Shanxi Piaohao and Shanghai Qianzhuang: a comparison of the two main banking systems of nineteenth-century China

We investigate the creation, development, and main business strategies of Shanxi Piaohao banks and Shanghai Qianzhuang banks. We also detail the characteristics associated with governance and family involvement in these different banking systems, and compare the two systems to illustrate differences in business practices. Piaohao banks had very conservative business practices, and Qianzhuang banks had very risky business practices. These differences arose from different intermediation needs in the two regions, and they were associated with different governance and ownership structures, which led to substantially different methods for dealing with potential agency problems.