From Cotton Mill to Business Empire: The Emergence of Regional Enterprises in Modern China 0674013948, 9780674013940

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From Cotton Mill to Business Empire: The Emergence of Regional Enterprises in Modern China
 0674013948, 9780674013940

Table of contents :
Maps, Figures, and Tables
Part I. Setting the Scene
1 Regional Enterprise and the Corporation as a Concept
2 National and Regional Context
Part II. Factories in the Countryside
3 Setting Up the Mills
4 The Realities of Industrial Work
Part III. The Characteristics of Big Business
5 The Corporate Structure
6 Business Performance and Crisis Management
Part IV. Enterprise and Region
7 Socioeconomic Control Beyond the Factories
8 Enterprise in Transition: Dasheng After Zhang Jian
Conclusion: Beyond 1949: Modern Enterprises and Regional Businesses in China
Works Cited
Character List

Citation preview


Harvard East Asian Monographs 229


Elisabeth Köll

Published by the Harvard University Asia Center Distributed by Harvard University Press Cambridge (Massachusetts) and London, 2003

© 2003 by the President and Fellows of Harvard College Printed in the United States of America The Harvard University Asia Center publishes a monograph series and, in coordination with the Fairbank Center for East Asian Research, the Korea Institute, the Reischauer Institute of Japanese Studies, and other faculties and institutes, administers research projects designed to further scholarly understanding of China, Japan, Vietnam, Korea, and other Asian countries. The Center also sponsors projects addressing multidisciplinary and regional issues in Asia.

Library of Congress Cataloging~in~Publication Data Köll, Elisabeth, 1965From cotton mill to business empire : the emergence of regional enterprises in modem China / Elisabeth Köll. p. cm. —(Harvard East Asian monographs ; 229) Includes bibliographical references and index. ISBN

o ~ 6 7 4 '0 1 3 9 4 ~ 8

(cloth edition : alk. paper)

i. Da sheng sha chang (China)-History. 2. Textile industry-China-Jiangsu Sheng-History. 3. Business enterprises-China-Jiangsu Sheng-History. 4. Industries-China-Jiangsu Sheng—History. 5. Corporations—China—Jiangsu Sheng—History. 6. Businesspeople— China—Jiangsu Sheng—History. 7. Jiangsu Sheng (China)—Economic conditions. I. Title. II. Series. H D 9 8 6 6.C 54 D335 2 0 0 4

338.095122—dc2i Index by the author @ Printed on acid^free paper

Last figure below indicates year of this printing 13 12 11 10 09 08 07 06 05 04 03


For my parents Ernestine and Franz Köll


This book could not have been written without the tremendous support of my teacher and advisor at Oxford, David Faure. I am deeply grateful for the time and constant intellectual stimulation he contributed to this project. Equally, I thank him for not losing patience with my Germanic prose as a be­ ginning graduate student; I hope that this aspect of my work has improved. Michael Quirin, Regine Mathias, and H orst Albach provided role models as excellent scholars and teachers during my undergraduate years in Bonn. Many librarians, libraries, and academic institutions have supplied the re­ search material this book is based on. Among them I particularly thank David Helliwell and the staff at the Bodleian Library, Oxford; Tony Hyder and the staff at the Chinese Studies Institute Library, Oxford; the staff at the Nantong Municipal Archives; Liang Zhan, Zhang Guolin, and Liu Daorong at the Nantong Library; Liu Weidong at the Nantong Textile Museum; Lu Ronghua for his introduction to the Nantong Museum; the Shanghai Municipal Archives; Professor Huang Hanmin and the staff at the Business History Research Center, Shanghai Academy of Social Sci­ ences; and Professor W ei Xiumei and the library o f the Institute of Modem History, Academia Sinica, Taibei. A long list of teachers, colleagues, and friends have provided helpful comments on this project in its various stages, among them Bian Linan, Raj Brown, David Buck, Chan Kai Yiu, Wellington Chan, Choi Chi-Cheung, Maybo Ching, Parks Coble, Du Xuncheng, Glen Dudbridge, Hamashita Takeshi, Christian Henriot, Paul Howard, Kwan Man Bun, Lai Chi-Kong, Ma Min, Andrea McElderry, Mori Tokihiku, Che Chang Ooh, Thomas Rawski, Kristin Stapleton, Xiong Yuezhi, Yang Liqiang, and Yasutomi Ayumu; I am grateful to them all. Raj Brown, Christian Henriot, Andrea



McElderry, Parks Coble, and an anonymous reviewer for the Harvard East Asian monograph series provided detailed and valuable suggestions for the manuscript revision. My colleagues in the Department of History at Case W estern Reserve University have been incredibly supportive in various ways; among them, Alan Rocke deserves special thanks as mentor, friend, and tireless proofreader. Parts of Chapter 4 were previously published in David Faure and Tao Tao Liu, Tow n and Country in China: Identity and Perception, 2002, Palgrave Publishers, reproduced with permission of Palgrave Macmil­ lan, for which I am gratefid. I thank the people of Nantong for their friendliness and hospitality, espe­ cially Lu Ronghua and his family for adopting me during my year in N an­ tong, Zhang Guolin and Liang Zhan for helping me with the reading of dif­ ficult handwriting, W u Ying for arranging interviews, and Liu Ying and her family for moral support. In Shanghai I thank Professor Xiong Yuezhi for introducing me to other scholars and Zhao Nianguo and Li Yihai for look­ ing after me and discouraging me from acquiring a Subei accent. I am grate­ ful to Professor Lü Fangshang for his introduction to sources and interview partners at the Institute of Modern History, Academia Sinica. My studies were generously financed through a Rhodes scholarship at Oxford and, with special thanks to Sir Anthony Kenny, a generous travel grant from the Rhodes trust for my year in Nantong. I have been further as­ sisted by travel subsidies from the Davis Fund and St. Antony's College. A pre-doctoral fellowship from the Chiang Ching-Kuo Foundation supported me during my last year in Oxford. Two generous junior faculty grants from Case W estern Reserve University allowed me to complete my field research in China. I especially thank my closest tongxue, Cheung Sui-wai, for his friendship and moral support and Puk Wing-kin for his optimism and for helping me with software problems. Aniza Kraus at Case W estern Reserve University displayed patience and technical expertise in touching up the illustrations and photographs. Thanks also go to Ulrike and Christian Bauch, Elizabeth Butland, Alex Chan and his family, Claire Gordon, Kimura Takeko, the Leifer family, Antonia Stiawa, and Ema W inter for the help each of them gave to this project. Finally, the biggest thanks go to my parents, Franz and Ernestine Köll, who were willing to let me go at an early age and never complained about



having to understand their daughter’s life in the context of three different continents. Most important of all, they were always confident that some day this project would come to its fruition. To their love, genuine interest, and untiring support this book is dedicated. E. K.


M aps , Figures, and Tables




Part I: Setting the Scene 1 Regional Enterprise and the Corporation as a Concept Regional Enterprise Past and Present 11/ The Business Corporation in China 16/ Zhang Jian and Dasheng in Chinese Business History 24


2 National and Regional Context 189s— A Fateful Year fo r Nation and Industry 31/ From Salt to Cotton: The Nantong Region 41/ Socioeconomic Dynamics o f a Periphery 44-


Part II: Factories in the Countryside 3 Setting Up the Mills


A Scholar Turns Businessman 5 6 / Government Support Versus Private Interests 6 3/ Family Ties 6 9 / Machinery , Land , and Technology 73 4 The Realities of Industrial W ork Factory Compound , Management, and Hierarchies 8 2 / Shop-Floor Routine and Discipline 97I Gender, W o r k and Income lo s t Labor Organization

and Labor Protest 114



Contents Part III: The Characteristics o f Big Business

5 T he Corporate Structure


Legal Status as a Company 124/ Internal Organization and Accounting System 131/ Tools o f Control: The Industrial Company and the Shanghai Office 136/ Ownership and Accountability 146 6 Business Performance and Crisis Management Profitability and Indebtedness 159/ Expenditures and the Problem o f Production Costs 169/ Prelude to the Crisis 183/ 1922a A Crisis Hidden in the Books 190/ Under Control o f the Banks 199


Part IV : Enterprise and Region 7 Socioeconomic Control Beyond the Factories


Agricultural Enterprises: Cotton Cultivation and Land Reclamation 212I The Model City: Nantong s Social Modernization 2 3 0 / Local Networks and Nantong Culture 236/ Newspapers and the Public Realm 242 8 Enterprise in Transition: Dasheng After Zhang Jian The Impact o f Politics and the Problem o f Succession 2S2/ Changing M arkets and Consumers 264/ Business Survival During W a r and Occupation 2 6 8 / Collaboration and Resistance on the Shop Floor 271/ Transformation o f Ownership and Control 274 Conclusion: Beyond 1949: Modem Enterprises and Regional Businesses in China



Appendix Appendix


Reference M atter Notes


W orks Cited


Character List




Maps, Figures, and Tables

M aps 1

The N antong area in the early twentieth century


Major land-reclamation companies and land use along the northern Jiangsu coast in the late 1910s and early 1920s

14 216

Figures 3. i T he Zhang family's ancestral hall in Changle


3. 2 T he Zhang family s ancestral hall in Changle in 1993


3. 3 Graduation certificate from the Nantong Textile School




Z h an g Jian in th ei9ios

3« 5 Zhang Jian's gravesite in Nantong, 1993


3. 6 Zhang Cha in the 1910s


4. i 4.


Map o f the Dasheng No, 1 Cotton Mill factory compound, ca. 1919


T he Dasheng jetty, main entrance, and clocktower in Tangjiazha, ca. 1920



3 T he Dasheng jetty in Tangjiazha, 1998






Factory grounds of the Dasheng No. 1 Cotton Mill at Tangjiazha, ca. 1920


Canal in the compound of the former Dasheng No. 1 Cotton Mill, 1998


Maps, Figures, and Tables


4. 6 4.7 4. 8

Original storage rooms of the former Dasheng No. 1 Cotton Mill, 1998


Zhang Jians office on the factory compound o f the former Dasheng No. 1 Cotton Mill, 1998


Brick factory buildings of the Dasheng No. 2 mill in Chongming, ca. 1920


4. 9 Label for Dasheng yarn


4.10 Company housing on the compound of the former Dasheng No. i Cotton Mill, 1998


Share certificate of the Dasheng No. 1 Cotton Mill, i8 97


5. i

5. 2 Internal structure of the Dasheng No. 1 Cotton Mill, 1900


5. 3 Structure of the Dasheng business complex in 1908


5. 4

Structure of the Dasheng business complex and the Shanghai office, 1908

5. 5 Page from account book for one of Zhang Jians private accounts 6. i 6. 6. 6. 6. 6. 6 6. 7 6. 8 6.9

2 3 4 5

141 151

N et profit and yarn-sales surplus of the Dasheng No. 1 Cotton Mill, 1899-1928


Debts and interest payments of the Dasheng No. 1 Cotton Mill, 1900-1926


Annual net profits of the Dasheng No. 1, No. 2, No. 3, and No. 8 Cotton Mills, 1899-1929


Debts of the Dasheng No. 1, No. 2, No. 3, and No. 8 Cotton Mills, 1900-1929


Total costs, coal costs, wages, and salaries of the Dasheng No. i Cotton Mill, 1900-1926


Total share capital, annual dividends, and annual bonuses of the Dasheng No. 1 Cotton Mill, 1900-1926


Total costs and costs other than interest of the Dasheng No. i Cotton Mill, 1900-1926


Depreciation and reserves of the Dasheng No. 1 Cotton Mill, 1900-1926


Cash values o f inventories o f yarn and raw cotton at the Dasheng No. 1 Cotton Mill, 1900-1926


M aps, Figures, and Tables 7.






Reclamation work on Tonghai company land, ca. 1920 Canal in the area of the former Tonghai Land Reclamation Company, 1995 Straight road in Haifuzhen village, 1995

xv 215 218 219

7 .4 Zhang Jians residence in Nantong city, ca. 1920




5 Zhang Cha s residence in Nantong city, ca. 1920

7. 6

Entrance to the Anhui huiguan in N antong city, 1995



Zhang Jians residence-turned-museum in Nantong city, 1998


8. i

Zhang Xiaoruo's gravesite in Nantong, 1993



2 Passenger ship of the Dada Steamship Company, ca. 1920


Tables 6.

i Costs at Dasheng in 1899



2 Cotton costs per bale, 1928



3 Cost of cotton as portion of cost of one bale of yarn, 1921-29


6 .4 Prices for raw cotton and yarn at Wujin, 1915-27



5 Indebtedness of the Dasheng No. 1 Cotton Mill, 1921


6.6 Indebtedness of the Dasheng No. 1Cotton Mill, 1922


6.7 Indebtedness of the Dasheng No. 1 Cotton Mill, 1923


6. 8 Indebtedness of the Dasheng No. 1 Cotton Mill, 1924


Ai A2 A3 A4 A5 A6

N et profit and yarn-sales surplus of the Dasheng No. 1 Cotton Mill, 1899-1928


Debts and interest payments of the Dasheng No. 1 Cotton Mill, 1900-1926


Annual net profits of the Dasheng No. 1, No. 2, No. 3, and No. 8 Cotton Mills, 1899-1929


Debts of the Dasheng No. 1, No. 2, No. 3, and No. 8 Cotton Mills, 1900-1929


Total costs, coal costs, wages, and salaries of the Dasheng No. i Cotton Mill, 1900-1926


Total share capital, annual dividends, and annual bonuses of the Dasheng No. 1 Cotton Mill, 1900-1926





M aps, Figures, and Tables Total costs and costs other than interest of the Dasheng No. i Cotton Mill, 1900-1926


Depreciation and reserves of the Dasheng No. 1 Cotton Mill, 1900-1926


Cash values o f inventories of yam and raw cotton at the Dasheng No. 1 Cotton Mill, 1900-1926


From Cotton M ill to Business Empire THE





Watching the development of business institutions and economic structures in contemporary China has never been more fascinating. The slow demise of state-owned enterprises, the transformation of collectives into shareholding cooperatives, and the creation of investment opportunities through stock markets document China's movement from a socialist state-controlled econ­ omy toward a socialist market economy. The drastic changes inaugurated by the economic reforms of the early 1980s have prompted economists, histori­ ans, political scientists, sociologists, and anthropologists to analyze and re­ evaluate these new business institutions and structures and their economic, social, political, and cultural impact. News media and scholarly and popular publications grapple with defining the resulting structural changes and un­ derstanding the implications for business of Socialism with Chinese charac­ teristics." Indeed, the problems are not small. The decentralization of economic management, increased local and re­ gional political autonomy, and the introduction of new enterprise structures based on the concepts of shareholding or limited liability have created high expectations on all sides. Even as these new businesses are released from state control and the Chinese government transfers financial and social responsibilities to the enterprise managers, assumptions about greater trans­ parency, accountability, and profitability have captured the imagination of managers and business investors, particularly in the foreign business community. The problem, however, is that the corporate structures of these new en­ terprises do not fit Western legal and managerial definitions. The transfor­ mation of a collective enterprise into a shareholding company does not, for example, necessarily involve the transfer of property rights from the original



owner, the collective; this leaves the financial and managerial control of the enterprise untouched. At the same time, personal and kinship networks in Chinese business continue to play significant roles in the control and owner* ship o f these new enterprises. Given the different concepts, complex defini* tions, and flexible interpretations of property rights, corporate structures, and business practices in contemporary China, we need to understand their historical, institutional, and cultural roots, particularly if we wish to compare them with W estern business models. And this is where business history can be of help. "Business historians do business history because they are not shrewd enough to do business." This statement by a former teacher of mine contains a certain element of truth, but it was intended to encourage us to be shrewd and critical and to avoid writing conventional business history. Chinese business history has traditionally been concerned with the relationship be* tween state and merchants, entrepreneurial personalities, or the sociocul* tural context of doing business in a non-Wes tern environment. However, as interest in late imperial and Republican China and its economic develop* ment has grown, the business institution has become a subject for research. Even the most basic and thus the most complex questions concerning the in* stitutional nature of the Chinese business enterprises that emerged in the late nineteenth century still need adequate answers: W hat is the best defini* tion of "the firm" in the Chinese context? How can the hierarchical, manage* rial, and financial aspects of the Chinese business enterprise best be charac* terized? W hat institutional tools were used to control the functional units of the firm? Is the term corporation a valid institutional definition for Chinese businesses? In the W estern historical context, we often identify the American or European corporation around 1900 as the epitome o f the modem business firm. O f course, Chinese business associations based on corporate principles are an invention neither of the W est nor of the Republican period; organiza* tionally and structurally they are rooted in the lineage trusts of the Ming and Qing dynasties. However, interpreting modern corporate enterprises in early twentieth*century China as a continuation of these lineage trusts would be as simplistic and deceptive as considering the imperial workshops the proto* type of modem factories in China. It is useful, even necessary, for historians of China to borrow Western theoretical models of the firm for comparison and provisional definitions.



However, we also need to develop a distinctive theoretical concept of the Chinese firm based on documentation produced by Chinese enterprises. In order to explore the application and transformation of this concept over time, it is essential to expand the research focus from external factors such as government policies, local politics, or family networks to internal aspects such as control and ownership, accounting, and management. T hat is a principal goal of this book. This study examines the emergence of large industrial companies founded in late nineteenth-century China in the form of regional enterprises that grew into substantial local business empires during the Republican pe­ riod. I illustrate the amalgamation of different institutional traditions— "modem" corporate structures based on Western standards with "tradi­ tional" structures rooted in Chinese family business— in the emergence of the modern Chinese firm by analyzing the Dasheng textile mills. Dasheng was the first successfid private Chinese-owned business conglomerate. It was founded by the famous scholar-official Zhang Jian (1853-1926) near N an­ tong city in 1895, flourished as a stockholding company with limited liability in the early Republican period, and continues to exist today as a state-owned enterprise. Neither based solely on the principles of the Chinese family firm nor or­ ganized as a full-fledged corporation, Dasheng, with its strong economic and social ties to the region, provides an excellent focus for exploring important issues in modern Chinese history such as the legal and managerial evolution of the firm, the introduction and management of industrial work, and the integration and interdependency of local, national, and international markets in Republican China. As a business institution, Dasheng was characterized by a confusion of private and public in terms of assets and managerial deci­ sions; this resulted in a number of complications and financial difficulties for the enterprise. In the mid-i920s, the financial situation had become so disas­ trous that creditor banks had to intervene and make what turned out to be permanent changes in the managerial and financial set-up of the company. A detailed study of Dasheng allows us therefore to explore the eventful history of incorporation and management in China as it unfolded in large-scale in­ dustrial ventures from the late nineteenth to the mid-twentieth century. The focus on control and accountability in the management of the enter­ prise is one important theme in this book, and it shapes my analysis of Dasheng as a business institution. A second leitmotiv is institutional transfer,



that is, the interpretation, adaptation, and application of Western corporate structures to existing Chinese business institutions and environment. Al­ though I stress the importance of institutional business analysis based on en­ terprise-related archival material, I do not neglect the impact of the general environment on the development of business enterprises. N o institutional analysis o f an enterprise with such complex and close ties to a region could make a compelling argument about the nature and operations of that enter­ prise without reference to the wider social, economic, political, and cultural conditions at the local as well as the national level. Consequently, this study combines institutional business history and social history. By merging these two approaches and embedding the analysis in the context of China's his­ torical development between the 1890s and the early 1950s, I seek to present a comprehensive narrative and highlight changes in China's political, legal, economic, and social framework and their profound impact on the emer­ gence and shaping of modem business institutions. Part I begins with a theoretical discussion and comparison of the devel­ opment o f the concept of the corporation and business enterprise in China and the West. As we shall see, the founding of the Dasheng cotton mill as a regional enterprise in northern Jiangsu province after 1895 resulted from the implementation of national policies in a particular regional environment fa­ vorable to cotton cultivation and textile production. The general economic backwardness and agricultural orientation of the area presented specific ad­ vantages as well as disadvantages for the introduction of industrialization in the form o f large cotton mills. Part II deals with the physical entities of the business institution— the factories in the countryside north of Shanghai. It describes the founding of the Dasheng No. 1 mill, the industrial core of the Dasheng business complex, and introduces its prominent founder, Zhang Jian. As the initial support of senior government officials quickly faded, Zhang Jian came to depend mainly on support from local businessmen and dignitaries since he was an outsider to the local society and business community in Nantong. This fact sheds light on the particular nature of managerial and financial control as well as ownership of this enterprise. In addition, I examine the Dasheng cotton mills as a concrete operation in its local context. This analysis of the factory compound, the shop floor, and the workforce illustrates the organization and hierarchy of work within the factory and the local origins of skilled and unskilled workers, united un-



der Zhang Jian's innovative factory discipline* Since the Dasheng cotton mills introduced factory work to the Nantong area, I also explore the poten­ tial economic and social transformation of the surrounding villages and their inhabitants. Curiously, the introduction of factory work to the area was not accompanied by the simultaneous emergence of a working class. In Part III, I turn to the hierarchical and financial aspeas of the business institution by discussing Dasheng s corporate structure, its accounting sys­ tem, legal status, management, and shareholding structure. This discussion also explores the role of members of the Zhang family. I argue that Zhang Jian was able to exercise complete control over Dasheng through the devel­ opment of institutional tools, specifically the Shanghai accounts office, which became a centralized instrument for handling his private and business affairs. This leads to the problem of why Dasheng almost went bankrupt in the early 1920s and had to be rescued by a consortium of Shanghai banks. I ap­ proach this problem through a detailed analysis of the enterprise's overall fi­ nancial performance, based on figures extracted from annual reports and company documents. The numerical analysis provides an explanation of Dasheng s planning and investment strategies and their direction by per­ sonal, shareholder, and bank interests. I argue that it was not so much in­ creasing costs but increasing indebtedness together with financial transfers between business and personal accounts and an unwise expansion that led to insolvency in 1922. Part IV treats the enterprise s relation with the region and its role in the areas development. I examine, in particular, the land reclamation companies and their impact on agriculture, economy, and society. In Nantong city itself, social division instead of community building characterized the relationship between workers in the mills and the townspeople. Since the Dasheng en­ terprise was (and still is) identified with Nantong city and its development in the early twentieth century, I question to what extent "modernization" propagated by Zhang Jian really served the community's interest and to what extent it was a public relations strategy serving other aims. Finally, I examine what a case study of Dasheng s development can tell us about the success of modern enterprises in their interactions with the Re­ publican state and the challenges to its political system. The company's ex­ periences after the founder's death and during the Japanese occupation and war say much about the viability of Chinese businesses as corporate entities.



As a prívate enterprise established by a first-generation entrepreneur, Dashengs business development was compromised by unwise political alii' anees, succession problems, and the economic pressures of changing markets. Like most enterprises at the time, Dasheng was unable to escape the impact of the various political crises that beset Republican China, but its structural flexibility allowed it— and the Zhang family— to survive. Like other recent studies of Republican history, this book also demon' strates that the institutional and social framework of the modern Chinese business firm exhibits historical continuities as well as discontinuities. Func­ tions of the firm that we might identify as "modem" were supported by "tra­ ditional" formations that survived until the late 1940s. O n a larger historical scale, the success and failure of regional enterprises like Dasheng illustrate the opportunities created by economic, political, and social reforms in the early twentieth century as well as the shortcomings of institutional structures in business, as they were exacerbated by various economic and political crises, locally and nationally, in Republican China. Nevertheless, the trajectory of regional enterprises bridges the 1949 divide. In the context of Chinas present economic changes, this study examines Dashengs contribution to the regions local development, which has been glorified in the official media and in the literature of the 1980s and 1990s. Regional enterprises have been resurrected in the new form of township' village enterprises during the economic reforms of the past two decades, and I seek to offer a fresh perspective on an important business institution that has historical as well as contemporary significance. My intent is to offer not so much a primer on starting a business in China as insights into how busi' ness was conducted in the past and how this understanding might be applied to contemporary business issues.

N o te on A rchival Sources Like many historians, I have benefited from the opening of local archives and the easier access to research material in China in the past decade. Until recently the only primary sources available were Zhang Jian s personal writ' ings, published posthumously by his son in Shanghai in 1931 and subse' quently reprinted in Taiwan in 198o.11 was fortunate to have been able to work for long stretches of time in the Nantong Municipal Archives, and I hope that this book encourages other scholars interested in business, social, and economic history to pursue work in this local archive. Only a tiny frac-



cion o f the vast material concerning the history of Dasheng, Nantong city, and Nantong county has been published.2 So far one compilation of annual company reports on the Dasheng N o. i, No. 2, No. 3, and N o. 8 spinning mills between 1900 and 1926 has been published as well as a reprint of the N o. i mill's shareholder reports, which in particular document activities dur­ ing the 1930s and 1940s.3 In addition to working with archival documents such as account books, business and private correspondence, share certificates, or board meeting re­ ports from the Nantong Municipal Archives, I also used material from the Nantong Municipal Library, the Nantong Textile Museum, and the N an­ tong Museum. T he Nantong Municipal Library houses documents relevant to the areas local history such as gazetteers, newspapers from the Republi­ can period, and private publications; the Nantong Textile Museums collec­ tion includes archival documents such as passbooks for Dasheng shares, rent books for company housing, and material related to Zhang Jian s textile school. T he material held in the local Nantong Museum found its way there almost by accident. Much of it appears to have been handed over to the mu­ seum by private donors if no other cultural institution laid a claim to it.4 For example, among its interesting collection the copy books of the correspon­ dence of W u Jichen (1873-1935), the head of the Shanghai accounts office, present a unique source of information on Dasheng s internal management.5 I also benefited from interviews with the granddaughter of Zhang Jian, Mrs. Zhang Rouwu (1919- ). These interviews were useful in fleshing out the general picture of Zhang Jian s personality and his family. Interviews with former workers or descendants of Zhang Jian s former associates pro­ vided information on the business aspects of Dasheng. Although members of the Zhang family remain prominent in Nantong politics and society, Zhang Jians private documents are no longer in the possession of his de­ scendants. Together with other personal objects and property, they were transferred to government institutions in Nantong before and during the Cultural Revolution when Zhang Jian was branded as capitalist and ex­ ploiter o f the very people he is now said to have launched on the path to re­ gional economic and social modernization in the twentieth century.

