Ngan Ho

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 regional names, such as ''qiansi'' (錢肆), ''qianpu'' (錢鋪), ''yinhao'' (銀號), ''duihuan qianzhuang'' (兌換錢莊), ''qiandian'' (錢店), ''qianzhuo'' (錢桌), ''duidian'' (兌店), ''qianju'' (錢局), ''yinju'' (銀局), or ''yinpu'' (銀鋪) in Mandarin Chinese, and translated as ''money shops'', ''native banks'', ''private Chinese banks'', or ''old-style banks'' in English, ''qianzhuang'' banks first sprung up during the Ming dynasty but greatly expanded during the Qing dynasty. Unlike the Shanxi banks, the ''qianzhuang'' tended to have much more risky business practices.

These institutions first appeared in the Yangzi Delta region, in Shanghai, Ningbo, and Shaoxing. The first ''qianzhuang'' can be traced to at least the mid-eighteenth century. In 1776, several of these banks in Shanghai organised themselves into the banking guild known as the ''Qianye Gongsuo''. In contrast to ''piaohao'', most ''qianzhuang'' were local and functioned as commercial banks by conducting local money exchange, issuing cash notes, exchanging bills and notes, and discounting for the local business community. ''Qianzhuang'' maintained close relationships with Chinese merchants, and grew with the expansion of China's foreign trade. When Western banks first entered China, they issued "chop loans" (彩票, ''caipiao'') to the ''qianzhuang'', who would then lend this money to Chinese merchants who used it to purchase goods from foreign firms. During the latter half of the 19th century the ''qianzhuang'' worked as intermediaries between Chinese merchants and foreign banks. Unlike the Shanxi banks the ''qianzhuang'' survived the fall of the Qing dynasty because of their close relationships with foreign banks. The ''qianzhuang'' have always been a true financial service provider for Chinese agribusiness and commercial households. The control of deposit and loan risk in the ''qianzhuang'' business model is a concentrated expression of the localisation advantages of ''qianzhuang''.

It is estimated that there were around 10,000 ''qianzhuang'' in China in the early 1890s. There were several financial crashes which occurred in China during which a large number of ''qianzhuang'' closed, the largest of these occurred in the years 1883, 1910, and 1911. By and by the traditional ''qianzhuang'' banks were being replaced by modern credit banks in China, particularly those residing in Shanghai. This would continue to happen well into the Republican period. The last ''qianzhuang'' banks were nationalised in 1952 by the government of the People's Republic of China.

During the 1990s ''qianzhuang'' made a come back in Mainland China, these new ''qianzhuang'' are informal financial companies which are often operating just within the edges of what is legal. The government attitude towards these new ''qianzhuang'' isn't that much different from their attitude in the 1950s.

Regional names for private banks in China

''Qianzhuang'' had a variety of regional names across China, these names differed from region to region and were sometimes included in the official name of the local company. The name ''qianzhuang'' was typically used for banks and bank-like institutions in the region around the lower Yangtze river. The terms ''yinhao'' and ''qianpu'' were more typically used in Northern China especially in cities like Beijing, Tianjin, Shenyang, Jinan, and Zhengzhou. In southern China ''qianzhuang'' was also often called ''qianju'' or ''qiandian'' (both of which could be translated as "money store"). Meanwhile, all terms were used in the cities of Xuzhou, Hankou, Chongqing, and Chengdu. In Hankou alone the ''qianzhuang'' were referred to by a long list of aliases including ''qianpu'', ''qianzhuo'', ''qiantan'', ''yinju'', ''yinlou'', ''yinpu'', and ''yin lufang'' in the local archives.

The larger native Chinese banks in the treaty port city of Shanghai were called ''huihuazhuang'' (匯劃莊, "credit banks"), ''da tonghang'' (大同行), or ''ruyuan qianzhuang'' (入園錢莊), these banks were members of the head office of the monetary business or the ''qianye zonggong suo'' (錢業總公所) in Mandarin Chinese. Separate terms existed for the smaller native Shanghainese financial institutions such as ''fei huihuazhuang'' (非匯劃莊 "non-credit banks") or ''xiao tonghang'' (小同行).

