Piaohao

From the time of the Taiping Rebellion, when transportation routes between the capital and the provinces were cut off, piaohao began involvement with the delivery of government tax revenue.

Piaohao grew by taking on a role in advancing funds and arranging foreign loans for provincial governments, issuing notes, and running regional treasuries.

[5] 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 remittance fee, known as huifei (匯費) or huishui (匯水), depended on the distance of the transaction, the urgency, and the quality of the silver that was paid to the remitting bank.

[5] These dividends were huge fortunes for China at the time—comparatively, a county administrator, or zhixian, would earn an annual salary of 45 taels of silver (or $67.50 in Spanish dollars).

The exact origins of the piaohao 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 period.

[7] 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 and ran stores in the cities of Beijing, Shenyang, Tianjin, and others.

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.

[5] 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 piaohao, but this system also protected them.

[5] 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.

[3] The members of the Pingyao-based Five United Weizi Banks include:[3] The piaohao 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 piaohao were responsible for inventing various types of draft and creating more pricing remittance fees based on a diverse range of factors.

[10][3] The Beijing branch of the Rishengchang had a large plate (竖匾) above its main entrance with the text Huitong Tianxia (匯通天下, 'Financial exchange all over the world'), for many years.

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.

[5] This policy would provide returns in several ways to the piaohao, as it not only attracted deposits of wealth from courted Chinese government officials and feudal nobles, but also entire budgets of ministries.

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

[5] The Treaty of Nanking stipulated that the government of the Qing dynasty had to pay the United Kingdom a sum of 21,000,000 Spanish dollars in war indemnities.

[5] 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.

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.

The piaohao offered the deposit of funds, which were known as cunkuan (存款), and credits, which were known as fangkuan (放款), to the local government, which were then called the guankuan (官款), state officials, or private persons.

As the piaohao 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 tael notes through their services.

It was customary for example for the Shanghai banks to make advances to junk owners who were engaged in the trade of carrying tribute rice to the north, holding their vessels as collateral.

[3] Following the Xinhai Revolution rule of law collapsed, causing many provinces to declare their secession from the new republic, making China merely into a geographic region rather than a political one.

[5] 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 piaohao were operating.

[5] The piaohaos' 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.

The leaders of the CCP viewed the qianzhuang as part of the hated bourgeoisie and claimed that private banks were anti-progressive, nationalistic, reactionary against the Socialist revolution, and that they were very politically unreliable.

The recovery of the private financial sector was crucial for the economy of Hankou following the devastating hyperinflation that affected mainland China during the aftermath of World War II and the retreat of the Nationalist Chinese government to Taiwan.

[14] During the late Ming dynasty period, Chinese people already widely used letters of exchange or money orders known as huipiao (匯票 or 會票) as a means of remittance (匯兌, huìduì or 撥兌, bōduì).

[5] 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.

[5] Some piaohao issued their own paper bills, which were known as duitie (兌帖), qitie (期帖), qiantie (錢帖), and yinpiao (銀票), with different functions (many of these banknotes represented letters of exchange).

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.