Setting the Scene



Regional Enterprise and the Corporation as a Concept

Regional Enterprise Past and Present In Midnight (Ziye), Mao D uns famous novel about Shanghai in the 1930s« the industrialist W u Sunfu ponders the future expansion of his business portfolio. A plan of great vision develops in his mind as he stares at a sheet o f paper« which listed only three items: first« capital of five million yuan« one third to be paid up; second« a plan for several new enterprises—textile industry« long-distance buses« mining« chemical industry; third« a relief package for several of his already existing enterprises—a silk filature« a silk-weaving factory« a steamship company etc.. . . Sun Wufu took the outline« and while looking at it again« a great« much desired scenario arose straight from the sheet of paper: tall chimneys like a forest« belching black smoke; steamships braving the wind and the waves; buses flying across the open country. He couldn’t help smiling. However« his ideas were not coming out of noth­ ing. With his rich practical experience he knew that it did not matter that his enterprises would start small« but that the scale in his plans had to be big. When he had been enthusiastic about developing his native place three to four years ago« he had also followed this strategy. At that time he had started with a power station as a base in order to build up his "[personal] empire of Shuangqiao" from there.1 Although a work o f fiction« Mao D uns novel accurately portrays a new type o f businessman that was emerging at the time. W u Sunfu is representa* tive of the ambitious Chinese businessmen who« in the early twentieth cen­ tury« set up enterprises in the hinterlands of large cities and created a sphere o f economic and political power in their former native places while control­ ling these domains from their headquarters in the big financial and commer-


Regional Enterprise and the Corporation as a Concept

rial centers. W riters like Mao Dun saw these businessmen as urban capital' ists beset by foreign economic aggression, the forces of tradition, labor dis' putes, and political struggles.2 In Midnight, W u Sunfu owns cotton mills and speculates on the stock market in Shanghai; stewards manage his enterprises in the countryside. As substantial business ventures with a significant amount o f control over local society, these enterprises developed into per­ sonal domains that buttressed the influence of the owner, his family, and his networks in his native place. Dominating the development of local economy and society, they became regional enterprises. Like most businesses in China, regional enterprises suffered from the war that began in 1937 and the transi­ tion to socialism in 1949. Those that survived the war with Japan and the civil war vanished in the 1950s when collectivization and state ownership led to the death of private enterprises in China. Nevertheless, after fifty years under a socialist economy, China is again experiencing the renaissance of regional enterprises, now under collective management. Since the 1980s China's official media have celebrated dynamic entrepreneurs and their regional businesses in the form of township-village enterprises as a new alternative that is creating economic growth and thus promoting social stability in areas outside the main industrial centers. A pas­ sage from a local newspaper in northern Jiangsu province in 1994» quoting the director of the Nantong Yintie Hongfang Tinplate Factory, is typical: Since the late 1980s, my factory's output has more than quadrupled.. . . Once the enterprise was thriving and developing and I had money in my hands, the first thing I did for my hometown was to set up a school and to promote education. I took more than 300,000 yuan to set up in the village a kindergarten, an all-day primary school, and a lower middle school. I subsidize the teachers to the amount of 10 yuan per month for their living expenses. Each year I pay for a trip for them, and I offer good awards to the three students with the best outside exam results and their supervising teachers. It has always been my long-cherished wish to bring some benefits to my elders and my people and to do something practical for my hometown! For the past seven years, each year I set aside a fixed proportion of my funds from the factory to build bridges, to repair roads, and to acquire water pumps, tractors, and other agricultural machinery.. . . In 1993 my factory donated one million yuan to the village.. «. Last year I contributed more than 500,000 yuan to provide running water for over 1,150 farm households in the village. In addition, I also set up a cooperative medical station. T o date, the funds given by my factory for benefiting my elders and my people have already amounted to more than four million yuan.3

Regional Enterprise and the Corporation as a Concept


In describing this enterprise s charitable contributions to its hometown's education, welfare, and infrastructure, like the industrialists of the 1930s, the director of the tinplate factory, Mr. Shen Binyi, turned the community he was benefiting into a personal domain. N o t only did his enterprise generate much needed employment and tax income for the government, but its prof­ its contributed to public education, health care, and other social benefits. T he enterprise has assumed community responsibilities that formerly be­ longed to the state and its most powerful local organ in Chinese society, the work unit (danwei ), which, before its weakening in the market reforms, man­ aged every aspect of personal and communal welfare. The Nantong Yintie Hongfang Tinplate Factory is a typical example of the growth of enterprise involvement in local government responsibilities. Regional enterprises all over the country have built schools and housing for senior citizens, installed electricity, dug wells, and raised money for impover­ ished villages and flood victims. Their directors, praised as successful re­ gional party officials or exemplary model workers (laodong mofan), occupy vi­ tal positions in community political, economic, and cultural organizations«4 As used in this book, regional refers to much more than just a rural industrial enterprise: a regional enterprise is a large-scale industrial operation in a rural environment with considerable economic and social impact on at least one or more counties. Whereas the direct economic impact of an industrial enter­ prise on any rural setting would be expected, its social and, to a certain ex­ tent, cultural impact depends on the leadership of the enterprise's director and his personal concept and application of local development and control. This rather broad definition allows us to look for historical precedents. At the beginning of the twentieth century the Dasheng No. 1 Cotton Mill, established in the countryside near Nantong city, was very similar to the tinplate factory of the 1990s. Dasheng s founder, Zhang Jian, a distin­ guished scholar-official, set up the factory in 1895 under official patronage. Although the mill started operations as a government-sponsored enterprise, Zhang Jian soon assumed total control of the firm. By founding schools, do­ nating to charity, and making improvements in Nantong's infrastructure, Zhang Jian became a local magnate. In short, the Dasheng cotton mills be­ came a regional enterprise and the mainstay of Nantong's economic, social, and cultural development. T he Nantong region, northwest of Shanghai, borders the Yangzi River to the south and the East China Sea to the east (see Map 1). Historically,


Regional Enterprise and the Corporation as a Concept

120° Map i The Nantong area in the early twentieth century

this region in central Jiangsu province was dominated b y salt production and the salt trade.5 As the salt trade declined at the beginning of the twentieth century, Zhang Jian turned the saline soil along the coastline into agricul­ tural land through land-reclamation projects that produced the raw materi­ als for his mills and thus brought industrialization and new agricultural pro­ duction to the area. As we shall see in the following chapter, the Nantong region has always been economically and culturally far less developed than the prosperous southern part of Jiangsu province. Suffice it to say here that Nantong was

Regional Enterprise and the Corporation as a Concept


certainly more than just the hinterland of Shanghai, but it never developed into an economic core dominating northern Jiangsu. Therefore, Nantong's growth under Zhang Jian received much public attention in the 1910s and 1920s.7 An enthusiastic Western visitor to Nantong in 1922 summarized her impressions: "At every turn is to be seen the embodiment of His Excellency Chang Chien [Zhang Jian]. Everything is typical of modern thought and development.. . . Modernity in regard to industrial and economic conditions is his hobby and the scope of it is very wide, it must be admitted."8 Even the terminology shows the continuity between the 1920s and tjie 1990s. Observ­ ers as well as the founders and directors were concerned with the contribu­ tion of the enterprise to the community. That, of course, is what lies behind the idea of combined economic and social "development"— in the Republi­ can period as well as today. In China, Dasheng as a modern business operation and Nantong as a leading example of local business initiatives are now frequently cited in the context of contemporary regional developments. The restructuring of cen­ tral-local relations, in particular fiscal decentralization, has not only intensi­ fied provincial regionalism and localism but also provided the necessary political conditions for enterprise reforms.9 Certainly, for a comparative approach to regional enterprises in the past and present, we need to con­ sider that township-village enterprises (xiangzhen qiye) such as the Yintie Hongfang Tinplate Factory are owned by the collective whereas Dasheng was organized as a shareholding company with limited liability.10 However, despite their differences in terms of property rights, I suggest that we need to view the development of the two forms of enterprises as analogous. As I will show in my comparative analysis in the Conclusion, we should con­ sider them analogous not only in regard to their impact on the regional society and economy but even more so in regard to the development of control without private ownership or majority shareholding. Here, in par­ ticular, recent research by political scientists, sociologists, and anthropolo­ gists on the evolution and transformation of property rights in Chinese col­ lective enterprises and the role of local government and local elites provides useful comparative perspectives.11 For example, just as Zhang Jian s influ­ ence through personal managerial control dominated Dasheng s fate despite its corporate structure, the creation of new shareholding rights in collective village enterprises has cemented rather than diminished the power of party


Regional Enterprise and the Corporation as a Concept

secretaries over village corporations.12 In order to understand the challenge o f incorporation to Chinese enterprises past and present, we need first to reflect on the interpretation and application of the concept of the corpora« tion in Chinese business history.

T h e Business Corporation in C hina Enterprise, firm, corporation— we tend to think of these institutional enti­ ties as products of industrialization and the modem nation-state, which are said to have created the necessary economic, legal, and social frameworks for their formation. Chinas industrialization started slowly in the mid­ nineteenth century. Before the Sino-Japanese war of 1894-95 and the Treaty o f Shimonoseki in 1895, foreigners did not have the right to establish facto­ ries in China.13 T he state turned a blind eye to foreign-owned enterprises in the treaty ports that were either small in scale or essential, such as shipbuild­ ing and repair, but it drew the line sharply at cotton spinning and weaving.14 W ithin the Chinese sector o f the economy, new industries were state-run. Arsenals, shipyards, and mines were first established under government sponsorship.15 T he need for substantial capital for those enterprises and the government s inability to provide it led to new financial and business struc­ tures. Government supervision and merchant management (guandu shangban) became the form under which official patronage and private investment were joined.16 In reality, no major factory could have been started in China without the approval and support of a senior official. As will be discussed in Chapter 2, more active private involvement in in­ dustry came after 1895. The consequences were dramatic. Between 1895 and 1911, 35 mining enterprises were founded as private enterprises (shangban) in contrast to nine mining enterprises totally owned by the government (guan ban), ten enterprises under joint government-merchant management (guanshang heban), and two government supervision-merchant management opera­ tions. 17 As the government withdrew from direct involvement in the enterprises under joint management, new forms of private business opera­ tions developed, now supported by structural aspects of incorporation, lim­ ited liability, and legal accreditation. The age of the modem firm in China had begun. But what did these modern firms look like? In a discussion of the emer­ gence o f capitalism in China, David Faure has suggested that modern busi­ ness operations appeared mainly in the form of three categories: as corporate

Regional Enterprise and the Corporation as a Concept


enterprises through privatization of government-sponsored enterprises, as family enterprises, or as regional enterprises/8 Well-known examples of gov­ ernment-sponsored enterprises are the China Merchants' Steamship Navi­ gation Company, the Hanyeping Company, and the Hengfeng Spinning Mill.19 According to Chi-kong Lai's research, the China Merchants' Steam­ ship Navigation Company attempted to consolidate government-business cooperation with its new joint-stock structure between 1872 and 1884 but continued under dominant government influence in the following years.20 W hen the company was privatized after 1895, the supervising director of the company appointed by the government, Sheng Xuanhuai (1849-1916), be­ came an appointee of the board of directors. As Albert Feuerwerker has shown, it was more a change in name than in fact, since Sheng Xuanhuai, while supervising director, had already acquired a substantial number of shares in the company.21 Second, some modem enterprises grew out of family businesses. The or­ ganization and cultural aspects of the Chinese family firm have been the fo­ cus of many recent discussions.22 Family businesses have a long tradition in China, but it was only with changes in business law, which came about first in the treaty ports and then by 1904 in the rest of China, that these busi­ nesses began to incorporate. Between 1904 and 1908, some 272 companies registered with the Chinese government, over half of them as joint-stock companies with limited liability.23 For example, the Nanyang Brothers T o ­ bacco Company registered under English law in H ong Kong in 1905 and later as a joint-stock company with the Beijing government under Chinese law in 1918.24 Various studies have addressed the subject of how the holding structure o f the business company affects its style of management. Sherman Cochran has documented a managerial innovation in the Nanyang Brothers Tobacco Company in the 1919 appointment of a financial controller responsible for reorganizing the company's finances.25 However, the management of the company, especially its debt and credit arrangements, was always problem­ atic because it was never clear whether the former compradors who managed it acted as agents or principals. T he Yong'an (W ing On) company, founded by the Guo family in Hong Kong in 1907, is another example of a large family business that was regis­ tered under English law and continued to exist as a joint-stock limited liabil­ ity company after 1912. The family exerted strong financial control over the


Regional Enterprise and the Corporation as a Concept

company's shareholding structure.26 As Kubo Torn and Wellington Chan have shown, even though the company was public, the Guo brothers achieved almost a complete consolidation between ownership and control through shares held by members of their extended family, overseas and na­ tive-place networks, interlocking directorships, and intercompany loans.27 Even those family firms that registered with the Chinese government (and most family firms in the treaty ports did not) did not necessarily give up their family business structure. However, instead of a stable hierarchy across several generations, the internal power structure in the Chinese family business was, according to Chi-cheung Choi, a simultaneous process of "con­ tinuous integration and disintegration."28 The third category of modern enterprises, the regional enterprise, began to emerge by the end of the nineteenth century. Originally designed as mo­ tors for industrial development, they were formed by privatization of gov­ ernment enterprises. However, even these incorporated enterprises exhibited many of the managerial characteristics of the family business. The subject of this study, the Dasheng enterprise—by which I mean the whole business group including all its subsidiaries and affiliated companies— is an example of such a business. Before 1895 regional enterprises were nonexistent; by the time they came to be promoted, the imperial government had already been weakened by war and social disorder. Although Dasheng was founded as a joint government-private venture, government involvement became negligi­ ble after the first five years and finally redundant when the company ac­ quired legal status as a shareholding company in 1907.29 The government never played a role in the management or ownership of the company, but Zhang Jian and his family did, though without ever turning Dasheng into a family business. Although we know something about the institutional structure and de­ velopment of modern enterprises rooted in government-sponsored enter­ prises and family businesses from various case studies, we still lack an insti­ tutional analysis of industrial corporate firms that developed from regional enterprises. Since their evolution into corporate business enterprises oc­ curred in a context of both government sponsorship and family influence, they are crucial for exploring the history of the modem firm, especially the history of incorporation and management, in early twentieth-century China. Therefore, the aim of my book is not just to confirm or to contradict a spe­ cific typology of business but, through institutional analysis, to present a

Regional Enterprise and the Corporation as a Concept


new approach to the theoretical interpretation of incorporation and management in Chinese business enterprises in general. Unfortunately, in contrast to W estern business history, where the search for a comprehensive theory o f the firm has produced various methodological approaches analyzing the definition, behavior, and functional roles of firms through issues ranging from transactions costs to entrepreneurship, we still lack a specific theory of the firm in China.30 Even in regard to the identifica­ tion of structural patterns, opinions differ greatly. As Rajeswary Brown has suggested, Chinese entrepreneurs and their relationship to the state, family structure, management hierarchies and style, accounting methods, and busi­ ness networks are part of the research necessary to identify the patterns of the Chinese firm.31 However, before we can concentrate on analyzing the in­ stitutional components of the business enterprise in comparative perspective, we need to consider our point of departure. As the reader may have noticed, in my discussion of the evolution of modem Chinese enterprise I have largely avoided the use of the term corporation in favor of locutions such as corporate structure and corporate enterprise. The choice is deliberate. The debate about the nature of the modern firm in China is often based on the assumption that we are dealing with an entity similar to the large corporation in the W est that emerged in the late nine­ teenth and early twentieth centuries. However, as this book will show, corpo­ ration may not be the most appropriate term for Chinese businesses in gen­ eral and regional enterprises such as Dasheng in particular. According to contemporary W estern définitions, the corporation is char­ acterized by perpetual life, limited liability, free transferability of interests, and centralized management. Accountability and the separation of ownership and control are also typical of the corporate structure. As a business entity, Dasheng exhibited characteristics not only of the W estern corporation but also of traditional Chinese business. Labeling these "modern" and "tradi­ tional," respectively, can be dangerous since these general terms are often pit­ ted against each other as misleading substitutes for W estern rationality and Chinese culture. For lack of a better word (and despite its unavoidable disad­ vantages), however, I will use the term modern to indicate the adoption of certain W estern corporate characteristics. In contrast, "traditional" business structures refer to those that function without the prescribed characteristics o f incorporation such as family firms. For example, by adopting limited liabil­ ity and a centralized management, Dasheng qualifies as a modem enterprise.


Regional Enterprise and the Corporation as a Concept

Yet at the same time, the role of Dasheng s founder in the enterprise elevated him above any rule or charter, and the boundaries between his private assets and the corporate assets of the enterprise were never clear. This lack of accountability simultaneously characterizes Dasheng as a traditional business. In the context o f the evolution of business enterprises in China, Dasheng was a modem enterprise because its managerial and financial organization differed greatly from existing structures of family business and government enterprises. But the involvement of the founders brother and son in the company arguably characterizes Dasheng to some extent as a family business. In this case, however, the family network was so small that the enterprise never developed into a family company. By being aware of the more complex structure o f the modem firm in China, we can avoid equating the corporate structure of W estern firms with "Western rationality" and the traditional structures o f Chinese businesses with "Chinese culture." Both the corporate and the traditional structures are rational and efficient modes of business operation. Part of the reason that regional enterprises such as Dasheng do not fit readily into the classification "corporate company" is that the history of the Chinese business company as an entity incorporated by law is comparatively short. In a study of pre-industrial capitalism, Fernand Braudel has traced the origins o f the firm in the West, or, to be more precise, in the Mediterranean region, to its simplest form as a maritime venture in the twelfth century.32 His description of the historical development of different types of firms in Europe—joint-liability family firms, limited partnerships, joint-stock com­ panies— spans the seventeenth to the late eighteenth centuries. However, despite a clear pattern of development, Braudel concedes that the majority of firms were still small, often ill-defined, and limited in their business scope well into the nineteenth century.33 If we search for a similar pattern of devel­ opment in China, we face one major problem: commerce as a separate sub­ ject of law was undeveloped in China until 1904 (see Chapter 3).M T o be sure, the lack of a statutory framework for business did not pre­ clude substantial and successful enterprises in China. In the place of statu­ tory law, Chinese merchants sought support in other institutional arrange­ ments such as native-place organizations or guilds.35 To understand Chinese business, we need to examine all aspects of the institutional framework of business. O ur starting point must be that the enterprise worked as one insti­ tution in interacting with society, economy, and state and as a combination

Regional Enterprise and the Corporation as a Concept


of separate institutions such as workshops and accounting practices that make up the business operation. T o understand the institutional basis of the business, we can turn to Max Weber. In the seminal Economy and Society, W eber described capitalism not as a state of mind but as a way of working in the economy that draws on numer­ ous institutions, such as property or the market, that is to say, on common understandings and practices.36 W eber defined the firm in the sense of a modem capitalist enterprise in the W est as a rational, profit-seeking eco­ nomic organization with enforced regulations that also exists as a technical entity divided between administrators and workers.37 Institutions may arise within a culture, or they can move from one culture to another. For example, although business had been conducted for generations under indigenous in­ stitutions in China, the decline of the imperial government and the impact of the W est in the early years of the twentieth century led to new institu­ tional arrangements for doing business. In any concrete historical case, a combination of different traditions will affect the evolution of the firm as an economic organization. In time, these different traditions might converge, but a case like Dasheng shows that substantial institutional disparities emerged in the process. In the following chapters, I will use institutional analysis to argue that in the case of Dasheng we are not dealing with a firm but with an economic in­ stitution developing toward the model of the firm. In a firm, private and business accounts, household and office, private assets and company assets, have to be separated.38 However, in the years covered in detail by this book, broadly from the establishment of the Dasheng Cotton Mill in 1895 to the death o f the founder in 1926, private and public were not clearly distin­ guished, despite the outward corporate appearance of the enterprise. The lack o f distinction between private and public in terms of assets and structures resulted in a number of complications and financial difficulties for the enterprise and finally required the intervention of creditor banks, which permanently changed the managerial and financial setup of the company* An analysis of the relationships of power, property, and institutionalization in the Dasheng enterprise allows us to explore the history of incorporation and management in China. In a recent reappraisal of W eber s theory and its applicability to the Chi­ nese economy and its institutions, D u Xuncheng addresses the issue of de­ veloping a definition of the Chinese firm. Although his detailed study makes


Regional Enterprise and the Corporation as a Concept

many valuable points, D u s more general assertion that Chinese enterprises can be clearly divided into two categories, family and non-family, seems questionable.39 Whereas he characterizes the non-family businesses as more '"Westernized" and the family businesses as more "traditional," D u neverthe­ less admits a certain amount of exchange and interaction between W estern and traditional principles in both enterprise types. However, he defines the traditional impact on the firm more in terms of cultural and social interac­ tions, for example, in the emphasis on native-place ties and family networks, but he fails to specify what traditional institutional structures were adopted by Chinese firms.40 The research presented in this book shows that corporate firms in early twentieth-century China did adopt traditional institutional characteristics of the Chinese family business. In the case of Dasheng, the enterprise utilized an institutional feature of the traditional family business— the central ac­ counts office— to achieve managerial and financial control, and this sus­ tained the implementation of other modem business structures. Thus this study introduces a new category of Chinese business firms. By now it should be clear that modem Chinese enterprises are not im­ ports from the W est with Chinese characteristics. This is not to say that business historians working on China should ignore the work of Western business historians like Sidney Pollard and Alfred Chandler, but we must be aware o f its limitations. Pollard, for example, has shown the importance of the rise o f the industrial manager, the adaptation of the labor force, and ac­ countancy as a tool of management in the Industrial Revolution.41 In par­ ticular, his discussion o f accounting as a method of control provides an im­ portant perspective on exploring the development of accounting practices and their institutionalization in modem Chinese enterprises. Chandlers definition o f the modem enterprise as containing "many distinct operating units" and "managed by a hierarchy of salaried executives" offers a useful point o f comparison for analyzing internal structures.42 However, in his ex­ planation of the initial appearance and continuing growth of modem corpo­ rations in the United States, Chandler does not regard government involve­ ment or the legal framework as essential factors.43 Therefore, his definitions cannot be automatically applied to the development of modem business in China, where the government wielded a dominant influence on the eco­ nomic sector through control and patronage.44

Regional Enterprise and the Corporation as a Concept


Apart from dealing with the institutional framework of the Chinese firm as a single business unit, this study also addresses the issue of the emergence of the business group, its organizational structure, and its economic func­ tions. Building on Ronald Coase's seminal article "The Nature of the Firm" in which he explained the existence of firms through their avoidance of transaction costs, Mark Granovetter defines the business group as "a collec­ tion of firms bound together in some formal and/or informal ways" and as characterized by an "intermediate level of binding."45 Chinese business groups have increasingly become the object of research in terms of informal and intermediate ways of binding, since they are often strongly connected with, and even dominated by, family businesses and their networks. In par­ ticular, Chinese business groups overseas have recently attracted much at­ tention because o f their impressive successes, before the Asian economic cri­ sis, in the local economies of such emerging markets as Indonesia, Malaysia, and Thailand.46 Patronage, networks, and entrepreneurial culture based on different ethnic backgrounds and cultural adaptation have become popular issues. I will argue, however, that cultural analysis has to be supplemented by institutional analysis in order to explain the rationales and economic motives behind the formation o f business groups. Even with its less than perfect corporate structure, Dasheng grew into a substantial and highly diversified business group whose activities ranged from industrial to agricultural production to financial and transportation services. T he analysis in this book of the Dasheng business group is con­ cerned less with its economic performance within the national economy and the international textile industry and market of the early twentieth century and more with formal and informal structures that connected the various parts of this business group.471 will argue that transaction costs and their management through the central accounts office played a vital role in the management and control of the Chinese business group. T o a great extent, this institution determined the structure of authority and ownership rela­ tions within the Dasheng business group and became the central instrument for decision making in terms of transaction costs for a complex, diverse group o f subunits. At the same time, the institutional structure of Dasheng as a business group was also characterized by informal ties and networks. In fact, the Dasheng case confirms Granovetter s general assumption that a business group based on a particular firm developed a more vertical configu-


Regional Enterprise and the Corporation as a Concept

ration that changed over time due to institutional influences both outside and inside the core firm.48 In a recent survey article on enterprise history in China, Chi*kong Lai suggests seven complex issues that require more detailed research based on company archives: the relationship between the central office and branches, the emergence of corporate structures, marketing strategies and manage* ment styles, consumer styles, legal disputes, Chinese business networks, and industrial technology.49 This study addresses most of these issues. By focus* ing on the enterprise's institutional setup, I examine the corporate structure and the specific function of the central office in the enterprise. The issues of management styles, marketing strategies, and industrial technology are of particular interest in the context of Dashengs factory production and the Chinese cotton textile market. I address legal disputes and business net* works in regard to Dashengs management, accounting, and investment structure. This institutionally oriented approach allows us to at least ap* proximate a new theory of the firm in modern China. However, to show how this approach departs from earlier studies, particularly their highly poli* ticized subtexts, it is necessary for us to take a look at the existing literature on Dasheng and Zhang Jian.

Z h a n g Jia n and D asheng in Chinese Business H istory The treatment of Dasheng and Zhang Jian in the literature offers valuable insights into the relationship between Chinese politics and the historiogra* phy of Chinese business. A substantial literature in Chinese, Japanese, and English discusses the achievements of Dasheng and its founder. Most of it adopts a biographical approach, which is understandable considering the fact that Zhang Jian was one of the most colorful and versatile personalities in late nineteenth* and early twentieth*century China. Another reason for the biographical focus is the obsession of conventional Chinese historical studies on business*related topics with the relationship between morality (daode) and engaging in a profit*oriented business.50 Needless to say, al­ though the biographical approach per se is not incompatible with the analy­ sis of business institutions, the biographical material on Zhang Jian has been of only limited use to my specific focus on the institutional aspects of the business* Biographies of Zhang Jian were published almost immediately after his death and, to a considerable extent, propagated an image much cultivated by

Regional Enterprise and the Corporation as a Concept


Zhang in his lifetime.51 Samuel C hus 1965 study, which followed this tradi­ tion, was the first Western-language work to treat Zhang Jian and the Dasheng enterprises.52 In this solid, detailed study, based mainly on Zhang Jian s collected works, Chu introduced the Dasheng cotton mill and Zhangs other business activities such as land reclamation and water control. The title Reformer in Modern China clearly defined C hus point of view in evaluat­ ing Zhang Jian: he considered him "a modernizer [who] did not abandon the traditional values in which he was steeped."53 Chu also discussed the question whether Zhang Jian succeeded or failed in his aspirations for mod­ ernizing China and concluded that the country lacked a sufficient number of persons like Zhang Jian who could have changed China's economic and po­ litical predicament in the early twentieth century.54 In China the political climate and ideological propaganda culminating in the Cultural Revolution led to Zhang Jian's vilification as a class enemy and capitalist who had ruthlessly exploited his workers.55 Zhang Jian and his business activities were rehabilitated only in the late 1980s by historians such as Lin Gang, Yan Xuexi, and W u Yiye.56 Since state policy at the time pro­ moted local enterprise initiatives, much of this literature praised Zhang Jian for his contributions to China's economic independence.57 Suddenly, his business success was intrinsically linked to his superior personal morality, and the greedy industrialist of the Cultural Revolution became the benevo­ lent patriot of the reform era. These changes in interpretation were generally not based on newly dis­ covered research material; rather, they reflect changes in the government's political agenda.58 A strong ideological slant, often in favor of indigenous ef­ forts for "development," is apparent in recent studies that eulogize Zhang Jian as "the founder of modern Chinese industry."59 For example, one vol­ ume in the biographical fiction series The Dream o f a Powerful Nation (Qiang guo zhi meng), which covers patriotic reformers of the late imperial and Re­ publican periods such as Lin Zexu (1785-1850), Kang Youwei (1858-1927), Liang Qichao (1873-1929), and Cai Yuanpei (1868-1940), is devoted to Zhang Jian and his patriotic commitment to national and local economic development.60 Publications such as the glossy series Shanghai Tycoon Legends (Shanghai jushang yanyi) cater to a popular audience and stress the creativity and entrepreneurial spirit of Chinese businessmen like Zhang Jian.61 One weakness of the biographical approach is that it does not spell out the obstacles and limitations Zhang Jian had to confront. Zhang Kaiyuan's


Regional Enterprise and the Corporation as a Concept

biography of Zhang Jian stands out as the first attempt to present a realistic picture of the man and his economic and political aspirations.62 In a bold departure from accepted Chinese historiography, Zhang Kaiyuan concen­ trates on Zhang Jian s relations with his social environment, since he consid­ ers categories such as class or social stratum of little use in analyzing a per­ son in the historical context. By "social environment," he means the various communities to which the individual belongs; he notes that an individual de­ rives a different identity from interacting with each.63 Thus Zhang stresses Zhang Jian s social and political networks, which were indeed vital to his many activities. Another relevant study is Qin Shao's analysis of the political culture of Nantong. Shao focuses on Habermas's public sphere concept and argues for its partial emergence in Nantong at the beginning of the early twentieth cen­ tury, and she makes the point that Zhang Jian was able to dominate and monopolize the community by introducing new W estern concepts of time and space, such as modem buildings and Western clocks. Shao argues that Zhang Jian used these new concepts of time and space to construct political power and to promote himself in Nantong. True though this might be, the attempt to relate Zhang Jian to a new po­ litical culture is of limited use for the institutional history of Dasheng as a regional enterprise. Admittedly, Zhang Jian succeeded in giving Nantong a progressive image and thereby increased his control over it, but the centerpiece of his business operations and the financial and strategic anchor of his activities in the community was not public relations but the Dasheng enter­ prise itself. Moreover, once the enterprise is given pride of place in an analy­ sis, the question of control dissolves because its boundaries were fluid. Qin Shao's study is the first attempt to analyze the myth of Nantong as it was portrayed in the early twentieth century. However, we still need a better un­ derstanding of what the commercialized display of power meant to the members of the community and whether they benefited from it. A recent study by Chang Zonghu is concerned with the question of N an­ tong s modernization in terms of its social development.65 Despite the au­ thor s serious attempt to address a broad variety of changes in the economic, social, and cultural structure of local society and the region, he is still primarily concerned with evaluating Zhang Jian and his thought. Consequently, in his conclusion, he pursues the unfruitful question of Zhangs success or failure in

Regional Enterprise and the Corporation as a Concept


promoting China's modernization. In the same vein, Japanese scholars like Nakai Hideki have hailed Zhang Jian as one of China's most prominent en* trepreneurs and introduced Dasheng rather uncritically as the most striking example of modernization in Chinese business.66 T he most detailed study in a W estern language on Dasheng and its role as a business institution in the development of the local economy is Kathy Le Mons Walker's work on the political economy of cotton textiles in N an­ tong, which examines the enterprise's reaction to external factors such as prices, trade, and political conditions. H er strong theoretical overtone fo­ cuses on the interactions of imperialism, semicolonialism, and local society.67 In her own words, her book "takes the problem of the formation of particu­ lar peasants as its grounding point."68 By analyzing modem industry and farm production in the region, she shows how Dasheng gained a monopoly over cotton through Zhang Jian's land-reclamation companies, which pro­ vided the raw material for his cotton mills to a large extent. Walker argues that because of its monopolistic position, the Dasheng enterprise became an obstacle to sustained economic growth in the area and as a consequence suf­ fered a drastic decline.69 This approach has its own problems, however. Although I agree with Walker that the Dasheng mills and their affiliated enterprises did not lead to sustained growth in the area as a whole, I think that holding semicolonial politics and the overdevelopment of social inequities responsible for N an­ tong's and Dasheng's problems in the 1920s is too simple an explanation. It neglects internal business (actors, which would have required a detailed fi­ nancial and managerial analysis of the enterprise. By focusing on the impact of capitalist industry, which Walker associates with the destabilization, im­ poverishment, and exploitation of the local peasant society, her interpreta­ tion follows a teleological narrative based on the theoretical concept of the "development of underdevelopment," an argument presented by Philip Huang in his study of the rural economy in the Yangzi Delta through the model of involution.70 T he most comprehensive approach to the institutional structure of the Dasheng enterprise to date is Dasheng xitong qiyeshi (Business history of the Dasheng group; 1990), and most of the secondary sources already mentioned rely heavily on its interpretation.71 The result of a team project under the guidance o f the economic historian Xu Dixin from the Beijing Academy of


Regional Enterprise and the Corporation as a Concept

Social Sciences, this serious and detailed study, based on company records and unpublished source material, was the first to examine Dasheng exclu­ sively as an institutional system (xitong).72The authors document the growth o f the enterprise from its founding in 1895 into a full-fledged business opera­ tion that included branch mills, subsidiaries, and numerous affiliated compa­ nies* By analyzing in some detail the numerical data in Dasheng's annual re­ ports, the study examines the profitability of the business between 1900 and the 1930s. It argues that Zhang Jian's expansionist strategy centering on the Dasheng cotton mills allowed him to gain control o f the region. The authors see the increasing indebtedness o f Dasheng and the financial problems of the land reclamation companies and the newly established branch mills as the main reasons for the enterprise's difficulties in the early 1920s.73 Dasheng xitong xiyeshi is a landmark in Chinese business studies because of the authors' serious attempt to back their argument with detailed statistical data. My analysis agrees with many of its conclusions, one of which is the possibility o f regarding indebtedness as the result of too rapid expansion. However, overextension is one of those concepts that works better in a posthoc argument than in an analysis of decision making. For example, one could blame any company's failure on overextension and ask what measures had been taken to hedge its risks. In the case of Dasheng, because of the lack o f a clear overall hierarchy and because of the free flow of funds between Zhang Jian's private and his business accounts as well as between different parts o f the enterprise, I would argue that the Dasheng xitong qiyeshi errs by taking too rigid a line in examining the financial structure o f the enterprise. T he problem arises, in fact, because the authors of Dasheng xitong qiyeshi accepted too readily the structure of the company as it was presented to the shareholders in the company reports. I agree with the authors of this study that power rested with Zhang Jian, but they have failed to notice the com­ plex role o f the central accounts office in the operation of the enterprise, which is vital to understanding Dasheng's institutional structure«74 In addi­ tion, the study does not give as much weight to the problem of financing the business as it does to the deposition of funds; that is to say, it fails to appre­ ciate that although capital is employed in the operation o f the business, capi­ tal itself can only be acquired at a cost and such costs may have much to do with the structure of the business and its management performance. There­ fore, I argue that for the purpose of critical analysis we should not take Dasheng's holding structure at face value.