In the local archives, the Hankou ''qianzhuang'' were divided into two major groups: one of these groups included the larger ''qianzhuang'' called ''Zihao'', and the other group included the smaller ''qianzhuang'' of Hankou and was referred to as ''Menmian''. This ''Menmian-Zihao'' division was loosely based on several factors such as their locations, trade sizes or scopes. The word ''Zihao'' verbatim means "name-brand" in English, while the word ''Menmian'' could be translated as "store-front". The nominal requirement for registration of a ''Zihao'' was to submit the signatures of 2 to 5 ''baoren'' (保人), as the newcomer's sureties, these ''baoren'' already had their business or businesses registered. The ''Zihao'' usually would demand more capital and better reputation as they engaged in more and wider note-transactions and would issue larger credit-loans. The ''Zihao'' formally established an initiation board for registration arrangements and other managerial issues. While the ''Zihao'' opened mostly in quiet alleys, the ''Menmian'' were located more in thoroughfares or more heavily crowded lanes, these locations tended to be more convenient for services such as money exchange and petty loans service.

Shanxi banks were another form of private banks in China which were locally known as ''piaohao'' (票號, "draft banks"). The Shanxi banks are often separated from ''qianzhuang'' by many scholars who study the economic history of China. But some scholars instead combine the ''piaohao'' with the ''qianzhuang'', as the distinction between them is seen more like a franchise strategy that was applied by the Shanxi merchants, this strategy was similar to that by merchants from other Chinese regions like Wuxi in the Jiangsu province and Ningbo in the Zhejiang province, the claiming initiator and dominator of Shanghai ''qianzhuang'' banks.

Structure of the ''qianzhuang''

The basic organisational structure of the ''qianzhuang'' was based on a system known as the "Eight Butlers structure", in this structure the ''qianzhuang'' was led by the manager and his associates as well as a supervisor, the subordinate staff consisted of employees which were collectively known as the "Eight Butlers", these "Eight Butlers" include accountants, cashier, clerical staff, exchange managers, financial marketers, interbank managers, receptionists, and salesmen. These staff members all had their own apprentices subordinate to them. What rank each staff member had within each ''qianzhuang'' was very dependent on the needs and business strategy of every individual ''qianzhuang'', for example a ''qianzhuang'' with low funds was more dependent on their interbank manager lending money, but ''qianzhuang'' that were richer tended to place the salesmen at the top of the "Eight Butlers" hierarchy because they were more important in expanding their business and other positions like that of interbank manager was placed second and that of accountant third.

The most important and powerful staff member of a ''qianzhuang'' was the manager who was responsible for most decisions that were made by the bank such as dealing with daily trifles, business transactions, and the transfer of staff members. Because of the power the manager held the shareholders had to make sure that they'd always hire the most qualified individual for the task, as this job required a great deal of trust and the selection process had to be done as carefully as possible to ensure that the most qualified manager headed the operation. Some shareholders would appoint supervisors to supervise these managers to make sure that they always had the best interest of the shareholders in mind and could report anything to the shareholders at any time.

Many ''qianzhuang'' also hired several associates to assist the manager, and the number of staff from each position as low as apprentice to as high as manager was never certain, as all employees are shifted according to both the scale and the focus of the business. Staff members of a ''qianzhuang'' were either hired directly by the shareholders or were recommended by managers. It is only natural that such an organisational structure can not only maintain the authority of the management, but could also implement policies and guidelines effectively. This structure also allowed for there to be plenty of flexibly so the ''qianzhuang'' were highly adaptable to changing circumstances. There were not only checks and balances between the same level of authority, but there were also a number of supervisory constraints between the upper and lower levels of the staff, this was done as a way to enhance the ability of ''qianzhuang'' enterprises to withstand more risks.

As long as the owner of a ''qianzhuang'' would file for registration and pay their fees, or skip both of these steps entirely, employed a staff, and would join the local ''qianzhuang'' guild then they were ready for operating their business. The average ''qianzhuang'' officially employed around and usually less than thirty people plus apprentices. While their earnings were audited every year their profits normally distributed only every 3 years.

This could lead to misconducts or embezzlement; thus the intervals of internal auditing and dividend distributing were synchronized afterwards. The western double-entry method was slowly adapted to replace the traditional ones. Usually around of the net earnings went to owners of the business, and the remaining profits went to employees, but the chief manager would still decide how to distribute the bonus packages. Normally, the chief manager would take 20% to 30% of the total bonus; the others shared the rest based on both performance and their status within the company hierarchy.

It was common that a reputed manager could run several qianzhuang at the same time as long as the owners of these businesses consensually agreed upon the arrangement.

