I went to PingYao a long time ago (check the January and February entries about PingYao), but recently decided to write an entry about the history of PingYao. Bare with the seemingly odd story-telling sequence and the repetition of theme here. Enjoy!
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If the walls of PingYao could talk, they would say,
"adversity is opportunity"
Tale 3:
One day many many years ago, a clever young clerkboy named Mao Honghui of XinCun Village of PingYao Prefecture journeyed on an errand to buy vegetable oil stock for his manager. On arriving at such-n-such town, the famed vegetable-oil city in Northern Shanxi Province (山西), the young man found himself in an unenviable situation: a desperate supply shortage of vegetable oil this year. There were simply too many merchants eager to buy the oil and not enough oil to satisfy the quantity demanded. Despite having even arrived early on the rush, Mao Honghui and countless other merchants stood with money to offer but nothing to buy because the well-experienced, old-timer merchants had contractually pre-ordered the entire supply. These wise merchants were on their leisurely way to pick up their promised stock.
"没办法!... there's nothing we can do," the unlucky young merchants dejectedly agreed. They all packed up and went home to face the wrath of their managers--or worse--the complete evaporation of their companies. But that clever Mao Honghui had a brilliant idea. He took the money and bought every last basket in the city. Why did he buy baskets, you ask? Well let me tell you.
A few days later, when the elderly merchants arrived they found their own little problem--every last drop of vegetable oil they had pre-ordered awaited them exactly as expected, but not one basket was available with which to transport it home! Mao Honghui then appeared to make his proposal. He offered the group of experienced merchants as many baskets as they needed in exchange for their collective contribution to meeting his vegetable oil needs. With no alternative, they agreed. A little here and a litter there later, Mao Honghui's stock was full. He walked away with not only all the vegetable oil he needed but also a handsome personal profit (since baskets were so cheap) and a far-spreading reputation as something of a genius. Indeed,
adversity is opportunity
Tale 1
"Located on the banks of the Fen River, PingYao Prefecture is composed of three parts: the plain, the hilly land, and the mountain area. There are a lot of people but not enough farm land. In addition, there are not enough underground water resources, and the farming conditions are simple and crude."
--Pingyao County Records (1707)
To this very day in April 2009, Shanxi Province (山西) is anything but a farmer's paradise. It rains too rarely. Winters are long, cold, and dry. Spring brings nothing but dust raining from the even dryer skies. Summers bring heat and humidity, but not enough water to cultivate bountiful harvests. The record quoted above testifies to a hostile agricultural environment stretching back for centuries.
But what is hostility if not a chance to overcome and fly higher? The costs of squeezing water out of a turnip are too high.... and there are other ways to get water, which can bring a flood. The wisest of the Shanxi people realized that instead of growing or making things to feed themselves, they could trade what others grow or make to feed themselves. And what a feast they found! Shanxi is a central province. To the north: Beijing and beyond. To the east: the coastal provinces. To the south: the fertile agricultural lands of South China. To the west: my Sha'anxi province, Xi'an, and its gateway to the globe-turning Silk Road. So whereas geography frowned on Shanxi's chances of making a living by farming, geography smiled, winked, and nudged at Shanxi's prospect of making a living by trade and business.
Indeed, to historians Shanxi Province is most famous for one thing--the Shanxi Businessman and the Shanxi business culture. They traded and transported grain, salt, silk, cloth, iron, and information. And PingYao--at the center of Shanxi's agricultural poverty--was for centuries the axis of a wealthy network of trade and commerce that spanned China and wider Asia. An old saying in China: "Where you find sparrows, you find the people of Pingyao."
The deep ruts of 100,001 wagon wheels have carved a unique story of economic history into the streets of PingYao
trade made this
PingYao
the sprawling Wang Family Mansion, a few kilometers to the south of PingYao; once the home of an incredibly rich merchant family, now a monument to their lifestyle and the economic history of Shanxi; said to be the civilian equivalent of the Forbidden City Palace in size and splendor... this picture is from Google Images since I was not able to go there myself
adversity is opportunity
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Tale 2
The Shanxi businessmen were tireless spiders spreading their web of trade and commerce across Asia. Almost immediately, however, they encountered a problem that only intensified as their web got larger: bandits. When merchants carried profits in the form of hard currency, their wagons became targets with the promise of dense loot. As the wealth and distances travelled increased, so did the chances of running into armed thieves. And with the infiltration of firearms into Asia, the thieves became a serious threat. A small group of bandits could pillage a company into bankruptcy with one raid. What to do?
