By the mid-19th century, dozens of piaohao firms based in three Shanxi counties were setting up branch offices throughout major commercial cities in China, and turning, of all the places in China, Pingyao, a remote, little-known city, into the financial hub of a nationwide network of money remittance. After the turn of the century, they reached into Japan and Korea. Thus, for an entire century until the fall of the Qing in 1911, the Shanxi bankers had locked up the money transfer business in China.
Hui merchants
Huizhou's geographic location was significant to the economy of southeastern China as a communication hub between the south and the north. As a result of Huizhou's particular geographical condition and the need of economic development, landowners began to take up business.
In theSouthern Song Dynasty(1127-1279), as the capital was moved fromKaifengto Lin'an (now Hangahou), the political and economic center shifted to the south as well. This stimulated the economy of neighboring areas to develop, and introduced the Central Plains culture to the South.
When the Imperial Court of the Southern Song moved its capital from the north to the eastern city ofHangzhouin 1132, Huizhou merchants were on hand to supply bamboo, wood, lacquer, and craftsmen for the construction of palaces,pavilions, villas, andtemples.
This construction boom provided Huizhou traders with capital to branch out into new industries and provinces. It transpired that with the strengthening of the southern economy, Huizhou's location between Zhejiang andJiangsu provincescould be made to turn a profit. Soon Huizhou became a key communications and trade route, and local traders diversified into selling tea, grain, silk, cloth, paint, pottery, ink, andpaper.
However, it was when Huizhou's merchants turned to the high margin salt and pawnbroking businesses that they were able to accelerate their expansion. They thus spread to all corners of China and even expanded into some Southeast Asian countries. Indeed, it was said that by the reign of EmperorGuangxi(1875-1909) all pawnbrokers in China were from Huizhou.
The merchant groups and bureaucracy
The fate and fortune of Chinese merchant groups were also intimately linked with another distinctively Chinese political system: the relatively open and formal access to the political power structure through the taking of the highly competitive, arduous, and impartial Civil Service Examination based on Confucian classics. Successful examinees who became gentry or bureaucrats were entitled to tax breaks and legal privileges.
In view of the status of bureaucrats as administrators, tax collectors, and legal arbiters, this system generated enormous incentives - or rather distortions -- for Chinese society, particularly merchant groups whose accumulated wealth was most vulnerable to the damages of arbitrary power.
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