Regional Enterprise and the Corporation as a Concept


Although this book treats various issues in the held of Chinese business his­ tory, it also attempts to address certain themes of significance to the broader context of modern Chinese economic history. By understanding the institu­ tional structure of the business enterprises, we can assess more carefully the issues of "undercapitalization" and excessive profit distributions that have of­ ten been held responsible for China's slow industrial development.75 As I will argue, these factors did not automatically lead to the economic failure of industrial enterprises and lackluster industrial development. In fact, al­ though this book points out the institutional problems of Chinese enter­ prises and their limited impact on regional economic development, it does not argue against the findings of economic historians like Thomas Rawski or David Faure whose studies have found considerable economic growth in cer­ tain areas o f rural China during the Republican period.76 My analysis will also explore how Nantong fit into Skinner's concept of macro-regions and to what extent the region experienced economic integration during the Repub­ lican period.77 In line with economic historians who stress the disparities in the levels of development of China s various geographical regions and inter­ actions between the traditional and modern economic sector,78 my study confirms that industrial growth in the Nantong area had an impact on rural development but in the end never sustained long-term growth despite the area's vicinity to the economic center of Shanghai. Finally, I need to make two disclaimers. Even though this study addresses the issue of the economic and social relationship between the Dasheng en­ terprise and the region, it does not analyze local agricultural data and the de­ velopment o f land and commodity prices to estimate growth rates and pro­ duction patterns. Similarly, despite the lively debate about the W estern concept o f capitalism and the arguments for its existence or absence in China, or its applicability or non-applicability to Chinese history and society, I do not approach the Dasheng business group with the intention to prove the success or failure of capitalism in early twentieth-century China.79 As R. Bin W ong and Kenneth Pomeranz have pointed out, we should not ask why China did not develop capitalism; rather, we should pay attention to the dynamics and limitations o f economic expansion in China in comparison with similar developments in Europe.80 Along this line, I suggest that we


Regional Enterprise and the Corporation as a Concept

investigate the (unctions of private large-scale business institutions in the economic process and then evaluate particular advantages and disadvantages of their organization; this will allow us to better understand the emergence of Chinese industrial capitalism and modem Chinese business structures af­ ter 1900.



National and Regional Context

The era in which the Dasheng cotton mills were established was one of great opportunities as well as great risks for businesses in China. The emergence of industrial enterprises as private business concerns and the new role of pri­ vate entrepreneurs alter 1895 were part of the transformation of Chinese state and society that roiled the last decades of the Qing dynasty. N or did the enormous challenges the government confronted in the political, social, and economic realms end with the transition from the late imperial state to the Republic in 1911. W ithin this transition, industrialization through private initiatives be­ came a focus in the power struggle waged by the central political authority, regional officials and their supporters, and merchants and businessmen. As this chapter will show, the emergence of private industrial enterprises in China in the late 1890s was a slow and difficult process, with considerable fi­ nancial risks for investors, sponsoring officials, and founding managers. To grasp the development of Dasheng as a business institution in this transition period, we need first to explore why government sponsorship of enterprises declined and private companies began to dominate the industrial sector. In addition, I will briefly discuss the topographical and socioeconomic charac­ teristics of the Nantong area that became significant factors in Dasheng s development as a regional enterprise.

189s — A Fateful Year fo r N a tion and Industry In 1895, the year that Zhang Jian began to plan a cotton mill in the Nantong area, the county was home to agriculture and a cottage industry of cotton spinning and weaving, but not to any kind of industrial production. In fact, at that time only a handful of Chinese factories under government sponsor-


National and Regional Context

sh ip an d control struggled for survival. A p a rt from th e im perial w orkshops supplying th e co u rt w ith silk an d porcelain, any private m anufacturing o f goods, even in sectors w ith a substantial o u tp u t, to o k place in th e form o f h an d icraft production. T h e first large-scale shipyards, mines, an d industrial textile mills in C h in a w ere n o t privately initiated and organized business o p ­ erations b u t p a rt o f th e governm ent's agenda to strengthen th e country's p o ­ litical econom y. T h e num ber o f these operations w as extrem ely small, an d th e ir success very lim ited. T h is was to change from 1895 on, w hen th e politi­ cal obstacles to private C hinese en trepreneurship w ere lifted.

In 1895 the Sino-Japanese war over political influence in Korea ended with China s defeat and the signing of the Treaty of Shimonoseki. Japan im­ posed, among other conditions, an indemnity of 200 million taels on China, forced the opening of further inland cities to foreign trade, and the conces­ sion of Taiwan to Japanese control. Aside from the economic consequences of the treaty conditions for China (the indemnity was more than double the government revenues of about 81 million taels in 1894), the outcome of the Sino-Japanese war also had a severe impact on China's foreign and domestic politics. The so-called scramble for concessions began with Britain, Russia, Japan, Germany, and France demanding leases of Chinese territory. Protest by the upper stratum of Chinese society against the treaty demands finally led to the Hundred Days reform of 1898 initiated by the scholar Kang Youwei. After its failure, events unfolded quickly.1 T h e cum ulative effect o f th e Boxer uprising in 1900, th e siege o f Beijing, th e onerous Boxer indem nity, an d dem ands by foreign pow ers for legal re­ form s exerted great political an d financial pressure on th e Q in g governm ent. In response, th e Q in g governm ent sta rted to pursue institu tio n al an d ad ­ m inistrative reform s. T h e late Q in g reform s o f th e 1900s m ade fundam ental changes in th e governm ent and society. F or example, th e abolition o f th e im perial exam ination system in 1905 in effect abolished th e trad itio n al gentry class, an d a prom ised constitution an d th e convening o f local an d provincial assemblies w ould have com pletely overhauled th e basis o f governm ent. Be­ fore th e reform s w ere com pleted, however, th e im perial governm ent was overthrow n in th e R evolution o f 1911.2 T h e year 1895 w as in m any ways crucial for th e developm ent o f privately ow ned industrial enterprises an d th e necessary adjustm ents o f C hina's socio­ econom ic fram ew ork. Follow ing th e end o f th e T aip in g Rebellion in 1864, concerned governm ent officials h ad initiated th e first attem p ts to build in-

National and Regional Context


dustrial enterprises. In th e wake o f this m ajor political crisis, th e au th o rity o f th e Q in g governm ent w eakened substantially, even as th e political pow er an d econom ic influence o f governors-general began to grow because o f their co n tro l o f regional arm ies an d th e profits from th e newly introduced lijin or tran sit tax in th e provinces. T h is regionalization o f th e political pow er and econom ic interests o f th e highest officials outside th e co u rt played a m ajor role d u ring th e first phase o f industrial enterprises in C h in a in th e 1870s an d 1880s. T h e little industrialization th a t existed in C hina before 1895 was focused o n heavy industries serving th e governm ents m ilitary an d defense needs. T h is was directly linked to the Self-Strengthening m ovem ent am ong concerned officials and their a tte m p t to revive th e national econom y an d mili" tary d u ring th e T o n g zh i R estoration period betw een 1862 an d 1874. W h e n Li H o n g zh a n g (1823-1901) was appointed governor-general o f Z h ili an d imperial com m issioner o f th e n o rth ern p orts in 1870, he became th e m ost ard e n t p ro p o n en t o f self-strengthening. H is career over th e years as a high" ranking official in various p arts o f th e em pire h ad given him m uch political an d even m ilitary experience. T o g eth er w ith m oderately reform "m inded of­ ficials such as Z e n g G uofan (1811-72) and Z u o Z o n g tan g (1812-85), he de­ m anded th a t th e governm ent strive to improve the m ilitary to defend C h in a against th e W e ste rn powers. T h ese officials were not, however, p roponents o f an industrial revolution or a m odern economy. T o th e contrary, they w an ted to restore the traditional econom y in agriculture and com merce; they h ad n o in te n t o f "enhancing th e strength and w ealth o f th e country a t the cost o f its traditional institutions.

H en ce it is n o t surprising th a t the Self-

S tren g th ening m ovem ent enjoyed strong su p p o rt from th e co u rt despite the fact th a t the proposals for change cam e n o t from co u rt circles b u t from offi­ cials w ith close ties to regional bases.6 T h u s th e initial establishm ent o f industrial enterprises has to be in ter­ p reted as an atte m p t to regain m ilitary strength and restore national pride w ith o u t contesting th e status quo o f governm ent an d society rath e r th a n as a step to w ard planned econom ic developm ent. A s p a rt o f this policy, any in­ d u strial enterprise founded before 1895 required n o t only th e sanction o r perm ission of, b u t even active supervision and sponsorship from , th e gov­ ern m e n t an d its agents, the bureaucrats. N o tab le examples o f this p ro m o ­ tio n o f industrial enterprises un d er governm ent sponsorship in th e 1860s an d

1870s included th e Jiangnan A rsenal (Jiangnan zhizaoju) an d th e C h in a

National and Regional Context


M erch an ts' S team ship N avigation C om pany (L unchuan zhaoshangju), b o th in S hanghai, as well as th e K aiping C oal M ines (K aiping m eikuang) near T ian jin . A ll th ree enterprises evince th e im m ediate goals o f th e S elf-S trengthening m ovem ent: th e arsenal was to im prove C hina's m ilitary stren g th by m a n u ­ facturing m o d ern arm s, th e steam ship com pany was to facilitate grain tra n s­ p o rt for th e governm ent as well as general com m ercial tran sp o rt, an d th e m ines w ere supposed to provide th e pow er for national tran sp o rta tio n an d lim ited private consum ption.7 T h is strategy was certainly n o t an am bitious pro g ram aim ed a t nationw ide industrialization th ro u g h private initiatives. T h e close relationship betw een these officially sponsored enterprises an d th e governm ent's agenda is revealed by th e character ja (governm ental bureau) in th e ir nam es, in co n tra st to ¿bang (factory) o r gongsi (ind u strial com pany), w hich w ould have indicated a private business concern. N evertheless, these new enterprises o p erated o n a m u ch larger scale th a n trad itio n al m anufacturing an d tran sp o rta tio n businesses an d th u s faced tre ­ m endous an d unprecedented financial, m anagerial, an d technological chal­ lenges. Especially in th e absence o f a national capital m arket, finding th e necessary capital for large-scale operations such as m ines, railways, an d fac­ tories was an obstacle to industrial developm ent. Facing a sim ilar predica­ m ent, th e Japanese governm ent o p ted to establish new enterprises as gov­ e rn m e n t m onopolies d uring th e 1870s an d 1880s, b u t th e Q in g governm ent d id n o t have sufficient funds for investm ents o f this m agnitude. In addition, ru n n in g th e new enterprises required technological an d m anagerial skills th a t governm ent officials, w ith th e ir adm inistrative background, could n o t provide.8 T o solve these problem s, th e new industrial enterprises established in th e

1870s an d i88os to o k th e form o f governm ent-sponsored enterprises m a n ­ aged by m erchants (guandu shangban). T h e bureaucratic term for th is type o f en terprise originated in th e salt m onopoly, in w hich m erchants provided capital an d m anagem ent an d officials controlled productio n an d set trad e quotas. U n d e r this new schem e for large-scale industrial enterprises, private investors, m ostly m erchants, w ere expected to p u t u p th e capital an d to m anage these concerns u n d er th e supervision o f officials. A p a rt from som e governm ent loans, th e m erchants bore all th e financial risks o f th e enterprise. In addition, th e officials w ho supervised th e m often follow ed th e ir ow n, n o t necessarily governm ent-directed, agenda an d in tro d u ced bribes, co rru p tio n ,

National and Regional Context


an d inflexible m anagem ent into these enterprises. A s A lbert Feuerw erker an d G u o h u i Z h a n g have show n in detail, these enterprises encountered in ­ num erable problem s because o f their peculiar financial an d m anagerial ar­ rangem ents.9 N o t surprisingly, th e financial returns for the private investors in these guandu shangban enterprises in the 1870s and 1880s were lim ited. D u rin g this period o f tim id state-directed industrial efforts, Li H o n g zhang became th e m ost pow erful p atron o f guandu shangban enterprises. T h e C h in a M erchants

S team ship N avigation Com pany, th e K aiping

M ines, an d the S hanghai C o tto n C lo th M ill (Shanghai jiqi zhibuju) were u n d er his official sponsorship, an d Li was able to translate his political pow er in to a sphere o f econom ic influence and to control these quasi­ m onopoly enterprises. T h is is n o t to say th a t Li H ongzhang's patronage h ad a com pletely negative im pact. A s C hi-kong Lai has show n for the C h in a M erchants' Com pany, in th e beginning Li's sponsorship secured suf­ ficient financial su p p o rt an d autonom y for th e m erchant m anagers.10 O n ly later, w hen Li H on g zh an g became unable to prevent the governm ent from assum ing m ore direct control o f the m anagem ent, did th e com pany encounter problem s. Rent-seeking, m ism anagem ent, an d m isuse o f funds th a t accom panied the governm ent's growing intervention in th e enterprise led to decreasing m erchant investm ent. In general, as was tru e o f contem ­ porary family businesses, th e lack o f auditing procedures an d absence o f a distinction betw een private and com pany funds characterized these governm ent-sponsored enterprises. In th e 1880s, as m erchants became less and less willing to risk their m oney in governm ent-sponsored enterprises, th e governm ent devised a com prom ise an d prom oted guanshang heban (official an d m erchant jo in t m anagem ent) enterprises, w hich it hoped w ould prove attractive to m er­ chants. U n d er this new arrangem ent, m erchants were to be m ore in control o f capital investm ent and o f m anagem ent. H ow ever, this move by the gov­ ern m en t tow ard m ore flexibility and private financial as well as m anagerial involvem ent never triggered th e desired outpouring o f funds. In fact, th e dis­ satisfaction o f th e m erchants grew during th e early 1890s, as even govern­ m en t officials acknow ledged.11 C ertainly, th e m ore restrained presence o f th e governm ent in guanshang

heban enterprises still offered private investors an advantage in th a t it guaran­ teed official protection against inconvenient national as well as foreign com ­ petition. N evertheless, as we shall see, creating an encouraging investm ent

National and Regional Context


clim ate for private activity in th e industrial sector first required th e m ore drastic step o f abolishing th e general pro tectio n ist m echanism against p ri­ vate enterprises in C hina, nam ely, th e governm ent policy o f n o t allow ing C hinese nationals independently to establish private industrial enterprises. T h e tu rn in g p o in t cam e in 1895, w ith a new phase in industrial en tre p re­ n eu rsh ip .12 F ro m th a t year on, greater num bers o f light an d consum er-goods industries w ere founded, an d th ere was a significant shift from governm entsp o n so red enterprises to enterprises w ith private ow nership an d m anage­ m ent. F o r example, a boom in establishing co tto n mills w ith full C hinese o w nership to o k place after 1895. Betw een 1890 an d 1894 only five co tto n ­ spinning mills h a d been successfully established (all b u t one w ith govern­ m e n t involvem ent); by 1916, 30 new mills w ere in operation, all o f th e m u n ­ d er private m erch an t m anagem ent ( shangban ).13 T h e statistics on weaving mills are even m ore impressive. O n ly one privately m anaged factory was o p ­ erating in 1897; by 1916 th ere w ere 81. W h y d id th e n u m b er o f private operations in th e C hinese co tto n sp in ­ ning an d weaving sector increase so quickly after 1895? W h a t caused th e gov­ e rn m e n t to reduce its d o m in a n t influence th ro u g h new econom ic policies and, if n o t encourage, a t least m ake private industrial enterprises legal? In te r­ estingly enough, th e incentives for increased industrial activity an d th e changing ow nership conditions did n o t originate in deliberate governm ent reform s to stren g th en a w eak national econom y; rather, they resulted from C h in a s foreign policy. T h e T re a ty o f S him onoseki g ranted foreigners perm ission to engage in m anu facturing in th e treaty ports. A s S hao X u n zh e n g has p o in te d o ut, th is m ade it im possible for th e governm ent to prevent its ow n nationals from en ­ gaging in industry. S hao stresses th a t Li H o n g zh a n g s fall from pow er in

1895 was also a vital factor.15 A s n o te d above, Li H ongzhan g , w ho u n til 1895 w as governor-general o f Z h ili province, h ad been by far th e m o st pow erful senior official active in governm ent sponsorship o f new enterprises. H e was n o t only on good term s w ith th e em press dow ager an d w ith th e foreign pow ers, b u t as com m issioner o f th e n o rth ern p o rts he was in charge o f th e m o st m o d ern p o rtio n o f th e Q in g navy.16 T h e S hanghai C o tto n C lo th M ill is an excellent exam ple o f how Li H o n g zh a n g s personal influence w orked an d th e obstacles it posed to in d u s­ trial developm ent. P lans for th e mill began in 1877, an d like o th e r govern­ m en t-sp o n so red enterprises, th e S hanghai C o tto n C lo th M ill was g ran ted a

National and Regional Context


ten-year m onopoly from 1882 o n .17 H ow ever, it to o k an o th er te n years be­ fore th e mill began operations. T h e m onopoly prevented th e establishm ent o f o th e r co tto n mills, an d even th o u g h several mills are k now n to have been in o p eratio n in th e early 1890s, these mills were, according to S hao X u n zheng, established n o t as private operations b u t as spin-offs o f Li H o n g z h an g s S hanghai C o tto n C lo th M ill.18 In 1893 th e S hanghai C o tto n C lo th M ill w as destroyed by fire an d rebuilt u n d er th e new nam e H u ash e n g .19 T o curtail fu rth e r com petition, as late as 1894 Li H o n g zh a n g p etitio n ed th e govern m ent to forbid fu rth e r expansion o f spinning operations such as th e governm ent-m anaged mill in H u b e i province.20 Li H o n g z h a n g s personal patronage o f such enterprises as th e K aiping M ines, th e S hanghai A rsenal, an d th e C h in a M erchants' S team sh ip N aviga­ tio n C o m pany w as crucial to th eir success. Li H o n g zh a n g was pow erful n o t only in Beijing near his pow er base in Z h ili province b u t also in Shanghai. T h e re h e exerted his influence in th e ap p o in tm e n t o f th e S h anghai circuit in te n d a n t ( daotai ), th e senior official in th e local adm in istratio n , an d p ro ­ m o te d his operations by netw orking th ro u g h fellow provincials, colleagues, a n d fellow exam ination grad u ates.21 T h ro u g h these form al an d inform al relationships, Li H o n g zh a n g w as able to gain su p p o rt from S h anghai an d Jiangsu officials as well as from m erchants an d gentry attracted by th e finan­ cial aw ards a t L is disposal o r by th e ir ow n interests in th e enterprises. In sh o rt, as long as L i H o n g zh a n g was in pow er, th e operations u n d er his su ­ pervision w ere p ro tec ted th ro u g h his patronage an d th ro u g h th e ir m onopoly statu s. H ow ever, this situation w as n o t to last. Since th e Sino-Japanese w ar h a d arisen from Li H o n g z h a n g s policies an d w as co nducted by tro o p s u n d er his control, C h in a s h um iliating defeat in 1895 led to L is disgrace an d rem oval from his p o st as governor-general o f Z h ili. T h is created a pow er vacuum in Beijing, in to w hich G overnorG en eral Z h a n g Z h id o n g (1837-1909) o f H u g u an g (H u n a n an d H u b ei) step p ed .22 Z h a n g Z h id o n g , like Li H ongzhang, h ad cham pioned W e ste rn i­ zatio n , b u t it was n o t u n til he w as app o in ted governor-general o f H u g u an g th a t he fo u n d a pow er base to im plem ent his ideas.23 B u t alth o u g h Z h a n g Z h id o n g w as to becom e one o f th e leading politicians an d reform ers d u rin g th e final years o f th e Q in g dynasty, he never achieved Li H o n g zh a n g s influ­ ence an d pow er over political an d econom ic affairs. Z h a n g Z h id o n g obviously w an ted to engage actively in establishing in ­ d u strial enterprises, b u t he was never able to see his plans th ro u g h to firui-


National and Regional Context

cion. F or example, while posted to Liangguang (G uangdon g an d G uangxi) in

1888, he h ad taken steps to set u p a cotton mill in G uangdong an d o rd ered m achinery for it.24 W h e n he was appointed governor-general o f H u g u an g th e following year, he to o k the m achinery w ith him , an d th e planned m ill in G u an g d ong never m aterialized.25 In th e city o f W uchan g , he th en estab­ lished th e H u b e i W eaving M ill (H u b e i zhiguanju), for w hich he o rdered new m achinery.26 H ow ever, w hen he was transferred to Liangjiang (Jiangsu, Jiangxi, and A n h u i) in 1894, the newly purchased m achinery was o f n o im ­ m ediate use an d was sto red in a S hanghai w arehouse for several years. T h is m achinery was to play a crucial role in launching Z h a n g Jian s first co tto n mill, as we shall see in th e next chapter.

Despite the fall of Li Hongzhang and his monopolies, it took more than a decade for substantial industrialization in terms of the number of factories and their output. It would be fair to say that Zhang Jian s move into the world of industry— he began preparations for his first cotton mill in 1895— was early even by the standards of the Qing. Indeed, it was not until the post-1900 reforms that the imperial court openly encouraged business and industrial enterprise and sought to grant merchants a higher social and po­ litical status.27 The cautious and limited approach favored by the govern­ ment for encouraging Chinese merchants to open factories after the loss of the war to Japan is apparent in a government proclamation from early 1896 posted outside the Shanghai customs house for several months and later quoted in the North China Herald : [By establishing factories,] it may be possible to successfully stop the flow of foreign commodities (into China) and prevent the country of being drained of its capital. It is not necessary to make a hard and fast choice of some branch of industry such as the manufacture of piece goods or silk filature. There is plenty of profit to be derived from other industries such as the manufacture of foreign candles, foreign sugar, or foreign crockery. It will be a good thing for those with small capital to manufacture several kinds of articles, with a view to accustom the popular mind (to the innovation). N o capital belonging to officials will be put in, nor will other mer­ chants or officials be mixed up in the matter. Hereafter the merchants will manage their business as they please, and the officials will have no questions to ask.28 T h is d o cum ent was draw n up by th e S hanghai circuit in te n d an t to publi­ cize Z h a n g Z h id o n g s instructions, w hich h ad received im perial approval. O bviously th e im perial governm ent considered th e proliferation o f facto­ ries— w hich in this context m eant the p roduction o f goods w ith m achines—

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to be o f param o u n t im portance; it was less concerned w ith th e type o f p ro d ' ucts, consum er dem and, and the m arket situation, w hich m ight have a substantial im pact on th e success or failure o f any new business enterprise. T h is proclam ation also reveals the desperate efforts o f concerned governm ent o f ­ ficials like Z h a n g Z h id o n g to initiate industrial production for the sake o f p rotecting and stabilizing the national economy. H ow ever, it is d o ubtful th a t the m anufacture o f foreign-style candles and crockery by C hinese for th e C hinese m arket w ould have prevented the large-scale draining o f C h i­ nese capital an d resources abroad. F or those searching for prom ising in d u s­ trialization projects, the textile sector became the answer. E stablishing factories for textile production required considerable private capital investm ent from m erchants and businessm en. Even w ith o u t interfer­ ence from the governm ent and influential officials, the risk o f investing p ri­ vate capital in m ajor industrial operations such as cotton-spinning mills or silk filatures was substantial. W ith o u t an open and accessible capital m arket, th e raising o f capital was a m ajor problem in founding private enterprises, w ith th e exception o f family businesses w hich recruited their capital from kinship and native-place netw orks. T h e D asheng enterprises reveal the strengths and weaknesses o f indus­ trial enterprises founded in the w ake o f 1895 and the transition th a t came ab o u t w ith privatization. As I explain in m ore detail in th e next chapter, D asheng was originally conceived as a regional guanshang heban operation; it was officially initiated by Z h a n g Z h idong, w ho planned to lend his su p p o rt in the beginning. H ow ever, in co n trast to the previous system u n d er Li H o ngzhang, Z h a n g Z hidong, th e guan or official side in th e enterprise, did n o t represent the governm ent as a corporate body b u t was acting as an indi­ vidual official. In this position he offered patronage and ineffective official p rotection for th e enterprise, b u t little else. A rguably, the w atering-dow n o f governm ent su p p o rt to th e patronage o f individual officials eventually led to the end o f involvem ent by individual of­ ficials in enterprises. Z h a n g Z h id o n g was unable to offer D asheng vital fi­ nancial support, and w ith o u t financial leverage his influence faded. W h a t started as governm ent-sponsored enterprise soon became a privatized opera­ tion o f the founder s family w ith o u t ever developing into a family business. R egistered officially as a shareholding com pany w ith lim ited liability in 1907, D asheng grew into a m ajor industrial com plex w ith considerable financial success and a substantial life span.

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A b roader view allows us to exam ine n o t only D ash en g s h isto ry as a business in stitu tio n b u t also th e im pact o f political a n d econom ic changes o n in d u strialization in early tw entieth-century C hina. C h in a s situ atio n a t th e tu rn o f th e tw en tieth century is often com pared to Japan's developm ent fol­ low ing th e M eiji R estoration o f 1868.29 A lth o u g h Jap an was successful w ith in d u strial developm ent after 1880, in th e first decade o f th e restoration, like C hina, it lacked private capital an d confronted th e technical an d organiza­ tional difficulties in m achine p ro d u ctio n an d risk-aversion by m erchants w ho m ig ht have provided investm ent capital.30 T o be sure, th e degree o f in ­ tervention by the central an d regional governm ents in Jap an was su b stan ­ tially w eaker. M o re im portant, however, was th e Japanese governm ent's d e­ cision n o t only to p erm it b u t actively to p rom ote th e fo unding o f private in d u strial enterprises in th e 1880s th ro u g h governm ent loans an d favorable in d u strial policies. T h u s, in co n trast to th e situation in C hina, Japan's en ter­ prise stru ctu re changed abruptly in N ov em b er 1880 w hen th e governm ent sold all its enterprises, w ith th e exception o f such strategically im p o rta n t sec­ to rs as railways, telegraphs, an d arsenals, to private buyers.31 T h e C hinese governm ent never m anaged to draw th e line so clearly; in m any cases, a change from governm ent enterprise to semi-official m anagem ent an d o w ner­ sh ip preceded any process o f im m ediate privatization. H ow ever, th e po st-

1895 developm ent o f enterprises like th e D asheng C o tto n M ill proves th at, despite tem porary involvem ent, th e C hinese governm ent was to lose co n tro l over th e m anagem ent an d ow nership o f these new concerns for good. I t w ould be a m istake to place th e blam e for th e slow ness o f C hina's in ­ d u strialization solely on th e Q in g governm ent. O th e r im p o rta n t m echa­ nism s necessary for ru n n in g m od ern large-scale enterprises such as an easily accessible capital m ark et o r legal p ro tection th ro u g h com m ercial an d com ­ p any laws w ere n o t properly in place before th e 1910s. N eedless to say, th e treaty p o rts becam e th e preferred locations for C hinese an d foreign busi­ nessm en to establish th e ir industrial enterprises. C hinese m erch an ts an d businessm en w orked w ith com pradors o r foreign brokers in th e treaty p o rts to gain access to financing an d foreign m aterials an d technologies. In ad d i­ tion, m any C hinese investors to o k advantage o f th e foreign settlem en ts an d th e ir special legal position to register th e ir com panies u n d er th e p ro tectio n o f foreign laws. Because o f its location an d its statu s as a regional enterprise in ru ral Jiangsu province in th e h in te rlan d o f a treaty p o rt, D ashen g differed in term s

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o f m anagem ent an d w orkforce from th e mills an d factories located in th e u rb an centers. C ertainly, D asheng was n o t th e only enterprise fo u n d ed w ith g overnm ent help th a t subsequendy becam e a private operation. W h e reas D ash en g rid itself o f governm ent patronage, however, som e enterprises actively co n tin u ed to seek an d exploit patronage d uring the R epublican period w h en political pow er becam e even m ore fragm ented. T h e L an zh o u M ining C o m p an y (Beiyang L an zh o u guankuang youxian gongsi) an d th e Q ixin C e m e n t C om pany (Q ixin yanghui gongsi) are tw o examples. T h e ir founder, th e official Z h o u X uexi (1869-1947), enjoyed th e political patronage o f Y uan S hikai (1859-1916), w ho, first as th e Q in g governor-general o f Z h ili an d later as p resid en t o f th e R epublic, h ad a great influence in th e Beijing governm ent. Y uan su p p o rted th e Q ixin com pany by partially exem pting it from custom d u ties an d arranging for it to becom e a m ajor supplier o f cem ent for th e gov­ ern m en t-o w n ed railways; this fortified th e positive relationship betw een th e m o st successful industrialist in n o rth e rn C h in a a n d th e Beijing governm ent. A lth o u g h th e establishm ent o f th e N an jin g governm ent in 1927 m ean t a drastic political change for Z h o u X uexi, his com panies w ere already so well established th a t they co ntinued to be successful u n til th e Japanese invasion in th e late 1930s.32 In ad d itio n to political sponsorship, th e role o f th e fou n d er an d his family as well as th e geographical context w ere vital factors in th e fo rm atio n o f re­ gional enterprises. W h e reas Z h o u X uexi com bined officeholding w ith en tre­ pren eu rship, Z h a n g Jian ab andoned officialdom for industry. Even m ore im ­ p o rtan t, he attem p ted n o t only to introduce in d u stry to th e local rural co m m unities b u t also to dom inate developm ent in th e N a n to n g area th ro u g h his social, financial, an d political activities. In co n tra st to th e Q ixin cem ent factories near u rb an centers such as T angshan, G uangzho u , o r Shanghai, th e D ash en g enterprise w as a governm ent-initiated project in a ru ral area th a t created a new pow er balance an d changed social structures, even if it d id n o t generate long-term econom ic developm ent an d grow th per se.

