between the Qing dynasty, Qing Empire of China and the Eight-Nation Alliance that had provided military forces (including ...

, which were known as the (). They also issued shares themselves which did, as that of the Dadetong Bank (), which yielded enormous profits for the banks. The shares were valued at 850 taels of silver in the year 1889; later their shares stood at 3,150 taels of silver in 1896, 4,024 taels in silver in 1990, and at 17,000 taels of silver in 1908. During the latter half of the 19th century, a group of southern Chinese banks known as the (), which were usually called ''

yinhao Qianzhuang () were local independent Chinese banks in the early modern period, as distinguished from the nation-wide bank networks headquartered in Shanxi province called the "Shanxi banks" (票號, ''piaohao''). Also known by a variety of reg ...

'' (), was created by local traders and merchants in the southern province of

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. These were, for instance, the Yuanfengrun Bank () or the Yishanyuan Bank (). The would find that China's social and business environment became more unpredictable as it was expanding. This coincided with the managers of the reaching the zenith of their competence; the highly centralized structure of the organizations would begin to show lower returns on investment. These high financial leverages paired with a narrowed profit margin would also indicate the hidden risks that the faced. During this time period the banks became more important in the Chinese financial sector, as they had close connections to the foreign banking companies that began investing in China, particularly in the treaty port city of Shanghai. Despite the rise of the , the financial power of the would still allow them a superior position during this era, as many of the smaller would often borrow money from them. In 1875, 24 founded the common office, the Shanghai Banking Association, or the (). The were, furthermore, backed by the government of the Qing dynasty, the officialdom, wealthy merchants and merchant families, and the landowner class. Contact between the and foreign banks or foreign merchants at this time was rather indirect, and passed only through the mediation of the local . During the

Boxer Rebellion The Boxer Rebellion, also known as the Boxer Uprising, was an anti-foreign, anti-imperialist, and anti-Christian uprising in North China between 1899 and 1901, towards the end of the Qing dynasty, by the Society of Righteous and Harmonious F ...

, the directly financed the Qing court as it fled from Beijing to

Xi'an Xi'an is the list of capitals in China, capital of the Chinese province of Shaanxi. A sub-provincial city on the Guanzhong plain, the city is the third-most populous city in Western China after Chongqing and Chengdu, as well as the most populou ...

in 1900 following the occupation of the former by foreign powers. Around 1900 the heyday of the was over, even if they still had operating capital of more than 200 million taels of silver. The had gradually taken over the fields of business where the also operated. In addition, each province of the Qing dynasty had founded a government bank, known as the (); the central government of the Qing dynasty, too, had created national banks such as the

Commercial Bank of China Commercial may refer to: * (adjective for) commerce, a system of voluntary exchange of products and services ** (adjective for) trade, the trading of something of economic value such as goods, services, information or money * a dose of advertising ...

, the

Bank of Communications Bank of Communications (BOCOM or BankComm) is a Chinese multinational banking and financial services corporation. It was originally established in 1908 and was one of a handful of domestic Chinese banks that issued banknotes in modern history. ...

, and the Da-Qing Bank. During the

Xinhai Revolution The 1911 Revolution, also known as the Xinhai Revolution or Hsinhai Revolution, ended China's last imperial dynasty, the Qing dynasty, and led to the establishment of the Republic of China (ROC). The revolution was the culmination of a decade ...

it became very common for the branch offices of the to be subject to looting which caused immense financial losses; furthermore, the chaos caused many bad loans to not be repaid and many people started withdrawing their deposits. During this era Chinese commercial banks and foreign banks started to poach the staff of the when they started to penetrate the Chinese remittance market.

After the Xinhai Revolution

After 1912 practically all closed or were transformed into more modern types of

s. Following the Xinhai Revolution

rule of law The essence of the rule of law is that all people and institutions within a Body politic, political body are subject to the same laws. This concept is sometimes stated simply as "no one is above the law" or "all are equal before the law". Acco ...

collapsed, causing many provinces to declare their secession from the new republic, making China merely into a geographic region rather than a political one. The were forced to either liquidate themselves voluntarily or fall into bankruptcy. Various factors were responsible for the ultimate fall of the following the fall of the Qing dynasty. Foreign banking and financial companies that were operating in treaty ports and foreign enclaves benefited from relative rule of law and legal innovations of the Western world such as

limited liability Limited liability is a legal status in which a person's financial Legal liability, liability is limited to a fixed sum, most commonly the value of a person's investment in a corporation, company, or joint venture. If a company that provides limi ...

