Popular Science Monthly/Volume 56/April 1900/Trade Corporations in China

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TRADE CORPORATIONS IN CHINA.
By M. MAURICE COURANT.

THE remarkable longevity of a large number of business houses in China is not due solely to the general conditions of society or to those which are peculiar to the commercial class, but their stability and their fame rest upon a special organization, under which they are united in groups. It is customary for all the houses possessing the same specialty to form an association which I shall call a corporation, reserving to myself the privilege of pointing out a few exceptions to the rule. These corporations, which seem to date from at least three centuries back, are difficult subjects to study.' Various in type, formed by the individuals interested, without the state having had anything to do with their regulations or even perhaps authorized them, they exist by force of custom and live conformably to their traditions, while some, I have been told, have written regulations and even, perhaps, archives—which they have not thought fit to communicate to the public. What is to be learned of them has, therefore, to be deduced from their visible transactions.

The corporation fixes the minimum price of articles of sale, and has secret agents to watch that no house takes less, thereby setting bounds to competition and preventing the injurious depreciation of goods. Only the public suffers from the existence of the minimum, but it does not seem to perceive it, and the Government never interferes except in respect to the price of grain, for which it fixes a maximum, and in times of great stress sells from its own granaries. The corporation, too, as represented in the banks and loan offices, fixes the rates of interest to be paid or received, and the kinds of securities and moneys that shall be accepted. In short, it adjusts the general regulations of business transactions, and defends the common interests of all those associated in it. If one of them is implicated in a judicial proceeding of general interest the corporation sustains him with its credit and its funds. It further takes in hand injuries to the interests of its associates. In 1883 the tea merchants' corporation of Hankow suspecting frauds by the agents of certain foreign houses, asked those houses to designate themselves some foreigner to superintend the weighings. Notwithstanding the good reputation of the corporation and the moderation of its requests, the foreign houses refused. All transactions were suspended, and the official in authority declared that he could not compel the merchants to sell contrary to their wish, and the foreign houses were eventually obliged to yield, one at a time.

The corporations likewise watch the transactions of their members, oppose fraud which might harm the good name of the association so far that the silversmiths will not permit one of their number to sell alloyed jewelry, even when the purchaser knows it is such. Some see that the taxes and duties on production are regularly and properly paid. Others, in the interest of the stability of the houses, forbid all fictitious sales and purchases, and most of the stock operations and a large number of commercial transactions which seem very simple to us would not be tolerated by them. The custom of selling short having been introduced upon the silver exchange in Peking a few years ago, a censor reported it as a kind of gambling, and the Government interdicted the operation—a very rare example of official intervention. Under a similar old-fashioned view, the corporation of bankers inquires into the total amount of the notes issued by its members. Every banker and every broker is free to issue notes, and little attention is paid to the precautions required by the law. But the corporation has an infallible means of restricting extravagance in the emission of bills. If a house is going so fast as to be in danger of compromising its credit and perhaps endangering the capital of others associated with it, an order is given, all the notes are thrown before the public, and the imprudent bank has to suspend its payments and retire.

The corporation further maintains its reputation and keeps on good terms with public powers by expenditures on ceremonials and charities. Every year it appropriates a sum for the opening of the kitchens from which rice and millet broths are distributed to the poor of Peking. In case of famine or inundation, the quotas of the corporations do not have to be waited for, while the more prominent commercial men also contribute largely under their own names. They will subscribe for a testimonial to a mandarin who has done good service, will help prepare the road over which an imperial procession is to pass, and will contribute to the pageantry of popular religious ceremonials.

Each corporation has its patron divinity, who is the object of a special cult. With one it is the' god of riches; with another Koan Yu, god of war; with others a spirit of more limited competency, like Lou Pan, a famous mechanician of the time of Confucius, now patron of the carpentcrs. Adored in every shop by all the patrons and clerks, the festivals of the protecting genius are celebrated by the whole corporation at fixed dates. To some divinities a sacrifice of meats and incense is offered in each warehouse, after which all the chiefs and the men employed take part, while the spirit is supposed to be present. To others, more rarely, a more bountiful sacrifice is made in a temple, and the banquet, held in a large hall, is enlivened by dramatic entertainments. The patron is also duly honored in the celebration of the general feasts of the Chinese people.

The corporations have tribunals of arbitration and a common treasury, but the method of operation of those departments is among the things they do not reveal to the public. I have only learned a few general facts on the subject. The corporations intervene, I have been told, in the disputes of the members and to prevent dishonest dealings and attempts to cheat one another, but I have not learned that they have any real judiciary authority. Their treasury is sustained by means of assessments and fines, and loans may be contracted on its account, for the salt merchants of Tientsin are still paying interest on a number of debts contracted by the corporation in the last century.

Great differences might be expected to exist between the corporations in respect to these points and many others. They have been constituted at different epochs, independently of one another, and are similar only in their essential features. The minimum price fixed by the assembly is not equally imperative in all. Thus, the price fixed by the fur merchants at the beginning of the winter does not bind the members. In most branches of commerce all the houses composing the corporation are on a footing of substantial equality, though, of course, the large banks prevail over the small brokers, but there is no unlikeness in the business or the situation. The policy of the tea trade is mainly controlled in Peking by the houses of the families Fang and Oou. They fix the price, determine the equivalence of weight (the standard is a pound of four ounces instead of sixteen), and lead the corporation. In fact, the retail dealers use their capital in the decoration of their shops with gilding and sculpture, at a cost of between sixteen hundred and two thousand dollars, while the goods are lent them by one of the importers, who holds the decoration as security, so that the whole corporation is in the hands of these two families. This is a special condition, and there is nothing else like it, even among other importers of southern products. While most branches of trade are independent of official action, slaughter houses, of which there are only five in Peking, have to be authorized by the Government. A religious motive may be at the bottom of this restriction, the large cattle being reserved for the imperial sacrifices. Moreover, the killing of animals has been interdicted at different times, and even now the slaughter houses are ordered closed, as an act of public penitence, in times of drought.

