Since the pioneering studies by Fujii Hiroshi in the 1950s the Huizhou merchants have epitomized the burgeoning commercial development of late imperial China and the potential for translating merchant wealth into social success. The rich documentary archive for Huizhou merchants is a legacy of the powerful lineage institutions that took root in Huizhou, which preserved an abundance of records pertaining to the social and economic life of their constituents without parallel anywhere else in China. Volume 1 of Joseph McDermott's The Making of a New Rural Order, published in 2013, focused on community and kinship in rural society in Huizhou, notably what McDermott refers to as the “village quartet” of she worship associations, popular shrines, Buddhist/Daoist temples, and lineages. In that volume he traced the shift from inclusive communal institutions in the Song dynasty to the rising dominance of exclusive kin groups such as corporate lineages in the Ming. Lineages remain central to the analysis in volume 2, but it is mainly addressed to the institutional innovations devised by Huizhou merchants to pursue commercial success away from home (the “New Rural Order” of the title is something of a misnomer here). Although kinship ties were integral to these institutions, McDermott seeks to specify in more precise terms the complex and heterogeneous ways in which Huizhou merchants capitalized on kinship relations and lineage structures to further their commercial activities.
As McDermott demonstrates, corporate lineages themselves were not commercial entities. The proliferation of ancestral halls in late Ming Huizhou—from a mere 11 halls in 1502 to at least 1,193 by the end of the Ming—galvanized lineage formation, collective ritual activities, and the compilation of genealogies. The ancestral hall, the ritual nexus of lineages and branches or segments of lineages, assumed a range of social, educational, and economic functions, notably as lending societies that supplied credit to lineage members and raised funds for the construction and maintenance of the halls themselves. Membership in an ancestral hall was not freely granted, but rather entailed financial contributions calculated as shares that became the basis of allocation of benefits (e.g., admission and placement of ancestral tablets in the hall, access to borrowing privileges). In some cases these lending societies evolved into pure profit-making enterprises not unlike the pawnbrokerages that became a Huizhou specialty in many parts of China, especially in the Yangzi Delta, the most commercially advanced region in late imperial China.
McDermott estimates that pawnshops operated by Huizhou merchants generated more than half of total government excises on pawnshops, a rough measure of their market share. Successful merchants often withdrew from more risky and wearying ventures as traveling merchants to open pawnshops and engage in moneylending, which offered a more settled life as well as more reliable returns on investment—a pattern we also observe in Renaissance Genoa and Venice. Interest rates declined over the course of the Ming dynasty, and Huizhou pawnshops were said to offer lower rates than their competitors in the late Ming. But in McDermott's view, Huizhou pawnshops largely catered to the demand for short-term, subsistence-oriented loans, finding few borrowers for commercial investment, and adhered to “conservative lending practices” (250). Yet the proliferation of Huizhou pawnshops in commercial centers—a dozen or more in major Yangzi Delta market towns, over a hundred in major commercial emporia such as Beijing, Linqing, and Hangzhou—surely indicates a significant role in financing commercial transactions, if not necessarily as a source of investment capital. Indeed, McDermott also cites contemporary observers who affirmed that pawnbrokers provided the vital liquidity that greased the wheels of local commerce.
The greatest mercantile fortunes made by Huizhou merchants derived from the profits they accrued thanks to their salient position in the operation of the Ming government's salt monopoly, which by the end of the dynasty had been transformed into a monopoly of Huizhou merchant cartels. McDermott retraces the familiar story of the Huizhou merchants' rise to dominance over the salt monopoly, a subject of considerable previous research. More broadly, in his view the “specific tactics cunningly deployed by Huizhou merchants to outwit their government” (225) to garner the lion's share of salt trade profits bespoke a general set of entrepreneurial principles to which Huizhou merchants adhered: safety-first risk aversion; pooling of resources for multiparty ownership; liquidity of investments; maximizing market share; trust based on kinship and countrymen ties; use of novel financial instruments; and cozy if not collusive relationships with government administrators. Yet unlike salt, most of the lines of business in which Huizhou merchants engaged—which included lumber, mining, transport, and craft manufacture, as well as commodity trading and pawnbroking—were highly competitive. The secrets of their unmatched success were found in the organizational flexibility of commercial partnerships, especially the joint-share partnerships on which the great majority of Huizhou business firms were founded. In contrast to commenda-type and agency partnerships, the joint-share partnership provided cheap access to capital, ease of entry and exit for investors large and small, and clearly defined managerial responsibilities and financial liabilities. Ultimately, though, the joint-share partnership depended (perhaps overly so) on kinship relations that did not necessarily correlate with business interests and objectives. Joint-share partnerships relied on internally generated capital from partner investments and retained profits rather than bank loans, but ease of entry and exit became a double-edged sword, and long-term investment often was stymied by the fickle commitments of investors.
The most rewarding part of McDermott's study is his thorough delineation of the different institutional frameworks of the “house firm” (usually rendered as hao 號 or tang 堂), the basic unit of Huizhou commercial enterprises. The house firm types—which McDermott defines as the multi-generational joint-house firm, the branch-based partnership, and the multi-segment syndicate (309)—differed in terms of their relationships to kin groups, their spatial organization and managerial structure, and their business strategies. What they shared was the goal of “dynastic stability”: preserving and transmitting the firm's assets, skills, and managerial control down to future generations. McDermott's detailed case studies of each type of house firm yields precious insights into the nature of commercial enterprise virtually unequalled in any study of premodern Chinese business history (apart, I would say, from Madeleine Zelin's exemplary The Merchants of Zigong).
Deeply informative as this study is, McDermott refrains from any comprehensive assessment of the place of the Huizhou merchants in Chinese social and economic history. The book's conclusion really is more of an epilogue, and dwells mostly on the village institutions that are the subject of volume 1. Ultimately McDermott underscores the limitations of Huizhou merchant enterprise rather than its transformative potential, an economic environment fraught with obstacles, tribulations, and insecurity, a socio-political world rife with perfidy and predation. Yet the prodigious wealth of the Huizhou merchants and the social distinction they amassed suggests that the institutional innovations showcased in this book should be judged remarkably successful on their own terms.