. Rival commercial Chinese banks gained similar flexibility under a 1901

German German(s) may refer to: * Germany, the country of the Germans and German things **Germania (Roman era) * Germans, citizens of Germany, people of German ancestry, or native speakers of the German language ** For citizenship in Germany, see also Ge ...

Civil Code, and other Chinese commercial banks also took root in foreign enclaves despite the legal discrimination they faced there. Modern technologies like railroads and telegraph lines let all such entrants establish account clearing operations that would rival the clearing houses already established by the at a lower cost. The rival banks, both foreign and Chinese, could charge less money for loans than the while paying higher

interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...

s. The main income of the , namely interest‐free deposits to the government of the Qing dynasty and intergovernmental transfers between different departments and provinces, disappeared overnight as there was no longer a Chinese government. The only institutional change brought to the Chinese financial system by the late Qing dynasty, the standardisation of currency, had completely ended the domestic money exchange business in which the were operating. As more chaos affected China, the ''s''' borrowers defaulted. They lacked any collateral—their reputation had always been enough to get a loan. The shareholders were completely unprotected due to their unlimited liability. The ''s''' capital shareholders and managers, due to the indemnification clauses which were present in their employment contracts, had to face the full losses causing many fortunes to be lost in the chaos. Following the takeover of

mainland China "Mainland China", also referred to as "the Chinese mainland", is a Geopolitics, geopolitical term defined as the territory under direct administration of the People's Republic of China (PRC) in the aftermath of the Chinese Civil War. In addit ...

by the

Chinese Communist Party The Communist Party of China (CPC), also translated into English as Chinese Communist Party (CCP), is the founding and One-party state, sole ruling party of the People's Republic of China (PRC). Founded in 1921, the CCP emerged victorious in the ...

(CCP) during the

Chinese Civil War The Chinese Civil War was fought between the Kuomintang-led Nationalist government, government of the Republic of China (1912–1949), Republic of China and the forces of the Chinese Communist Party (CCP). Armed conflict continued intermitt ...

and the

establishment of the People's Republic of China The proclamation of the People's Republic of China was made by Mao Zedong, the chairman of the Chinese Communist Party (CCP), on October 1, 1949, in Tiananmen Square in Beijing. The government of a new state under the CCP, formally called t ...

in 1949, the CCP started introducing many Soviet-style reforms. While many of the reforms affecting the ''

ancien régime ''Ancien'' may refer to * the French word for " ancient, old" ** Société des anciens textes français * the French for "former, senior" ** Virelai ancien ** Ancien Régime ** Ancien Régime in France {{disambig ...

'' banks, including the , superficially resembled the reforms of the Soviet Union, the CCP would adopt a strategy which they dubbed ''cultural positioning''. This model would utilize traditional Chinese cultural influences in the process of implementing radical Socialist changes. During this transitional period the would maintain their strong traditional identity, but as were severely influenced by the political changes that affected them, many adopted a strategy of political compliance for their continued existence. The CCP saw the in a very antagonistic light; this was for a myriad of reasons strongly related to their Confucian nature. The leaders of the CCP viewed the as part of the hated

bourgeoisie The bourgeoisie ( , ) are a class of business owners, merchants and wealthy people, in general, which emerged in the Late Middle Ages, originally as a "middle class" between the peasantry and aristocracy. They are traditionally contrasted wi ...

and claimed that private banks were anti-progressive,

nationalistic Nationalism is an idea or movement that holds that the nation should be congruent with the state. As a movement, it presupposes the existence and tends to promote the interests of a particular nation, Smith, Anthony. ''Nationalism: Theory, Id ...

