Interregional Capital Flows: From Remittance Market to Domestic Exchange

Matthew Lowenstein, Stanford University

From the sixteenth to nineteenth centuries, China developed increasingly effective mechanisms for financing interregional trade. The most critical innovation, arising sometime in the sixteenth century, was the commercial remittance. This piece of paper could be issued at one location and drawable on another; in short, it allowed merchants to transfer funds--and therefore make purchases--across long distances without shipping merchandise or hard specie. At first, remittance routes were modest in scope, largely running between Grand Canal ports, especially from Suzhou to Beijing. But by the early Qing, financial institutions began operating remittance networks connecting large parts of the empire. In 1820, the Shanxi merchant Lei Lutai invented the dedicated "remittance bank" (piaohao). These specialized dealers in bills of exchange dominated the remittance business and provided reliable fund transfers to virtually any major commercial center. In the 20th century, the market in interregional funds underwent a final transformation. As commercial volumes increased, institutional brokering of remittances was replaced by transparent, exchange-based trading of what became known as "domestic exchange."

No extended abstract or paper available

 Presented in Session 66. State and Business Institutions in Early Modern China