Spring 2008, Volume 18, No. 1
Recent Studies of Chinese Business History in America
Linsun cheng
University of Massachusetts-Dartmouth
Though Chinese business has been booming for a long time and many scholars paid great attention in searching for the secret codes behind China’s economic development over the past thirty years, the study of Chinese business history seems not followed at the same pace in American academic world. According to a quick online search I found that only a score of books on this subject have been published in English over the past several years. Covering wide variety of topics, it is hard to say there is any special focus or perceivable trend in this academic field. Three books were published in 2003 discussing Chinese banking, two on the development of China’s salt industry or textile industry. Other books are focusing on China’s consumer culture, the relationship between Chinese merchants and Chinese government and etc.
In introducing the study of Chinese business history in America, I have to mention Professor Sherman Cochran first. After his first book, big business in China, which is called “the pioneer work of Chinese business history study in the US,” was published, Professor Cochran has been patient in searching and collecting raw materials and thinking research topics. His hard work paid off twenty years later. Over the past several years, he has published books one after another. In 2001, he edited Inventing Nanjing road, which is a conference paper collection on Shanghai’s commercial development in the 19th and 20th century. Two years later he published Chinese networks-- Western, Japanese, and Chinese Corporations in China, 1880-1937. A few months ago, he sent me his latest book, Chinese Medicine Men and Consumer Culture in China and Southeast Asia, 1880-1956. His another book on Liu Hongsheng will come out very soon.
In his book on Chinese medicine men and consumer culture, Cochran reconsiders the nature and role of consumer culture in the spread of cultural globalization and examines how Chinese entrepreneurs and Chinese-owned businesses interacted with consumers. Focusing on the marketing of medicine, he shows how Chinese constructed consumer culture and extended it to local, national, and transnational levels.
Through the use of advertisements, photographs, and maps, he illustrates the visual forms that Chinese enterprises adopted and the far-flung markets they reached. Cochran brings to light enduring features of the Chinese experience with consumer culture. Surveying the period between the 1880s and the 1950s, he observes that Chinese businesses surpassed their Western counterparts in capturing Chinese and Southeast Asian sales of medicine in both peacetime and wartime. He provides revealing examples of Chinese entrepreneurs' dealings with Chinese and Japanese political and military leaders, particularly during the Sino-Japanese War of 1937-45. The history of Chinese medicine men in pre-socialist China, he suggests, has relevance for the twenty-first century because they achieved goals--constructing a consumer culture, competing with Western-based corporations, forming business-government alliances, capturing national and transnational markets--that their successors in contemporary China are currently seeking to attain.
It is interesting to notice that three prestigious presses have published three books in the same year of 2003 on the same topic of the history of modern Chinese banking. These books are
- Brett Sheehan, Trust in Troubled times: Money, Banks, and State-Society Relations in Republican Tianjin, published by Harvard University Press.
- Ji Zhaojin, A History of Modern Shanghai Banking-The Rise and Decline of China’s Finance Capitalism, published by M. E. Sharpe.
- Linsun Cheng, Banking in Modern China- entrepreneurs, professional managers and the development of Chinese banks, 1897-1937, published by Cambridge University Press.
Sheehan’s book focused on Tianjin. Despite Tianjin’s importance as Republican China’s second largest financial, industrial, and trade center, few scholarly works are available in English that explore its economic development and its significance for our understanding of modern China. Brett Sheehan’s book breaks new ground in the history of modern China by providing a comprehensive account of Tianjin’s financial, social, and political history in Republican China.
During the period covered by this book, Tianjin underwent endless regime changes, constant political chaos, and frequent financial crises. By scrutinizing nine financial crises that wracked Tianjin between 1916 and 1937 and describing Tianjin’s bankers’ struggle in deal with these crises, Sheehan provides a clear picture of the development of Tianjin’s modern banks in Republican China.
Tianjin’s modern banks first survived the 1916 moratorium crisis by cooperating with local elites and local government officials. They made Tianjin a stable financial center and producer of a trustworthy paper currency in the midst of the chaos of Republican politics. In the following years, Tianjin’s banks further expanded and showed the “powerful flesh” of a “tiger” (even though sometimes the “tiger” was simultaneously weak paper) in various financial crises. Various warlord regimes vied for access to bank-controlled financial resources and threatened to disrupt trust in banks and the money they issued. In response, Tianjin’s bankers developed a number of strategies to promote trust. Relying on their financial power, they initiated many institutional arrangements and developed certain rules in dealing with government demands. Sheehan’s documentation of the increase in bank deposits and paper money shows that this situation continued without a “complete break” throughout the early Nationalist period until 1934. From 1916 to 1934, paper currency circulation of Tianjin’s modern banks jumped more than eight times.
