Money and Trade in Qing China


A review of Money and Trade, Hinterland and Coast, Empire and Nation-State: An Unusual History of Shanxi Piaohao, 1820-1930, by Luman Wang.

Shanxi piaohao distinguish themselves from other early modern financial institutions for having successfully built a financial empire across China in the Qing Dynasty from the 1820s to the 1930s. It should be difficult to write a history of an empire lasting for more than a century; however, Luman Wang manages to present a vivid image of Shanxi piaohao. This dissertation covers the rise and fall of the financial empire in the age of imperialism through a sequence of dynamic scenarios. Thus, it is organized into five chapters based on these critical moments: the birth of Shanxi piaohao and the expansion with treaty-port trade, competition and cooperation as the routine, the rise to national prominence, the opt-out of the financial empire, and the post-piaohao era. We see here a group of business men reacting to opportunities in historical contingency, interacting and connecting with each other in the business empire they built, and finally making their own choices from their own perception of the future. We also see a group of financial firms developing in a closed and native business environment, contending with new and more powerful competition from outside, and also clashing with an old but still strong imperial system. Readers will be impressed by how dynamic and diversified the path of development had been for Shanxi piaohao in a drastically changing society.

Chapter 1 includes the birth of Shanxi piaohao in the 1800s, their early business from the 1820s to the 1860s, and the rise of the piaohao financial business after the 1860s. The demand for transporting silver ingots across the country is the primary reason for the birth of Shanxi piaohao, especially when social disorder caused more and more disruption to inland transportation in late nineteenth century China. Fundamentally, increasing commercialization and monetization after the late eighteenth century prepared the economy for the new financial firms. The early Shanxi piaohao not only provided remittance services for inter-regional merchants and local elites, but also engaged directly in long-distance trade, which was its main business before the remittance services. Even at this stage, Shanxi piaohao received large remittance orders from local governments. The real rise of Shanxi piaohao followed increasing financing needed to support the expansion and intensification of treaty port trade in both coastal areas and the interior after the 1860s. Shanxi piaohao remittance business linked inland areas with treaty ports by facilitating trade transactions and even by extending both long- and short-term credits to traders, which in general accelerated monetary flow across the empire. Contrary to the belief that modern colonial banks had already outstripped piaohao after the 1840s, this chapter finds that piaohao interaction with colonial banks reinforced their vital role.

Chapter 2 explores Shanxi piaohao everyday remittance business and their inter-firm relations. In this chapter, this dissertation first challenges the prevailing explanations in the literature regarding the disappearance of Shanxi piaohao. The backward and innately defective banking practices of Shanxi piaohao are often ascribed as one of the reasons; however, the author argues that the bookkeeping methods applied in Shanxi piaohao were functionally equivalent to their western counterparts, especially with regard to recording assets and liabilities and to keeping track of bad debts. Another common belief is that Shanxi piaohao were ignorant of using collateral loans to minimize losses on defaults. On the contrary, the author finds that they actually practiced collateral on a regular basis. Piaohao emphasis on loans on personal trusts can be a reasonable practice when conducting banking business in imperial China. At the end of this chapter, the author considers piaohao special inter-firm relations as the underlying reason for their quick opt-out from the financial market and their final disappearance.

Chapter 3 reveals the business relationship of Shanxi piaohao with the Qing Empire after the 1850s. It is commonly believed in the literature that their close linkage with the Qing state is the reason for their business success, and therefore the same reason for the decline of their businesses at the end of the Qing Empire. However, the author argues that piaohao business interaction with the Qing state was contingent and temporary at the beginning when piaohao started to actively participate in remitting taxes for provincial officials, and always controversial and inconsistent even after the 1860s when piaohao financial influence rose to national prominence. The Qing court believed that piaohao interference in imperial revenues would undermine the court’s control of fiscal revenues and territorial bureaucracy. Thus, the court never institutionalized remittance as a legitimate means of transferring taxes. The court launched four campaigns against provincial officials’ reliance on remittance services to deliver taxes and always insisted on restoring the conventional overland silver shipping method. From the piaohao perspective, the market for transferring government funds was never monopolized by their remittance business, which was never competent enough to replace overland shipment due to intrinsic problems in the piaohao mechanism of remittance.

Chapter 4 discusses the difficulties Shanxi piaohao encountered after the Qing’s modern financial reforms and explains why Shanxi piaohao finally declined to participate in the reforms. After 1895, the Qing state started a series of financial reforms aimed at centralizing and modernizing its financial administration. In this process, piaohao business for government remittances was eclipsed in competition with newly-chartered or state-owned modern Chinese banks. Finally, the newly-established Chinese central bank completely deprived piaohao and other cash shops of the privilege of handling government funds. After the reforms, piaohao not only operated under strict regulations and close monitoring, but also experienced shrinking business and a loss of profit. Nevertheless, piaohao still rejected the Qing’s financial reforms for two reasons. First, piaohao suffered from an unstable business relationship with the Qing court and provincial officials. Second, piaohao were still confident of coexisting with other financial institutions in the Chinese financial market.

Chapter 5 reviews the life of Shanxi piaohao families when piaohao gradually opted out of the financial market and adds new content to the study of Shanxi piaohao as financial-business entities from the previous four chapters. The author disagrees with the standard interpretation of piaohao decline, which especially links piaohao future to western-style modern banks. From a family-centered perspective, the author argues that although the piaohao financial business shrank in size and scope, piaohao and their families did not decline. After the Qing’s financial reforms, many piaohao merchants quickly shifted to other modern industries. Actually, various non-banking strategies were devised to maintain family prosperity, rather than merely to pursue profit maximization. For some wealthy piaohao merchants and their descendants, academic and social achievements were more attractive than reforming piaohao into modern banks.

Besides offering a historical narrative, this dissertation contributes a review of the history of Shanxi piaohao from three new perspectives. First, the author draws attention to the complexity of the relationship between Shanxi piaohao and the Qing state, which is usually categorized in the literature as a one-sided state-merchant relationship. Distinct from the general impression of piaohao’s heavy reliance on the government, the author shows that Shanxi piaohao remained relatively independent from the state, even when their financial influence expanded across the empire. Second, the author places inland banking firms, i.e., Shanxi piaohao, at the center of her study and focuses on the financial-business network linking inland trading towns and coastal cities, in contrast to treaty-port-centered financial histories of post-1840 China. More importantly, the author reveals a different picture of the hinterland of China from previous literature which generally depicts inland China as an abandoned and isolated area excluded from social change after the 1840s. Third, the author suggests portraying and analyzing Shanxi piaohao not only as financial business entities but also family firms operating in the special social-economic circumstance of late imperial China. By combining these two images, the author challenges financial modernist discourse which commonly interprets the social and business practice of Shanxi piaohao within the framework of comparing them with modern western-style banks.

Ye Ma
Faculty of Economics and Business
University of Groningen

Primary Sources

Daqing yinhang dang’an 大清銀行檔案
HSBC (Hongkong and Shanghai Banking Corporation) Group Archive
Shanxi Piaohao Shiliao 山西票號史料
Shanxi Piaohao Ziliao Shujianpian 山西票號資料書簡篇

Dissertation Information

University of Southern California. 2014. 279pp. Primary Advisor: Brett Sheehan.

Image: Head office of Rishengchang, Pingyao, Shanxi. Photo by author, July 2010.

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