Travel Guide East Asia China

Centuries of Regional Merchant Groups

In observing the development of Chinese merchant groups, it becomes apparent that no business group can exist without timely opportunities, the right conditions, and a beneficial geographical situation.

The splendor enjoyed by the Shanxi and Anhui merchants of old have become legendary. However，special circumstances, which blessed the beginning of China’s reform and opening up, led to the unprecedented economic achievements of Guangdong’s merchants, just as the outward-looking, multi-tiered market economy cultivated the success of Zhejiang’s businesspeople.

Shanxi bankers

The Shanxi merchant group, from a region with a fair share of barren land, achieved commercial fame possibly even earlier than that of the Hui merchants. Their trading routes, more in the North-South direction, extended nationwide and reached Russia through the caravan land-routes. But what brought them unprecedented prosperity was their nationwide money remittance service from the 19th century.

Legend has it that it all started around the 1810s when a paint and dye merchant started China’s first piaohao, a banking firm that provided merchants and long-distance travelers with drafts that they could exchange for cash at a specified branch after reaching their destination, thus effectively reducing the cost and risk of carrying bulky metallic cash.

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 provinces could 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.

Guangdong businesspeople

As the testing ground for China’s Reform and Opening-up Policy,Guangdong Province, with its favorable proximity to theHong Kong, virtually monopolized the nation’s foreign trade business from 1978 to 1993.

Statistics indicate that during those 15 years, more than 70 percent of the mainland’s overseas investment came from Hong Kong (now the Hong Kong Special Adminstrative region, or Hong Kong SAR). Meanwhile, Guangdong became China’s main passageway to the rest of the world.

The mainland’s opening up energized Hong Kong’s economy, while the SAR simultaneously boosted the development of its ancestral home of Guangdong.

That lengthy monopoly helped Guangdong finish the original accumulation of capital and economic powers to nurture the flourishingPearl RiverDelta and foster the growth of the increasingly proactive Guangdong merchant group.

Zhejiang merchants

Whereas Guangdong’s merchants were able to expand their enterprises based on geographic advantages, Zhejiang businesspeople started from nothing.

Roving the nation as itinerant craftsmen making furniture, building houses, and cobbling shoes, the entrepreneurs of Zhejiang had only their persistence and reputations to speak for them. The tribulations they faced over the years seem to have instilled in them the spirit of hard work and a will to succeed.

Through initially copying designs and eventually creating their own brands, Zhejiang merchants gradually converted their role to become a driving manufacturing force in the late 1990s.

One of the most important factors in their success has been the interpersonal relationships and distribution networks they developed during their past endeavors. These networks based on kindred business alliances and countless links with local governments have resulted in enormous power throughout the entire market.

Although the provinces or regions leading China’s business groups have changed several times throughout ancient and modern history, the basic can-do spirit and dedication to excellence has endured.

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