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Some merchants played it safe by restricting their business to the confines of their city wall. [sigh] Limited opportunities. Some more clever merchants took up the idea of hiring armed escort services. They could travel the world... at a heavy but reasonable cost. Risky opportunities!
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Enter Lei Lutai of PingYao. This visionary merchant first distinguished himself as the manager of the Beijing branch of Li Xiyeng Dye Shop. Faced with the problem of transporting silver past the thieves, Lei Lutai stepped into the limelight of China's economic history with his brilliant idea: remittances.
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Here's how it works. A PingYao merchant sells silk to a retailer in Beijing. The retailer gives him a sum of silver. The PingYao merchant then deposits this silver at the Beijing branch of XYZ silver inventory. The XYZ silver inventory clerk gives him a piece of paper that says he is entitled to this amount of silver at any of the XYZ silver inventories. The PingYao merchant leaves Beijing with nothing but a piece of paper in his hands. When the PingYao merchant returns to PingYao, he goes to the PingYao branch of XYZ silver inventory and hands the clerk there the piece of paper. After a little verification, he can withdraw as much silver as he deposited in Beijing.
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Yep. It's a bank! Have you ever thought about how valuable banks are to you? Banks create wealth in more ways than interest on savings. Take note. The remittance service eliminated the threat of bandits and reduced the expense of hiring escort services for merchants transporting profit. And since merchants carrying a remittance no longer needed carts, horses, fodder, or drivers to transport a single piece of paper, Lei Lutai's idea reduced transportation costs too. In addition, ambitious merchants who used the remittance banks to take out loans were able to access quick capital to finance investments that enhanced efficiency and productivity. In short, the remittance method stimulated a surge of trade and commerce all over China.
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What about our hero, Lei Lutai? Well at first, his remittance method helped make his boss's dye business a lot of money. Then recognizing even more opportunity, Lei Lutai persuaded his boss to quit the dye business altogether in order to become a remittance bank company with serious inventories and branch offices in as many places as possible. Earning profit on fees and loan interests, the bank soon made its boss a fortune. Other PingYao merchants hopped on the bandwagon. Successful dye shops, grocery stores, lacquer ware shops, etc. closed down to become headquarters of banking empires.
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Lei Lutai became rich and famous. PingYao became a finance capital..."Asia's Wall Street" of the 19th Century, as some historians say. Other Shanxi merchants and cities prospered too. And consumers across China benefited from the lower prices of an increasing variety of goods... all thanks, in a twisted sort of way, to the bandits.
goods and currency were carried in these wagons and protected by escorts trained in the martial arts
service desk at Lei LuTai's Ri Sheng Chang... the first piaohao (draft bank) in China
one of the silver inventory vaults at Ri Sheng Chang
the silver inventory space was impressively large. The silver was protected from thieves above by hexagonal iron wire netting and from fellow employees by a strict system of accountability
adversity is opportunity
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Tale 4
The twilight years of the Qing Dynasty were mostly unkind to PingYao. Europe and the U.S. brought conflicts, skirmishes, rebellions, and civil wars that disrupted the flow of trade so vital to PingYao and Shanxi's economy. Europeans also brought opium, which devastated the minds and energy of China's upper class elite. As the nail in PingYao's coffin, the Western powers also introduced a finance system that surpassed the remittance banks in scale, efficiency, and reliability. The Western banks were great for coastal, Southern China but devastating for PingYao.
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Just as quickly as they rose to fortune, the PingYao banks collapsed toward total ruin. Most of the remittance banks layed off their personnel and converted their shops into other enterprises. It was a stampede to quit the market. Two unemployed bank clerks, Meng Hongren and Liu Qinghe, however, sniffed the scent of opportunity. They decided to re-enter the market, this time as managers of their own bank, Xie Tong Qing. Why enter a shrinking market? First, they predicted that the rush to quit the market had created an environment of less fierce competition. They also recognized that the pool of laid-off bank clerks provided a cheap and bottomless supply of expertise in the banking industry. Finally, these two Xie Tong Qing founders saw that foreign powers had penetrated southern and eastern China with their finance services, but were too far from Western China to have any influence there. So they sought to advance a banking empire westward. And their forsight paid dividends... fortune and glory for Xie Tong Qing!
