Shanxi Bank

Piaohao (Traditional Chinese: , literally 'draft banks'), also known as (), (), or (), in Mandarin Chinese, or ''Shanxi banks'' () or ''Shansi banks'' in English, were a type of bank that existed in China during the Qing dynasty 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 while the ''qianzhuang'' were mostly active in the south. The continued to be the dominant financial institutions of China until 1900 when more modern commercial banks 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 ports. During their heyday the had over 400 branches operating across the territory of the Qing dynasty and branches in other countries like Japan, Korea, Russia, India, and Singapore.

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 until they were all finally nationalised alongside the and the rest of the Chinese financial industry in 1952.

Structure and business strategies

All were organised as single proprietaries or partnerships, where the owners carried unlimited liability. They concentrated on interprovincial remittances, and later on conducting government services. From the time of the Taiping Rebellion, 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 centralised 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 and would travel north through Siberia to cities like Moscow and St. Petersburg; it is suspected that the Shanxi merchants had observed how Western 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 ''qianzhuang'' 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 sycees 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 taels

HOME


Content is Copyleft
Website design, code, and AI is Copyrighted (c) 2014-2017 by Stephen Payne


Consider donating to Wikimedia



As an Amazon Associate I earn from qualifying purchases