Between the years of 1926 and 1927 a large percentage of the ''qianzhuang'' of Hankou shifted their structures of ownership, nominally these ''qianzhuang'' held an unlimited liability, but many of them evolved from sole-proprietorship to partnerships. This change in model could be explained by several events such as the 1926 Northern Expedition by the Kuomintang, their purging of Communists, the Kuomintang occupation of Hankou in 1927, and the Nanchang Uprising in Jiangxi, as well as the Autumn Harvest Uprising in Hunan by the communists. These events all lead to the Hankou ''qianzhuang'' to form more alliances, the business model created from this situation was known as the "armpit partnership". The "armpit partnership" was designed as a way to avoid head-counting trade censuses by the local authorities.

The creation of the "armpit partnership" model allowed for those who wished to avoid any attention by the authorities to join the very lucrative ''qianzhuang'' business. A united voice of "armpit partners" also had the power to protect their pecuniary interests from being funnelled to the dominating partners. This model of "armpit partnerships" would serve a defensive mechanism (or a ''modus vivendi''), enticing the Hankou ''qianzhuang'' to make more business allies under political gauntlets.

Lending out money is the greatest source of risk that these traditional bank faced in China. If the loan was steady then the risk would be greatly reduced, the paramount key to the risk control that a ''qianzhuang'' could have is by lending only to trustworthy people.

The ''qianzhuang'' employed a special type of personnel selection and hiring system. A ''qianzhuang'' generally had a rather strong family(-like) style about personnel arrangements and how they would function. The selection process of shareholders, managers, and even apprentices is rooted in the Chinese tradition of "consanguinity, kinship, geographic, and professional affinity", this system is called a "pan-family" relationship network.

It is in fact because of this "pan-family" relationship network family-like personnel mechanism, that ''qianzhuang'' with their rather less rigorous internal control systems seemed to have reduced occurrences of internal risks due to their own staff. If the managers were not personally close to the shareholders who owned the ''qianzhuang'' in their "pan-family" relationship network, then they would mostly be selected from the three year ''qianzhuang'' apprentice programmes or from other employees, and most of these staff members also tended to have "pan-family" relationships with shareholders. In fact there were strong "pan-family" tendencies in the selection processes and the appointment of various other positions at most ''qianzhuang'', these included things such as recruiting apprentices, introducing relatives and friends to the ''qianzhuang'', training exchange students from other regions, etc. Through this "pan-family" personnel system, the bankers of a ''qianzhuang'' were not just considered to be "only doing a job", but they were also seen as "standing for the family".

''Qianzhuang'' guilds

In traditional Chinese society, the number of ''qianzhuang'' is generally more than 10, this was even the case in an ordinary city, because of the large number of ''qianzhuang'' in China, there was usually exists guild within the scope of the city.

Hankou

The Hankou ''qianzhuang'' guilds were established sometime before or in the year 1894 as mediators for the Hankou ''qianzhuang'' as the high number of ''qianzhuang'' made the scene overcrowded. In Hankou two separate guilds for the ''qianzhuang'' coexisted simultaneously, one was called the ''Qianye Gonghui'' (錢業公匯) and the other was named the ''Qianye Gongsuo'' (錢業公所, "money industry office"). The ''Qianye Gongsuo'' concerned itself only with Confucian rituals and ritualistic events while the ''Qianye Gonghui'' handled all mundane issues. These rituals performed by the ''Qianye Gongsuo'' were practiced to evince ancestral respects, something highly valued by the Confucian community.

Both Hankou guilds did not show any signs of competition but tended to have a sense of mutual support. During the Xinhai Revolution of 1911 the workplace of the ''Qianye Gonghui'' was completely burnt to ground, but it could still have its regular function maintained in the temple joss hall, which was loaned by the ''Qianye Gongsuo'', which managed to survive the chaos of the uprising. The average interval time of draft-exchange business was 5 to 15 days; then it was converted to a daily base after 1911 to satisfy expanding monetary and fiscal transactions done by the Hankou ''qianzhuang''. The ''Qianye Gongsuo'', and its duties, was gradually merged into the ''Qianye Gonghui'' during the early Chinese Republican period. During the financial chaos from 1907 to 1908, the Hankou ''qianzhuang'' managed to restore themselves because of the Hankou ''qianzhuang'' guild's collective acts. Before its full recuperation, the Xinhai Revolution of 1911 clouted again. But due to actions from the Hankou ''qianzhuang'' guild the Hankou ''qianzhuang'' experienced another steady recovery from 1911 to 1926. According to records from the municipal archives of Hankou, it is revealed that the Hankou ''qianzhuang'' Guild tended to evolve with a series of business booms and busts in the local money market, meaning that it was flexible.