, reactionary against the Socialist revolution, and that they were very politically unreliable. The CCP hoped to transform the financial sector of China to serve the

proletariat The proletariat (; ) is the social class of wage-earners, those members of a society whose possession of significant economic value is their labour power (their capacity to work). A member of such a class is a proletarian or a . Marxist ph ...

instead of the bourgeoisie. In reality, the political ambiguity of the private Chinese financial sector was likely an obstacle in the eyes of those who wished to transform the Mainland Chinese economy into a state-controlled

planned economy A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, ...

. But during the initial phase of the People's Republic of China, the continued existence of the independent private banks was tolerated. During the year 1950 the private banks of

Hankou Hankou, alternately romanized as Hankow (), was one of the three towns (the other two were Wuchang and Hanyang) merged to become modern-day Wuhan city, the capital of the Hubei province, China. It stands north of the Han and Yangtze Rivers w ...

steadily experienced a recovery. The recovery of the private financial sector was crucial for the economy of Hankou following the devastating

hyperinflation In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real versus nominal value (economics), real value of the local currency, as the prices of all goods increase. This causes people to minimiz ...

that affected mainland China during the aftermath of World War II and the retreat of the Nationalist Chinese government to Taiwan. The financial authority of Wuhan introduced more regulations and policies affecting local private banks, including the only in the city. The new

Wuhan Wuhan; is the capital of Hubei, China. With a population of over eleven million, it is the most populous city in Hubei and the List of cities in China by population, eighth-most-populous city in China. It is also one of the nine National cent ...

financial authority placed all banks, including , (Shanxi banks), and commercial banks, into a single category. The local government of Wuhan attempted to negotiate mandatory deposit reserve ratios for banks, valorise credit markets, and release tighter remittance restrictions on all banks to stimulate the ravaged economy. By the end of 1950 the Wuhan financial authority would place all and the sole remaining of Wuhan, most of which were located in former Hankou, into three bank unions. The banks were allowed to negotiate which union they would join. Seven would form the first banking union, five Zhe-Bang and one formed the second banking union, and five formed the third banking union.

Banknotes issued by

During the late Ming dynasty period, Chinese people already widely used letters of exchange or money orders known as ( or ) as a means of remittance (, or , ). By the 19th century

paper money Paper money, often referred to as a note or a bill (North American English), is a type of negotiable promissory note that is payable to the bearer on demand, making it a form of currency. The main types of paper money are government notes, which ...

had been long abandoned in China and various types of commodity currencies such as silver sycees denominated in taels had become the standard currency for large transactions. The tael had regionally varying weights dependent on which city it was being traded in; for example, the Guangzhou tael was 37.5 grams of silver, the Shanghai tael was 33.9 grams of silver, and the Customs tael was 37.8 grams of silver. The conversion rates between common tael types were well‐known among Chinese traders and merchants, and local units would take precedence unless a particular weight or purity was specified. The Spanish dollar (or ''piece of eight''), which was a common currency in coastal China, contained 25.56 grams of pure silver; this made one Chinese tael roughly 1.5 Spanish dollars. The monthly interest rates were usually 2-3 '' li'' for deposits and 6-7 for loans. Monthly interest rates were calculated based on permillage (‰) while annual interest rates were based on

percentage In mathematics, a percentage () is a number or ratio expressed as a fraction (mathematics), fraction of 100. It is often Denotation, denoted using the ''percent sign'' (%), although the abbreviations ''pct.'', ''pct'', and sometimes ''pc'' are ...

s (%). There exists the possibility that the papers issued by the were discounted when traded, but there is no evidence to support this hypothesis. Some issued their own paper bills, which were known as (), (), (), and (), with different functions (many of these banknotes represented letters of exchange). These banknotes were seen as "making good for the missing of a kind of paper money or paper currency in the monetary system of the (early) Qing dynasty period", as well as for the failed Great Qing Treasure Note and Hubu Guanpiao banknotes issued during the reign of the

Xianfeng Emperor The Xianfeng Emperor (17 July 1831 – 22 August 1861), also known by his temple name Emperor Wenzong of Qing, personal name Yizhu, was the eighth emperor of the Qing dynasty, and the seventh Qing emperor to rule over China proper. During his re ...

