Money shops yield to modern banking

When Shanghai opened as treaty port, foreign banks rushed in, coexisting with money shops and giving rise to modern Chinese banks.迷你倉 Yao Minji lends an ear.In January 1948, a monthly tram pass in Shanghai cost 120,000 yuan (legal tender or fa bi 法幣) and in May 1949 it rocketed to around 3.3 trillion.In the tumultuous late 1940s, baskets, suitcases, bushels and wheelbarrows of paper money were routinely used for everything from grocery shopping to bigger financial transactions.Tram passes and other examples of Shanghai's financial history are displayed at Shanghai's Bank Museum, on the 7th floor of ICBC Shanghai building.The Kuomintang government's unrestrained issuing of currency to support its forces in the civil war caused the famous devaluation in China, when prices changed every day. Old photos show Chinese carrying baskets filled with paper bills for just one day's grocery shopping, and other fighting to buy gold.In 1949, the largest denomination was a paper bill for 6 billion yuan, which could only buy around 70 grains of rice.Financial institutions were on the verge of collapse.It was 102 years earlier, in 1847, that the UK-funded Oriental Bank became the first foreign bank in Shanghai. It was followed by dozens of others from Europe, the United States and Japan in the next century.Shanghai, after its port opened to foreign trade in 1843, soon became the most attractive Chinese city for foreign banks. The huge volume of trade and financial transactions had a major impact on the city's culture, economy and lifestyle, even today."Historically, Shanghai was a difficult place to classify because she was neither quite foreign nor quite Chinese," says Li Dan, a Fudan University professor specializing in financial history."Shanghai tended to display hybridity in her institutions, culture, economy and lifestyle," he tells Shanghai Daily. "Today's Shanghai inherited the hybridity from her past, which makes it an attractive place for financial institutions from all over the world to set a subsidiary here."It took time, but the Chinese government and businessmen gradually learned and started setting up domestic banks."These foreign banks played an important role in introducing Western financial structures and institutions to Chinese people, though they mostly came to deal with their own trade first," Xu Baoming, vice curator of the Bank Museum, tells Shanghai Daily."At that time, we didn't have modern banks, but native banks (qian zhuang 錢莊 or money shops). The first modern Chinese banks adopted the entire structure from these foreign banks. Later, many money shop owners also upgraded their shops into modern banks," Xu explains.In 1897, the first modern Chinese bank, Commercial Bank of China, was founded in Shanghai, based on the corporate structure of foreign banks.The headquarters stood at today's No. 6 on the Bund, a famous venue with upscale restaurants, bars and luxury designer brand stores.In 1906, the first Chinese-funded savings bank was also founded in Shanghai, shortly followed by many more. Since the 1920s, Chinese-funded banks expanded quickly and financial institutions clustered along the Bund, Asia's Wall Street at the time.According to Yang Yinfu, a famous economist at the time, in the late 1920s Shanghai had China's highest concentration of financial institutions, including more than 130 native banks, around 80 modern domestic banks and more than 20 foreign banks."But it was not a global financial center. Every global financial center needs to be supported by an economically powerful nation. In the 1930s, China was poor and her share of global GDP was only around five percent. It was unlikely Shanghai would emerge as a global financial center," Li says. "But now, the situation will change if China continues to grow rapidly."From the 1920s to 1940s, foreign banks, modern domestic banks and native banks coexisted in both competition and partnership. The partnership was especially common between foreign and native banks: the foreign banks had mo儲存e capital and the native banks had knowledge of local business conditions and merchants.Li's research shows that before 1910 it was not uncommon for foreign banks to advance loans to local money shops, which in turn advanced loans to Chinese merchants. This supported trade in agricultural commodities between the coast and inland areas. Elaborate certificates issued by native banks were accepted by most foreign banks in Shanghai.Native banks were not a threat to foreign banks because they dealt with Chinese merchants who needed to exchange silver ingots, which were to heavy to carry, for certificates. These certificates bore various seals for authenticity and many were very detailed, even containing 500 ancient characters, making it difficult to counterfeit.The main competition faced by foreign banks came from the rise of modern Chinese domestic banks, such as the Bank of China and the Bank of Communications, Li adds."These modern banks were relatively strong in capital and the operating managers used to be compradors employed by foreign banks, some of them with overseas diplomas," she says. "These banks were established along Western lines and knew China better than foreign institutions. They became very successful in attracting domestic deposits and in the lending business."The competition became so fierce that many Chinese banks, which previously had only catered to wealthy people, started targeting the public.Traditionally, Chinese love to save, to hide treasures in their houses. The challenge was to get them to make deposits in a bank.Savings banks launched campaigns, gave out gifts, advertised in papers and distributed handbills to encourage people to save with them.One Shanghai bank produced a 365-day calendar in the 1920s, each page with a brief motto about savings. On one page during the Chinese Lunar New Year, it read, "You should cheer for the day, but you must also teach your children and grandchildren to save so that they are prepared for bad times."Another bank handbill from the 1930s targeted small vendors, barbers, rickshaw boys and other laborers:"If you are a small vendor, when you are affluent, you should play cards less and save that money in a bank. Later, when you lack cash to play cards, you can get it from the bank instead of asking your wife, who will scold you.If you're in the business of rickshaws, haircuts or even if you're a servant, you should smoke less and save that two or three yuan to put in the bank. That way, after 20 years, we can give you a lot of money back to start your own business."The rapid expansion of the banking business also increased the demand for bank employees, at the time one of the best paid and most respected jobs."I got into the bank's training program after I graduated from high school. There was a Chinese exam, an English exam and an interview. I also needed a guarantor and a security deposit of 300 yuan, which I could get back five years later," 89-year-old Ji Jialu once told the oral history program of Shanghai Municipal Archives. "And you could not get married in the first five years."Since 1940, Ji worked in the Shanghai Commercial and Savings Bank, one of the largest China-funded banks. He worked mostly with Chinese clients and was required to wear cheongsam and have a standard haircut, neither too long nor too short.Young employees like Ji lived in banks' bachelor's dormitories where they could play cards, snooker, table tennis and other games. They were not allowed to gamble and were forbidden to go to nightclubs like the Paramount, where they could become morally corrupted and tempted to steal from the bank.• Bank MuseumOpen: Wednesdays, 1-4pm (for individuals); Mondays-Fridays, 9-11am, 1-4pm (for groups)Address: 7/F, 9 Pudong AveTel: 5888-5888 ext 6705Admission: 5 yuan for individuals, 4 yuan for groups, 3 yuan for students• Exhibition of Shanghai's Financial HistoryOpen: Mondays-Saturdays, 9am-4:30pmVenue: Shanghai Municipal Archives Bund Branch, 9 Zhongshan Rd E2Admission: Freemini storage