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Tale 5
Fortune and glory for Xie Tong Qing!... well, briefly at least. The Qing Dynasty fell from power, but conditions only soured for the PingYao merchants. The power vaccuum nurtured warlord feudalism and civil war. Opium went wild. And the foreign powers' capital and political power gained even more influence. By the end of the 1930s, PingYao merchants had become the tools of the Japanese military. The merchants had lost everything.
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Well, conditions in PingYao stabilized with the defeat and retreat of Japan from China following WW2 and the unification of mainland China under Communist control in 1949. But stability was not all that PingYao needed. The days of remittance banks and Shanxi businessmen were over. Turn to agriculture for prosperity? Fat chance!
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By the 1980s PingYao was in a pretty sorry state. It was as if the economy had been stalled for almost a century. The roads were too small. The schools were poor. Houses were crumbling. There wasn't enough water. The city and its people were stuck in the 19th Century. How could the city grow? How could there ever be prosperity in PingYao again?
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One day in the '80s, Professor Ruan Yisan of Shanghai Tongji University saw the answer. Whereas nearly every other city in China had developed gradually with the reforms of the 20th Century, PingYao really was stuck in time. Almost nothing had changed. But this stagnation was not a curse. It was a blessing in disguise! Because nothing had changed, PingYao stood as a rare living history museum of a bygone era. The preservation of PingYao was worth far more than wider streets, cars, gas stations, dance clubs, fast food, Wal-Marts, movie theaters, state-of-the-art schools, etc. People would learn and appreciate Chinese history and culture by walking the streets of PingYao. And they would pay a lot of money to do it!
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As a city representative of the culture of elite Han society of the Ming and Qing Dynasties, PingYao is so well-preserved and so valuable that the Chinese government declared it a landmark site and gave it state protection in 1986. In the early 1990s, famous Chinese director Zhang Yimou used one of the merchant family mansions (Qiao Family Mansion) outside of PingYao as the site for his famous movie Raise the Red Lantern. And then in 1997 it applied and was approved as a UNESCO World Heritage Site. These recognitions have brought a stream of spend-happy tourists to PingYao. First local tourists. Then tourists from Beijing and Xi'an. Then tourists from all over China, Hong Kong, and Taiwan. And with its recent inclusion in Lonely Planet's Guide to China, PingYao now hosts tourists from all over the world. PingYao is hot! HOT!!!
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adversity is opportunity
Story 6
When I went to PingYao in January, it was in the dead of winter just days before the Spring Festival rush. No business. Bad times for restaurant cooks, shopkeepers, hotel owners, hostel owners, postcard sellers, etc. In fact, the manager at my hostel told me that hostels in PingYao lose money each day for about 7 or 8 months of the year surrounding the jackpot of holiday vacation times. That's just how it is.
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Well listen here. The Shanxi Business man is not just someone you read about in books. I met the Shanxi Businessman face-to-face in the living flesh as soon as I got off the train. Five or six hostel owners greeted me in a chorus of pleas to come stay at each of their hostels. They spoke English that was not only smooth but also smooth--if you know what I mean. They had fancy brochures. One promised free coffee, another free Internet. All offered discounts... name a price! And they all offered to bring me to PingYao downtown free of charge. They really spoke to me!!!
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200 years ago they were selling dyed silk and vegetable oil. Today they're selling a room at the hostel with wi-fi. Tomorrow they're selling me a scarf when the weather is a hellish -20C and windy. The Shanxi Business man... building fortunes sailing rough seas.
adversity is opportunity
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note on sources: this entry owes everything to the following book: Dong Jianyun and Dong Peiliang, A Brown Paper Book of PingYao, Beiyue Literature & Art Publishing House (2007), which I purchased in PingYao. This book provided the information and the inspiration for this entry. All I did was condense it, wrap it all around a theme, rewrite it in my own style, and illustrate it with my own pictures. I can't emphasize enough how important this book has been. I probably would have only stayed in PingYao a few days if not for this book. I probably should have paid full retail price (98 RMB) for it, but ever the opportunist I was able to bargain it down to 80 RMB because there was literally not another living soul walking the streets of PingYao on that day! :-)
adversity is opportunity
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