F rom Salt to Cotton: T h e N a n to n g Region T h e lan d to th e n o rth o f th e Y angzi River was a backw ard area th ro u g h o u t th e n in e tee n th century. D espite its proxim ity to Shanghai, n o rth e rn Jiangsu (S ubei) differed considerably from prosperous Jiangnan, th e so u th e rn p a rt o f th e province. S o u th e rn Jiangsu could boast o f enorm ous econom ic success in agricultural a n d handicraft p ro d u ctio n as w ell as in com m erce, w hich

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w en t h a n d in h an d w ith a stro n g elite culture.33 In contrast, n o rth e rn Jiangsu was often stereotyped as a region o f econom ic poverty an d cu ltural back­ w ardness. A lth o u g h th e city o f N a n to n g an d its adjacent counties w ere n o rth o f th e Y angzi River and th e local dialect an d custom s w ere d istin ct from th o se o f Jiangnan, it nevertheless did n o t exhibit th e extrem e poverty fo u n d in S ubei cities fu rth e r n o rth such as Y ancheng o r Funing. O n e m ajor advantage enjoyed by N a n to n g was its river connection. N ea rb y sm all p o rts along th e Y angzi linked th e region to th e rest o f C hina. H ow ever, th e area rem ained underdeveloped in regard to o th e r tran sp o rta tio n facilities. Even w hen, in th e tw en tieth century, railways were built in Jiangsu, they passed N a n to n g by. D u rin g th e Q in g dynasty, N a n to n g county was know n as T o n g z h o u county, w ith T o n g z h o u city as th e county seat.35 W h e n th e co unty was ele­ vated to th e adm inistrative level o f an indep en d en t d ep a rtm en t (T o n g z h o u zhili zh o u ) in 1724, it cam e un d er th e direct control o f th e censor in charge o f th e S u zh o u circuit (dao) and th e provincial governor o f Jiangsu.36 T o n g z h o u in d ep en d en t d ep a rtm en t controlled neighboring H aim en subprefecture an d R ugao county.37 U n d e r th e R epublic, T o n g z h o u becam e N a n to n g county (N a n to n g xian) w ith N a n to n g city as th e county seat. In th e R epublican pe­ riod, N an to n g , H aim en , an d R ugao counties to gether w ith C hongm ing, an island in th e Y angzi estuary, co n stitu ted th e N a n to n g region as discussed in th is b o o k (see M a p 1, p. 14)» A s we shall see, socioeconom ic developm ents in H aim en county an d C hongm ing island to th e so u th east an d in R ugao county to th e n o rth w ere closely related to those in N a n to n g county. H istorically, th e m o st significant p ro d u ct o f th e area w as salt. Since th e T a n g dynasty, th e region h ad been know n for its salt fields. S alt p ro d u ctio n to o k place in th e H u a in a n salt yards along th e eastern coast u n d e r th e su ­ pervision o f th e L ianghuai S alt A dm inistration, th e governm ent m onopoly for salt in Jiangsu province. T h e salt trade was th e m o st im p o rta n t com m er­ cial activity in th e region.38 H ow ever, from th e early nin eteen th century on, th e salt trad e declined drastically because o f rising salt prices in connection w ith rising tax rates an d rising silver prices, new trad in g routes for salt, and, especially, intense salt sm uggling.39 A s th e salt fields w ere gradually ab an ­ d o n ed by th e salt producers, reeds to o k over.40 T h e decline in th e salt trad e was com pounded by an o th er long-term d e­ velopm ent in th e N a n to n g region: th ro u g h o u t th e ages, silt has been depos­ ited o n th e seaw ard coast o f Jiangsu, an d th e n o rth e rn shoreline o f th e

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Y angzi has been eroded by th e river current.41 T h e coastal area d id n o t m ake g o o d farm land because th e soil w as to o saline for rice, b u t it could be co n ­ verted to co tto n an d w heat cultivation. L and-reclam ation com panies (see C h a p te r 7) set u p in th e coastal area in th e early years o f th e tw en tieth cen­ tu ry a tte m p te d to take advantage o f th e declining salt trad e an d th e geologi­ cal changes by reclaim ing th e land for co tto n cultivation. T h e erosion o f th e n o rth e rn banks o f th e Y angzi h a d different consequences: th e river p o rts perforce rem ained sm all an d h a d to be relocated every few generations.42 In sh o rt, th e n in eteen th century saw a drastic change in th e local econom y; th e conversion from salt to co tto n affected p attern s o f lan d use, occupation, p ro d u ction, an d com m erce. C o tto n w as intro d u ced quite early to th e region. T h e T o n g z h o u gazet­ teer o f 1755 encouraged "people along th e river to be skillful a t grow ing co t­ ton."43 H ow ever, th e level an d quality o f cotton-textile p ro d u ctio n in th e N a n to n g area w ere still far below those achieved in Songjiang prefecture, th e leading center for spinning an d w eaving in so u th e rn Jiangsu province, near S hanghai.44 C o tto n grow ing was a com m on activity in T o n g z h o u by th e early n in e tee n th century, to judge from local publications o f th a t tim e, w hich gave detailed descriptions o f a n d am ple advice o n how to plant, grow, an d process cotton.45 O v er tim e, th e quality o f T o n g z h o u co tto n im proved, an d R epublican sources describe co tto n from N a n to n g county as superior to th a t p ro duced in o th e r counties o f th e province.

A p a rt from th e quality o f

th e co tto n, th e h u m id w eather conditions o f th e N a n to n g area w ere tra d i­ tionally regarded as advantageous for co tto n grow ing an d spinning. F arm ers in H aim en county sou th east o f N an to n g , an area th a t h ad never been fully a p a rt o f th e H u a in a n salt pro d u ctio n area, traditionally pro d u ced raw co tto n an d th e n wove it in to various types o f cloth as a highly special­ ized h o u sehold industry.47 Like N an to n g , H aim en was also supplier o f th e indigo dye for th e co tto n cloth, w hich, after processing, was sold as lanbu (blue-dyed co tto n cloth) in th e local m arkets.48 In th e early tw en tieth cen­ tury, H a im e n co tto n w as considered high quality, an d th e b ulk was sold to th e D asheng N o . 3 C o tto n M ill an d th e rest shipped for sale to N a n to n g an d Shanghai.49 C o tto n -re late d h ousehold pro d u ctio n o n C hongm in g island can be traced to th e M ing dynasty (1368-1644).50 D u rin g th e R epublican period, C h o n g m ing county included n o t only th e island in th e Y angzi River estuary b u t also new ly reclaim ed land o n th e so utheastern tip o f n o rth e rn Jiangsu

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(presen t-day Q id o n g county).51 D u e to th e sandy soil an d th e islan d s su it­ ability for grow ing cotton, th e quality o f th e co tto n p rodu ced in C h o n g m in g co u n ty o n th e m udbanks in th e W aish a, Jiulong, an d Beixin districts w as re­ g arded as su perior even to th a t o f N an to n g . A lth o u g h I include R ugao county in th e N a n to n g area for th e bro ad er p u rp o se o f analysis, traditionally households th e re did n o t engage in th e p ro d u ctio n o f co tto n y am an d cloth. N e ith e r yarn n o r cloth is m en tio n ed am ong th e local pro d u cts listed in th e gazetteers covering th e early an d m id ­ n in e tee n th century. Indeed, co tto n farm ing was intro d u ced to R ugao only in th e late n in eteen th century, an d in th e R epublican p eriod R ugao co tto n was still described as inferior in quality. Since th ere was no stro n g local h an d i­ craft o r factory p ro d u ctio n o f yarn in Rugao, m o st o f th e little co tto n th a t w as p ro d u ced w as exported to N a n to n g an d S hanghai.53

Socioeconomic D ynam ics o f a Periphery A lth o u g h co tto n replaced salt as N an to n g 's m o st im p o rta n t p ro d u ct an d in ­ com e p ro d u cer an d th e quantities o f finished yarn an d cloth increased su b ­ stantially, th e area rem ained a periphery to th e econom ic an d cu ltu ral cen­ ters o f th e Y angzi D elta. H isto ria n s have addressed th e issue o f S ubei as a p eriphery in th e nin eteen th and early tw en tieth century from various angles. Em ily H o n ig has dealt w ith th e em ergence o f dem eaning cu ltu ral stereo­ types a n d th e ir reflection in th e native-place hierarchy for Subei m igrants w ho cam e to S hanghai for w ork in large num bers after 1900. A n to n ia Finn ane has expanded this them e by analyzing Subei's econom ic an d political m al-integration com pared w ith so u th e rn Jiangsu in term s o f in tern al colo­ nialism .54 A s useful as these studies are, I shall concentrate only o n th e sig­ nificant a s p e a s o f N an to n g 's n atu re as a periphery in relation to th e socio­ econom ic conditions an d infrastructure th a t provided th e fram ew ork for D asheng's developm ent after 1895. A s m en tio n ed above, th e Jiangnan area was am ong C hina's m o st p ro s­ p erous a n d m o st highly urbanized regions in th e nineteen th a n d tw en tieth centuries. In contrast, th e N a n to n g region to th e n o rth o f th e Y angzi River was, ap a rt from N a n to n g city, d o tte d w ith only sm all m ark et to w n s a t th e su b co u n ty level a n d village clusters. N a n to n g city, th e co u n ty seat, was a w alled city su rro u n d e d by a m o a t c o n n e a e d to th e canal system an d could be crossed on foot over bridges leading to th e city gates in th e east, west, an d so u th faces o f th e wall.55

National and Regional Context


Demographie figures for the Nantong region in the early twentieth century reflect both its predominantly rural population and its lack of urban centers. For example, a survey conducted by the local police bureau in 1920 quoted in the Republican gazetteer gives a population of about 108,000 for Nantong city. However, this number included inhabitants of the suburbs and villages administratively attached to the city; only some 10,000 people lived within the city walls.56 Among the 22 other towns and larger villages listed in the county survey, only one, the town of Jinsha, had a population of similar size. T he total population of Nantong county was around 1.1 million people in 1920 and 1.5 million in the early 1930s (for comparison, Shanghai city at that time had a population of 3.5 million).57 In the 1930s, Rugao county had a population of about 1.5 million people, Haimen 0.7 million, and Chongming 0.5 million people.58 Since it was a third larger than N an­ tong county, Rugao had fewer people per square kilometer. The population density in Haimen and Chongming, both substantially smaller-sized coun­ ties, was comparable to that in Nantong.59 Despite the incorporation of the region into the national cotton trade, before the twentieth century Nantong city did not function as the commer­ cial core of the area, centralizing and directing all regional and interregional trade in the cotton business. Rather, it served instead as the periphery to other economic centers in southern Jiangsu. This is not to say that the re­ gion in general lacked commerce: on the contrary, the growing of cotton and the handicraft production of cotton yarn and cloth in rural households had to be trade-oriented. However, most of the business transactions between cotton producers and buyers took place near the area of production, in the villages or along the river, and not in the county seat. A 1923 survey of 96 cot­ ton and yam shops in the region confirms this trade distribution pattern. Only six of these establishments were situated in Nantong city.60 Business was obviously conducted not from the city but in locations in the country­ side near the farmers who were both producers of cotton and consumers of yarn. Even when the cloth trade to Manchuria through Shanghai came un­ der the control of local cloth firms in the late nineteenth century, the major­ ity of the firms were not located in Nantong city but in villages and suburbs closer to the areas of cloth production.61 If we apply G. William Skinners model of market hierarchies and mar­ keting systems to Nantong city, the category of the central market town would seem an obvious choice for the county seat.62 However, as Skinner


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suggests, a city's administrative status did not always overlap with its posi­ tion in the marketing structure. Before 1900, Nantong city was more impor­ tant within the administrative hierarchy than it was within the economic hi­ erarchy, where it should have been "a strategic site in the transportation network" with "important wholesaling functions."63 A case in point is the fact that for the longest time Nantong city did not have its own trading port, despite its proximity to the Yangzi River. In the Ming dynasty a stone sluice gate had been built at Tianshenggang, which became essential for the regula­ tion of the canal system.64 Until the early twentieth century, Tianshenggang served as the regions main port and entrance to the Yangzi River. Once in­ dustry developed around Nantong city, ships transporting bulk loads of cot­ ton, coal, and other material crowded the canal between Tianshenggang and Tangjiazha, the location of the Dasheng No. 1 Cotton M ill Only then, in 1905, was a road built between the two places.65 It was not until 1913 that the local chamber o f commerce financed the construction of a road connecting Nantong city and Tianshenggang.66 Convenient transportation facilities via the river and the canal system were extremely important for the Nantong region since the production of good-quality cotton attracted buyers from outside the area. For example, in the early nineteenth century traders from Fujian and Guangdong provinces came at the end of autumn to the Tongzhou cotton fields on the sands (shadi) to buy ginned cotton (huayi ). According to the 1830 gazetteer, the merchants from the south loaded the ginned cotton onto huge junks, which crowded the canals and rivers.67 Heavy shipping traffic on the Yangzi to transport the area's produce is documented for the Republican period as well; the descriptions mention many different types and sizes of boats. In addition to bulk goods such as raw cotton and yarn, they transported com­ mercial goods such as rice, dry goods, and tobacco, and, of course, passengers between the ports near Nantong and the destinations up- and downriver. Especially notable were agents from Shanghai buying cotton on behalf of the cotton-spinning mills in that city.69 Despite all the economic activities related to long-distance and interre­ gional trade, Nantong remained an economic periphery in terms of local economic institutions and their members. Certainly, the cotton trading sys­ tem connected local farmers and local wholesale merchants through outside agents and their contacts indirectly to major markets all over China. The lo­ cal merchants, however, never managed to dominate the regional trade sys-

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terns in raw cotton, which remained in the hands of outsiders, such as wholesale merchants from the southern provinces and the Shanghai agents mentioned above. Local firms continued to play only a minor role in the cot­ ton trade even in the early twentieth century.70 The dominance of outside merchants was at first also visible in the cloth trade. In the most informative study of the history of Nantong tubu or local hand-woven cotton cloth to date, Lin Jubai mentions Shandong merchants in the nineteenth century who purchased tubu for export to Manchuria.71 As Lin shows, only in the early twentieth century did a group of 25 local cloth firms from Nantong and Haimen, the so-called guanzhuang, manage to dominate the cloth trade to Shanghai, where the tubu was then sold via wholesalers to the north, in particular to the target market of Manchuria.72 Long-distance trade and commercial activities also left their imprint on the area s social structure through the formation of various regional organi­ zations of merchants. In Nantong city the biggest native-place organization ( huiguan ) looked after the business interests and social needs of merchants from Anhui province, who were prominent in the cotton and banking busi­ ness.73 Founded at the end of the eighteenth century, this native-place association, the Xin'an gongshan tang (Xin an Hall of the Public Good), occupied a large piece of land within the walled city along one of the main north-south streets; it was still featured as one of Nantong's prominent institutions on a 1925 city map.74 Although within the city walls, the area occupied by this huiguan was as far away as possible from the yamen, the administrative seat of the local magistrate and the local government. The merchant association had also acquired large plots of land outside the city as burial grounds for natives of Anhui province.75 Another important merchant group in the Nantong area hailed from Ningbo and was represented by two huiguan in the villages of Hai ergang and Yancangba. Most of the Ningbo sojourners in the Nantong area were either skilled craftsmen or traders. It appears that the huiguan in the region were not necessarily based in the county seat. A further example is the huiguan for the Guangdong merchants, traders in cotton and in the late 1920s in opium, which was originally established in Duanjiaba village and not within the walls of Nantong city. In addition to the usual services for fellow provincials, the Guangdong huiguan in particular maintained also its own local customs by holding an annual temple fair for Tianhou, the Em­ press o f Heaven.76


National and Regional Context

Local merchants from the Nantong area never became famous as long­ distance traders within China, unlike their colleagues from Anhui, Guang­ dong, or Ningbo. I was able to locate only one source stating that merchants from Tongzhou maintained a huiguan in Beijing (established in 1724).77 An­ tonia Finnane has remarked on the lack of a strong indigenous merchant or­ ganization as one of the main reasons for Subei's low economic develop­ ment,78 A look at the origins of shopkeepers in the Nantong area confirms her argument. About a quarter of the managers of the 96 cotton cloth and yarn shops in Nantong, Rugao, and Haimen registered in a 1923 survey came from places outside the region such as Anhui, southern Jiangsu, or Z he­ jiang.79 A high percentage of the managers of such shops in Haimen county also came from places outside the region such as Dantu, Huizhou, Ningbo, or Zhenjiang. By contrast, all the cotton cloth and yarn shops in Rugao were managed by people from this county. Since Rugao was not a traditional cotton-producing area, it probably did not attract much outside merchant in­ terest in this sector.80 However, a large and diversified community of so­ journing merchants dominated Rugaos commerce in other trade sectors. For example, most pawnshops were run by people from Anhui, who had their own huiguan.81 Natives of Zhenjiang city, mostly wealthy merchants, established a huiguan in Rugao under the name Jingjiang (the old name for Zhenjiang), which even had its own school from 1907 on.82 Since many of the extra-local merchants were involved in banking and pawnshops, a few remarks about the financial infrastructure of the region are appropriate. Cotton cultivation and the cotton trade were financed by local, traditional native banks (qianzhuang) well into the 1920s. The qianzhuang were situated throughout the area in smaller towns and villages such as Shigang and Baipu.83The same distribution pattern held for pawnshops (diandang), another traditional financial institution that catered to the needs of villagers in the Nantong region.84 Indicative of their close ties with the cotton business is the fact that some native banks also owned big cloth firms and financed part of Dasheng s early business expansion. As the company records show, until the late 1910s Dasheng conducted financial transactions with large qianzhuang such as Shunkang and Deji throughout the Nantong area.85 One indirect result of the establishment of the Dasheng cotton mills and their growing business was the establishment of branches of the Jiangsu Provincial Bank and the Bank of China in 1915 in the county seat.86 As late­ comers to the city's commercial infrastructure, the branches of modem

National and Regional Context


banks such as the Shanghai Commercial and Savings Bank, the Huaihai Bank, and the Bank of Communications were concentrated at the very edge of Nantong's city wall or even outside the walls, as a map from 1925 indi­ cates.87 Haimen county, which was much less industrialized than Nantong county, had no modem banking facilities at all in 192o.88 Although much of Subei's characterization as an economic and political periphery— the identification of Subei natives with poverty, backwardness, and boorishness— is known to us through the prejudices Subei people ex­ perienced as migrants in twentieth-century Shanghai, Shanghai did not play an important economic role for Nantong's workforce before the 1910s and 1920s. In the i88os a regular boat service transported passengers from Shanghai to W usong harbor, where they could catch a connecting boat to Langshan near Nantong.89 A t that time most of those who traveled to Shanghai were local cloth and yam merchants who had business with agents and brokerages in that city. T he economic ties between the Nantong area and Shanghai intensified only in the early twentieth century, when the treaty port experienced tre­ mendous economic growth and employment opportunities and the lure of a better livelihood and modernity there began to attract people from the coun­ tryside. In particular, people from Subei's poorest areas near Yancheng and northeast o f Yangzhou migrated to Shanghai, where the majority took up menial jobs as freight haulers, night soil collectors, rickshaw pullers, and beggars.90 Although Nantong was a periphery in comparison to southern Jiangsu, its socioeconomic conditions compared very favorably to these im­ poverished districts. After 1900 the increasing number of factories in Shang­ hai drew people from rural areas, but not particularly from the Nantong re­ gion.91 W ith a general increase in commercialization and intensified trade links between Shanghai and the Nantong area— some of the bigger local cloth firms opened branches in the metropolis and Dasheng had its head­ quarters there— Nantong businessmen set up offices, wharfs, and store­ houses in Shanghai.92 By the early twentieth century, several steamship companies were running directly between Nantong and Shanghai and faced stiff competition for passengers and goods. As I will show in Chapter 8, the profits o f these transportation businesses were so lucrative that in the mid1930s control over the Nantong steamship lines and their wharfs came under the protection racket of Shanghai's notorious underworld organization, the Green Gang (Qing bang).93


National and Regional Context

T he fact that migration from the Nantong area to Shanghai increased only during the Republican period is also demonstrated through the representa* tion and organization of these natives in the metropolis. The number of workers and small shopkeepers in various trades and occupations from Nan* tong sojourning in Shanghai grew slowly but steadily in the first decade of the 1900s. It was not until 1933, however, that these sojourners founded their own native*place association for fellow provincials from the five counties of Tong* zhou, Rugao, Chongming, Haimen, and Qidong. In comparison with na* tives of other areas in the country, people from the Nantong region joined Shanghai's substantial immigrant population at a relatively late stage. In fact, due to their origin in the Subei periphery and prejudices against them, people from northern Jiangsu joined the industrial workforce in Shanghai rather late and did not appear as unskilled workers in the records of industrial enter* prises such as cotton* and silk*spinning mills until the early 1920s.95

T o judge from the historical genesis of private industrial enterprises in late nineteenth- and early twentieth-century China, the general political climate represented a major obstacle to industrial development and private invest­ ment. Only a radical, even if involuntary, change in government policies and the removal of officials who embodied government sponsorship and mo­ nopolizing patronage, opened the door to a slow transformation of China's economy through private entrepreneurship and industrial investment. Even­ tually, political and subsequent socioeconomic changes on the national level translated to the regional level. As the case o f Dasheng shows, regional industrialization was initiated be­ cause o f national economic policies, which almost inadvertently resulted in privatization without a clear framework dictated by the government. Thus, many aspects o f management, ownership, and control that had not been ad­ dressed by the government would have to be negotiated by the new manag­ ers and owners over time. By tracing Dasheng s evolution from an enterprise established with government cooperation in 1895 into a de ficto but not yet legally recognized private shareholding company by 1901, we can explore the phasing out of government influence and the decline of official sponsorship during the transitional period. The next chapter examines this regional en­ terprise as a particularly interesting case of institutional development in Chinese business history.

National and Regional Context


T he region itself, with its particular socioeconomic structure and dynam­ ics as a periphery, was to have a deeper impact on the future of the enterprise than any of the people involved in the founding of Dasheng could have antici­ pated. Certainly, the availability of raw materials and cheap labor was an in­ centive to start cotton mills in the countryside. Nevertheless, the Dasheng cotton mills also experienced the disadvantages of the periphery, particularly problems with the infrastructure, land development, and a non-industrial, ru­ ral workforce* How the Dasheng factories came to be set up in such a curious place at that particular moment is the subject of the next chapter*



Factories in the Countryside



Setting Up the Mills

The Dasheng mills were among the first major private industrial enterprises to be established in the countryside, outside the large commercial cities and treaty ports. The mills introduced large-scale industrial production through modem factories and shop-floor management to the region and to the Chinese-owned textile sector. Establishment of the production facilities thus involved the creation of three new elements: the factory as an institu­ tional workplace, an industrial workforce, and the entrepreneurial business­ man filling various managerial functions. This part of the book focuses on the two main agents in the Dasheng mills: the owner-manager and the workers. The following chapter discusses the nature of industrial labor in terms of work discipline, wages, hiring patterns, and social stratification; this chapter is devoted to the founder of the enterprise and to the political and socioeconomic aspects of becoming an entrepreneur and starting a cotton mill in late nineteenth-century China. In this analysis of Dasheng, the issues of control and accountability will emerge as the main themes. These concerns are manifested not only in the managerial and financial side of the enterprise but also in the cultural and educational aspirations of Zhang Jian and his family. This chapter is not, however, a detailed biography of Zhang Jian; rather, it addresses the ques­ tion of the extent to which his family background and roots in local society determined and helped promote his business goals. The biographical litera­ ture on Zhang Jian is ample and provides detailed, and mostly hagiographie, descriptions of his early life as a scholar and as an assistant to high govern­ ment officials.1 Zhang Jian s standing as a scholar may help to explain his elevated position in local society, but we need a broader approach to explain


Setting up the Mills

his sudden transformation from scholar-official to businessman. As we shall see, the founding of Dasheng required negotiations between private and gov­ ernment interests, political connections on the local and the national levels, and a support network of family and social ties.

A Scholar T u rn s Businessm an The story o f Zhang Jian's venture in Nantong illustrates many general prob­ lems Chinese business had to face before the nationwide advent of industri­ alization. A t the same time, Zhang Jian had to re-invent the role of busi­ nessman and entrepreneur and forge a new career among the changing economic and political elites of the early twentieth century. In Marion Levy's convincing characterization, Zhang Jian represents the first generation of "industrial executives" who took over business initiatives from "industrial promoters" in the government.2 Many business decisions of this new indus­ trial executive were based on coincidences, opportunities, political condi­ tions, and personal connections. The Dasheng mills were not designed in the abstract or built according to a long-existing master plan. On the con­ trary, they were founded amid a constant struggle between insufficient pri­ vate investment and waning government patronage. From land to machinery to capital, every aspect of the enterprise entailed a complicated negotiation between private efforts and government influence. Zhang Jian was always associated with the city and the region of Nantong in contemporary literature, an association that continues today.3A Chinese reader would conclude that he was a Nantong native, but this was not the case. Although the Zhang lineage traced its origins to Tongzhou, since the eighteenth century the family had been linked with Changle village in Haimen, east of Nantong city, where this branch of the Zhang family had its an­ cestral hall (see Figs. 3.1 and 3.a).4To judge from the lineage endowment, the Changle branch of the Zhang family was not nearly as wealthy as another branch of the family in Jinsha, northeast of Nantong city. Still, it was not poor. As head of the Zhang family's Changle branch after his father's death in 1894, Zhang Jian was in charge of the ancestral rituals, a task he took seri­ ously.6 From his diary, we know that he kept his main residence in Changle village throughout his life. According to his granddaughter and other infor­ mants, Zhang Jian always celebrated the New Year festival in Changle.7

Setting up the M ills


Fig. 3.1 The Zhang family's ancestral hall in Changle (Zhang shi jiapu, 1903, juan shou, citu, 3b).

As a native o f Haimen, Zhang Jian had to make his way in Nantong from outside. Once he had established himself as a successful businessman and local dignitary in the early twentieth century, he had a Western-style residence built in Nantong city. In Shanghai, he lodged at the impressive Dasheng office building in the International Settlement. However, his fam­ ily ties were always rooted in Changle and not in Nantong. Zhang Jian (courtesy name: Zhang Jizhi; literary names: Zhang Se an, Zhang Seweng) was born on July 1, 1853.8 According to Zhangs reminis­ cences, he came from an ordinary, rather poor peasant family that had never produced a scholar or government official.9 However, the family cannot have been very poor since Z hangs father, Zhang Pengnian (d. 1894), had his son educated by tutors from the age of five and in his teenage years sent him to Xiting, northwest o f Jinsha, for further private studies.10 Zhang Jian was the second youngest o f five sons, but he developed a close relationship only with his next older brother, Zhang Cha (1851-1939), whose support was to be a major factor in Dasheng.


