There is still no consensus on the details of origin of Shanxi Banks. Most scholars believe that the Shanxi banks are a native innovation from China, while some western scholars (initially proposed by Randall Morck) hypothesize a potential influence from Russia or Britain. Rishengchang was estimated to be founded during the
Qing dynasty in 1823. However, the exact founding year remains controversial, some scholars argue it was found in 1797 or 1824. To deal with the transfer of large amounts of cash from one branch to another, the company introduced drafts, cashable in the company's many branches around China. Although this new method was originally designed for business transactions within the Xiyuecheng Company, it became so popular that in 1823 the owner gave up the dye business altogether and reorganized the company as a special remittance firm, Rishengchang Piaohao. In the next thirty years, eleven
piaohao were established in Shanxi province, including
Pingyao and neighboring counties of
Qi County,
Taigu, and
Yuci. By the end of the nineteenth century, thirty-two
piaohao with 475 branches were in business covering most of China, and the central Shanxi region became the
de facto financial centres of Qing China. The Chinese banking institutions of
draft bank or
piaohao were also known as Shanxi banks because they were owned primarily by Shanxi merchants. All
piaohao were organised as
single proprietaries or
partnerships, where the owners carried
unlimited liability. They concentrated on interprovincial remittances, and later on conducting government services. 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. From the late
16th century, the Silk Road had become nearly impassable making it desolate for commercial purposes. The trade routes between imperial Russia and the Qing dynasty was known as the "
Tea Road" and following the signing of the
Kyakhta Treaty in the year 1727 the trading posts of Kyakhta,
Zuluhaitu, and
Nerchinsk were opened to trade with the Chinese, though only Kyakhta ever saw any significant trade and basically all goods from and to China went through the city. Initially, the imperial Russian state maintained a complete monopoly on the lucrative trade with China, furthermore the government of the Qing dynasty required a prior preclearance of all exported goods in its capital city of
Beijing, this policy initially meant that trade between the two countries was minimal. But in the year 1755, the government of the Qing dynasty dispensed with preclearance. Trade saw another boom when
Catherine the Great had opened up the city of Kyakhta to private Russian merchants in the year 1762.
Possible Russian and British influence on modern piaohao While the Shanxi merchants entered Russia, banks in imperial Russia took deposits, they made loans, exchanged different currencies, and let merchants and traders transfer funds to each other, though they primarily only made loans to noblemen they favoured. which gave this proposed reason more credence. Another plausible explanation for the position that Shanxi merchants had is based on defecting 1640s Ming soldiers reappearing in the Shanxi province acting as
private security to the region's merchants, this gave the merchants from this province a distinct edge under waning rule of law during the
transition from Ming to Qing. A similar hypothesis proposes that hiding 1640s Ming soldiers were redirecting their talents to commerce. While locals from Shanxi were oddly absent from the top rank imperial exam records during the Qing dynasty, the dynasty's 19th-century enthusiasm for the services of the
piaohao asperses this hypothesis somewhat. The most plausible explanation of the financial prominence of the province of Shanxi states that its salt works at
Xiechi Lake fostered mercantile activity that would ultimately need banks. A state salt monopoly held by the imperial government persisted, with only a few minor interruptions, from the
Han dynasty until the year 1370 during the second year of the Ming dynasty. In 1370 the army of the Ming began using its salt rights, known as
yan yin, which were initially redeemable only at the Xiechi Lake, to pay for transporting provisions to Chinese soldiers stationed on the
Great Wall. As the Shanxi merchants were handling this lucrative business from its very beginnings, they managed to get a piece of the Ming state's monopoly and the imperial government quite likely netted more revenues of the salt monopoly because of higher overall efficiency. This policy that benefited the Shanxi merchants remained in effect long enough for them to accumulate a substantial amount of wealth for themselves. This hypothesis regarding the rise of the Shanxi merchants also accords with evidence that the region comprising the current Shanxi province was not an important commercial centre until the reign of the Ming dynasty. == See also ==