Shanxi merchants, also known as Jin merchants (Chinese: 晋商; pinyin: Jìnshāng), refer to the group of merchants from Shanxi province, China. Jin is an abbreviated name of Shanxi. Even though the history of noticeable Shanxi merchants can be dated back to as early as the Spring and Autumn Period, more than 2000 years ago, Shanxi merchants became prominent during the Ming and Qing dynasties, and their dominant influence in Chinese commerce, within the nation and with neighboring Mongolia, Russia and Japan, lasted for more than 500 years.
Shanxi merchants were among the earliest Chinese businessmen and their history could be traced back to the Spring and Autumn Period and the Warring States period. Southern Shanxi first came into commercial prominence due to its proximity to the political and cultural centers of ancient China.
However, it was not until the Ming and Qing dynasties, that Shanxi merchants really stood out among other Chinese merchant groups, built a strong and long-lasting commercial network and accumulated enormous wealth.
At the beginning of Ming dynasty, the newly established government was in constant fight with the remnant of the expelled Mongolian armies, along the northern border. In order to reduce the cost of logistics to transport food and other essential supplies to the military, the Ming government decided to grant salt sales license to those who deliver supplies for the frontier soldiers. The salt trade, as a high margin trade of essential goods, had been historically monopolized by the government to ensure enough tax, and the distribution of salt sales licenses served as one of the main profit sources for the early Shanxi merchants. Shanxi is located in North China close to the Ming-Northern Yuan border, and Yuncheng city in southern Shanxi has a very large natural salt production lake, therefore the geographical proximity was conveniently exploited by these merchants.
In Qing dynasty, merchants from central Shanxi basin, including Yuci, Qixian, Taigu, Pingyao, etc pioneered the first private financial system, so-called draft banks or Piaohao, throughout and even beyond China. 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.
During the Republic of China period, the Qing Shanxi merchants based on conventional draft banks and tea trade had largely fallen. The prominent example of Shanxi merchants during this time is H. H. Kung, who was highly influential in determining the economic policies of the Kuomintang-led Nationalist government.
Business and culture legacy
Shanxi merchants were active for more than five hundred years from early Ming dynasty, creating centuries-old prosperity, leaving significant business and culture legacies. Among the diverse businesses scope that Shanxi merchants had worked on, there are two main trades, one is the draft bank system, or Piaohao, serving as the main financial institutions, and the other is the tea trade to Mongolia and Russia, in exchange of fur and European goods.
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.
To successfully run a nationwide financial system, credibility was of paramount importance for the draft banks. There were numerous stories that Shanxi draft banks honored their bank notes even after generations or major disasters. An honorary system to the highest degree was a main legacy of the Shanxi merchants.
They widely employed joint ventures among families living in the same villages or towns, yet they generally avoided using direct relative in the business management, direct relative could only be owners together but not managers. This way they minimized the interference of personal bias based on kinship with professional business management.
They were the first to separate the ownership and management of businesses, which is crucial for professional business development, such as draft bank financial systems. The professionalism of Shanxi Merchants was also well-known. Their professionalism was characterized by dedication and focus.
The families of Shanxi Merchants were generally different from historically wealthy families, who gained wealth mainly through political privilege with key family members as bureaucrats in the court. A lot of Shanxi merchants tended to run businesses without ambition in politics. Although some of them did eventually seek higher social status by joining the Chinese bureaucratic system, and combined the business network and wealth with political power.
China Central Television created an eight-part documentary about them in 2006.
The enormous wealth accumulated from the international trade and the financial institutions had enabled the Shanxi merchants to build luxurious family residence. The houses and gardens built by them are culture and architecture heritages now, and most of these buildings are scattered throughout the central Shanxi basin.
The notable architecture complexes are:
- Wang Family Compound in Lingshi, which is the largest of the Shanxi Courtyard Houses.
- Qiao Family Compound in Qi County
- Qu Family Compound in Qi County
- Chang Family Compound in Yuci
- Cao Family Compound in Taigu
- The Kung Family Residence in Taigu, where the family of H. H. Kung used to live.
- The Meng Family Courtyard in Taigu, later, this private family compound was transformed to the Ming Hsien school (铭贤学校), which is further incorporated as part of Shanxi Agricultural University.
- Shen Family Compound, (申家大院) in Changzhi.
- Shanxi Provincial Academy of Social Sciences, ed., Shanxi piaohao shiliao (山西票号史料) (Taiyuan: Shanxi jingji chubanshe, 1992), pp. 36–39.
- R. O. Hall, Chapters and Documents on Chinese National Banking (Shanghai: Shangwu yinshuguan, 1917), p. 3.