Although it focuses on money and banks in Republican China, this book’s second contribution lies in its valuable new perspective on the social and political history of modern China. The author approaches the questions of local elite activism, tensions between the center and the periphery and the emergence of professional bankers by exploring behaviors of the local elite, non-local professional bankers, and both local and central state authorities in various financial crises. In the 1910s and 1920s, warlord governments tried but failed miserably in enforcing the circulation of paper money by force. Tianjin’s professional bank managers and the local elite successfully defied state authority in maintaining or restoring people’s trust. In the 1930s, however, the Nationalist government institutionalized its authority over the financial system and made a relatively smooth transition of bank-issued paper money from silver-based to nonconvertible currency in 1935. As a result, state authority implemented monopoly control over the issue of paper money and played the primary role in creating the institutional environment for the rules of the game.
Not the least value of this book is its unique style of narration. Framing the study around Bian Baimei, a professional bank manager of the time, Sheehan draws stories from contemporary newspapers, journals, folk songs, and official documents and makes various players in this book true to life. He turns an ordinarily dull subject into a fascinating one and makes this book a truly enjoyable read.
Ji zhaojin’s book studies the history of Chinese banking in a different way. In chronological order, the author first analyzed the origins of Shanghai’s three major financial institutions: native Chinese banks, foreign banks and modern Chinese banks. Competing among themselves but also complementing and cooperating with each others, these three institutions formed integrated financial capitalism in Shanghai.
The end of Qing dynasty and the following decentralized warlord period provided new opportunities for Shanghai’s banks. By combining Western training and traditional Chinese practice, a group of new Chinese bankers created and expanded their banking business, promoted democratic ideals and laissez-faire economic enterprises, and led to a golden age of Shanghai banking. A series of foreign and domestic crises, however, provided unique opportunities for the emergence of state banks. Having destroyed the development of free integrated finance capitalism, however, the state finance capitalism did not survive the Sino-Japanese war and the following Chinese civil war. It collapsed soon after struggling with the worst hyperinflation in Chinese history.
The author did not stop here. A special value of this book is that the author extends her study to describe the process of the socialist transformation of Shanghai banking after 1949, which had never appeared in English scholarship. The newly Communist regime set up its own central bank, took over all previous government banks, and restricted the business of foreign and Chinese private banking. Finally, socialist transformation of banking ended the legendary history of such as the National City Bank of New York, The American Express Company; Germany, French, Italian banks and even the Sino-Scandinavian Bank which was established by Chinese, Norwegian, and Danish merchants. All of Chinese banks were united under one state bank-the People’s Bank of China by end of 1952.
In examining the development and role of foreign banks in Shanghai’s financial market, the author introduced thirty foreign and Sino-foreign joint banks, one section for each, ONE by ONE, such as Hong kong and Shanghai Banking Corporation, Mitsubishi Bank and City Bank. The author also integrated many important events into her narrate of Shanghai banking history. Also ONE by ONE, she analyzed various domestic and international crises, their impacts upon Shanghai’s banking and Shanghai banks’ responses. Listed in the content includes the Xianfeng Inflation from 1851 to 1862, the financial crisis of 1883, the Discount Storm of 1897, the Rubber Stock Crisis of 1910, the Revolution of 1911, the Shanghai Financial Panic of 1935 and others.
In a word, the book can be seen to certain extent as an encyclopedia for the history of modern Chinese banking, which will benefit every people who are interested in modern China. The book’s layout, however, serves as a double-edged sword. The encyclopedia-styled description inevitably led to the shortage of deep analysis on many important issues. While introducing 30 foreign or Sino foreign joint banks ONE by ONE, for example, the book has not shown the complicated relationship between various players in the history of these banks. Readers are hard to understand the true history of foreign banks in China. Why and how these foreign banks were initiated in China? How did they run their businesses in China? Why some of them expanded spectacularly in China while others failed miserably? What were the impacts these foreign banks imposed upon traditional and modern Chinese banking system as well as Chinese economic and social life?