. The traded in currencies and conducted currency exchange. At the time there were twenty different forms of bulk silver currency circulating in China; each of these currencies had a different weight and percentage of silver purity. The issued two types of draft bills, one for ordinary customers and the other for longstanding customers. The bills issued for ordinary customers told the branch office to use a specific type of unit without informing the customer, while the bills for longstanding customers explicitly defined which unit was used.

Differences between and

Hankou

In an attempt to see why the succeeded in Hankou while the (or Shanxi banks) failed, Yun Liu attempted to compare them and tried to see why one type of bank slowly disappeared while the other continued to thrive in the same city by comparing information on both of them from the archives of Hankou. Both the and the expanded their businesses at the same time. During their history, neither the Hankou nor the Hankou chose to Westernise their business models and practices, and despite being managed very similarly, the Hankou would struggle following the fall of the Qing dynasty, while the Hankou would continue to strive. When modern banks started entering the Hankou scene, both the Hankou and the Hankou would maintain their small business and staff sizes. According to Yun Liu, some modern scholars claim that the disappeared because they resisted adopting modern corporate structures and they remained deliberately ignorant of how modern financial businesses operated. This narrative was stated by the manager of a Hankou in a report to his '''s'' head office in Pingyao, Shanxi, where he insisted on the incorporation of a new bank to be better equipped to compete. His plans included an elaborate scheme of staff duties, how ownership should work, and its corporate bylaws, but this proposal was disregarded by the higher-ups. Both the Hankou and the Hankou would continue to claim infinite liability without actualising an incorporated form. In reality this caused their business traditions to resist any adoption of fiscal reforms. Yun Liu also argues that it would be futile to argue that either the or the system would be more Confucian-featured, thus would either be more privileged or deprived in business because of this style assumingly. Following the

Wuchang Uprising The Wuchang Uprising was an armed rebellion against the ruling Qing dynasty that took place in Wuchang (now Wuchang District of Wuhan) in the Chinese province of Hubei on 10 October 1911, beginning the Xinhai Revolution that successfully overthr ...

which occurred in the city of

Wuchang Wuchang is one of 13 urban District (China), districts of the prefecture-level city of Wuhan, the capital of Hubei, Hubei Province, China. It is the oldest of the three cities that merged into modern-day Wuhan, and stood on the right (southea ...

, right next to Hankou, the number of Hankou decreased in a very short amount of time. During the Qing dynasty in 1881, the city of Hankou counted a total of 33 , while only 31 years later immediately following the proclamation of the Republic of China in 1912, the only numbered five. However, in 1923 the number of Hankou would increase to nine. In 1931 the number of Hankou was at 150 compared to only seven Hankou . Only two years later, in 1933, the number of active Hankou had been reduced to two. By 1949, when the

under the Chinese Communist Party was established, only a single remained in all of Hankou. In his paper, Yun Liu concluded that Hankou were more prone to (permanent) closure because they were more vulnerable to any changes in the political landscape due to their higher levels of exposure to political risks. While for politicians the would often serve as their liaisons to the locals, this might explain the failure of the Hankou being plausibly caused by its credit risk hidden in its uncollateralized loans, or a combination of various accidents over the years.

Jade parachutes and pensions

The had created a rather complicated system for pensions and welfare to help incentivise people to work harder for the shareholders. This pension scheme consisted of three separate funds was either referred to as a (literally 'pension account') or a ''

Caishen Caishen () is the mythological figure worshipped in the Chinese folk religion and Taoism. He has been identified with many historical figures, viewed as his embodied forms, among whom Zhao Gongming (, Wade–Giles: ''Chao Kung-ming''; also kn ...

'' (literally 'God of wealth account'). The first fund was a type of bad state‐of‐the‐world insurance. The capital shareholders and expertise shareholders would negotiate a fraction of earnings that would have to be retained to be placed into this fund. The money saved into this fund was used for the scenario when an "

act of God In legal usage in the English-speaking world, an act of God, act of nature, or damnum fatale ("loss arising from inevitable accident") is an event caused by no direct human action (e.g. Severe weather, severe or extreme weather and other natur ...