Setting up the Mills

After many years of diligent study and success in the local civil service ex­ aminations, Zhang Jian passed the provincial examination for the juren degree in 1885 after several fruitless attempts and obtained the jinshi degree in the metropolitan examination in 1894. Even though he headed the list of successful candidates, a distinction that earned him the prestigious title of zhuangyuan and the offer of the chief compiler's post at the imperial Hanlin Academy, Zhang refused to enter government service. At that time he had already reached the age of 41 and had been working for many years as a dis­ tinguished tutor in various scholarly academies and as a personal assistant in the private secretariats (m ufu) of high-ranking officials such as General W u Changqing (1834-84). 2 Zhang Jian s volatile career path and late start in business were not exceptional; Xue Nanming (1850-1929) served in the pri­ vate secretariat of Li Hongzhang and then in official posts before embarking on a career as entrepreneur in the silk industry. After his father's death in 1894, Zhang Jian returned from the capital to his native place to carry out his mourning duties. H e returned with a higher social status as a first-class scholar and some official connections, but with­ out a strong family network, local ties, or the business or commercial experi-

Setting up the Mills


ence that one would consider necessary for entrepreneurial activities. The change in career was indeed drastic. T he argument has been made that the defeat in the war with Japan in 1894-95 and the humiliating Treaty of Shimonoseki were the main reasons for Zhang Jian s decision to turn his back on government service and to en­ ter the world of business.14 Zhang Jian himself contributed to this view, which suggests that patriotism and concern about the national economy were the driving forces behind his sudden career change* In his essays Zhang repeatedly blamed Japan for its aggression and, to use a modem term, eco­ nomic imperialism, both of which in his opinion were partly responsible for China s political and economic problems.15 For example, his public state­ ments on his motivations for founding Dasheng emphasized national eco­ nomic independence: Cotton mills are established in Tongzhou for the sake of the Tongzhou peoples livelihood and also for the sake of [exploiting] China's economic resources. T he cot­ ton produced in Tongzhou with its pliable strength and long fibers is the very best in Asia and is needed by Japanese mills. T he export of [raw] cotton and import of yam is increasing day by day. W e give up our produce in order to supply others, and they then sell to us goods that have made use of what we sold them. [This] is like bleeding yourself to fatten the tiger and then following that with exposing your flesh. If we cannot preserve our wealth, our people will become poorer day by day. W hat, then, can the country rely on?16

Zhang Jians indignation over Japan's increasing power and his economic concerns reflect the rhetoric of the time. The people's livelihood ( minsheng ) was emerging as a key term in public discussions about China s exposure to foreign economic competition, the protection of its economic rights, and the promotion of its industrial development in the late nineteenth century. Gov­ ernor-General Zhang Zhidong, for example, repeatedly stressed the need "to protect and maintain the livelihood of our people."17 Against the back­ ground o f this debate with its highly patriotic overtones, Zhang Jian frequently depicted his business as a contribution to the public good, and he wove national pride and apprehensions about China's economic fate into his arguments. His highly moral tone most certainly reflected the attempt of the busi­ nessman to please the government and to create a positive image in public opinion. Traditionally (at least in orthodox Confucian writings), Chinese society held the merchant in much lower esteem than the scholar-official.18


Setting up the Mills

However, with the increasing commercialization in the nineteenth century, the improved social status and upward mobility of merchants, who were even allowed to buy academic titles, had in reality blurred the distinction between merchants (shang ) and gentry (shen).19 Thus the late nineteenth cen­ tury saw the emergence of the so-called class of gentry-merchants (shenshang) as local leaders. This term was also used for the new class o f businessmen before more specific terms such as shiyejia (industrialist) or qiyejia (entrepre­ neur) came into use. N antongs local newspaper was using shenshang to refer to Zhang Jian and his son and their business activities as late as 1922.20 Although the rigid traditional ranking system broke down and social in­ teraction between merchants and gentry became common, scholarly writings and debates continued to consider the agrarian economy the most appropri­ ate and solid foundation of the Chinese empire and assigned a much higher economic and social value to it than to industry.21 Zhang Jian himself repeat­ edly evoked the dogma o f the agrarian base in his writings on the state of the Chinese nation as the cure for social instability, which he sought to achieve through more efficient agricultural, commercial, and industrial activities.22 W hat are we to make o f these contradictions? Zhang Jian s abandonment o f officialdom to enter business was an act that required a certain amount of justification in 1895. Most certainly, the publicity given Zhang Jian and oth­ ers who made this decision gradually brought about a change in the percep­ tion o f the role o f the businessman as someone with much larger ambitions than those found among traditional merchants. Zhang Jian s previous career as a scholar with the prestigious zhuangyuan title and as a government official was in itself an indirect form of capital, which I will call "reputation capital." As we shall see in Chapter 7, Zhang Jian s social prestige and reputation capital were vital to his business, political, and social endeavors. Another de­ scription o f reputation capital can be found in Ma Min's excellent study of the role o f the gentry-merchant in Chinese society, where he refers to Zhang Jian as the Mzhuangyuan capitalist" (zhuangyuan zibenjia), who, like other for­ mer government officials and degree holders, embarked on a business career in the late nineteenth and early twentieth centuries.23 Zhang Jian clearly was one of the most successfiil of the more scholarly shenshang . His life-long interest in and promotion of education certainly re­ flect his background as a member of the scholarly elite. Thus Zhang Jian the gentry-merchant has to be seen in contrast to the more practical "comprador type" o f gentry-merchants who used the knowledge and business connec-

Setting up the Mills


cions they had gained as compradors ( maiban ) dealing with foreign firms in the treaty ports in the mid- and late nineteenth century to create their own business enterprises.24 Sheng Xuanhuai, another famous businessman and contemporary of Zhang Jian, is the most successful case of a compradorturned-businessman with excellent connections with the government.25 For Zhang Jian, abandoning an official career did not mean severing his official connections. In fact, he is typical of the businessman with strong po­ litical interests who emerged as the Qing government embarked on reforms meant to curtail the power of officialdom and to introduce an element of popular representation.26 Between 1904 and 1911, major changes in China's economic, educational, and political structure led to the creation of new in­ stitutions and legal regulations. In 1904 the imperial government decreed the establishment of a national school system in connection with the abolition of the examination system in 1905.27 A t the same time study societies (xuehui) began to mushroom and focused their efforts on education, agriculture, or the preparation of a constitution. As Marianne Bastid has pointed out, these study societies are perhaps the best indication of a change in social mentality among the gentry, and they proved useful in the diffusion of new values and reformist ideas.28 Zhang Jian, as I will show in Chapter 7, is the perfect example of a mem­ ber of the gentry who enlarged his field of action step by step through educa­ tional and welfare projects. In addition, he became a strong supporter of lo­ cal self-government (difang zizhi) in the reform period of the last decade of the Qing dynasty. Very briefly, the idea behind local self-government was to rely on local elites to restructure Chinese society and thus to create a new re­ lationship between state and society. In the imperial government's plans, lo­ cal self-government was meant as an important step in the country's shift to a constitutional government.29 Zhang Jian was a proponent of constitutional government and founded the influential Society for the Preparation of a Constitutional Government (Yubei lixian gonghui), which he ran jointly with Zheng Xiaoxu (1860-1938), a prominent political figure and one of Dasheng's most outspoken and influential shareholders.30 Even before selfgovernment regulations were promulgated by the imperial government in January 1909, initiatives for local self-government found their most common expression in commercial, educational, and political societies run by local ac­ tivists. Zhang Jian s dedication to educational and charity projects in N an­ tong reflected general political and social trends among local elites.


Setting up the Mills Zhang Jian also supported the establishment of chambers of commerce

(shanghui), another facet of the late Qing reforms. In proposing a system of one general chamber in each province with branch chambers in each pre­ fecture, he expressed the wish that the state play a less intrusive role in commercial activities and be "supportive rather than determinative."31 Following the establishment of the General Chamber of Commerce in Shanghai in 1902, similar organizations were soon founded in smaller towns throughout the country.32 From the account books of the Dasheng No. i Cotton Mill, we know that Dasheng contributed regularly to the Nantong Chamber of Commerce.33 Since his brother Zhang Cha and later his son, Zhang Xiaoruo (1898-1935), were directors of this local chamber o f commerce, Zhang Jian was able to utilize this institution to lobby the local government to pro tea his personal and business domain (see Chapter 7). At a higher political level, the provincial assemblies elected in 1909 be­ came the institutional expression of the autonomous political power de­ manded by the aspiring modem elite. In the first decade of the 1900s, Zhang Jian increasingly devoted his time and energies to politics, notably in 1909 as president o f the Jiangsu provincial assembly.34 In 1911, he was one of the most independent-minded political leaders in Jiangsu; after the revo­ lution, he served as minister of agriculture and commerce first in Sun Yatsens and then in Yuan Shikais government between 1912 and 1915.35 D ur­ ing his ministerial career, Zhang Jian promulgated new regulations for land reclamation, which created new business opportunities along the coast for himself and his business associates (see Chapters 6 and 7). Although he held no further public office, newspaper articles and even cartoons contin­ ued to refer to his political standing and reputation as a public figure until his death in 1926. In his role as minister, Zhang Jian was, along w ith other political figures, even immortalized in a Cantonese play about the country's difficult political situation during Yuan Shikais presidency.37 However politically and socially influential Zhang Jian may have become, prestige alone was not sufficient to get the factories set up quickly in 1895. O n the contrary, patterns of official patronage and influence had changed and began to play a much less dominant role in the founding of businesses at the turn of the century.

Setting up the Mills


G overnm ent Support Versus Private Interests Planning for the Dasheng No. 1Cotton Mill in Tangjiazha village northwest of Nantong city began in 1895, but it took four years before operations started in 1899. From Zhang Jian’s correspondence with senior government officials, we know more about the negotiations with these officials and the struggle to obtain sufficient sta rtu p capital than about the practical ar­ rangements for setting up the mill. Nevertheless, these documents reveal why Zhang Jian went into business. In late 1895, the governor-general of the Liangjiang provinces and imperial commissioner of the southern ports, Zhang Zhidong, contacted officials in Suzhou prefecture, Zhenjiang prefecture, and Tongzhou independent de­ partment and requested that they recruit local merchants to establish facto­ ries for the production of local goods.38 The reason given by Zhang Z hi­ dong was "to boycott the plans of the foreigners," meaning the business expansion of Westerners and Japanese into China's interior in the wake of the Treaty of Shimonoseki (see Chapter 2). In answer to the question of why he had chosen Nantong for his textile enterprises, Zhang Jian later de­ scribed his reaction to Zhang Zhidong s invitation: "The cotton produced in Tongzhou is the strongest and [qualitatively] the best; for this reason I de­ cided to establish cotton spinning mills."40 His response and the fact that the idea to found a business originated in a suggestion from the government show that the project was not based on a long-premeditated plan. It is also questionable whether Zhang's move into business was based on purely ideal­ istic motives. W e can say with certainty that Zhang Jian was not guided in his decision by contact with foreigners or personal experiences abroad. In contrast to businessmen with a comprador past, Zhang Jian had no connec­ tions with the foreign business community in Shanghai and was unable to read the English or Japanese publications on economics or industry available at the time. Zhang Jian started with six promoters committed to helping him raise the necessary funds and look for potential investors interested in a private enterprise. Pan Huamao from Guangzhou, Guo Xun from Fujian, and Fan Fen from Ningbo were businessmen in Shanghai; Liu Guixin, Shen Xiejun (courtesy name: Shen Jingfii), and Chen Weiyong were merchants from


Setting up the Mills

Nantong and Haimen.41 These six promoters jointly committed to investing 600.000 taels; the three Shanghai investors under Fan Fen were responsible for supplying 400,000 taels, and the local investors under Shen Xiejun for 200.000 taels. In order to attract private capital, Zhang Jian wanted the enterprise to be defined as completely sbangban, that is, under full merchant management. The six promoters were listed as managers (jingli dongshi) of the enterprise in the first official document from 1895, which laid out the government's plan for financing and managing the mill's setup.42 The initial plan was soon overturned by harsh financial realities. After nine months the Cantonese and Fujian promoters backed out, and the Dasheng cotton mill became mainly a local concern.43 In the long run, this development strength­ ened Dasheng s nature as a regional enterprise and economic concern; how­ ever, the withdrawal of funds delayed the mill considerably. As it turned out, convincing local merchants to buy shares was a slow and not very successful process. Zhang Jian had to face many difficulties, not least the acquisition of ex­ pensive machinery. In his original proposal, Zhang Jian had suggested that spinning machinery with 20,000 spindles would be purchased with the capi­ tal collected by the Shanghai investors.44 W hen they backed out, he sought the government's financial support to purchase the machinery. His decision has to be understood in the context of the absence of a national capital mar­ ket in late nineteenth-century China and his initial lack of connections with local financial networks in the Nantong area. The request for official spon­ sorship proved to be a bad decision in two ways: it curtailed Dasheng s ap­ peal as a "private" operation to potential investors, and the government was unable to give sufficient financial support. T o make things worse, in early 1896 another problem arose when Zhang Zhidong was ordered to resume the governor-generalship of the Huguang provinces; for Zhang Jian this meant the loss of his official patron and sup­ porter. W hen Zhang Jian informed Zhang Zhidong s successor as gover­ nor-general of Liangjiang, Liu Kunyi (1830-1902), about his difficulties in raising funds, Liu proved to be sympathetic but unsuccessful in offering fi­ nancial help.45 After much correspondence, the pressing problem of machin­ ery was indirectly solved through Zhang Zhidong s intervention, which, in­ cidentally, served his own purposes very well. Zhang Zhidong "contributed” the secondhand English equipment he had originally purchased for a

Setting up the Mills


planned cotton mill in Wuchang. As mentioned in Chapter 2, Zhang Zhidong had been unable to use it, and it was being stored in a Shanghai ware* house.46 Zhang Jian and the government agreed that this donation of ma­ chinery would be considered the governments provision of half the capitalization o f the Dasheng mill. The remaining half was to be provided by private investors, and therefore, according to late Qing terminology, Dasheng was a guanshang heban enterprise.47 T he machinery was valued at 500,000 taels, and shares in this amount were to be held by the government. T o complicate the situation, the government contribution came with the condition that an equal amount of private capital be raised.48 Zhang Jian found it difficult to raise the private capital required. In 1897, he approached Sheng Xuanhuai for funds. Sheng at that time was promi­ nent in government-sponsored businesses as director of the Huasheng Spinning and Weaving Mill, the China Merchants' Steamship Navigation Company, and the Imperial Railroad Administration.49 In a desperate at­ tempt, Zhang Jian offered Sheng Xuanhuai half the machinery Zhang Zhidong had agreed to supply in return for Sheng s agreement to raise 250,000 taels.50 This overture clearly reflects Zhang Jian s calculation of the political situation at the time and his wish to avoid the collapse of an enterprise that so far only existed on paper. Zhang Jian was probably relying on Zhang Zhidong s goodwill to pressure Sheng Xuanhuai, since Sheng had already agreed to take over the struggling Hanyang Ironworks and its subsidiary mines in 1896 after Zhang Zhidong was unable to raise the necessary funds.51 If that strategy had succeeded, Zhang Jian would in effect have sold a portion o f Dasheng s assets provided by the government in order to claim that he had raised private capital. Apart from the fact that this transaction would have turned government assets into private funds, it would also have meant a much smaller operation than the one he had promised Zhang Z hi­ dong in order to get the machinery. Much to Zhang Jian s dismay, however, Sheng Xuanhuai did not raise the money, and the deal fell through.52 In the end, Zhang Jian did not succeed in raising the required private capital, but in 1899, since he at least had the machinery, he started operations anyway. W hen the Dasheng mill commenced production in 1899, paid-up capital amounted to 195,100 taels and had been provided by local investors from N antong and Haimen.53 By 1901 their investment had risen to 239,400 taels,


Setting up the Mills

and by 1902 to 330,000 taels.54 A list of the shareholders in the Dasheng No. i Cotton Mill between 1898 and 1903 reveals that many of the major lo­ cal cloth businesses were investors. For example, Hengji, a prominent local business, owned five shares in the No. 1 mill.55 W e can assume that these local merchants understood the cotton busi­ ness in Tongzhou and invested in the Dasheng mill as part of their local business activities. In their shops, these merchants sold the yarn produced by Dasheng next to locally produced cloth ( tubu ).56 The high-quality yam produced on Dashengs industrial machinery was purchased mainly by local weavers, who then wove it into tuhu on their wooden handlooms. These lo­ cal merchants brokered the link between industrial yarn production and cloth weaving in Nantong and the cloth's major markets in the Northeast (Dongbei) (see Chapter 8). It is no coincidence that Shen Xiejun, one of Zhang Jian's most capable and staunchest supporters from the very beginning, was an influential cloth merchant and a prominent member of Nantongs merchant community. Shen was the managing partner of the well-established Hengji cloth shop (buzhuang), which sold cotton cloth wholesale to the northeastern provinces. At the beginning o f the Guangxu period (1875-1908), the cloth market had experienced a slump. Local merchants had deputed Shen Xiejun to request a reduction in the transit tax on commercial goods.58 Despite repeated peti­ tions, Shen had no success. Later he received support from Zhang Jian, who petitioned the government in the late 1890s to protect Chinese merchants. Zhang Jian warned that the power balance in China had recently changed and that the government could no longer afford to neglect important eco­ nomic issues. As he put in Tn China nowadays officials are all merchants, and merchants can become officials."59 Apart from these local political initiatives, which must have made Zhang Jian popular within the business community, his diary reveals how impor­ tant Shen Xiejun was to him as an advisor and close business associate. U n­ fortunately his discussions of business are never very specific, but the fre­ quency of his meetings with Shen Xiejun is clear enough. For example, in 1896 Zhang Jian either met or corresponded with Shen several times every month; this cooperation was to last for years. Once factory operations be­ gan, Shen immediately became senior manager in charge of raw material ac­ quisition and distribution in the Dasheng No. 1 Cotton Mill.

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There is little doubt that Zhang Jian as an outsider both to business and to Nantong needed Shen Xiejun as a mediator and as a socially and economically powerful member of Nantong's business community. In a nut­ shell, local support for Zhang Jian proved much more important than pa­ tronage from senior government officials. Zhang Jian paid tribute to Shen Xiejun's vital practical and moral support in an emotional obituary that documents Shen s key role in his business success: W hen I [Zhang Jian] went from scholarship into industrial enterprise, people did not trust me. A t this time Shen [Xiejun] was already in the cloth business. T he cloth mer­ chants were grateful for Xiejun s efforts in having the transit tax (lijin) reduced, and his trust and reputation were greater than mine. A t the times of utmost difficulties in my factory operations, I was dependent on Xiejun as the provider of consolation! H e never said a word that discouraged m e .. . . I often tell people that Tongzhou [i.e., Nantong] owes the success of its textile industry to the help of Xiejun.61

Shen Xiejun exemplifies the many members of Nantong's commercial community with whom Zhang Jian maintained business relations. Liu Yishan and Zhang Jingfu are other examples of important local businessmen among Dasheng's prominent shareholders. Liu Yishan owned the Liu Zhengda cloth business and invested in several of Dasheng's business opera­ tions; Zhang Jingfu was the founder and manager of the Deji company, one o f the biggest cloth shops in the area, which grew out of a qianzhuang with the same name and became a major customer of Dasheng.62 In 1900 the Dasheng N o. 1 mill reported its first net profit of 26,850 taels. Profits doubled during the first half of 1901.63 A t that time one share in the company was priced at 100 taels. The text on the share certificates stated a total incapitalization o f 500,000 taels: 250,000 taels in form of machinery contributed by the government and 250,000 taels as private (but only even­ tually paid-up) capital by private investors.64 In order to enhance the reputa­ tion and probably the trustworthiness of the newly founded enterprise, Zhang Jian's full title as Hanlin scholar (Hanlin yuan xiuzhuan ) appeared on the share certificates between 1897 and 1907.65 Share certificates issued in 1915 and 1919 no longer mention him.66 Obviously by that time the company had established a solid reputation and was able to attract investors more eas­ ily than it had earlier. Each share entitled its holder to a guaranteed dividend ( guanli) of 8 percent per year,67 regardless of the company's performance. This was a


Setting up the Mills

common practice to attract investors and had been a feature of the first sub' stantial government-sponsored enterprises such as the China Merchants' Steamship Navigation Company.68 As the passbooks (xizhe) for drawing the dividends show, the shareholders collected their fixed dividend from Dasheng at the end of each fiscal year.69 The cotton mill was the first enterprise in a growing industrial complex, which would gradually encompass such varied subsidiaries and affiliated en­ terprises as flour and oil mills, shipping lines, land reclamation companies, a publishing house, and even a distillery. As I discuss in detail in Chapter 5, all these companies were founded during the first decade of the twentieth cen­ tury, and they kept their affiliation with Dasheng even after it became a lim­ ited liability company. Because o f the important role of land reclamation in guaranteeing a stable supply of cotton, it became one of Zhang Jian's major business concerns. T he official founding of the Tonghai Land Reclamation Company in 1901 was preceded by several years of negotiations. This reclamation operation along the coast o f Haimen was part of the reward Zhang Jian received from the government for his efforts to found a local industry. From his diary we know that in the seventh month of 1895 Zhang Zhidong came to discuss business matters with Zhang Jian.70 Only two weeks later, Zhang Jian started the negotiations over the fee he would have to pay to the garrison that at the time occupied parts of the wasteland along the Haimen coast. The Tonghai Land Reclamation Company began operating in 1903, but it took several years before the 120,000 mu of land Zhang had purchased were brought under cultivation.71 The activities of the Tonghai Land Rec­ lamation Company would eventually complement the operations of Dasheng, since they enabled Zhang Jian to provide his factories with raw material within easy reach and at competitive prices (see Chapter 7). This company is crucial for understanding Zhang Jian's strategy during the fol­ lowing years of establishing enterprises that supplied raw materials or by­ products or provided transportation facilities for the cotton mills. During this initial period, Zhang Jian concentrated his business activities mainly in Nantong county. The Dasheng No. 1 mill and subsidiaries like the flour mill and soap factory were located in Tangjiazha; the transportation companies' offices and the publishing house were in Nantong city. In 1904 Zhang Jian started preparations for setting up a branch mill, known as Dasheng No. 2 Cotton Mill, on Chongming island, and operations began in

Setting up the Mills


1907.72 Apparently the success of his first mill emboldened him to expand his business. Chongming island was famous for its high-quality cotton and could easily supply the new plant with raw material. As his business grew into a conglomerate, Zhang Jian needed support from his personal network and family to fulfill the many managerial tasks. Although I will argue in the following chapters that Zhang Jian succeeded in maintaining control not through networks but through institutionalized tools within the enterprise, Dasheng's day-to-day business involved family members, without, however, giving them full access to Zhang Jian s instru­ ments of power.

Fam ily Ties Zhang Jian s active involvement in provincial and national politics meant that he spent much of his time away from Nantong. His brother Zhang Cha looked after his local business interests during his absence. Although Dasheng never became a family business, family members were included in the managerial and financial administration of Dasheng and the business complex at large. However, Zhang Jian limited the involvement to core members; he depended more on a personal network of business and political associates and personal friends among the local elite (see Chapter 7). For this reason I prefer to speak of family ties rather than of a full-blown family network. Zhang Cha has received much less attention in the literature than his brother, but he was more influential and important to the Dasheng business than has generally been assumed.73In 1902, at the request of his brother, he had left his official post as a minor magistrate in Jiangxi province to help manage the Dasheng No. 1 mill. Zhang Chas role in the enterprise is exam­ ined below; here suffice it to say that his involvement increased from the mid-i9ios on. For example, he became general manager of the Dasheng No. 3 branch mill, which was founded in Haimen in 1914.74 T hat same year he also joined his brother in founding several land-reclamation companies along the northern Jiangsu coast. The two brothers also worked together to direct Nantong's social and educational development. Reflecting the hierarchical status of his manage­ ment positions in the various business enterprises, Zhang Cha, for example, was the vice-director of the schools and charity institutions set up by Zhang


Setting up the Mills

Fig. 3.3 Graduation certificate from the Nantong Textile School with the portraits of Zhang Jian and Zhang Cha (NTFB: doc. 4 2 3 , 1918). Jia n .75 In public th e tw o bro th ers assum ed different roles, vividly d o cu ­ m en ted in a graduation certificate o f th e N a n to n g textile school from 1918 (see Fig. 3-3).76 T h e p hotograph o f Z h a n g Jian on th e do cu m en t show s him in a W e ste rn su it and w ith a cropped m ustache; Z h a n g C h a appears in a trad itio n al C hinese riding jacket w ith skull cap and a long beard. T h e co ntrasting images w ere circulated in contem porary publications an d were also featured in th e m e n s respective biographical entries in Who's W ho

in China, published in S hanghai in th e early 1920s, and in reports in th e North China Herald in 1921.77 A lth o u g h Z h a n g Jian was th e zhuangyuan scholar an d representative o f traditional C hinese learning and governm ent service, he chose the image o f a m odernizer and p ro m o ter o f "W estern" ideas in public (see Fig. 3.4). N o t surprisingly, this progressive image continues today, as can be seen, for example, in the recently erected statue o f Z h a n g Jian a t his gravesite in N a n to n g city (see Fig. 3.5). In contrast, his bro th er, w ho h ad no particular claim to fame in scholarship an d officialdom, chose to present him self publicly in the role o f th e traditional scholar (see Fig. 3.6). T h ese

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Fig. 3.4 Zhang Jian in the 1910s (Nantong youyi julebu, N a n to n g sh iyc, ji a o y u , c is h a n fe n g jin g , 1920, unpaginated).

visual distinctions reflected the complementary aspects of their cooperation. Zhang Chas traditional image may well have evoked trust from traditionally minded local shareholders and business associates in Dasheng; Zhang Jian s Western image and modern attire appealed to members of the reformminded local elite, the business community in Shanghai, and the political circles in which he moved. The brothers also indirectly symbolized the na­ ture of Dasheng as an enterprise oriented toward Western-style manage­ ment and a strong adherence to Chinese traditions. This interpretation, in an ironic twist, is a rather profound statement about Dasheng s institutional character as a Chinese business in the early twentieth century, as I will dis­ cuss in Çhapters 5 and 6. Although Dasheng was not a family business, the second generation eventually became involved in the enterprise. As Zhang Jian s only son, Zhang Xiaoruo was groomed to be a modern young man with a Western education and experiences abroad.79 However, as we shall see in the last chapter, he did not live up to expectations and become a strong and capable business leader after his father's death. Instead, he preferred the world of en­ tertainment in Shanghai to the world of business in Nantong.


Setting up the Mills

Fig. 3.6 Zhang Cha in the 1910s (Nantong youyi julebu, N a n t o n g sh iy c , ji a o y u , c is h a n fe n g jin g , 1920, unpaginated).

Setting up the Mills


Apparently Zhang Jian never seriously considered establishing the younger generation of his family in his business. Although his own son lacked the qualities of a capable successor, Zhang Jian could have trained his brother s sons for key positions in the enterprise. However, in contrast to industrialists like the Rong brothers who made use of their ex­ ten d ed family network to manage their various enterprises, Zhang Jian did not delegate power to the next generation. For example, Zhang Ren, the older son of Zhang Cha, only headed the local industrial police guard for Tongzhou, Haimen, and Taizhou, which had been established as a private local militia to guarantee law and order during the transition to the Repub­ lic.81 Zhang Ren died in the late 1910s, and Zhang Chas younger son, Zhang Jingli (1911-83), did not become involved in the Dasheng business until the 1930s. Zhang Xiaoruo's death in 1935 ended his involvement in the business* As discussed in Chapter 8, Zhang Jingli then became the family's only representative in Dasheng until its transformation into a state-owned enterprise in the early 1950s.

