Qianzhuang

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.

[6] 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.

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).

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.

[citation needed] 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.

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 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.

This situation would face a quick downturn when in the year 1894 several qianzhuang started to fraudulently declare bankruptcy as a means to avoid paying out the promised interest rates on the zhuangpiao.

[citation needed] Around the year 1890 the larger Chinese banks in Shanghai had developed a form of clearance management known as the gongdan zhidu (公單制度) which occurred on a daily basis, during the gongdan zhidu the banks of Shanghai would meet in the afternoon in a huihua zonghui (匯劃總會, or clearing house) and would then proceed to clear their holdings of letters of exchange and banknotes, this allowed them to settle all the claims and liabilities of their accounts for that day.

These reformers were quick to point out how Qing China's institutional weakness was a reason why foreign banks were enabled to recoup profits from the issuance of fiat banknote in the treaty ports where they were allowed to operate.

This dilemma was how to retain their revenue without causing severe inflation which would provoke large scale resistance from the people, and without surrendering more central powers to banking and financial institutions.

[7] Despite facing a heavy burden of extortion by the municipal government, the Hankou qianzhuang were still capable of escaping bureaucratic domination and they played a very active role in daily local business and maintained a relative amount of their own autonomy during this period.

In the year 1910 the total number of investments made in rubber stock companies was as high as 60,000,000 taels of silver, consequently the Shanghai financial market suffered because there wasn't enough cash to make loans.

[citation needed] In Hankou the qianzhuang were divided into four cliques which were based on their owner's native place or county of origins, these social ties in Chinese culture were linked together in a vague concept known as "Tongxiang" (which could be translated as "hometown-folk").

He recorded there to be 65 Ben-Bang, 26 Xi-Bang (9 from Ji'an and 17 from Nanchang), 6 Hui-Bang, 8 Shao-Bang, 16 small Qianpu and Yin-Lufang with no identifiable native-places; a total of 121 qianzhuang were counted by the Japanese Consul-General in Hankou.

[7] The United Commerce Bank of Wuhan would convert itself into an agricultural product transportation and trade business in September of the year 1952, from an ostensibly abysmal status with skyrocketing debts announced.

The Hankou archival evidences from the local sources indicate that their official dissolution been the result of political changes rather than from their inability to serve modern businesses or any form of resistance against ruling orders.

[6] The Qianzhuang would mobilise their domestic resources to an order of magnitude that would exceed the paid-up capital that they initially received several times over, this happened mostly through issuing banknotes and deposit receipts.

During this era foreign banking companies tended to have an account at least one qianzhuang, since only the guilds operated by them could clear the large number zhuangpiao forms that were circulating in the city of Shanghai, this happened through a rather elaborate daily mechanism which was dubbed Huihua (非匯, "draft exchange").

[6] When the chop loan mechanism collapsed this severely affected the standing of zhuangpiao, much like all the other organic, private-order arrangements were badly hit, in a negative way on the monetary Chinese market.

The archived documents of the "Zhonghang Yuekan" are compiled in cities like Shanghai, Wuhan and a few others and include government reports, news press, gazetteers, memoirs, and surveys.

[citation needed] Unlike modern banks which primarily assess risks through the gathering of financial data, auditing specifically wasn't allowed in the qianzhuang model.

[citation needed] Traditional Chinese business circles traditionally attached a great number of importance to commercial credit, this perception extended to the entirety of their business circle and businessmen placed an extremely high value on their commercial credit seeing it as their "second life", in fact an old Chinese saying stated "A promise holds more weight than one thousand bars of gold".

[citation needed] Traditional Chinese society views interpersonal relationships as extremely important and every person has both a semi-closed and semi-open circle of contacts with whom they interact.

While for politicians the qianzhuang would often serve as their liaisons to the "locals", this might explain the failure of the Hankou piaohao being plausibly caused by its credit risk hidden in its uncollateralized loans, or a combination of various accidents over the years.

[citation needed] The most direct procedures qianzhuang guilds used to prevent entry by new players was utilising a peer recommendation system and by creating qualification examination of applicants.

[citation needed] In January 2018 VoxChina issued an article comparing the data on qianzhuang and diandan in 137 counties in northern China, mostly in the Shandong province, in 1912 with the modern development of informal financial entities in the same region, particularly small loan companies (xiao'e daikuan gongsi), rotating savings and credit associations (ROSCAs or hehui), pawnshops, and (illegal) underground banks (dixia qianzhuang) over the past couple of decades before the study and how these informal financial institutions both emerged and rapidly expanded.

These results are potent to controlling for a range of confounding factors including economic growth, the structure of the local industry, state-owned banking companies, and the geography of these small financial institutions, among others.

[38] The researchers of VoxChina suspected that these correlations might be related to the tenants of Confucianism which harnessed a culture where these informal financial institutions only provide services to respected and credible people.

As their work coincides with both Pauline Grosjean, who in her 2011 paper The Institutional Legacy of the Ottoman Empire: Islamic Rule and Financial Development in South Eastern Europe published in the Journal of Comparative Economics found that the historical Islamic rule that prohibited interest-lending resulted in a less developed financial and banking market today, and Luigi Pascali, who in his 2016 paper Banks and Development: Jewish Communities in the Italian Renaissance and Current Economic Performance in the Review of Economics and Statistics found that the charity-lending institutions in 15th century Italy still had an effect on the performance of the modern Italian banking sector.