The firm in early Modern China☆
Introduction
This article is part of a larger project in which I use the development of the shareholding company in China to examine the relationship between culture, law and economic growth. China provides a particularly interesting comparative case for scholars of private law, first, because of the unusual informal role played by law in the institutionalization of popular shareholding practices and second, because periodic reform of civil law throughout the twentieth century has created a living laboratory in which legislation and custom have competed to shape Chinese business practices and Chinese attitudes about the role of law and of the state in private transactions. Both processes have left their traces in court cases, genealogies, local histories, encyclopedias and the private papers of Chinese corporate entities.
This article provides background to the larger project by asking how a society whose most basic cultural identifiers reject the culture of the marketplace, whose moral and political culture is bound to the ascriptive ties of kinship and native place, and whose formal system of law virtually ignores the realm of private law produced the dynamic market economy that we now know to have existed in the late imperial period.2 This study first examines the institutional foundations of the indigenous firm in China prior to enactment of China's first Western-based Company Law. It then provides a preliminary inquiry into the impact of Western law and business practice on the Chinese firm and proposes some ways in which a comparative approach to Chinese business can refine our understanding of the forces shaping the indigenous Chinese firm.
Section snippets
The Chinese “Family Firm”
As noted in Chan (1998), most of the literature on Chinese business history is focused on a familiar trope, the “Chinese family firm.”3 These Chinese family firms are generally thought to have been organized as simple
Characteristics of the Qing business environment
Under what kinds of institutional arrangements did these business relationships evolve?11 In important respects early modern Chinese merchants enjoyed an institutional environment that was a mirror image of
Legal protections in the absence of company law
It is not surprising that little has been written on the legal protections to companies under Qing rule. Most of the evidence we have of shareholding entities consists of contracts that establish the internal relationships among investors, but can shed little light on the relationships among firms and between firms and individuals. Nevertheless, we have been able to establish that Chinese shareholding entities had certain qualities of legal personhood. They could invest as an entity in other
The early impact of Western business on Chinese business organization
The institutional environment under which firms like Ruifuxiang, Yutang, the numerous firms operating at the Zigong salt yards and the partnerships whose traces are now emerging from other local archives operated did not fundamentally change until the twentieth century. What did change were the Chinese political environment and the universe of non-Chinese business arrangements against which Chinese businesses competed and were measured. The West is often credited with bringing the idea of the
Guandu shangban enterprise
Prior to the turn of the century Chinese authorities appear to have been less concerned with the harmonization of Western and Chinese shareholding practices than they were with steering potential Chinese investors in the direction of domestic industrial enterprise. Their first attempt at state directed industrialization came in the form of the so-called “self-strengthening” movement of the 1870s and 1880s, whereby powerful provincial governors attempted to create an industrial economy through a
Chinese business in the early twentieth century
In 1904, during the last decade of Qing dynasty rule, China promulgated its first company law. The biggest innovation in the law was the creation of a legal basis for limited liability. Although the law laid out four categories of companies (co-partnership, limited company, joint stock company, and joint stock company limited), really only the ability to limit liability distinguished the new rules of the game from the way firms had been organized in the past. A co-partnership was defined as an
Some twentieth century firms
I would like to end this study with a brief examination of three twentieth century firms with very different investment patterns, business strategies, and organizational plans. My purpose is to argue that, in the final analysis, we cannot point to any one business model as the Chinese business model. Rather, Chinese entrepreneurs responded to market conditions in different ways, bringing with them their own experience, but also molding the lessons of their pasts to contingencies of the present.
Looking ahead
In this article I have tried to provide a basis for the study of the complex evolution of the Chinese shareholding corporation in the twentieth century. Contrary to popular beliefs, Chinese businesses entered the modern period equipped with a highly flexible repertoire of institutions born of China's household and lineage property regime and centuries of experience writing contracts and enforcing them, when necessary, in the courts. While the pre-1904 Chinese legal code provided no guidance in
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Paper prepared for the First IERC Conference: The Economic Performance of Civilizations: Roles of Culture, Religion, and the Law, University of Southern California, Los Angeles, February 23–24, 2007.
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Madeleine Zelin is Dean Lung Professor of Chinese Studies and Professor of History and East Asian Languages at Columbia University. I want to thank Naomi Lamoreaux, Timur Kuran and Ron Harris for the comments on earlier drafts of this paper, presented at the Law and History Conference, Baltimore, November 16–18, 2006, and the First IERC Conference: The Economic Performance of Civilizations: Roles of Culture, Religion, and the Law, University of Southern California, Los Angeles, February 23–24, 2007. I also wish to acknowledge support from the Templeton Foundation, through a grant to the USC Institute for Economic Research on Civilizations.