In the year 1929, the Hankou ''qianzhuang'' guild gained a self-governing board that was professionally managed. As a part of the reforms affecting the Hankou ''qianzhuang'' guild, the member ''qianzhuang'' would elect members that would serve in a standing committee to fulfil duties such as planning events, settling disputes, the clearance of trade, publishing flyers, and welfare for the staff. The costs of operating the guild were shares among the ''qianzhuang'' which were its members. The Hankou ''qianzhuang'' guild distributed its daily market flyyer to the regions surrounding the city on regular basis. Its issuing volume surpassed 20,000 flyers a day. However, this number fell to only 10,000 after the catastrophic flood of 1931 that inundated Hankou and killed more than 30,000 people in two months which also severely affected many of its readership.

The Hankou ''qianzhuang'' guild fully funded an affiliated elementary school and a night school for the staff. The employees of the affiliated Hankou ''qianzhuang'' could enroll into the guild-maintained night school, while the young relatives of these employees were allowed to go to the affiliated elementary school.

Between the years 1938 and 1945 the city of Hankou was occupied by the Japanese during the Second Sino-Japanese War (which would later become a theatre of World War II), the Hankou ''qianzhuang'' guild managed to continue operating despite the foreign occupation. Many local ''qianzhuang'' chose to collaborate with the Japanese during the occupation, dozens of these ''qianzhuang'' were facing jeopardy following the surrender of Japan in 1945.

Shanghai

In the treaty port city of Shanghai the ''qianzhuang'' were all members of a two guilds organised by them based on their location in the city. The guilds responsible for the Shanghai ''qianzhuang'' operated as two geographical bodies parallel to each other, the one for northern Shanghai was called the ''Bei Huiguan'' (北會館, "Northern guild hall") and the one for southern Shanghai was called the ''Nan Gongsuo'' (南公所, "Southern industry office"). These two guilds handled things like the draft-exchange business practiced among their members separately. There was another guild body named the ''Neiyuan'' (內園, "inner garden") which coordinated the south–north draft-exchange as a joint agency of both Shanghai ''qianzhuang'' guilds.

National guild

In the year 1947 the Shanghai ''qianzhuang'' guild invited the guilds from the cities of Hangzhou, Ningbo, Nanjing, Hankou, Chongqing, Beiping, and Tianjin to form a national Chinese ''qianzhuang'' guild. This national guild would gain members from 38 other cities in October of the same year as it began to expand, one of the reasons why more cities started joining this national ''qianzhuang'' guild was as a defense against the uncontrollable hyperinflation which had struck China during the 1940s following the end of World War II.

The national ''qianzhuang'' guild served as a loose coalition and would exist for 5 years before undergoing the same fate as all ''qianzhuang'' in China. Some of the efforts of this national Chinese guild include establishing a joint reserve for the issuance of new banknotes by both commercial banks and ''qianzhuang'', however, this proposal never came to fruition due to the chaos of the Chinese Civil War.

Role and liability of shareholders and high risks

In the traditional Chinese banking industry, a system was implemented which was known as the "identity stock system". The "identity stock system" is a system based on profit dividend. When a ''qianzhuang'' is profitable, the manager can then share the dividend.

As the shareholders of a ''qianzhuang'' offered unlimited liability they were fully liable for any debt the ''qianzhuang'' had, even if the ''qianzhuang'' was declared bankrupt and was liquidated. When a ''qianzhuang'' loses money, especially when it is liquidated, all the debt and losses are borne by the shareholders. The typical ''qianzhuang'' is usually highly indebted, and tend to have a capital-to-debt ratio of tens of times. For this reason the credit of ''qianzhuang'' to the depositors was not dependent on the amount of equity it had, rather on the abundance degree of the family background of the shareholders, as well as on the operation of any property which they owned. In fact, after a ''qianzhuang'' was declared bankrupt those that the ''qianzhuang'' still owed money would demand repayment from its shareholders and it wasn't uncommon for the (former) shareholders, even after a year or two after its closure, would still insist on paying ''qianzhuang's'' debts. This was also because if they would not pay these debts their "business credit" would also decrease as the shareholders bear unlimited liabilities for the debts of the ''qianzhuang''. When shareholders would invest in a ''qianzhuang'', there had first be a considerable amount of deposits in ''qianzhuang'' made by the shareholders.