I have written the third book about Chinese banking which is published by Cambridge University Press. Drawing from original documents of major Chinese banks, I explained how and why the modern Chinese banks were able, despite a succession of foreign and domestic crises, to grow into viable and self-sustaining institutions in China. My book traced the development of the principle banks in Shanghai and the activities of prominent bankers who influenced the direction of their development and management. It explored the reforms that major Chinese banks introduced to their business practices and the management methods they used to compete with their foreign and domestic counterparts. This book offered a revisionist interpretations of several accepted and overly simplistic ideas about the role of Chinese banks, including the idea that the rapid expansion of banks rested solely on their speculation on government bonds; that the failure of economic construction during the Nanjing decade was mainly the result of a corrupt banking establishment; and that the banks’ success was an aberrant phenomenon at a time when China was beset with economic crises. The actual picture was far more complex.
Madeleine Zelin’s book, The Merchants of Zigong: Industrial Entrepreneurship in Early Modern China, adds depth and breadth to the inquiry into the structure of the Chinese economy by exploring the salt production at the Furong Saltyard in southern Sichuan province from the early 19th century to the 1930s.
Zelin chooses private entrepreneurship as focus and moved away from the traditional emphasis on the role of the state in the salt business. As she argues, in Zigong the state played a much less interfering role than traditionally assumed and did not prevent private capital investment in the salt business. She demonstrates that substantial private investment before the early 20th century was possible to promote the development of salt industry when the government was short of help and modern banking services and a commercial code were not available.
As Zelin convincingly argues, the merchants of Zigong themselves became investors and managed their business agenda through the use of contracts and the building of business institutions. Exploring the link between private investment and economic development, Zelin makes useful comparisons with investment patterns in Western economies during industrialization. Like their Western counterparts, Zigong businessmen applied innovative management methods and developed vertically integrated firms which optimized the potential of salt production to an astonishing degree. The level of private investment at the Furong saltyard was exceptional in the economy of late imperial China with Zigong becoming “a sponge, soaking up scarce capital seeking an outlet in the province.” As this sophisticated study shows, Zigong’s investment structure created great opportunities for private entrepreneurship; financing railroads and the like still needed the support of modern banking institutions emerging in early 20th-century China.
Another book also studies salt merchants, but in a different place, Tianjin. Guan Wenbin’s book, The Salt Merchants and Civil society in Late Imperial China, (University of Hawai'i Press, 2001) saw the salt merchants of Tianjin in late Qing dynasty as the essential glue that held together late imperial China's unique civil society. Instead of standing in opposition to the demands of the state, Tianjin's salt merchants integrated the interests of state and society through cooperation, compromise and negotiation with the court in Beijing, while at the same time carving out for themselves a significant social space in Tianjin's urban world. By Kwan's account, the growing demands of modernity in the early twentieth century did not bolster civil society but only served to destroy it. While suggesting a provocative alternative chronology of Chinese civil society, the merchants of Tianjin also offers valuable insights into family life, urban culture and above all, the intricacies of doing business with the state during the Qing. Kwan demonstrates how merchant families functioned as successful business concerns, with diversified portfolios and sophisticated management strategies. Readers also gain insight into the emotional messiness of combining family and business, and discover the surprisingly strong public role of women in salt merchant families. Over the course of the generations, salt merchants not only survived periods of imperial "squeeze," but also managed to amass large fortunes and become the major cultural arbiters and charitable benefactors of Tianjin. It is these activities that for Kwan gave salt merchants a central role in something like a civil society.
Elizabeth Koll’s book, From Cotton Mill to Business Empire: The Emergence of Regional Enterprises in Modern China, traced how the Dasheng Cotton Mill, created by Zhang Jian in Nantong, developed into a business empire encompassing, among other concerns, cotton, flour, and oil mills, land development companies, and shipping firms from the 1890s until the foundation of the People's Republic in 1949. She focuses on the legal and managerial evolution of limited-liability firms in China, particularly issues of control and accountability; the introduction and management of industrial work in the countryside; and the integration and interdependency of local, national, and international markets in Republican China. By doing so the author proves that the concepts, definitions, and interpretations of property rights, corporate structures, and business practices in contemporary China have historical, institutional, and cultural roots.
Morris Bian’s book, The Making of the State Enterprise in Modern China, (Harvard University Press, 2004) is also quite interesting. Different from other books, Morris studies the state enterprises. The dominance of state enterprise is one of the major distinguishing features of Chinese economy during the period between 1952 and 1975. However, few scholars of China studies could correctly explain when, how, and why the state enterprise system took shape in modern China.
