#3035 - Week 6 Lecture Notes - Chinese Economic History Since 1850

State and commercial organization developed alongside each other in the long-run

Guilds were an important social organization

• John Major encountered problems in the Lower Yangzi with them

• Silk weaver guild destroyed Chen Qiyuan’s factory in Guangdong

  • Guilds overlapped with lineage

The problem was not that the State caused actively damaged prosperity

• The bigger problem was they didn’t do enough

“Chinese people are like loose sand” (Sun Zhongshan)

• Founding father of Modern China

• Like many revolutionaries, Sun spent a lot of time overseas

The lack of social cohesion meant revolution and modernization were difficult

Civic identity was important, but was not organized nationally

• Social organization was organized along family lines

• Migrant merchants were attached to their hometowns not their trading city

Guild and other organizations were “feudal powers”

• Searched for monopoly and rents

  • A fundamental feature of guilds

• Often overlapped with lineage and family

Weber – A sociologist who invested the Chinese culture and lineage

Secret societies were another important social group

• Dynastic leaders were weary of them

Commerce as a profession was ranked bottom, below handicrafts

• In contrast to the West, where mercantilism was fundamental to Western ideology

  • E.g. East India Company

• Lack of commercial and contractual law made it difficult for large scale firms to become established

What were the problems of family firm?

• There was no distinction between public and private

• Corruption and nepotism

• Difficult to transcend beyond your individual households

• Capital accumulation and pooling of capital was limited to close circles and your lineage

Rational accounting was the primary factory in the development of modern Western capitalism (Weber and Sombart)

Italian “double-entry” allowed:

• Corporate form of organization

• Separation between public and private assets

Arabic numerals were systematic

• Chinese numeral system didn’t have place notations

Absence of calculating capital investment

The Chinese mercantile network was widespread in Southeast Asia

• Huff notes that Singapore is the place where Chinese and English entrepreneurs met

• Dominant in Yokohama in late Tokugawa and early Meiji

The Japanese Meiji revolution was a response to Chinese mercantile power as well as to Western challenge

There was a symbiosis in the treaty ports between the Chinese and West

There was a rise of Chinese industrialists in the 1920s

Although there was no formal laws, there was a widespread contractual culture

There was in fact widespread use of accounting at all levels

• The abacus and Chinese numeral system worked very efficiently together

• Account books were used for households, lineage entities, firms and the state

Must compare Chinese business organizations on their own terms, not set against Western standards

Chinese business organizations were vastly shaped by historical, political and social factors

They were far more flexible and fluid than we recognize

They responded to market incentives, had some corporate features and were quite rational given the constraints

They were more viable and enduring than expected

As an example of the importance of money to Chinese, they burned money when people died as they believed they needed it to survive in the afterlife

Possibly had a fairly integrated market for agricultural staple goods such as rice and wheat

World’s first paper money, sophisticated credit and debt instruments

Relatively isolated and from poor regions

Based in Northern China

Organized along regional and native place lines

Strong separation between owners and managers

Managers were usually hired from outside the family or immediate relations

• Were given considerable autonomy

Worshipped Guangong, a sworn broterh in the Three Kingdom dynasty

• Was a symbol of loyalty and trustworthiness to his sworn brothers

  • Although they weren’t related by blood

A case of going beyond blood lines

Turned Pinyao (a small town) into a centre of banking in 19^th-20^th century China

Classic example of agglomeration economies: concentration of bankers and private mail and security services

Built a vast national network in China which extended to Japan and Korea in the early 20^th century

Failed to penetrate into the major treaty ports

They focused only on remittance

Why didn’t they evolve into the “Bank of China”

Again, relatively isolated and from poor region

Based in Anhui province

Organized mostly along lineage

China’s most elaborate lineage organizations

Some of the lineage was fictitious, based purely on name

• Allowed it to expand beyond blood or region lines

Lineage had its own rules and regulations for its members

• Sometimes this was recognized by the state

Lineage characterized village and mercantile organizations in Southern China and in overseas Chinese communities

Lineage had “corporate” characteristics that own and hold property in perpetuity

• Democratic system for managing the property

Lineage are often large land owners that sublease their land to their lineage members or even outside

• Also engaged in other commercial and...