The way the system was set up was that the credit of a ''qianzhuang'' was wholly independent of the equity or capital of the bank itself but was based on the credit of the shareholders themselves as well as the credit of their whole family. The stronger the financial resources of shareholders and their families and the more prominent their credit and reputation in the business world was, the stronger their banking power will be, and by extend the banking power of the ''qianzhuang''. This was also why the debts of a ''qianzhuang'' will be distributed by the shareholders based on the percentage of their shares, and the shareholders themselves will be fully responsible for paying the debts. If there is any issue with the ''qianzhuang'', it was customary for the shareholders to pay these off immediately. In the event if of a bank run, it was required for the shareholders to compensate with their own lives. Therefore, the management of managers is to take not just the investments but also the lives of shareholders in the game, the responsibility of the managers in this respect was quite heavy, naturally there was also a high sense of moral responsibility associated with the profession.

When reversal of debt would occur, the debts could not be repaid (for ''qianzhuang'' the goals of debt recovery are draft scattered, and those debtors may indeed be no money), but depositors of ''qianzhuang'' were hardly likely to push the ''qianzhuang'' (meanwhile for depositors the goal of debt recovery is rather obvious and concentrated), together with the support of the Chinese government, a wealthy family of shareholders, within the timeframe of only several days, may ruin all of their fortune and they would become street beggars.

History

Imperial China

The earliest ''qianzhuang'' were established during the Ming dynasty. These early private banks would be operate either as a single proprietorship known as ''duzi'' (獨資) or as a joint proprietorship known as ''hehuo'' (合伙). Most ''qianzhuang'' tended to be small proprietorships which had unlimited liability, these local banks were often sparsely aligned along family and linguistic ties and they were rarely patronised by the local government authorities. A large number of these early ventures were simply a business that some merchants families kept on the side and a few of them were also seen as an investment of government officials or those who belonged to the landowning gentry. The larger ''qianzhuang'' would change money, operate deposits, make loans to traders, care for remittances, and in some cases issue their own scrip known as ''Zhuangpiao'' (莊票) and ''Yinqianpiao'' (銀錢票, "silver money notes"). Larger ''qianzhuang'' would issue company scrip against individual deposits, this scrip was also accepted by proximate shops but to cash these out would take around 10–15 days after it was given to the shop, this was because couriers would have to liaise with the issuing shop in order to rule out fraudulent Zhuangpiao notes.

The first documented ''qianzhuang'' banking institution of Beijing was the ''Yinhao Huiguan'' (銀號會館, "bankers' guild hall"), this bank had a shrine called ''Zhengyisi'' (正已祠) in its building, the ''Yinhao Huiguan'' was first mentioned in 1667 under the reign of the Manchu Qing dynasty. The first ''qianzhuang'' in Shanghai was founded seven decades later in 1736 was named the ''Qianye Gongsuo'' (錢業公所, "money industry office"). The primary business of the ''qianzhuang'' was giving out loans in the Chinese hinterland to promote trade and the exchange of commodities with the coastal regions of China. Many ''qianzhuang'' engaged in the business exchanging copper-alloy cash coins and silver sycees and foreign coins and vice versa as China used a bimetallic currency system with fluctuating exchange rates. number of coins in a single string was locally determined as in one district a string could consist of 980 cash coins, while in another district this could only be 965 cash coins, these numbers were based on the local salaries of the ''qiánpù''. During the Qing dynasty the ''qiánpù'' would often search for older and rarer coins to sell these to coin collectors at a higher price. Remittances by ''qianzhuang'' would be carried out using a vast network of partner institutes, the owners of these other financial institutes would often hail from the same region, yet most of these small private banks would only operate locally. Comparatively, the financial landscape of northern China was very much focused on the imperial Chinese government. The ''qianzhuang'' were the main financial institutions serving as intermediaries between the Europeans and the Chinese for financial purposes.

The ''qianzhuang'' had two kinds of their own funds, one is the equity capital, the other is the demand deposit in firm deposited by the owning shareholders, which is called copy or passport. Because the shareholders of a ''qianzhuang'' often own many firms, their deposits in one firm are often variable. And the different ''qianzhuang'' owned by the same shareholders would often pay for the other's deposits if it had insufficient funds.

Under the reign of the Jiaqing Emperor a central banking institute was founded in the city of Tianjin named the ''Yinhao Gongsuo'' (銀號公所).

There were 106 financial institutions founded in the last quarter of the eighteenth century.