M achinery, L and, and Technology The issues of machinery, land, and technology are important because they were determined by the peculiar way in which the mill was founded. W ith the government capital in form of machinery, crucial decisions on the use of specific equipment and technology had already been taken out of the hands of the aspiring industrialist. As I will show, this did not necessarily imply a competitive disadvantage for Dasheng and suited Zhang Jian s financial pri­ orities rather well. Zhang Zhidongs machinery had sat in a warehouse in Shanghais wharf area for several years. It had to be shipped from the warehouse in Pudong to the factory site at Tangjiazha village, where it was cleaned and scraped in or­ der to remove the accumulated rust.82 The cleaning and repair of the ma­ chinery was a costly procedure; including the transportation costs, it amounted to over 16,000 taels.83 However, considering the cost of new equipment, the use of old and rusty, though yet unused, machinery could still be justified. Even in the English cotton industry in the eighteenth and nineteenth century, it was not uncommon to use secondhand equipment in newly estab­ lished factories in order to minimize initial fixed capital costs.84 W hen


Setting up the Mills

Zhang Jian established his first branch mill in Chongming in 1907, he also purchased secondhand machinery, this time from the Shanxi Central Bu­ reau for Commercial Affairs (Shanxi shangwu zongju).85 Since the installa­ tion of textile machinery was complicated, the original contract, which Zhang Jian acquired together with Zhang Zhidongs machinery, had in­ cluded the supervision of the installation by an expert. A foreign engineer was hired at considerable expense to supervise the installation of the ma­ chinery at its new home in the Dasheng No. 1 mill in Tangjiazha.86 Most of this initial machinery equipment in the Dasheng mills had been manufactured b y British firms and eventually was supplemented with equipment ordered from American firms in the 1910s and early 1920s. J. Hetherington & Sons Ltd., a textile-machine maker in Manchester, En­ gland, was the producer of the first 20,400 spindles installed in the No. 1 mill after 1896; by the early 1920s, the number of spindles rose to 80,000, all by the same maker.87 As one of the major producers of machinery for every step of the production process in a cotton mill, this firm, like many other Western and Japanese suppliers, maintained an office in the middle of Shanghais International Settlement on Hankou Road. The first 35,000 spindles of the No. 2 mill in Chongming were purchased from Howard & Bullough, another prominent British textile firm. Power in the No. 1 mill was provided by a steam engine and a Lancashire boiler. W hen the factory added weaving to its production process in 1915, 400 looms from the Ameri­ can machine manufacturers Lowell and Henry Livesey were imported.88 The boiler and other supplementary machinery equipment such as belts and pipes were also purchased through specialized Shanghai brokerages and transported to Tianshenggang, which became the most significant port for Dasheng on the north bank of the river. As early as 1899 trading companies like Mitsui supplied the No. 1 mill through this port with bulk goods such as coal or heavy machinery ordered in Shanghai.89 The boiler and steam engine for the No. 2 branch mill, which had been ordered through the Swire bro­ kerage in 1904, were transported in the same fashion and arrived in over 1,800 large and small boxes.90 Since assembling the machinery correctly ac­ cording to the plans and explanations was difficult, the brokerages always sent an experienced engineer to supervise the installation. Most likely the engineer introduced the factory technicians to the use and maintenance of the equipment.

Setting up the Mills


Machinery from Hetherington & Sons, Howard ÔC Bullough, and Lowell represented the cutting edge in textile technology at the time, not only in China but worldwide.91 By relying on these foreign imports, Dasheng not only acquired the newest machinery but also the most up-to-date technology in cotton yarn production. In the case of the initial machinery supplied by the government, the detailed discussions between Zhang Jian and his man­ agers on the question of which equipment to order had become redundant. However, until the 1920s, the Dasheng mills relied mainly on technical ad­ vice from Shanghai brokerages and their engineering experts when ordering new equipment.92 In the textile business, in China as well as all over the world, most ma­ chinery was custom-made according to the plant's specific physical arrange­ ments and the production needs of the customer. For example, the engineer Frederick R. Pratt from the W hitin Machine Works in Whitinsville, Mas­ sachusetts, worked with Dasheng through a contract with the Gaston, W il­ liams & Wigmore Far Eastern Division Inc., a brokerage in Shanghai. Pratt first advised and then supervised Dasheng s purchase of 25,000 spindles in 1921 from the W hitin company.93 Consultations with the Dasheng managers took him or his representative (in 1921 a Chinese engineer named Yang Shizong) to Nantong several times. The overwhelming reliance on foreign machinery by Chinese textile mills was common at the time and necessitated by the lack of domestic manufac­ turers. Since agriculture-based products dominated the structure of prewar manufacturing in China, the manufacture of textile machinery developed only slowly in the wake of the domestic textile industry's development as a whole. As Thomas Rawski has pointed out, as in other industrializing na­ tions, in China "the accumulation of mechanical and metalworking skills re­ sulting from repair work in textile factories was a major contributor to the emergence of an engineering industry.”95 The Dalong Machine Works owned and managed by the Yan family in Shanghai illustrate Rawski s point. The company started out by servicing steamships in the early 1900s and then switched to servicing machinery in the 1910s due to increasing demand during the boom in the textile sector and other manufacturing industries. However, despite its profitable business, Dalong did not venture into machine manufacturing until the 1920s and even then had to overcome the competitive advantage of imports from well-


Setting up the Mills

established foreign firms. Despite its eventual success, machine manufacture ing did not become the most profitable part of the Dalong company; the owner'manager decided to branch into real estate and to establish his own spinning mills.97 Similarly, literature on engineering and professional issues in the textile industry emerged in significant quantity only relatively late. In 1919 the suecessful Chinese cotton mill owner M u Ouchu (1876-1942) (he had founded three large mills in 1915, 1918, and 1919) shared his experiences in setting up and running a mill in the newly founded professional journal published by the Chinese Cotton Mill Owners' Association (Huashang shachang lianhehui), of which he also served as president. However, his report reflects his personal and practical experience and does not represent a theoretical ap­ proach to the topic. Professional manuals with titles such as Factory Design and Management dealing with issues from shop-floor design to insurance to time management and productivity began to appear only in the late 1920s." T he slow development and spread of technical knowledge should not surprise us in an emerging industry, even though the first Chinese transla­ tions o f English manuals on steam engines and mechanical engineering by translators from the Jiangnan Arsenal had been published in the late nine­ teenth century. 00 T he establishment of technical colleges and the introduc­ tion of textile engineering into the teaching curriculum in the 1910s attest to the industry's increasing need for specialized knowledge and professional training. T he first textile schools, such as the Nantong Textile School (N an­ tong fangzhi zhuanmen xuexiao), founded by Zhang Jian in 1912, used teach­ ing materials based on original business documents and equipment used in the mill to which it was attached. For example, the materials on textile ma­ chinery were drawn by hand by a teacher in the Nantong school who him­ self was a graduate of the second class to enter the school, in 1914.101 Because of the lack o f appropriate textbooks, students studying how to prepare a contract for foreign machinery studied copies of contracts between major Chinese cotton mills and their brokerages in Shanghai.102 Probably reflect­ ing the late development of Chinese machine manufacturing as an industry and machine engineering as a technical profession, essays by engineers on the technical aspects of textile machinery and choices in technology began to ap­ pear in professional journals such as Textile W eekly only in the 1930s.103 Apart from machinery, land and buildings are the other major assets needed to set up a cotton mill. According to Zhang Jian, the group of local

Setting up the Mills


investors in Tongzhou bought the land for the No. i mill in Tangjiazha in 1896.104 Unfortunately, I was not able to locate the original land deeds in Nantong, and it is not absolutely clear who became the owner of the com­ pany land. However, six land deeds for the Dasheng cotton mill are listed in a document from 1911 and state that land in Tangjiazha west of the river was systematically purchased from private owners in 1895, 1896, 1901, 1903, and 1905 at a total cost of 8,125 yuan«105 According to this document, the cotton mill owned 142 mu in Tangjiazha, but other land deeds may well have existed. The earliest complete original land deed available to me is dated 1905 and indicates that the Industrial Company (Shiye gongsi), later established as Dasheng s shell company, sold a small plot of land to a cer­ tain Z h u family in the village of Yuchigang.106 This plot of land had appar­ ently come into the company's possession through Zhang Jian s land rec­ lamation project after 1900. Land for building the branch mills was acquired in a similar fashion. Rec­ ords kept in the accounts office of the No. 2 mill in Chongming show sys­ tematic purchase from 1904 on of land on this island to establish a new work site.107 More than 22 recorded contracts give a clear description of where the plots were located, how much land they included, the selling price, and the seller. However, although the Dasheng No. 2 mill acquired some land for the construction of factory buildings, it also rented out purchased land. For example, as the contracts show, vacant land to the northeast of the factory was leased as farmland to tenants after it had been purchased by the com108 pany m 1906. Construction work at Tangjiazha started in late 1897 and was followed by the building o f workshops, the final installation of machinery, the repair of sluice gates and embankments, and the construction of roads and bridges in 1898.109 In 1899 the factory buildings at the No. 1 mill were completed and the boiler installed; the spinning machines began operating in May of that year. Zhang Jian had an authoritarian management style, and his diary sug­ gests that he seldom visited the factories in person. As befitted a managing director at the time, he delegated the supervisory tasks to his managers. However, in 1898 and 1899 he went to Tangjiazha every few months in order to inspect progress on the construction and was present at major events such as the installation of the boiler.110 In similar fashion, directors of the board in German textile factories liked to visit construction sites at important junc­ tures such as the raising of the rafters and have their picture taken.111


Setting up the Mills

Despite his erratic presence, given his authority and prestige, Zhang Jian filled an almost ritual (unction in the construction of the factory compound* For example, after the buildings of the No* i mill were finished, he corn* posed an auspicious couplet alluding to the importance of his business for the welfare of the country, which was later immortalized in a pair of scrolls in the famous calligraphy of the imperial tutor W eng Tonghe.112 O ther events like the installation of a generator for the mill's power supply show that Zhang Jian took his ritual role seriously and did not hesitate to perform ceremonies; on the outside this seems to contrast oddly with the use of modern technology* In proper and respectful attire, he knocked his head in reverence toward the electric light three times after the power was switched on, very much as one pays respects to the ancestors.113 H e also had ceremo­ nies performed on behalf of the success of the construction work. In the case of the N o. 3 mill, established in Haimen in 1916, Zhang Jian wrote an auspi­ cious poem for the groundbreaking ceremony. The title clearly suggests that he composed it for the sacrifice to the Earth god held on this occasion.114 Needless to say, as documents of modern and scientific mill management, none of the Dasheng mills' construction plans ever marked the location of a little temple or shrine on the compound, although its existence is conceivable. This leads us finally to the question of the local response to the introduc­ tion o f power-driven machinery and industrial technology in the last decade of the nineteenth century. As has already been mentioned, before the arrival of industrial factory work in the Nantong area, cotton yam and cloth had been produced at home on simple spinning wheels and mechanical looms for private consumption and as supplemental income for rural households.1 Although the local spinners could have perceived the new factories as a po­ tential economic threat to their livelihood, the impression usually given in studies on Dasheng is that the introduction of machine spinning did not meet with local opposition. Nevertheless, a commemorative volume published in Nantong in 1926 indicates that things did not go so smoothly at first. After noting the reluc­ tance of the local elite to invest in the enterprise, this text remarks: "There were people engaged in the native cloth industry who wanted to burn down the factory, and so soldiers were sent to protect it. Only then could the Dasheng spinning mill be established."116 W e know about Luddite-like riots by silk weavers in Guangdong against the mechanized silk filatures in the late Qing period.117 However, it seems

Setting up the Mills


that the protest in Nantong was never as severe. One explanation for the lack o f unrest is the fact that hand-weaving expanded because of the high quality and abundance of the machine-spun yarn. In contrast to the Guang­ dong silk weavers who were unable to use the fine machine-spun thread on their wooden looms, weavers in Nantong began to produce a cloth that combined the use of machine-spun yarn as weft and hand-spun yam as warp .118As a result, the quality of the local hand-woven cloth improved. Thus industrial yam production led indirectly to increased demand for products of the cottage weaving industry in Nantong at the beginning of the twentieth century; this must have taken the edge off protest.

T he difficulties Dasheng encountered during its founding are symptomatic of those many new Chinese industrial enterprises faced after 1895. The po­ litical atmosphere for private investment may have become more flexible, but the increasingly unreliable relationship between private businessmen and the government posed problems. In addition, the as yet insufficient economic, legal, and social framework prevented Chinese business from developing rapidly because of financial and proprietary issues. A t a time when private investors were slow to put their money into unfamiliar busi­ ness ventures, government patronage no longer guaranteed financial help. As Dasheng s case shows, after 1895 the structure of patronage broadened but did not disappear completely.119 Although Zhang Jian received support from various officials, their influence was not strong enough to set the en­ terprise on firm financial grounds. T o complicate things, officials-turnedentrepreneurs like Zhang Jian also had to cope with a general lack of ex­ pertise in organizing and using modern machinery and technology in the industrial setting o f the factory. A t the local level, Zhang Jian s difficulties in establishing the mill point to his position as an outsider, with no previous industrial experience and no track record in Nantong. As in the case of other industrialists with a back­ ground in officialdom such as Nie Qigui (1850-1911) or Zhou Xuexi (18661947)1 reputation capital in form of the prestigious zhuangyuan title did not automatically guarantee more favorable business opportunities. The fact that it took Zhang Jian so long to find investors for his business shows the limits o f reputation capital for acquiring capital in late imperial China.


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The role the government played through its contribution of machinery and rewards of land decided the initial location and equipment of the factory without forcing Zhang Jian to make these significant business decisions* I have argued here that Zhang Jian s role in the founding of Dasheng reflects more a rational response to given circumstances than industrial activism based on patriotic sentiments. Although I do not dispute his enthusiasm and commitment, I argue that we also have to acknowledge Zhang Jian s skills as a businessman who recognizes a business opportunity and, despite initial setbacks, turns it into the cornerstone of a profitable enterprise. Finally, we have to ask how representative Dasheng s development as a regional enterprise was. For example, the Sulun mill was established as a government enterprise in Suzhou in 1897 under the management of the zhuangyuan Lu Runxiang (1841-1915). However, the enterprise never achieved any substantial profits, even after its privatization in 1912. The Yeqin spinning mills in W uxi represent another case of a regional enterprise under the management of an official-turned-industrialist, in this case the former daotai Yang Zonghan. However, like the Sulun mills and despite the patron­ age o f Zhang Zhidong, the enterprise never achieved a secure economic footing.121 Both cases illustrate the limitations of decentralized official pa­ tronage, insufficient private investment, and poor capital markets. In N an­ tong, a combination of positive factors such as Zhang Jian s charismatic per­ sonality, the local availability of high-quality cotton, and his skillful incorporation of the local commercial community into his business plans turned Dasheng into a regional enterprise that not only survived the initial stage but became one of China's most successful private enterprises in the early twentieth century. It is now time to turn to the other important ingre­ dient in the success story o f Dasheng as a regional enterprise— its workforce and the work environment in the mills.



The Realities of Industrial W ork

This chapter examines the concrete physical and managerial organization of the factories and their workforce, with an emphasis on the Dasheng No. i mill. T he majority o f the No. i mills workforce consisted of unskilled workers from the surrounding villages with some background in home weav­ ing. Thus any definition of the term worker must incorporate both the work­ ers' rural background and their employment in factory work. The introduc­ tion o f industrial work to a rural area confronts us with questions of how the transition from home industry to factory work came about, how workers at the factory defined themselves, and who, from management's point of view, counted as a member of the mill's workforce. These issues are closely con­ nected to the concepts of control and accountability management applied to the work process and to the social hierarchy within the compound. Studies on factory work by Emily Honig, Elizabeth Perry, and Gail Hershatter have examined the working and living conditions of a predominantly female workforce in big cities such as Shanghai or Tianjin during the Re­ publican period.2 Their detailed analyses and their strong focus on socioeco­ nomic factors have dealt with the responses of workers to the requirements of factory work, the organization of labor protest, and the relationships of these protests to the formation of a working-class consciousness. A study of the Dasheng mills in Nantong will broaden our perspective on these issues not only because these factories were located in a rural area but also because this industrial development predates the economic booms in Shanghai and Tianjin by almost twenty years. The Dasheng mills can tell us much about the conceptualization of work and workplace among workers, employees, and management and how this process affected the company's management


The Realities o f Industrial W ork

echos, the lives of local workers, and the social and economic development of the surrounding communities. As we will see, certain patterns in labor rela­ tions, shop-floor management, and labor politics highlight the differences between urban and rural work environments.

Factory C om pound, M anagem ent, and Hierarchies The Dasheng No. i Cotton Mill was situated in Tangjiazha village, north­ west of Nantong city. The mills official name, Tongzhou Dasheng shachang (Dasheng cotton mill in Tongzhou department), which changed in 1911 to Nantong xian Dasheng shachang (Dasheng cotton mill in Nantong county), indicated that the manufacturing of cotton yarn in the mill did not take place in Nantong city.3 However, publications from the beginning of the twentieth century on associate the Dasheng No. 1 Cotton Mill with the development of Nantong as a city and a region and do not refer to Tangjia­ zha as an independent place with its own community and socioeconomic structure. They create the erroneous impression that the factory compound was located in an urban setting. In feet, the rural background of the work­ force was an essential ingredient of the Dasheng No. 1 mill. The same can be said o f the branch mills that began production in 1907,1921, and 1923. Maps, photographs, and written descriptions are the main sources for piecing together a picture of the work compound as it existed in the late nineteenth and early twentieth century. In contrast to Nantong city, whose maps recorded the modern educational and public welfare institutions in which the city took pride, Tangjiazha had nothing more modern to offer than the cotton mills that dominated it.4 The maps of the cotton mill said all there was to be said about Tangjiazha; the village, even if not consciously, was meant to be forgotten. In 1898 a large factory compound with modern factory buildings was a novelty in China, especially in the countryside. Although the scale of opera­ tion of some silk-producing workshops during the Ming and Qing was quite substantial, these early workshops were not factories. For example, in the mid-seventeenth century, the Suzhou imperial silk workshops had 400 looms and employed 1,170 artisans who were paid in rice each month.5 But as an enterprise these workshops were not characterized by the single hierar­ chical structure characteristic of a complex factory operation. The silk work­ shops tended to split up into subcontracting units, with the government

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Fig. 4.1 Map of the Dasheng No. 1 Cotton Mill factory compound (adapted from Jiangsu T ongzhou D ashengfangzhi gufcn youxian gongsi zh i tu , 1919?).

officials responsible for their organization functioning as purchasing agents. In contrast, the Dasheng compound exhibits a complex yet strict hierarchi­ cal structure in the organization of work in relation to the layout of the shop floor. Moreover, management dictated a daily routine that created a new so­ cial hierarchy. T he earliest Chinese map of the Dasheng No. 1 Cotton Mill shows that the work compound consisted of two parts: the administration section (hang) and the workshops (gongchang) (see Fig. 4.1). Together they made up the

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co tto n mill (shachang).6 In later m aps, th e term chang as in shachang came to be used for th e w orkshops.7 T o judge from th e nom enclature, th e adm inistrative and trading functions o f th e mill were considered as im p o rta n t as the m anufacturing side in th e early days; only later, w hen th e term chang came to be associated alm ost exclusively w ith production, did it acquire its cu rren t m eaning o f "factory" and the adm inistrative and business side o f th e en ter­ prise becom e overshadow ed in th e popular m ind by th e w orkshops. T h e D asheng N o . i w ork com pound was spread over 8.6 hectares (21.25 acres).8 Som eone arriving from outside T angjiazha w ould m o st likely ap ­ proach it by bo at along th e T ongyang canal, w hich was linked to th e Y angzi River. T h e com pany ow ned a stone je tty on th e canal in fro n t o f th e m ain entrance to th e com pound, w here boats unloaded th e raw co tto n from local collection stations or from S hanghai an d loaded finished goods, m ostly yam , for d istribution an d sale. A t th e en d o f th e jetty, a large w ooden gate w ith three arches an d th e inscription "D asheng Pier" (D asheng m atou) gave the com p o u nd a grand an d distinctive entrance (see Figs. 4.2 an d 4.3). Beyond th e je tty a crow d o f p o rters— know n to W e stern ers an d C hinese as "coo­ lies"— w aited for w ork.9 T h e y carried cotton bales from th e je tty in to the com p o u nd.10 T h ese porters were n o t m entioned in th e com pany s regula­ tions an d w ere n o t on th e payroll. O bviously, they w ere hired on a daily ba­ sis an d paid according to th e w ork they did. For som eone approaching the w ork com pound from th e village, th e com ­ p o u n d s do m in an t features w ould have been the clock tower, chim ney, an d walls (see Fig. 4.4). V isually, th e com pound was a tightly stru ctu re d build­ ing com plex surro u n d ed on its n orthern, southern, and w estern sides by a bam boo fence and canals (Fig. 4.5). T h ese canals connected th e com p o u n d w ith th e T ongyang canal east o f th e mill and th u s eventually w ith th e Y angzi River. Access to storage room s, toilets, and com pany housing b o r­ dering th e w ork co m pound was possible over three sm all bridges.11 W o rk e rs entered th e w ork com pound from the m ain gate to th e east, u n d er a big brick gatew ay bearing th e characters "D asheng shachang" (D asheng C o tto n M ill).12 Inside th e com pound, the buildings were laid o u t in the o rd er o f th e p ro ­ duction, delivery, and d istribution processes. B ehind th e office for raw co t­ to n deliveries ( shouhuachu ) were cotton storage room s ( huazhan ) on th e right an d yarn storage room s ( shazhan ) an d th e wholesale office ( pifasuo ) on th e

The Realities of Industrial W ork

Fig. 4.2 The Dasheng jetty, main entrance, and clocktower in Tangjiazha, ca. 1920 (Nantong youyi julebu, N a n t o n g sh iye , ji a o y u , c is h a n fe n g jin g , 1920, unpaginated).

Fig. 4.3 The Dasheng jetty in Tangjiazha, 1998 (photograph by the author).



The Realities of Industrial W ork

Fig. 4.4 Factory grounds of the Dasheng No. 1 Cotton Mill at Tangjiazha with the training area of the company patrol force in the foreground (Nantong youyi julebu, N a n t o n g sh iyc , ji a o y u , cish a n f c n g jin g , 1920, unpaginated).

left (Fig. 4.6). The head office (zong banshichu) was situated in the middle of the administrative section, surrounded by a dining hall, with separate kitchen facilities, and additional storage rooms. Behind the head office on the left was the "foreign building" (yanglou), the office built in a "foreign style" ( yangshi) that served as Zhang Jian's personal office (see Fig. 4.7). In order to stress its detachment from the rest of the work compound, this of­ fice was surrounded by a bamboo fence. Because of the physical layout, or­ dinary workers seldom entered the administrative area; the routes from the main gate to the workshops kept them away from the offices. Behind the management offices were storage rooms for oil, machinery parts, and other equipment and finally the workshops proper. Until 1915, the workshops were housed in one-, two-, and three-story brick buildings (see Fig. 4.8).14 The workshops' design was meant to be functional rather than aesthetic: high windows and supporting pillars, between which were placed row upon row of machinery. Brick gave way to steel girders and ce­ ment in 1915 when the Dasheng No. 1 mill incorporated weaving into its op­ erations. The looms were too heavy for multistory workshops and had to

The Realities o f Industrial W ork


Fig. 4.5 Canal in the compound of the former Dasheng No. 1Cotton Mill, 1998 (photograph by the author).

be installed in one-floor buildings with sawtooth roofs and large skylights that afforded more natural light for the more complicated weaving proce­ dures.15 Each workshop was defined by the task performed in it and gave it its name: the picking room (jianhua ¿bang), ginning room ( yahua chang), blowing room (qinghua chang), roving room (cusha chang), spinning room (xisha chang), reeling room ( yaosha chang), and packing room (chengbao chang).16 In the pick­ ing room, the workers sorted the raw cotton according to its quality and condition. It was then taken to the ginning room where seeds, sand, and other impurities were removed. The cleaning process was continued in the blowing room, where the matted cotton was tom apart, fluffed, and cleaned again. The workers in the roving and spinning rooms were occupied with the task of producing the actual cotton yarn by entering the rope-like strands of cotton into a series of roving and spinning machines until a fine cotton thread emerged. In the reeling room, the cotton yarn was reeled from the machines bobbins into hanks, which were finally taken to the packing room for weighing and bundling (see Fig. 4.9).


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Fig. 4*6 Original storage rooms for raw cotton at the former Dasheng No. i Cotton Mill, 1998 (photograph by the author).

Fig. 4.7 Zhang Jians office in the yanglou on the factory compound of the former Dasheng No. 1Cotton Mill, 1998 (photograph by the author).

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Fig. 4*8 Brick factory buildings with the tower for the boiler at the Dasheng No. 2 mill in Chongming (Nantong youyi julebu, N a n t o n g s h iy c jia o y u , c ish a n fe n g jin g , 1920, unpaginated).

Once weaving was added to the production process in 1915, the yarn had to go through a preparatory process before it could be used in the weaving sheds. According to an anonymous visitor to Dasheng s shop floor in the early 1920s, the yarn was again put onto the reeling machines, which wound the thread into bigger yarn cans. After feeding the yarn into sizing machines to make it stronger and more durable, it was wound onto loom-beams be­ fore being drawn into the shafts and reeds for the final weaving process.17 Although it is easy to understand how the production process dictated the outlay of the shop floor, it is much more difficult to assess the impact of the industrial environment on the workers' potential transformation into factory workers. A crucial aspect for understanding the dynamics on the shop floor is the issue whether and, if so, how industrial work in a factory environment helps create new identities for industrial laborers. A collection of interviews conducted with 214 former workers at the Dasheng No. 1 Cot­ ton Mill in the 1960s enables us to reach some conclusions on how workers thought of themselves and their work. Unskilled workers, that is, workers without vocational skills or training and previous work experience, represented the lowest stratum and the


The Realities o f Industrial W ork

Fig. 4.9 Label for bales of Dashengs most popular brand of yarn, Kuixing. Considering Zhang Jian's scholarly background, the brand name is appropriate. Kuixing is the chief star of the dipper and was worshipped as the god of literature (from the author's collection).

majority of Dashengs workforce. From the accounts of workers in the inter­ view sample, it is obvious that unskilled workers thought of their work only in terms of the particular activity in which they were engaged and not in terms of professional identification as workers.18 Only three of the inter­ viewees referred to themselves as workers ( gpngren); the rest used their work­ shop affiliation as point of reference when asked about their life in Dasheng. For them, working in one of the workshops was "doing work" (zuo gong) af­ ter "entering the factory" (jin chang).19 A worker "entered the factory" on the day he or she began working in the compound. From that day on, they might move slowly up a hierarchy that was closely connected to the várieties of work available in the work compound. Even without a clearly pronounced identity, the workers in the Dasheng mill were integrated into a diversified social hierarchy on the shop floor. Dif­ ferent varieties of work required different skills and brought different wages. Piecework in the reeling and roving rooms tended to be more demanding than timework in the picking and ginning rooms. The work in the reeling room was extremely exhausting, not only because reeling the hanks was dif-

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ficult but also because workers were paid according to the number of reels finished and thus felt under pressure to exert themselves.20 In comparison with tasks like carding or spinning, reeling was paid at the lowest wage rate. Like most other workers in the Dasheng No. 1 mill, the reelers worked in a large room; the reeling room housed at least eighty reeling machines separated into five rows.21 One incentive for the reelers was promotion to the roving room. T he roving room, where slivers were put through a set of rov­ ing frames to produce a softer thread, was one of the noisiest and dustiest rooms in the work compound, but roving was paid at a higher rate than reel­ ing.22 In short, for most unskilled workers, "doing work" (zuo gong) trans­ lated into working with specific machinery in return for a wage; the work was such that it did not force on them an abstract awareness of being an in­ dustrial worker (gongren). T he reelers, the rovers, indeed almost all the workers who came from the surrounding villages, were unskilled and were trained on the shop floor in specific tasks under the supervision of the foremen (discussed in the follow­ ing section). At the top of the shop-floor hierarchy were the machinists re­ sponsible for looking after machinery in certain workshops and repairing any broken parts. They had vocational skills and practical work experience, yet lacked formal textile-specific education or training; hence they fell into the middle part o f the work hierarchy, above unskilled workers and below engineers. Skills acquired as a blacksmith or armorer were the usual re­ quirement for employment as a machinist.23 A machinist usually started in the boiler room and then moved on to the blowing room, for example, where he worked under the supervision of a more experienced machinist from Shanghai until he was promoted and assigned to a specific workshop.24 In addition to these skilled workers, the middle stratum of Dasheng s workforce also included administrative staff employed as accountants and their assistants, clerks, and secretaries. Since they were working in the de­ tached administrative section (hang) of the compound, no direct communi­ cation or interaction between the unskilled workers in the workshops and the administrative staff took place. The company regulations (see below) stressed the centrality and supervising function of the administration, in par­ ticular the accounts office, over the mill's operations. The accounts office ex­ erted strict control on a day-to-day basis by carefully examining and filing daily records from the storage rooms, registration cards from the workshops, and other aspects of the work flow.25

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Skilled w orkers an d adm inistrative sta ff belonging to th e m iddle stra tu m w ere n o t classified in to blue* an d w hite-collar w orkers. T h is is clearly re­ flected in th e ir housing options. B oth groups w ere m ore closely tied to th e w o rk co m p o u n d th a n th e unskilled w orkers because they qualified for com ­ pany accom m odation in either th e sushe (d orm itory) o r gongfang (w orkers' housing). T h e sushe, a sm all building in th e m iddle o f th e adm inistrative co m pound, served as accom m odation for u n m arried sta ff m em bers o f th e ad m in istration, for example, apprentice clerks; it also served as tem p o rary lodgings for co tto n traders an d o th e r visitors to th e m ill from outside. M ore su b stan tial housing was provided in th e gongfang, b u t only em ployees in th e m iddle ranks w ere eligible; ordinary unskilled w orkers retu rn ed to th eir vil­ lages after th e ir shifts.26 T h ese tw o-story, sm all square houses w ith very n a r­ row alleys betw een th em w ere b u ilt in blocks in th e early 1900s. T h e y d e­ rived th e ir nam es from th e ir positions on th e com pound, such as w orkers' houses to th e east (dong gongfang), w orkers' houses to th e w est (xi gongfang), an d new w orkers' houses (xin gongfang), term s still used in T angjiazha today (see Fig. 4.10).27