Taking the history of modern Chinese ordnance industry and heavy industries, this book systematically traced the origin and evolution of state-owned enterprise system and its major characteristics from 1860s to 1940s. Drawing on extensive research on previously unavailable archives, Bian proved that basic institutional arrangement of China’s post-1949 state enterprise system-bureaucratic governance, management and incentive mechanisms, and the provision of social services and welfare to employers-took sharp before the Communist took over China and was not derived from the Soviet model as is commonly believed.
Applying the theory of institutional change, theory of mental models and the concept of resource endowments, the author offers a new theoretical framework to explain the formation of China’s state enterprise system.
According to the author, the changes of China’s state enterprise system were both path-dependent and path-independent. Though China’s existing institutional endowments exerted a profound impact on China’s modern transformation, the author attributed all defining characteristics of the state-owned enterprise to the sustained crisis and the Chinese elite’s response to it. These crises shaped radical institutional change and determined its timing and magnitude. The crisis unleashed by the Sino-Japanese war revealed the inadequacy of China’s institutional environment. At the same time, the dramatically increased availability of intellectual and ideological resources across national boundaries and the emergence of Chinese technocrats made it possible for the Nationalist Party elites to transform their existing mental model and restructured the institutional environment in overcoming the constraints of existing institutional endowments. The Nationalist elite developed a system they believed best suited China, based on various models then respectively prevailing in the Soviet Union; in the Germany, Italy and Japan; and in the Great Britain and the United States. They adopted cost accounting system to rationalize business management and increase efficiency and launched work emulation campaign to enhance productivity. In a word, a combination of limited institutional resources, endogenous creation, and exogenous appropriation of institutional resources explain the formation of the state enterprise system and its characteristics.
As I know that there are more works going on in studying the Chinese business history. Several years ago Hong Kong University hold a conference discussing money and banking in modern Chinese society. The organizer planned to edit a book, Money and Banking in Republican China, to publish those papers presented in this conference. Prof. Li Peide is working on Chen Guangfu and Shanghai Bank; Prof. McElderry has been always interested in writing a bibliography of Chen Guangfu; another scholar at Columbia University is working on her Ph. D thesis on DaQing Bank. Elizabeth Koll is working on her next book on Chinese railroad. A graduate student at John Hopkins University is writing her dissertation on Wuhan’s Yudahua textile company. I sincerely wish more scholars will work on this field.
Bibliography:
- Bian, Morris
The Making of the State Enterprise in Modern China
Harvard University Press, 2004 - Linsun Cheng
Banking in Modern China- entrepreneurs, professional managers and the development of Chinese banks, 1897-1937
Cambridge University Press in 2003 - Sherman Cochran (ed.)
Inventing Nanjing Road: Commercial Culture in Shanghai, 1900-1945
Cornell University Press, 2001 - Sherman Cochran
Encountering Chinese Networks: Western, Japanese, and Chinese Corporations in China, 1880-1937
University of California-Berkley, 2003 - Sherman Cochran
Chinese Medicine Men and Consumer Culture in China, 1880-1956
Harvard University press, 2006 - David Faure
China and Capitalism: A History of Business Enterprise in Modern China
Hong Kong University Press, HKU, 2006 - Girth, Karl,
Made in China, Harvard University Press, 2005 - Ji Zhaojin
A History of Modern Shanghai Banking-The Rise and Decline of China’s Finance Capitalism
M. E. Sharpe in 2003 - Kwan Man Bun
The Salt Merchants of Tianjin: State Making and Civil Society in Late Imperial China,
Honolulu: University of Hawai'i Press, 2001 - Koll, Elizabeth
From Cotton Mill to Business Empire: The Emergence of Regional Enterprises in Modern China
Harvard University East Asia Center, 2003 - Brett Sheehan
Trust in Troubled times: Money, Banks, and State-Society Relations in Republican Tianjin
Harvard University Press in 2003 - S. A. Smith
Like Cattle and Horses: Nationalism and Labor in Shanghai, 1895-1927
Duke University Press, 2002 - Zilen Madeleine
Contract and Property in Early Modern China
Stanford University Press, 2004 - Madeleine Zilen
The merchants of Zigong: industrial entrepreneurship in early modern China Columbia University Press, 2005