Until the Xinhai Revolution deposed of the Qing dynasty in 1911, the dominant financial and banking institutions in China were the Shanxi banks (''piaohao'', which could be translated as "remittance houses"), the Shanxi banks specialised in long-distance money remittances which they would engage in on behalf of agencies of the Qing government or to dispatch of government officials’ emoluments. In the middle of the nineteenth century the ''qianzhuang'' started making more short-term loans to cash strapped local governments, invested more into national funds, and started issuing shares. The ''qianzhuang'' and ''piaohao'' ("Shanxi banks") were created out of different circumstances, while the ''piaohao'' were created out of a necessity for long-distance remittance, the ''qianzhuang'' were originally created for the silver-specie exchange market. Because of this, the scope of business of the ''qianzhuang'' was very dissimilar to that of the Shanxi banks, the ''qianzhuang'' tended to make their profits from relatively high interest rates which they would charge on unsecured loans to medium-range merchants, while the Shanxi banks subsisted their profits more on draft commission. Because of these different business models, some Shanxi banks were known to deposit some of their idle funds in ''qianzhuang'' interest-bearing accounts, this meant that the general relationship between the ''qianzhuang'' and the Shanxi banks was one of cooperation and complementarity rather than of confrontational competition. A large bulk of the cash coins the ''qianzhuang'' dealt with were inherited from earlier Chinese dynasties, or were re-cast in the furnaces of imperial mints and private franchised furnaces, or illegally elsewhere. The face value of cash coins were often not contingent on intrinsic value of the metal they contained. The silver-purity standards entailed long business disputes, while many local Chinese archives repetitively documented mounting concerns to specie and silver forgeries which circulated at the time. It seems that the primary service of the early ''qianzhuang'' involved primarily with the necessity of silver-specie exchange, and thus the market demand created ''qianzhuang'' spontaneously.

Through the financial exchanges between ''qianzhuang'' and ''qianzhuang'', ''qianzhuang'' and ''piaohao'', ''qianzhuang'' and domestic and foreign commercial banks, a rather large financial network was established to communicate cross-regional trade and foreign trade within and with the Chinese Empire. The ''qianzhuang'' system is one of the most representative forms of business development in imperial China's financial industry. It played an indispensable role in the history of Chinese finance and even the economic history of China, as well as the transition from the traditional Chinese economy model to a more modernised model adopted during the late 19th century.

In Shanghai many ''qianzhuang'' were initially created by businessmen from the Zhejiang Province, especially from the city of Ningbo. Many of these businessmen moved their ''qianzhuang'' to Shanghai as a method to finance their businesses back home. By the year 1776, under the reign of Qianlong Emperor, The Shanghai ''qianzhuang'' owners had established an association in the Yuyuan Garden, with 106 affiliated members.

In the city of Hankou the ''piaohao'' were prosperous before the ''qianzhuang'' were, this might have been due to connections with the political circle. Less is known about the origins of the Hankou ''qianzhuang'' which could be either due to the immense number of aliases used to describe ''qianzhuang'' or the fact that the Qing government wasn't good at record keeping during this early era. The trade conducted by ''qianzhuang'' in Hankou is locally referred to as ''Yin-Qian'' (銀錢). Between the years 1841 and 1850 the Hankou ''qianzhuang'' were dominated by merchants from the Jiangxi province, the larger ''qianzhuang'' from this era had an average ''benqian'' (本錢, "principal capital") which ranged between 6000 and 10,000 taels of silver, and on average they issued hundreds of thousands of ''Huapiao'' (匯票, "remittance notes") banknotes for circulation.

The economic centre of gravity of the Qing dynasty began to shift during the 1850s from the port of Guangzhou, Guangdong to Shanghai. During the chaos of the Taiping Rebellion many Chinese government officials and affluent landlords were forced to flee their lands as it was being occupied by the advancing Taiping Heavenly Kingdom, many of these refugees would flee to the Bund in Shanghai's foreign concessions. This led to the ''qianzhuang'' of Shanghai in taking up real estate investment and stock exchange speculation expanding and diversifying their business scope. During the 1860s the ''qianzhuang'' of Shanghai started looking to the foreign banking companies as a source of capital. As foreign banks began investing more into the Chinese market, these foreign banking companies would fulfill the need for money that local Chinese banks had at the time by issuing short-term loans known as ''zhekuan'' (拆款, "interbank loans") to them. These loans were necessary as monetary volume of most ''qianzhuang'' banks usually was around 70,000 tael