As one rent book of the Dasheng No. 1 mill's company housing shows, almost all the tenants were identified as employees ( zhiyuan ) on the office staff, machinists (jigong), or bookkeepers (jizhang).28 Most of the tenants and their families were not from Nantong county but from cities such as Ningbo, Wuxi, Shaoxing, Zhenjiang, and even Shanghai and Nanjing.29 These are the places from which skilled labor and engineers were recruited. T h e re n t book also reveals an o th er aspect o f D asheng's policy regarding com pany housing: a substantial n u m b er o f te n an ts h ad occupations obvi­ ously u n related to th e mill, such as sh o p ow ner, m erchant, vendor, o r h air­ dresser. A ccording to inform ation from a form er w orker an d ten an t, M r. Li G u angquan, com pany housing was very cheap, ab o u t one yuan per m o n th in th e 1920s, an d over tim e ten an ts becam e virtual ow ners o f th eir u n its.30 T h u s th e accom m odation was k ep t in th e family for generations an d could be "in­ herited" by family m em bers, even if they them selves w ere n o longer em ­ ployed in th e D asheng mills. In certain respects, the housing arrangements for members of the work­

force on the compound bears some resemblances to the work-unit (danwei) system of post-1949 China. I t would be easy to interpret Dasheng's company housing as the predecessor of the socialist work unit, which until recently

The Realities o f Industrial W ork


Fig. 4.10 Company housing on the compound of the former Dasheng No. i Cotton Mill, 1998 (photograph by the author).

provided housing plus all necessary social services for workers. Recent schol­ arship has shown that the danwei system can be traced to the pre-1949 pe­ riod.31 Linan Bian has discussed the development of social service institu­ tions and industrial welfare in China's national defense industries during the Sino-Japanese war (1937-45), and W en-Hsin Yeh has shown how the Bank of China in Shanghai with its dormitory compound, welfare facilities, and training methods took care of the needs of its middle-class employees in the 1930s. Bian s argument is persuasive in terms of the industrial origin of the work-unit system and its characteristics, and Yeh's case study is helpful in understanding Dasheng's policies, particularly her discussion of the bank's social services and company culture in the context of corporate leadership through paternalistic authority. Dasheng s housing policies have more to do with the attempt to create a company culture based on social hierarchy for its middle management than with the creation of a prototypical work-unit system for the whole work­ force. As we shall see in the following section on factory discipline, Zhang Jian favored a paternalistic and authoritarian approach to middle and upper management. Unlike cotton mills in Japan, which tried to attract and retain

The Realities o f Industrial W ork


a labor supply by providing secure an d strictly supervised com pany h ousing for young female w orkers from th e countryside, Z h a n g Jian's paternalistic a ttitu d e extended only m arginally to the skilled w orkforce an d n o t a t all to unskilled w orkers.33 Since th e D asheng N o . i mill d id n o t offer even th e m o st basic welfare a n d recreational facilities to its em ployees, o r any h o u s­ ing an d m edical care to its unskilled w orkforce, th e housing policies were o n th e w hole a m o d est a tte m p t to create a hierarchically o rien ted com pany cu ltu re in th e mill. T h e cheap ren ts an d lenient lease regulations m ay have been incentives for D asheng s skilled em ployees to settle in T an g jiazh a in ­ stead o f looking for m ore lucrative o r attractive em ploym ent in th e grow ing textile in d u stry o f th e big cities d u rin g th e early R epublican period. D ecen t ho u sin g was obviously rare in T angjiazha. A s th e m ills re n t b o o k shows, em ployees from Z h a n g Jian's o th e r com panies in T angjiazha village, for ex­ am ple m achinists from th e Fuxin F lour M ill o r th e G uangsheng O il M ill an d em ployees in th e Z ish e n g Iro n W o rk sh o p , w ere also eligible for com ­ pany housing.34 T h e housing arrangem ents for th e u pper stra tu m o f D ash en g s w orkforce reflect its distance from the skilled an d unskilled w orkforce. M anagers an d th e ir assistants in th e m aterials departm en t, th e w orkshop d ep artm en t, an d th e finance d ep a rtm en t w ere required to live in th e adm inistrative section o f th e co m pound; th e m anager o f th e m iscellaneous tasks d ep a rtm en t was al­ low ed to choose his accom m odation outside.35 Likewise, high-ranking em ­ ployees like engineers, m any o f th e m hired from places outside N an to n g , w ere n o t required to live in com pany housing.36 A s D asheng s m anaging director, Z h a n g Jian h ad a private office next to th e adm inistrative building, b u t like the rest o f th e to p m anagers he seldom visited th e factory. In co n trast to enthusiastic industrial en trep ren eu rs like th e G erm an m achinery m anufacturer A lfred K rupp, w ho a t th e beginning o f his in d u strial career in th e m id-nineteenth century lived w ith his family in a villa rig h t next to th e w orkshops in ord er to show solidarity w ith his w o rk ­ force, Z h a n g Jian k ep t his family residence in C hangle in H aim en co unty all th ro u g h his life. F or purposes o f public image an d as a d em o n stratio n o f lo­ cal pow er, he later b u ilt a grand villa in N a n to n g city along th e H a o h e canal rath e r th a n in th e vicinity o f th e factories. In fact, once th e m ill sta rted o p ­ erations, Z h a n g Jian visited only ab o u t tw ice a year, an d his arrival was an ­ n o u n ced by dru m s o n th e je tty an d th e raising o f a flag. Z h a n g Jian was th e p atro n an d pow er center o f th e D asheng enterprise, but, as on e w ould ex-

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pect, h e en tertain ed no visions o f solidarity w ith his w orkforce o r an egalitar­ ian com pany culture*37 In sh o rt, th e spatial design o f th e com p o u n d created an d solidified th e social hierarchy w ithin D ash e n g s w orkforce. F u rtherm ore, w ith its selective h o u sin g arrangem ents, th e co m p o u n d also reflected th e specific em ploym ent p a tte rn for hiring unskilled labor. A s we have seen, unskilled w orkers w ould n o t ordinarily com e in to direct contact w ith any m em ber o f th e m anagerial staff. A m ong those interview ed in th e 1960s, only m achinists m en tio n ed th e existence o f m anagers an d w ere able to nam e them ; th e unskilled w orkers' experience w ith m anagem ent was lim ited to contact w ith th e gongtou, th e m ale o r female forem an.33 T h e gongtou an d th e h iring system they represented w ere o f central sig­ nificance to th e dynam ics on th e sh o p floor an d are explored in m ore detail below. H irin g practices an d shop-floor m anagem ent in th e D ash en g mills relied m ainly on th e so-called co n tract w ork system ( baogongzhi), only occa­ sionally su pplem ented by h iring th ro u g h in dependent contractors. A s Emily H o n ig has show n in h er stu d y o f textile mills in S hanghai, mill m anagers in ­ stalled th is system in th e 1910s. A forem an was paid a flat fee by th e m an ­ agem ent for delivering a required am o u n t o f o u tp u t; he h ired w orkers th ro u g h subordinate forem en an d paid th e m on his ow n w ith o u t providing acco m m odation.39 T h e m ore infam ous contract labor system ( haoshenzhi) only cam e a b o u t in th e S hanghai textile mills in th e late 1920s. U n d e r this system , m ostly exploitative contractors "bought" young w om en for a flat fee in th e countryside an d created a relationship o f to ta l dependence by hiring th e m o u t to th e mills in Shanghai, providing accom m odation an d food, co n ­ trolling th e ir life even outside th e factory, and, m o st im po rtan t, paying th em directly an d retaining substantial po rtio n s o f th eir wages.40 O bviously, D ash e n g s location in th e countryside an d th e lack o f com ­ p any h ousing for unskilled labor p o in t to th e developm ent o f hiring th ro u g h th e co n tract w ork system rath e r th a n th ro u g h th e co n tract labor system. T h e unskilled w orkforce for m enial jo b s in th e blowing, roving, carding, cleaning, o r packing room s was hired from villages w ithin w alking distance o f T angjiazha.41 Gongtou did n o t need to provide food an d lodging for th e young w om en w orkers. N evertheless, unskilled w orkers in th e m ill were h ired by th e gongtou an d th e ir subcontractors an d n o t by th e m anagerial staff. T h e salaries em ployees o f th e com pany received from th e accounts office are traceable in th e account books, b u t wages for unskilled w orkers are n o t to be


The Realities o f Industrial W ork

found as regular, separate expense categories in these company records.42 Since the unskilled workers were subcontracted by the gongtou, they received their wages directly from the gongtou . Expenses for unskilled labor appear only as a single lump sum in the annual reports, a figure presumably compiled in the mill's accounts office by adding the company's payments to the

gongtou . T he role o f the gongtou among the skilled workforce was quite different. T he more complicated jobs, such as working at the drawing frames and weaving looms, required skilled labor that could not be recruited in sufficient numbers from the Tangjiazha area. N o t surprisingly, the skilled workers (lianggong) for these tasks came mostly from Ningbo in Zhejiang province, which had a long tradition of and high reputation for handicraft cotton yam and cloth production. These skilled workers were hired by their own Ningbo gongtou and formed an autonomous group on the shop floor and within the factory.44 This pattern was repeated at the other Dasheng mills. W hen the Dasheng No. 2 mill on Chongming island opened, skilled work­ ers from textile centers in southern Jiangsu such as Shanghai, Suzhou, and W uxi were hired as instructors for the unskilled workers there, who had no experience working with textile machinery.45 Engineers were hired directly by the Dasheng management. According to letters found in the company archives, Chinese engineers for the No. 1 mill were recruited in Shanghai.46 Once the Nantong Textile School, set up by Zhang Jian in 1912, and other textile schools in the country began producing graduates, they automatically became candidates for recruitment. A t least half of Nantong's first substantial class of textile engineers (almost 70 per­ cent came from other places in Jiangsu, Zhejiang, and Hunan province) in 1917 found employment in Shanghai or elsewhere; the rest joined the Dasheng mills at least for their initial job.47As mentioned above, foreign en­ gineers were occasionally hired for a short period of time to supervise the in­ stallation o f new, imported machinery. These engineers were hired through the Shanghai brokerage that had negotiated the purchase of the machinery on Dasheng's behalf.48 In summary, the spatial location of work and residence in Dasheng's compound said much about status. The resident community was made up of technicians, administrators, and middle management. Senior management, like the unskilled workers, commuted to the factory* The compound func­ tioned like a miniature society: social groups formed according to their eco-

The Realities o f Industrial W ork


nomic position and social status, all under the strict control of Zhang Jian and the senior management, who devised the company policies regulating the compound and work hierarchy. T he establishment of the Dasheng No. i mill with its huge compound and impressive industrial architecture changed the appearance of Tangjiazha village; in fact, what people in the area called simply the "No. i mill" (yichang) became the dominant landmark. A t the same time, the work compound had an impact on Tangjiazha's socioeconomic structure. Shops and food stalls opened near the main gate of the Dasheng No. i mill to cater to the needs of workers before and after their shifts.49 Because of the increased population and its need for food, in the early 1900s Tangjiazha developed into an entre­ pot and marketplace for rice from Anhui and southern Jiangsu, thus becom­ ing a market for grain brokers from neighboring counties.50A late Qing pe­ riod source describes the thriving development of Tangjiazha since the founding of the mill and other Dasheng subsidiary factories: "The residents in the vicinity o f the sluice gates who work at the various factories amount to as many as three to four thousand people.. .. The number of trading boats along the river and markets and shops along the sluice increases day by day."51 T he requirements o f industrial production brought so many workers from outside the community (waidiren ) to the mill that they became a com­ mon sight in Tangjiazha. These workers were despised by the local peasants because o f their black clothes and their strange, unfamiliar accents. In a typi­ cal condescending and derisive reaction to strangers in the community, the locals referred to them as "worms" (chongzi).52 Perhaps the professional skills and thus higher wages and higher social status of outside workers gave the locals additional reasons to envy and to reject them.

Shop-Floor R outine and Discipline Factory work requires discipline. Discipline is required in the production process, maintained through rewards and punishments, and justified by a work ethos and moral code. Obviously, how much discipline is required of the worker and how it is maintained and justified varies according to rank and responsibility, and we shall see how different groups within the work hi­ erarchy responded to the requirements. W ork in the cottage weaving indus­ try or on the firm certainly had its own rules and discipline.3 Farmwork, however, was regulated by the seasonal cycles and subject to the vagaries of the weather. T he Dasheng No. 1 Cotton Mill operated around the clock in


The Realities o f Industrial W ork

two twelve-hour shifts throughout the year.54 Agricultural work and secon­ dary occupations took place within the household, and work routines tended to be more flexible. In contrast, by the early 1920s manufacturing at the Dasheng No. 1 mill involved up to 8,000 workers working to a strict rhythm.55 Coordination required strict discipline. The discipline required to run the cotton mill was laid down in the "fac­ tory regulations" (changyue), which served as written guidelines for unskilled workers, skilled workers, and managers. According to an entry in his diary, Zhang Jian drew up the factory regulations in late 1897.56 These rules were apparently among the most comprehensive regulations to be laid down for an industrial enterprise in China at the time. I have not been able to locate factory regulations for those cotton mills established prior to 1895, but a set of factory regulations for the Deji and the Housheng cotton mills in Shang­ hai published in the late 1910s emulate the example set by Dasheng. They are, however, far less comprehensive and lack the autocratic, strongly disciplinar­ ian spirit enforced by Zhang Jian.57 T o the best of my knowledge, Zhang Jian designed the factory regula­ tions apparently without consulting W estern factory discipline and regula­ tions, such as those instituted in Germany by large industrial companies like Hoechst or Bayer, covering wages, work hours, and discipline, in the 1880s.58 I suspect that Zhang Jian was influenced more by regulations for the mili­ tary and military-related, government-sponsored enterprises in China in the late nineteenth century.59 For example, the "Regulations for the Beiyang Navy" ("Beiyang haijun zhangcheng"), published in 1888 with ample refer­ ences to the regulations of the British and other European navies, dealt with such issues as shipbuilding, administrative control, promotion, rewards and punishments, accidents, financial compensation, and training and could easily have served as a blueprint for Zhang Jian s factory regulations.60 The fact that Zhang Jian was familiar with Chinese naval affairs from his earlier career in the private secretariat of General W u Changqing lends support to this hypothesis. The strong connection between the establishment of a modern military, based on W estern models, and the creation of a new so­ cial order in schools, factories, and prisons through the introduction of new concepts of time, space, discipline, and the body has been established for Meiji Japan.61 The regulations for the Dasheng No. 1 Cotton Mill touched on discipline in several different contexts: time, the handling of machinery and company

The Realities o f Industrial W ork


p ro p erty , an d general issues o f conduct. T h e y becam e im p o rta n t factors in defining w hen, w here, an d how th e w orkforce w as expected to perform in th e factories an d w ithin th e com pound. T im e discipline w as a significant p a rt o f th e overall factory discipline. A s specified in th e factory regulations, unskilled w orkers, referred to as labor h an d s ( xiaogong ), child w orkers ( tonggong), an d female w orkers ( nügpng ), h ad to w o rk twelve hou rs a day in tw o shifts, day an d night.62 D ay -sh ift w orkers h ad to ap pear a t 5:30 a .m. to register w ith th e sta ff in charge o f w o rk su p er­ vision (guangong zhishi).63 A fter th e w orkers h ad entered th e co m pound, th e gate w as locked an d late arrivals were n o t ad m itted in to th e co m pound.64 T h e n a siren w ould sound, w hich was th e signal for th e w orkers to en ter th e w orkshops. In som e w orkshops, th e sh ift was longer th a n th e prescribed twelve hours. In th e reeling room , for example, th e shift could last th irte en hours. In th e w eaving shed, w hich was set u p in 1915, th e sh ift could be as long as fourteen h o u rs because th e prod u ctio n process could n o t be in te rru p te d arbitrarily. H ow ever, th e re was no n ig h t shift in th e weaving shed, probably because daylight from large factory w indow s an d skylights m ade it easier to co n tro l th e com plicated weaving process on th e loom s th a n it w ould have been u n ­ d er insufficient, costly artificial light. Packing d e p a rtm en t w orkers, w hose w o rk load w as m uch m ore predictable in term s o f th e daily o u tp u t, w orked only e ig h t-h o u r shifts an d only d u rin g th e day.65 F o r th e m anagerial staff, th e regulations specified a fixed daily schedule for sta ff m eetings. D aily m eetings in th e late afternoon w ere devoted to re­ viewing th e proceedings o f th e day, an d th e resulting rep o rts h ad to be sen t to th e accounts office.66 O ffice apprentices, w ho lived in th e d o rm ito ry o f th e adm inistrative building, w ere subject to fu rth e r tim e discipline. T h e d o o r to th e ir building was locked a t 10:15 p.m., an d th e lights cam e o n only a t 6:00

a .m. H e re tim e discipline was integrated w ith m oral discipline for single m en living in th e com pound. T h e se rath e r drastic m easures w ere obviously considered necessary in o rd er to prevent im proper activities d u rin g th e night. T h e factory regulations stipulated th a t th e apprentices an d tem p o rary lodg­ ers in th e d o rm ito ry be well behaved an d n o t sm oke opium , gam ble, o r en ­ te rtain p rostitu tes.67

As a physical embodiment of the factory regulations, the Western-style clock tower erected after 1900 as part of the main gate was a prominent fea­ ture of the factory compound and became the omnipresent symbol of time


The Realities o f Industrial W ork

discipline.68 T he clock structured the work schedule for management, and it signaled the beginnings and ends of shifts for unskilled workers.69 As in the W est, factory production, in contrast to work in the village, meant "a me­ chanical and totally uniform division of the working day, instead of the vari­ able, flexible and organic rhythms of more traditional forms of labour."70 T he 1897 factory regulations also specified how workers were to handle machinery and company property. The regulations for the ginning room, for example, stipulated that the machinery had to be oiled and the belts stretched because the lack of proper maintenance could destroy the ma­ chine.71 Female workers in the roving room were forbidden to switch off the machines in order to reconnect broken threads.72 Halting the loom to re­ connect broken threads was a common practice among weavers working at home, but switching the power-driven machine on and off would presuma­ bly wear it out more quickly. The workers were advised to summon the xiaogong, who had been trained in the quick repair of broken threads.73 The frequent advice to handle machinery with care probably reflects as much managements concern about maintenance, financial losses due to downtime for repairs, and replacement costs as the workers' inexperience with modem machinery. O ther regulations laid down in detail that the buildings and company property must be treated with care.74 In the materials department, workers were advised to open the windows on sunny days but to keep them closed otherwise, probably in order to avoid damage through a combination of bad weather and negligence. The same paragraph ordered unskilled workers to transport heavy and bulky materials through the east and north gates of the compound, since these gates were nearer the storage rooms. Other workers were not allowed to use these gates. T he factory regulations also demanded changes in daily habits, such as greater attention to fire prevention. Fire was considered an extreme and con­ stant danger at the Dasheng No. 1 Cotton Mill. This worry, shared by every mill owner, was reflected in the strict orders about fire prevention in every workshop. Fires could be caused not only by the careless use of oil lamps and lights but also by scraps from the iron bands holding the cotton bales to­ gether. Iron scraps swept with the cotton into the metal scutchers could eas­ ily set the cotton on fire.75 A fire started by the scutching machines resulted, for example, in the complete destruction of the Shanghai Cotton Cloth Mill in October 1893.76

The Realities o f Industrial W ork


A stric t ban o n sm oking, especially in th e storage area, w as repeated m any tim es in th e factory regulations.77 W o rk e rs w ere n o t allow ed to carry m atches o r lighters for fear th a t carelessness near th e dry co tto n bales an d clo th bolts w ould spark a conflagration th a t w ould destroy th e entire com p o u n d .78 In o rd er to enforce these fire-prevention m easures, w hich w ere aim ed m ainly a t th e unskilled w orkers, Z h a n g Jian m ade th e m anagers in charge o f th e m aterials, w orkshop, an d miscellaneous tasks d ep artm en ts p er­ sonally responsible for fire prevention.79 T o som e extent, th e regulations dem arcated m anagem ent from skilled a n d unskilled w orkers. R egulations th a t sought to p ro tec t com pany p ro p erty req u ired m anagers to view every w orker as a poten tial thief. A t th e en d o f a shift, th e unskilled w orkers w ere searched as they left th e co m p o u n d for sto ­ len yarn o r co tto n . T h e p rohib itio n against offduty w orkers loitering aro u n d th e storage room s m ay also have been an a tte m p t to curtail th e ft as well as to keep everyone in his o r h er w orkplace.80 T h e factory regulations also addressed the co n d u ct o f m anagers an d th eir assistants. In co n tra st to th e regulations for skilled an d unskilled w orkers, w hich concen trated on behavior th a t was adjudged unacceptable in the w orkplace for practical reasons, th e regulations for m anagers em phasized a t­ titu d es an d m oral values.81 T h e responsibilities an d au th o rity o f th e m anag­ ers w ith in th eir respective d ep artm en ts w ere described in detail. T h e y w ere req u ired to keep th e ir sta ff u n d er tig h t control an d to intervene decisively to p revent inefficiency o r discontent. T h e regulations even recom m ended th a t m anagers g ath er in form ation on th eir subordinates' perform ance b ehind th e ir backs. T h is recom m endation in th e factory regulations was accom pa­ n ied by a q u o ta tio n from th e Zuo zhuan , one o f th e C onfucian classics; p er­ haps th is w as an a tte m p t o n Z h a n g Jian s p a rt to len d th e regulations strongly punitive character th e sanction o f th e classics.82 In addition, th e regulations distinguished betw een perform ance an d p er­ sonal integrity in judging th e m anagers' w ork. T h e term s used in describing th e d istinction are revealing: "U nintentional m istakes, guilt by association, an d b ad results despite good intentions" were considered "public dem erits"

(gongguo), w hereas "corruption, em bezzlem ent, violation o f th e regulations, laziness, an d incom petence" w ere regarded as "personal dem erits" ( siguo).83 Indeed, any breach o f integrity w as viewed seriously, an d private dem erits w ere punishable w ith dism issal. In contrast, poor w ork perform ance led to a red u ctio n in th e annual bonus.84 A pparently th e com m unity o f m anagers


The Realities o f Industrial W ork

w as to consist only o f people w ith integrity, b u t once a person h ad been ad ­ m itte d in to th e com m unity, public standards determ ined how rew ards w ere m eted o u t.

T he appeal to a moral code as a tool of disciplining managers reflected a sharp class distinction. Zhang Jian's regulations for skilled and unskilled workers did not resemble nineteenth-century English employers' attempts to prevent immoral behavior in- and outside the factory by reforming workers drinking habits and use of bad language. In contrast, Zhang Jian did not at­ tempt to improve the morality of his workers.85 The regulations for manag­ ers, however, assumed that they were people of integrity, even though in a very practical way their bonuses were tied to performance. Despite Zhang Jian's commitment to Confucianism (discussed in Chapter 7), the factory regulations for the Dasheng No. 1 mill were on the whole not a strikingly moralistic document. C o rro b o ra tio n for th e practical approach to w orkplace discipline can be fo u n d in th e com pany regulations for th e D asheng N o . 2 C o tto n M ill, th e bran ch mill o p erating on C hongm ing island since 1907.86 T h ese regulations o m itted th e m oral adm onitions for m anagers, b u t th e description o f th e w o rk in th e various shops becam e m uch m ore detailed an d generally less prohibitive.87 T h e N o . 2 mill was only a cotton-spinning mill an d never h ad w eaving facilities and, as the local new spaper repeatedly p o in te d out, h a d to cope w ith an unsophisticated an d inexperienced local w orkforce.88 In th e te n o r o f th e m odernizing 1920s, local publications accused th e people o f C h o n g m ing o f being "dependent o n fate," superstitious, an d lacking in hy­ giene.89 P erh ap s for this reason th e regulations paid m ore atten tio n to de­ tailed jo b descriptions for th e unskilled w orkers th a n to th e m oral appraisal an d education o f m anagem ent. A n o th e r d ep a rtu re from th e 1897 factory regulations was th e inclusion o f th e role o f th e gongtou. F or example, th e regulations for th e roving ro o m laid do w n th a t th e female gongtou in th e N o . 2 mill h ad th e au th o rity to assign w o rk to each w orker o n th e sh o p floor. T h e gongtou s pow er is clean "W h e th e r o r n o t they are experienced, w orkers are required to obey th e as­ signm ents set by th e female gongtou, T h o se w ho disobey are fined th e first tim e, fined double th is am o u n t for th e second offense, an d are replaced th e th ird tim e."90 T h e fine was set equal to one w eeks wages, an d dism issed w orkers w ere n o t to be rehired. T h e regulations for th e D ash en g N o . 2 m ill pub lished in 1910 clearly sta te d th e com pany's official acknow ledgm ent

The Realities o f Industrial W ork


o f th e gongtous au th o rity on th e shop floor. Since th e gongtou was in ef­ fect a subcontractor, her o r his incorporation into th e factory regulations am o u n ted to recognizing th a t th e subcontractor m ight enforce discipline on b eh a lf o f D ash en g s m anagem ent. T h e gongtou h ad officially becom e a p a rt o f th e m ills lower-level m anagem ent. I t is alm ost certain th a t few o f th e unskilled w orkers, even if literate, read o r even knew ab o u t th e factory regulations, since none o f th em referred to th e regulations in th e interviews conducted in the 1960s. H ow ever, alm ost every w orker com plained ab o u t having been disciplined an d fined. Fines w ere levied for poor w orkm anship o r for breaking tools an d even for taking tiny am o u n ts o f cotto n to be used as insulation in th e soles o f shoes. M any w orkers also com plained ab o u t being fined up to tw o weeks' wages for f il­ ling asleep d uring w ork hours.91 I t is clear th a t for th e unskilled w orkers th e prohibitive n atu re o f th e regu­ lations was m o st striking. F or them , discipline was equivalent to th e unneces­ sary restriction o f personal freedom : m ost o f th e unskilled w orkers com ­ plained th a t they had n o t been allowed to eat in th e w orkshops, th a t they had to eat th e ir m eals cold, and th a t they were n o t allowed to rest d u ring w ork, to ch at w ith o th e r w orkers, o r to sm oke inside the compound* Since th e w orkers w ere u n d er th e constant supervision o f the gongtou in th e w orkshop, they som etim es felt com pelled to go to th e toilet if they w anted to have a conversa­ tio n w ith a cow orker. Obviously, th e daily routine in th e factory required th e m to give u p habits they w ere used to w hen w orking at hom e.92 W o rk e rs also com plained about the infringem ent o f personal dignity in th e fo rm o f body searches by th e guards a t th e m ain gate a t th e en d o f a shift.93 Q u ite understandably, they h ated this rigorous routine in w hich even th eir shoes w ere searched. H ow ever, this was n o t an uncom m on m easure in facto­ ries a t th e tim e to curb th e ft o f com pany m aterials and property.

T o judge

from th e interview transcripts on this issue, the w orkers apparently d id n o t feel gu ilt a t taking hom e sm all scraps o f cotton.95 G iven th e enorm ous am o u n t o f co tto n th e m ill used, they did n o t seem to have counted taking a handful o f raw co tto n for padding jackets an d blankets a t hom e as theft. E nforcem ent o f discipline thro u g h th e gongtou in this an d o th e r situations tu rn e d th e gongtou in to a com m on target as the personification o f punitive factory discipline. In th e interviews, the w orkers expressed little sym pathy for th e gongtous responsibilities tow ard u pper m anagem ent.96 In som e cases th e d em ands by th e gongtou w ere certainly quite arbitrary. F o r example, in


The Realities o f Industrial W ork

1914 Ling Wenbin, a fifteen-year-old unskilled worker in the spinning room at the Dasheng No. 1 mill, was told by a fierce female gongtou to cut off his queue. H e refused, was harassed, and eventually decided to quit.97 Nevertheless, the gongtou did not provide sufficient physical control over the whole workforce within the compound. The most visible agent of disci­ pline and enforcement in the Dasheng No. 1 mill was the company's patrol force (.xunding ). According to the 1897 regulations, the force was to patrol the compound day and night, to watch over the gates and side entrances, to check the workers as they left the compound, and to protect the company against burglars.98 During the day the guards were equipped with clubs, and at night they had guns. The fire squad, which was part of the patrol force, was specially trained in using the hydrant (shuilong) in the case of fire. Financial rewards and favorable working conditions were used as incen­ tives to increase the patrol force's loyalty to the management.99 Patrol guards received their food, rifles, and seasonal uniforms. In addition, they received rewards for good results at target practice and medical treatment if they were badly injured while fulfilling their duties. If the guards were successfiil in ar­ resting a worker with stolen goods, the manager of the department for mis­ cellaneous tasks decided how the culprit was to be punished and whether he or she was to be handed over to the authorities. Although the patrol force was on the company's payroll, members did not live in Dasheng company housing. It appears that this was a deliberate decision by the management to prevent them from striking up friendships with other members of the workforce. This assumption is corroborated by the fact that the factory regulations stipulated that local people (turen) were not eligible for the patrol force. In employing outsiders ( waidiren ), who could not speak the local dialect, the management was probably trying to forestall collusion with local workers. The relationship between the guards and the workers was characterized by mutual distrust and the identification of fac­ tory discipline with its enforcement through outsiders. Local workers dis­ liked the company guards for forcing discipline on them, for enjoying a more privileged status in the work hierarchy, and for coming from outside their 100 own community. In summary, unskilled and skilled workers in the Dasheng mills were subjected to a punitive factory discipline intended to make the factory run more efficiently. For the workers, the punitive discipline was the single most important characteristic of industrial work. Despite the undertone of com-

The Realities o f Industrial W ork


p lain t in th e interview s, in practice D a sh e n g s w orkers seem to have h ad lít­ ele alternative b u t to allow th e m anagem ent to ride ro ughsh o d over them .

