It’s a slow news week in China, means it’s time for the different Beijing bureaus to trot out the history features. Last week, NPR had the court music of the Tang Dynasty, this week the IHT looks at Pingyao banks from the Ming and the Qing eras.
At Pingyao’s height, the 22 banks here thrived on the flourishing trade in Shanxi Province, as silk and tea moved north to Mongolia and Russia from southern China and wool went south.
Compared with the excesses of today, scholars say, the early days of banking were a time of solid business ethics. There were no toxic mortgages, no opaque financial instruments. Trust among businessmen was so strong that the banks were able to start a system of remittances, credit and check-writing, the first of its kind in China. Currency was in silver ingots.
Yet, some of the banks’ practices might raise eyebrows today.
Still visible in the two-story courtyards of the defunct banks here are opium dens and mah-jongg tables, as well as rooms where prostitutes hired by the banks plied their trade to win over potential customers.
I thought of about 15 different jokes related to the last bit there, but none suitable for posting on this blog.
The Fed just hammered the last nail in the coffin of the US dollars.
“How I don’t read the rise and fall of Pingyao as a cautionary tale.” – blevitt
“At Pingyao’s height, the 22 banks here thrived on the flourishing trade in Shanxi Province, as silk and tea moved north to Mongolia and Russia from southern China and wool went south.”
The success of the Shanxi piaohao were not so much tied to modern banking practices as much as they were a result of support from the Qing state (!?)。 The piaohaos “florished” following the Taiping rebellion, when they took responsibility for collected remittances “jingxiang” 京饷– the government could no longer maintain the safety of its roads and canals, so these private remittance organizations replaced the traditional overland transportation of silver and tribute goods to Beijing. These banks were more like a glorified privitatization of the IRS, not the beneficiaries of “florishing trade”.
Now, why did the piaohao fail? Their demise came with the fall of the Qing state, ending the era of jingxiang and tribute to the Qing court. Not only were there foreign banks in Shanghai creating a new economic order, the remaining mandarins that aligned with the Beiyang army organized the Daqing Bank 大庆银行, a modern national bank that came to finance North China warlord era governments. After the 1911 revolution, it was renamed Bank of China, as it is still known as today. The piaohaos demise was entirely one of political-economy—the national bank model won out. (As a side note, the piaohao were approached on multiple occasions by Yuan Shikai to help finance the national bank. The response each time? Rejection.)
Nevertheless, the rise and fall of the “piaohao” make a nice contrast to the current banking crisis. They became prosperous as the Qing lost control of their empire and their economy. They were replaced by a national bank– something similar to “The Fed”. Now, unless we think Benny B is up in the Fed playing Texas Hold ‘Em and drawing lines, I don’t think the fall of the piaohao can be read as a “cautionary tale”. We are not in the midst of a millennial cult revolution or witnessing a empire-wide political vote of no confidence—although I do like that image of America’s “great helmsman” 伯南克主席 slacking on the job.
Instead, the failure of our modern banks is one of regulation, not one of internal turmoil and political upheaval.