The loan houses also need an official authorization. They pay a tax on their operations to the local authorities, and are divided into three classes, according to the importance of their business. Those of the first class receive deposits from the authorities of various sums, on which they pay interest, the administration reasoning that by helping them increase their capital and enlarge their business it will be doing a philanthropic work and assisting the people. These loan offices are not at all like our pawnbrokers' shops, but are a credit institution, to which the middle class as well as the poor Chinaman has constant recourse. Being conducted on equitable terms and serving their convenience in various ways, they render great services to the Chinese people, and have become necessary to their life, and this explains the departure of the Government from its usual policy of non-interference to supervise and favor them. China has, further, large and small capitalists, and numerous credit establishments very much like ours. They may be classified as exchange offices, banks, and banks of discount. The last are at Peking, where they were founded a few decades ago by some men from Chan-Si. Their single industry is trading notes in all China and some of its dependencies. They have no monopoly, for some of the larger banks and more important traders were all doing the same; but they have regulated the business, extended it to more places, and have almost entirely suppressed the transportation of money in bulk.

The banks of exchange perform a variety of functions on a restricted scale, charging two per cent for exchanges, issuing notes without any supervision, and lending money at two per cent a month in normal times. They are not, however, always able to pay their notes at sight, and it is well, therefore, not to keep them too long. In the provinces a bank usually accepts only its own notes. In Peking some well-known signatures are accepted everywhere after examination by an expert, who places his seal on the note he declares good, charges a fee for each verification, and is responsible for his mistakes.

The large banks, by accepting or refusing the notes of any house or by throwing money or sapiques on the market, rule in the corporation and have the whole fate of the market in their hands. The four Hengs, by the amount of their reserve, the solidity of their credit, and the number of their branches or correspondents, have no rivals in north China. All exchange operations are carried on in the money market, which is held every day in the southeastern part of the city, on the street, near the Tauist Temple, where all the houses in Peking are represented, and every one takes care to be so, lest he be thought in default. "When the rate is fixed the news is dispatched by couriers, pigeons, etc., to all whom it concerns. The couriers of the corporation, who communicate with the brokers and bankers, are also the confidential agents of the syndics, are acquainted with the amounts of the emissions of each house, know whether a certain patron is really ill or only feigning, and by their reports decide who shall be boycotted or declared insolvent. All this goes on in full liberty, without surveillance by the state, without any tax on the transactions, and without any other interference than the prohibition of fictitious dealings. The corn market is in the same way the almost exclusive domain of the corn corporation, the state never interfering except in the case of a famine in the region.

Besides the merchants' corporations, there exist also corporations of artisans. The embroiderers, the makers of cloisonné, the tanners, and the carpenters have theirs. The carriers and the boatmen, who, before the opening of the railway, had the monopoly of transportation between Peking and the provinces without forming associations, met at their respective inns and established rules and rates for their business. Informal organizations, varying among the different towns in their degrees of development, exist among the barbers—who at Peking meet every year for a sacrifice and a banquet—the chair-bearers, and the jinrikisha men, and so every city has its corporations and associations which are not like those of the next city.

Some branches of trade have no corporations, and the peasants, when they come to town to sell their produce, trade on their own account, for the best terms they can get, and have to accept, in the market, an organization the origin of which is forgotten. Every year, on the appearance of each sort of crop, the King ki of the market, having agreed with the dealers, fixes the minimum price of the commodity for the season. He also polices the market. The function of King ki is the property of the person who exercises it, who has bought it from his predecessor and will sell it to his successor by private contract, and nobody contests his right. In the market for azaroles the position is hereditary. The monopoly of the corporations is often complicated with a provincial question. The Chinaman regards every man who was born in another district as a foreigner—still more if he is of another province. Those who are of the same local origin, on the other hand, stand by one another. Hence it has come to pass that some trades have been monopolized by the people of some one province. Most of the bankers were originally from Chan-Si; all the great merchants came from Anhoei. The people of Chan-tung have three special occupations in Peking. They have the exclusive privilege of killing pigs and retailing meat. They are the only water carriers, each one having his well on the public highway, his watering place for horses and mules, and his district where he sells water without permitting the people to provide for themselves elsewhere. Such privileges are consecrated by usage and zealously defended by their holders, and respect for them is enforced, when necessary, by the authorities. Associations are formed, also, even among the coolies who work on the docks.

These details show by how great a variety of forms all the corporations assure the same result—the organization of labor. We see also how they extend beyond commerce. The Chinaman is in fact a social being bound closely to his fellows—of the family, province, trade, or class—by every tie and in every sphere of life. He is never a man living by himself and for himself, and is not accustomed to independence. Hence the authority of the corporation, instead of seeming strange, is a necessity to him. Consequently the corporation has the right, by universal consent, to exact obedience from its members, and to compel those who would stay out to come into it.—Translated for the Popular Science Monthly from the Revue des Deux Mondes.

 


 
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