" harmed the bank's earnings during this fiscal year. The second fund was used to pay interest to the capital shareholders of the and this fund also contained their deposits; this was because capital shareholders were free to reinvest any fraction of their dividends into the company if they so wished. Drawing this fund down would require the approval of the capital shareholders. The fund provided a capital base for financing the development of the as well as its expansion. The third of these funds was used to pay dividends to both dead and retired shareholders as well their heirs. These payments always had fixed terms and were paid until the shares expired. For example, a general manager who formerly had a single expertise share would receive one "dead share" with an expiration date after eight years and a lesser insider with only one expertise share would receive a "dead share" which expired only after seven years. Insiders with fractional expertise shares were granted identical fractions of a "dead share", but these "dead shares" would expire sooner for smaller fractions. For example, "dead shares" comprising an eighth or a ninth of an expertise share were typically terminated after only six years, while those from 0.6 or 0.7 of an expertise share terminated after five years, and so on, getting shorter for smaller fractions. This system gave retiring managers of a or one of its branch offices strong incentives to look to the long‐run profitability of the in general, and to carefully choose and train those who would succeed them, for their incomes in retirement as well as the prosperity of their heirs would be dependent on the performance both the ''piaohao'' of their successors. According to some reports, the first general manager of the nominated a candidate other than his own son as the next general manager, as this system disincentivised

nepotism Nepotism is the act of granting an In-group favoritism, advantage, privilege, or position to Kinship, relatives in an occupation or field. These fields can include business, politics, academia, entertainment, sports, religion or health care. In ...

in favour of a

meritocracy Meritocracy (''merit'', from Latin , and ''-cracy'', from Ancient Greek 'strength, power') is the notion of a political system in which economic goods or political power are vested in individual people based on ability and talent, rather than ...

References

Sources

* Hong Pu (洪璞) (1998). "Shanxi piaohao (山西票號)", in Tang Jiahong (唐嘉弘), ed. ''Zhongguo gudai dianzhang zhidu da cidian'' (中國古代典章制度大辭典) (

Zhengzhou Zhengzhou is the capital of Henan, China. Located in northern Henan, it is one of the nine National central city, national central cities in China, and serves as the political, economic, technological, and educational center of the province. Th ...

: Zhongzhou guji chubanshe), 668. (in

). * Huang Da (黃達), Liu Hongru (劉鴻儒), Zhang Xiao (張肖), ed. (1990). ''Zhongguo jinrong baike quanshu'' (中國金融百科全書) (

: Jingji guanli chubanshe), Vol. 1, 227. (in

). * Mo Zongtong (莫宗通) (1997). "Piaohao (票號)", in Men Kui (門巋), Zhang Yanjin (張燕瑾), ed. ''Zhonghua guocui da cidian'' (中華國粹大辭典) ( Xianggang: Guoji wenhua chuban gongsi), 102. (in

). * Tang Chuansi (唐傳泗) (1992). "Piaohao (票號)", in ''Zhongguo da baike quanshu'' (中國大百科全書), ''Zhongguo lishi'' (中國歷史) (

: Zhongguo da baike quanshu chubanshe), Vol. 2, 751. (in

). * Yao Enquan (姚恩權) (1993). "Piaohao (票號)", in Shi Quanchang (石泉長), ed. ''Zhonghua baike yaolan'' (中華百科要覽) (

: Liaoning renmin chubanshe), 85. (in

). * Zhang Guohui (張國輝) (1988). "Piaohao (票號)", ''Zhongguo da baike quanshu'' (中國大百科全書), Jingjixue (經濟學) (

: Zhongguo da baike quanshu chubanshe), Vol. 2, 712. (in

). * Zhaojin Ji (2003). ''A History of Modern Shanghai Banking: The Rise and Decline of China's Finance Capitalism'' ( Armonk /

London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...

: Sharpe). {{Shanxi topics Defunct banks of China Economic history of China Financial history of China Banking in China Banks disestablished in 1952