Organizer: Chi-Kong Lai, University of Queensland
Chair: Andrea McElderry, University of Louisville
Discussant: Robert P. Gardella, U.S. Merchant Marine Academy
The Chinese are known for their industriousness, their ability to exploit business opportunities, to network and to save, and business historians sometimes forget, also their passion for gambling.
We would suggest that it might be worth our while to consider the element of gambling—risk taking—as a central theme in our papers. Broadly, we might say the overall problem we could all be concerned with could be what sorts of risks did Chinese businesses have to undertake in the twentieth century, and how, if at all, institutional changes had made it possible to assess some of these risks.
We will all provide concrete cases to examine the problems of our choice. We want to be able to bring the papers together finally with some ideas for contrast and comparison. Did Shanghai ever create the image that share-holders might have power, or did share-holding remain as risky in the 1920s as it did in the 1870s? Did the modern banks provide safe havens—and if they did, why did the qianzhuang remain so attractive?
Ultimately, by looking at risks and risk-taking, we are probably asking questions about predictability and power in the market place. Would one actually say that a market that was dominated by a bureaucracy was necessarily more predictable? Did share-holding impose an order, whereby managers were made more accountable to share-holders? Did Chinese investors become more knowledgeable about the possibilities of the finance market?
Risk Taking and Profit Making: The Jen-chi-ho Insurance Company
Chi-Kong Lai, University of Queensland
This paper will examine the rise and fall of the Jen-chi-ho Fire & Marine Insurance Company. The Jen-chi-ho Insurance Company was very successful in making profit. Its organizational structure was under the China Merchants’ Company’s control. The prosperity of the insurance company’s business enabled the China Merchants’ Company to minimize its losses in a competitive shipping market. The paper will argue that risk taking in the insurance business was providing profit-making opportunities in the imperfect market during the late Ch’ing and early Republican period.
The paper will highlight the issues of both political risks (such as political extraction, war, changing government policies) and economic risks (such as economic cycles, the risks of the holding company/ subsidiary relationship and mismanagement) that affected capital formation in the company. I will discuss the effect of organizational structures and international environment on the survival strategies of the firm. The paper will also investigate the company’s profit making strategies and its contribution to the survival of the China Merchants’ Company. I will also assess the company as a microscope to understanding the role of the state in the development of modern insurance companies. The general aim is to develop an institutional framework, within which the organizational dynamics of Chinese firms’ profit-making and survival strategies are defined. Drawing on documentary sources and archival sources, we can elaborate the factors that relate to profit-making and risk taking in modern corporations in the late nineteenth and twentieth century China.
Networking, Representation, and Marketing: The Jiuda-Yongli Conglomerate in Business, 1914–1937
Man Bun Kuan, University of Cincinnati
The experience of the Chiu Ta Salt Refining Co. Ltd. (founded 1914) and the Pacific Alkali Co. Ltd. (Yung Lee Soda Co., founded 1917), one of the largest industrial conglomerates in China illustrates the complex interplay of economics, markets, institutional inertia, society and foreign imperialism that is the history of Republican China. Caught at the junction between the powerful network of salt merchants operating the state monopoly system and foreign imports at the treaty ports, how did the conglomerate struggle, adapt, survive and grow?
I intend to analyze the risk management of the conglomerate, by focusing on its organization, especially its board of directors, sources of capital, rates of profit, reinvestment pattern, and the relationship between the conglomerate and its supporting network of banks and financial institutions.
In the context of the Chinese economy of the 1920s and the 30s, the conglomerate not only had to compete with established salt merchants operating the state salt monopoly, but also other salt refineries. Against the former, the conglomerate advocated open and free competition to break into hitherto closed markets. Where opportunity presented itself, however, the conglomerate also formed subsidiaries to take over existing monopolies, assuming the role of "traditional" salt merchants itself. With fellow salt refineries, the conglomerate formed cartels or entered into retail price maintenance arrangements to protect its share of the market. When the conglomerate’s soda factory finally began production, threatening the Imperial Chemical Industries’ hold on the Chinese market, the resulting price war was settled by ICI’s "market-sharing" scheme. The conglomerate used political connections to alleviate the company’s risks. All the above mentioned strategies help the conglomerate to minimize their risk in the uncertain political and economic climate.
Risk and Uncertainty in Modern Banking: The Bank of Communication in Republican China
Po-yin Chung, Hong Kong Baptist University
The banking industry is a profitable, but risky business. This statement is especially valid to Republican China—and the risk involved was largely generated by China’s political uncertainty. In the late Qing and Republican era, the Peking governments, suffering from the disadvantages of inadequate fiscal policies and institutions, recognized the need for the establishment of a "central bank." This decision immediately split the officialdom into two camps and two competing "central banks," and the Bank of Communications and the Tai Ch’ing Bank (later re-named as the Bank of China) were established under different political patronage. While the Bank of Communications was established by the Board of Communications, which controlled funds in railway and telegrams, the Bank of China was established by the Board of Finance which controlled funds in taxation. In Republican times, the two banks had competed for the status to act as the Central Bank of China, and thus, for the control over the central treasury. By looking into the rise and decline of the Bank of Communications in China’s public financial sector, this paper intends to examine the risk and chances involved in banking industry in modern China. This paper argues that the growth of the Bank of Communications, as China’s central bank, was mainly hindered by factional politics in the late Qing and the Republican era.
Multiple Nationality as a Means for Early Twentieth-Century Overseas Chinese Merchants’ Risk Taking
Man-houng Lin, Academia Sinica
Based upon Japanese archives and Chinese newspapers, this paper takes Kuo Chun-yang (1859–1935), an Indonesian overseas Chinese merchant who traded to Japanese Colonial Taiwan and China, as an example to illustrate their adopting multiple nationality for risk-taking in early-twentieth-century international trade.
Kuo was born in a very poor family in Tung-an, Fujian. He went to Indonesia in 1876 when Indonesia had an expanding economy under the Dutch. By 1933–1934, Kuo’s sugar sales were the biggest in Indonesia. Kuo’s tea sale from Taiwan to Indonesia ranked first in the period of 1916–1934.
With the main office in Indonesia, Kuo had branch stores in Taiwan, Hong Kong, Xia Men, Zhangzhou, Shanghai, and Tianjin. In China, he also invested in sugar companies and sugar fields. In Indonesia, he was the chief financier and also a school owner, as well as head of the Chamber of Commerce in Java. In Japanese colonial Taiwan, he received the fifth-rank medal in 1919, and fourth-rank medal in 1928. Meanwhile, Kuo, who had an official title given by the Qing government, received the first patriotic medal and fifth-rank performance medal from the Republican government.
Kuo’s political and social network was built on Kuo’s multiple nationality. In contrast to the People’s Republic of China’s prohibition against multiple nationality for overseas Chinese from 1955 onward, overseas Chinese were more expedient to take commercial risk from the political side in the early twentieth century.