Chen San, for example, entered the mill in 1911 as a piecer in the spinning room at the age of twelve.101 Together with his mother and his elder brother, he had to commute a long way on foot every day from the village where his family lived and had cultivated land as farmers. Since the family did not possess a clock, they raised a cockerel to wake them up in time for work— a measure with only limited success. Chen San s statement "While at work in the compound, whatever the foreman said had to be accepted as right, it was impossible to say that it was not right" sums up his impression of factory discipline as represented by the gongtou.102 Like many others, Chen was angry with the foreman, whom he called a "rat" (laoshu) in his interview, for impos­ ing a fine on him. H e also despised the guards at the gate who conducted the body searches, which he held responsible for crippling his brother s leg: once, during the rush to leave the compound at the end of the shift, his brother was squeezed in the crowd and hit on the head with a bamboo club by a guard. H e fell and was trampled by the people rushing out. N o medical help was available within the compound for his injuries, which left him lame so that he eventually had to quit work in the m ill There was no apparent pro­ test by the workers, nor any indication that a protest in such circumstances would have attracted the sympathy of Dashengs management.

G ender, W o rk , and Incom e Considering the long, physically exhausting hours and the strict discipline on the shop floor, one wonders why unskilled workers, especially women, were eager to obtain work in the Dasheng No. 1 Cotton Mill. W hy would one consider a factory job if there was work to be done in the fields or on the handlooms at home? W as cash income the only reason for the decision to work in the factory? In this section, I examine work as a means to create in­ come and also look at the general economic background of the workers at Tangjiazha in order to arrive at some understanding of the importance of factory income relative to overall family income.103 Hiring practices and ca­ reer patterns, especially as they involved the employment of women and children, are connected with this issue. From the very beginning, the Dasheng No. 1 mill employed thousands of people from the surrounding area. Based on scattered evidence from the company records and estimates based on the amount of machinery, the total


The Realities o f Industrial W ork

workforce amounted to 3,250 people in 1899.104 By 1925, the Dasheng No. 1 mill had over 8,000 workers with an administrative staff (including skilled workers, management, and engineers) of 400.105 In order to interpret these numbers in a meaningful way, we have to put them into the context o f population figures for the region. If we calculate the population density based on population figures in the Nantong county gazetteer, rural Tangjiazha and its surrounding area with an average o f 885 per­ sons per square kilometer was about as densely populated as Nantong city, which had an average of 964 inhabitants per square kilometer in the early twentieth century.106 It seems plausible to identify migration toward Tang­ jiazha, stimulated by the presence of the mill, from other parts of Nantong county as a reason for the relatively high population density. One indication of the in-migration is the larger than average number of persons per household in Tangjiazha district (qu ). If we again resort to the local gazetteer and analyze the figures from the early Republican period, the average Tangjiazha household had almost ten people, in contrast to averages o f four persons per household in Nantong city and of almost six persons per household in all of Nantong county.107 Statistically almost every seventh person in the Tangjiazha district, or 1.5 persons per household, worked at the Dasheng No. 1 mill.108 The interviews with former workers in the 1960s support the argument of in-migration. In several cases, unskilled workers from other parts of N an­ tong county had left home for economic reasons and moved to Tangjiazha in the hope of improving their standard of living through work in the mill. After they had found work as unskilled workers in the spinning or blowing rooms of Dasheng No. 1, they rented rooms from families near Tangjia­ zha.109 Skilled workers, such as the machinists from southern Jiangsu, moved into company housing.110 Statements about people s standard of living in Tangjiazha in the early twentieth century and changes in that standard due to earnings from work in the factories need to be qualified carefully. As discussed in Chapter 2, Nantong had a traditional cottage industry producing hand-woven cotton cloth. Agriculture was the principal occupation in most of Nantong county; in addition, many rural households engaged in handicraft spinning and weaving.111 Although we cannot put precise figures on the number of house­ holds that might have derived an income from handicraft production, we

The Realities o f Industrial W ork


can n o t ignore th e possibility th at, for many, such an incom e w ould have been substantial. T h is assum ption is corroborated by various pieces o f inform ation we can extract from th e interview s w ith 214 form er w orkers. A ccording to m y analy­ sis o f th eir cases, 43 percent o f all th e interview ed w orkers h ad w orked in th e fields o r been engaged in hand-w eaving before, during, o r after starting to w o rk in the D asheng N o . 1 C o tto n M ill.112 I f we take these 43 percent as a to ta l sample, 17 percent o f th e w orkers h ad w orked in th e fields an d 14 per­ cent h ad been engaged in hand-w eaving before entering th e mill, b u t ceased to d o so once th ey began w ork in th e factory. H ow ever, 64 percent started firm in g during th e ir em ploym ent in the mill; in contrast, only one person to o k u p hand-w eaving. T h e rest o f th e w orkers, 5 percent, w ere farm ing or hand-w eaving before they becam e factory w orkers and continued to do so w hile being em ployed in th e mill. T h is m eans th a t ab o u t h a lf o f the interview ed w orkers engaged in farm ­ ing before o r after their shift in th e factory.113 O f those w orkers engaged in p art-tim e farm w ork at hom e, 77 percent w ere w om en. O n e m ight errone­ ously conclude th a t w om en, rath er th a n men, were expected to w ork at h om e in add itio n to th eir factory jobs. Instead, we m u st n o t forget th a t even am ong th e to ta l sam ple o f D asheng w orkers engaged in farm w ork a t one tim e o r another, only 23 percent were men. T h e interview s also provide us w ith som e inform ation on wages for u n ­ skilled w orkers. T h e re are, o f course, problem s w ith using an interview sam ­ ple as a source o f wage data. T h e interviews were conducted to generate gen­ eral narratives a n d were n o t based on a specific set o f questions; th u s th e interview transcripts do n o t supply uniform inform ation for each w orker. T o m ake things m ore com plicated, th e interview ed w orkers often gave only spo­ radic wage inform ation w ith o u t relating it to a specific year o r tim e period. N evertheless, by averaging only those reports th a t are specific to a period an d to a particular kin d o f w ork on th e shop floor, it is possible to arrive at an im pression o f wage levels in th e D asheng mills. Between 1900 an d 1910, th e average wage for w om en in th e roving room was 0.08 yuan p er day; this rose to 0.12 yuan in th e 1910s b u t decreased to 0.10 yuan in th e late 1920s.114 In th e ginning room , w om en earned ab o u t 0.07 yuan per day in the first decade o f the 1900s an d 0.08 yuan per day in th e 1910s an d 1920s. W o m e n s w ork in th e reeling room was relatively well paid, w ith an average daily wage


The Realities o f Industrial W ork

o f yuan in th e first decade o f the 1900s, 0.25 yuan in th e 1910s, an d 0.20 yuan in th e 1920s. In general, the wage increase in th e 1910s reflects D asheng's business success during the p o s t- W o r ld W a r I boom in th e C h i' nese co tto n industry, an d the decline in wages in th e 1920s m irrors D a ­ sheng's financial problem s in 1922 (see C h a p te r 6) an d th e overall difficulties o f th e C hinese textile industry due to supply problem s, rising prices for raw cotton, and intense Japanese com petition.115 In using th e data extracted from the interview sam ple as an average basis for wages, we have to bear in m ind th a t 77 per cent o f th e interviewees were w om en, an d o f these 80 percent had entered th e m ill as child w orkers b e ' tw een five and thirteen years old.116 T h e wage d ata given above tell us in general m ore ab o u t wages for female child w orkers. H ow ever, th e d iscrep ' ancy betw een wages for ad u lt females an d female children was substantial. In th e absence o f d ata th a t w ould perm it us to construct a com plete tim e series on ad u lt female w orkers, I can give only som e examples: in 1928, a n in e tee n ' y ea r'o ld female earned betw een 0.10 an d 0.25 yuan per day in th e reeling room ; in 1929 a tw elve-year-old female in th e sam e w orkshop earned betw een 0.08 and 0.10 yuan per day. T h is m eant th a t wages for ad u lt females w ere alm ost double those paid children.117 O f course, m any o f these ad u lt w om en w orkers h ad greater responsibilities in the w orkshop. I t appears a t first th a t th e discrepancies in th e wages o f unskilled male an d unskilled female w orkers w ere n o t th a t great. H ow ever, one has to bear in m in d th a t only 23 percent o f th e to tal interview sam ple w ere male workers, an d only 36 percent o f those males were unskilled w orkers. M oreover, 55 percent o f th e male unskilled w orkforce entered th e mill as child w orkers an d th u s received th e low er wages paid children. F or example, in 1916 a male child w orker in th e roving room , age fourteen, earned 0.10 yuan per day. In

1915, a female child w orker, age twelve, received 0.08 to 0.16 yuan per day for w ork in th e sam e w orkshop. N o t surprisingly, unskilled ad u lt male w orkers received distinctively higher wages than unskilled ad u lt female w orkers.118 T h e average o f th e six instances am ong th e interview sam ple o f unskilled ad u lt m ale w orkers' wages show s th a t they earned 0.26 yuan per day in th e roving o r reeling room , w hereas unskilled ad u lt female w orkers received an average wage o f only 0.12 yuan per day for sim ilar w ork. O f course, th e wage discrepancies betw een skilled an d unskilled labor w ere even greater. S tatem ents in th e 1897 factory regulations reveal th a t th e m anagers h ad a fixed incom e o f 50 to 100 yuan per m o n th an d w ere also e n '

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titled to a 15 percent share of the annual net profits, split among at least eight managers.119 T he managers' assistants and the administrative staff received a monthly salary of between 4 and 40 yuan, depending on their specific tasks and responsibilities.120 According to Dashengs account books, the monthly salaries o f engineers ranged between 24 and 33 yuan in 1909-10.121 In general Dashengs level of remuneration was not especially attractive to engineering graduates and reflected to some extent the mills' particular location in the countryside without the standard of living and expenses of the big cities. The fourteen entries from a record produced by the textile school attached to the Shenxin mill in Shanghai in 1929 shows that job changes in cotton mills were frequent.122 Almost half of this school's graduates worked for some time in the Dasheng No. 1 or No. 2 Cotton Mill. The six graduates employed in the Dasheng mills on average changed jobs five times in about twelve years. M ost o f them took jobs at Dasheng No. 1 during the first years o f their professional career and then moved on to positions in cotton mills in industrial textile centers such as Shanghai and Wuxi. Presumably, an engi­ neer would consider employment at Dasheng No. 1 more a starting job than an upward move in his career. T he role o f the gongtou in Dasheng was also connected with a specific career pattern. Most male gongtou were skilled workers who had served an ap­ prenticeship and had experience as a machinist.123The position was consid­ ered to be so important that job openings were advertised in professional tex­ tile magazines in 1919.124The career pattern for the female gongtou in Dasheng was quite different. Here it seems that after long service in one of the work­ shops hard-working and well-behaved women were promoted by middle management to the position of gongtou. This in-house selection process is con­ firmed through descriptions in the interview sample; unskilled female work­ ers mentioned their promotion to gongtou not so much because they felt em­ powered in their new position on the shop floor but because of the raise in pay.125 The in-house promotion also corroborates the absence of outsiders among the unskilled labor in the workshops, since the gongtou were themselves locals who saw no need to bring in unskilled labor from other areas. In order to measure the economic potential of wages at Dasheng, we have to look at their purchasing power. Unfortunately, there are no detailed price indices available for Tangjiazha or Nantong for the period between 1900 and 1930.1261 shall, therefore, resort to a price index for another part of Jiangsu province for the purpose of comparison. In the following, I use the Wujin


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price index.127 W u jin was a rice-producing rath er th an a cotton-producing county and, in this respect, was n o t sim ilar to N an to n g . N evertheless, rice p roduced in W u jin was sold in S hanghai and elsewhere in Jiangsu province, an d so th e price o f rice in W u jin reflected supplier-prices, and th e price series is indicative o f annual price changes for m uch o f Jiangsu, including N an to n g . In 1900, one sheng (liter) o f polished rice cost 0.035 yuan on an annual av­ erage in W u jin . T h is price rose to 0.057 in 1910 and to 0.073 yuan in 1920. W h a t can these figures tell us ab o u t th e purchasing pow er o f th e wages paid by th e D asheng mills? A n unskilled female w orker in the roving room a t the low est end o f th e pay scale earned on average 2.24 yuan per m o n th o r 26.88 yuan per year late in th e first decade o f th e 1900s. I f we take 470 catties (285 kilogram s) o f rice as the m inim um subsistence per person per year, this w orker w ould have paid a total annual sum o f 26.79 yuan at W u jin prices,128 o r roughly h er annual income. Ac this tim e, an unskilled male w orker in th e roving room earned about 2.8 yuan per m o n th a t the low er en d o f th e pay scale, o r 33.6 yuan per year. T h is am o u n t w ould have been m ore th an suffi­ cient for the purchase o f one year s polished rice for one person.

However, at the upper end of the pay scale, a female worker promoted to head of the shift in the spinning room would earn a monthly wage of 5.46 yuan per month or 65.52 yuan per year during this period. This wage would have enabled the worker to buy twice the amount of rice needed for personal subsistence. At the upper end of the pay scale, the situation was even better for male workers in advanced positions on the shop floor. Their average an­ nual income for work in the spinning room and packing room came to 100.8 yuan. W ith this amount they would have been able to buy almost three and a half times the amount of rice needed for personal subsistence at Wujin prices. In general, these figures are indicative o f w h at industrial wages m ight have m eant to D ashengs w orkforce. U nskilled w orkers at the low er en d o f th e pay scale w ould n o t have been able to afford polished rice th ro u g h o u t th e year. T h e y could have resorted to low er grades o f rice o r o th e r staples such as sw eet potatoes. M any o f th e w orkers interview ed in th e 1960s com ­ plained th a t they had h ad to eat noodles and vegetables instead o f rice o r h ad lived on sw eet potatoes through th e w inter. T hese dietary p attern s probably reflect th e standard o f living for w orkers a t the lower end o f th e pay scale.129 W o rk e rs at th e upper end, however, w ould have been able to afford m uch m ore rice in their diet, even th ough the W u jin figures probably exaggerate

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somewhat the amount of rice they were able to purchase, since the price in rice-producing W ujin would probably have been lower than in rice­ importing Nantong. A comparison of Dashengs wages with those paid textile workers in the Shanghai cotton mills, even though the data are incomplete and do not spec­ ify the workers'jobs, reveals that Dashengs wage levels were generally lower than those in Shanghai mills during the 1910s and 1920s.130 Thus we need to pose the question why the near-subsistence wage received by workers at the lower end of the pay scale would be reason enough for women and children to seek work in the Dasheng factories. It is possible to understand that the wage was attractive to them only if we take into consideration that half the female workers worked in their spare time in the fields at home. Thus the cash wage from the factory work, albeit near-subsistence level, was addi­ tional to the family's regular farm income, and their wages would lead to a higher family income than without the factory work. In contrast, for men the financial incentive to seek employment as an unskilled worker in Dasheng was not strong enough to make them give up cultivation and forfeit farm income. This argument is supported by Rawski's data on the trend of annual farm wages for males in Jiangsu, which establish that the real value of rural wages in Nantong, Haimen, and Chongming rose at least moderately from the mid-i920s to the early 1930s and certainly was not declining.131 Therefore, the majority of men continued to work on the farm, unless they were skilled and could, for example as a machinist, earn almost four times the amount of wages earned by unskilled male workers at the lower end of Dashengs pay scale.132 Since around 77 percent of the workforce at Dasheng No. 1 were women, female labor became a distinctive characteristic of the mill. About 55 percent of these women would have held two jobs— before setting off to work in the mill or after returning from their shift, they would do farmwork. Some even gave up their work in the mill temporarily and helped out at home during the agricultural busy seasons on a regular basis.133 One could even argue that these women actually held three jobs since they, of course, also had house­ work and thus often worked 18 to 19 hours per day.134 In the interviews the women clearly expressed their frustrations about being burdened with mul­ tiple responsibilities at the workplace, on the farm, and in the family. W ith regard to the issue of how the concept of industrial work was perceived and integrated into the language, it is interesting to note that the interviewed fe-


The Realities o f Industrial W ork

m ale w orkers used th e te rm gong (w ork) only in reference to factory w ork, b u t n o t for farm w ork, handicraft production, o r h ousew ork.135

N ext to female labor, child labor was another important characteristic of Dasheng's workforce. According to a survey conducted in 1930 among nine* teen Chinese cotton mills all over China, the mills in Nantong had the high' est proportion o f child labor.136 The survey reported that in Nantong female workers accounted for 56.5 percent of the total workforce, child workers (female and male) for 12.8 percent, and male workers for 30.7 percent. However, we have to bear in mind that more than half of the child workers were female, too. In comparison, the workforce in Shanghai mills on average con' sisted of only 5.7 percent children.137 Probably representative of most work' shops o f the mill, a picture taken at Dasheng No. 1 in the late 1910s or early 1920s shows a huge workshop with reeling machines attended by children. M ost o f them are so small that they obviously have difficulties looking over the reels to the next row of machines.138 T he answer to the question why the Dasheng mills employed a relatively high percentage o f child labor lies in the career pattern for unskilled workers. As mentioned above, the overwhelming majority of unskilled female workers (80 percent of the women in the interview sample) joined the Dasheng No. 1 mill as children and then continued their careers as unskilled female workers and sometimes even as gongtou. Needless to say, the child workers, a welcome source o f cheap labor with little responsibility for the management, brought much desired cash income for rural families whose surplus from farming was more difficult to turn into cash and subject to the usual vagaries of agricul' ture. The importance o f a cash income explains why female workers resorted to bribing the gongtou with gifts of home-grown produce or money to ensure jobs for their children and other family members or to keep their own job if they had incurred the gongtou s wrath.139 The combination of factory and farmwork abo forced many female workers to take their children with them into the factory to keep an eye on them. Inevitably, nasty accidents involving children happened not because they were tending machines but because they played unattended in the workshops near dangerous machinery.140 H ow ever, there was still an o th er side to keeping th e children in th e w orkshops. In nineteen th -cen tu ry E nglish co tto n m ilb, children w ho en ­ tered th e factory a t th e age o f nine o r te n w ere expected to acquire sk ilb by w orking next to th e ir paren ts o r o th e r relatives.141 D u rin g th is inform al ap ­ prenticeship, th e children began as scavengers o r piecers an d received litd e o r

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no pay until they were at least able to tie some threads on the spinning ma* chines.142 As the interview sample confirms, the same happened at the Dasheng N o. 1 mill. Educating the next generation of workers through early, informal on-the-job training, even if the workers were still regarded as un­ skilled workers, was certainly a significant incentive for Dasheng's manage­ ment to hire child labor. As one former worker described her training ex­ perience: "W hen I was ten years old, the workshop buildings were being erected. I often went with people to the compound in order to play there, and by playing around I just learned [the job]. A t the age of thirteen I en­ tered the factory to work in the spinning room."143 Even if we cannot dismiss the welcome financial contribution of child workers to the family income, this example indicates that there was another work-related, not entirely wage-related reason for children to enter the factory at a young age. In my interpretation of the gender, age, and wage structure of industrial work in the Dasheng No. 1 Cotton Mill, I have consciously given more room to the quantitative than to the qualitative analysis of wage and employment data, however fragmented, in order to substantiate generalizations about the motivations, incentives, and pressures behind decisions to work in a factory. A t the same time, I am not oblivious to the often negative work experiences of most o f the women and children. In fact, it is very difficult to discuss the factory life of women and children without being repulsed by the harsh work environment they had to deal with. Historically, child labor was not a moral issue in China since all children were integrated into the world of work, either in- or outside the home, from a very young age. W hat to our age appear to be appalling conditions of child labor were common long before factories were built in China or the West. In England, legislation limiting working hours for children was first intro­ duced with the Factory Acts of 1831 and 1850.144 In China, where factory work was a much more recent phenomenon, the problem of child labor was not directly addressed until the creation of the Factory Act in December 1929 and its final promulgation in 1931.145 However, the driving force behind demands to improve working conditions in Chinese factories were the for­ eign inspectors of the International Labor Organization from Geneva or campaigners on behalf of religious societies such as the YMCA. Even after the introduction of factory legislation in the 1930s, articles in professional textile magazines indicate that the legal requirements and actual conditions on the shop floor were still worlds apart, in both rural and urban areas.147


The Realities of Industrial W ork

Labor O rganization and Labor Protest Strikes were not nearly as numerous in Tangjiazha as in the Shanghai cot­ ton mills, and they were fairly ineffective and quickly put down by the fac­ tory management. The absence of unrest or strikes at the Dasheng No. i mill until the late 1920s is remarkable. The first strike occurred in March 1928 and was sparked by management's attempt to increase the workload for workers in the reeling room without a concomitant increase in wages. Consultations between the workers' deputies and the management were fruitless, and after a few days the striking workers had to give up. Lu Jingwei, secretary of the Communist party branch for Nantong county, established in 1926, had become involved in the strike movement and was consequently arrested and sentenced to fifteen years' imprisonment. However, the other strike leaders, who were also arrested and punished, were not members of the Communist party. 9 The next strike at the Dasheng No. 1 mill was a protest in 1932 that ended in violent confrontation with the company's patrol force, leaving several workers wounded or dead.1 Similar "stability," secured and ruthlessly enforced through Dasheng's pa­ trol force, was the rule in the No. 2 factory on Chongming island. In 1922, when a dispute broke out between the work supervisors at the No. 2 mill, Zhang Jian personally ordered the guards to solve the problem.1 1 However, we do not know whether the solution was achieved by peaceful means. Al­ though measures taken by the factory management in the early 1930s to in­ crease productivity on the shop floor led to serious complaints and opposi­ tion from the workers, their protest did not lead to an organized strike movement. Instead, they accepted a heavier workload, with each worker re­ sponsible for an increased number of spindles and machines, without any raise in wages.152 Given the general level of political discourse and activities in the N an­ tong area, the workers' organization had not developed sufficiently to sup­ port a serious strike movement. A candid local report on social conditions in Chongming in 1925 revealed the lack of organizational structures and procedures in the industrial workplace : "Chongming's industry is not at all developed, and there is no opportunity to study for improvement. In addition, there are no labor organizations such as unions or industrial associations. Everybody holds meetings in order to decide on the methods for each procedure."153

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Whereas strike activities in the Shanghai cotton mills took place under the direction of the Shanghai General Union, the weakness of the workers' organization in the Nantong area resulted in unfocused protest without strategy or results. So fer I have not been able to identify strong informal re­ lationships among Dasheng workers through sisterhoods (jiemeihui), con­ nections with the Green Gang, and native-place organizations as described by Emily Honig and Elizabeth Perry for workers in Shanghai's industrial enterprises during the Republican period.154 Female workers at Dasheng certainly established informal networks by walking together in groups from the village to the factory, helping and supporting one another at work, or ar­ ranging employment for family members and friends. However, these net­ works were not institutionalized and did not lead to the emergence of a con­ scious class of factory workers. It appears that the lack of organizational structures was a reason why political activism and the wave of strikes in the late 1920s did not automatically spread from Shanghai to Tangjiazha. Politi­ cization o f the workforce in Nantong did not take place before the late 1930s, and then it came in response to the Japanese invasion. During the Japanese occupation of the Nantong area from 1938 to 1945 and the imposed Japanese presence in the Dasheng mills (see Chapter 8), the lack o f personal safety and the frequency of incidents involving Japanese sol­ diers led to the strengthening o f informal worker organizations in- and out­ side the mills. Female workers would organize themselves in tight groups, walking to and from the compound together and banding together as much as possible at work, even during the breaks or while running errands in the factory. They also accompanied one another to the toilet facilities, which were located in the distant corners of the compound, and established their own watch groups on the shop floor during night shifts. Nevertheless, sev­ eral women among the workers interviewed in the 1960s admitted that they had been so afraid of Japanese harassment that they quit the Dasheng N o. 1 mill altogether.155 This leads to a more general question: to what extent were the Commu­ nist party and labor organizations able to mobilize the workforce in Dasheng, particularly during the Sino-Japanese War? In the 214 interviews with former workers, the absence of references to organized labor activism in the factories is quite striking. In 1938, the Communist party dispatched rep­ resentatives from Shanghai to establish underground organizations in vari­ ous localities in northern Jiangsu province. However, the party's attempt to


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infiltrate the Dasheng mills never really succeeded. Meng Guilin was sent to Tangjiazha with three tasks: to create an underground party organization within the Dasheng No. i mill, to organize anti-Japanese resistance among the workers, and to mobilize the masses in the political and economic strug­ gle.156 According to Meng's description of his activities in Dasheng between 1938 and 1945, his mission eventually reduced itself to anti-Japanese resis­ tance, which simply meant sabotage of factory property and the production process. This particular form of resistance did not require formal organiza­ tion, specific training, or political education.157 It could also be interpreted as a reflection on the general lack of vibrant political activism among the work­ ers of the Dasheng No. 1 mill. As Meng Guilin had to realize, the workers' social and economic affiliation with the factory, "their lifeblood," was not easily replaced by a new, uncertain political agenda.158 Another, probably even more important reason for the workers passive behavior and reluctance to strike was their continuing involvement in farmwork at home and the particular income structure that grew out of this situation. In addition to the women's vital cash contributions to the farmbased family income, the specific employment pattern connected with Dasheng's rural-based workforce certainly took the edge off the workers' readiness to go on strike. For example, when the Dasheng No. 1 mill was hit by a severe crisis due to financial mismanagement and shortages of raw ma­ terial in the early 1920s (see Chapter 6), the management halted production for several weeks and dismissed the workers temporarily. Since the majority of the unskilled workers had farmland to which they could return, they were able to rely on produce and income from their land to sustain themselves. In contrast, rural workers who moved to the big cities to obtain work in the textile mills there could no longer fall back on income from farmland when they were laid off or had to accept wage reductions and hence were more likely to form unions and strike to protect their jobs and wages.

W hat generalizations about factory work, worker identity, and the process of social transformation through industrialization can we draw from the Dasheng No. 1 Cotton Mill? If we look for similarities between this largescale factory in the countryside and Chinese industrial enterprises in the ur­ ban areas, Chinese sources from the late 1910s and early 1930s indicate that in terms of industrial architecture and work organization, Dasheng No. 1 was

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indeed a prototype for C hinese cotton mills established later in Shanghai an d o th e r cities.159 A s recent studies suggest, changes in w ork discipline, w o rk organization, an d social stratification also came ab o u t in o th e r lightin d u stry sectors such as tobacco, m atch, or to o l factories during th e R ep u b ­ lican period.160 M y analysis points to the significant differences betw een industrial en ter­ prises in th e countryside an d in th e cities. In 1899 th e D asheng N o . 1 C o tto n M ill w as in term s o f th e area it occupied and th e size o f th e w orkforce an ex­ ceptional operation for th e T angjiazha area an d even on a nationw ide scale.161 T h e developm ent o f an industrial w orkforce in C h in a in th e late n in eteen th and early tw entieth centuries should th u s no longer be consid­ ered only in th e context o f an urban setting. A s D asheng s case shows, "the im portance o f place' over class' in E ast A sian constructions o f w orker iden­ tity" is certainly valid for th e rural as well as th e urban context in C hina.162 A t th e sam e tim e, urban w orkers gradually developed a different conscious­ ness w ith regard to their role as industrial w orkers. In con trast to D asheng's w orkforce, th e m ajority o f unskilled w orkers in C hinese co tto n mills located in th e u rban areas o f Shanghai, T ianjin, an d o th e r cities w ere m igrants from rural areas.163 A lthough native-place organizations and local personal con­ nections were vital to obtaining a jo b and surviving in th e harsher u rb an en ­ vironm ent, unlike D asheng w orkers, they slowly lost th eir ties w ith the countryside and over tim e adapted, a t least in part, to th e life-style o f the city.164 S ubsidiary occupations and cottage industries no longer played a role in th eir lives. T h is leads us to an o th er question: how, if a t all, was industrial w ork co n ­ ceptualized by m anagem ent? A nyone familiar w ith th e literature on textile mills will recognize sim ilar problem s regarding w ork discipline, social hierar­ chies, an d labor relations in industrial enterprises in England, th e U n ite d States, an d Japan from th e late eighteenth to th e early tw entieth centuries.165 Z h a n g Jian's autocratic style re fle a s th e earliest stage o f private C hinese in ­ du strial m anagem ent, w hich was ch a ra a e riz e d by indirect co n tro l th ro u g h th e gongtou system and th e absence o f scientific m anagem ent. H ow ever, even in th e W e st, for example in the G erm an chem ical industry, factory m anag­ ers— instead o f forem en an d overseers— began to hire w orkers for th e w ork­ shops only in the first decade o f the tw entieth century.166 F rom a com para­ tive p o in t o f view, still m ore significant is th e fact th a t in Jap an scientific m anagem ent and T aylorism appeared on th e shop floors only in the 1910s


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and 1920s and co-existed with and reinforced the corporate paternalism of Japanese labor management.167 As the author o f the factory regulations and director of the Dasheng en­ terprises, Zhang Jian never addressed the issue of factory work and its im­ pact on man, society, and environment directly. N o t surprisingly, he did not deal with the problem of the workers* alienation from their work or with the workers* physical and economic hardships, since these issues were generally ignored at the time.168 Only in one report on the Dasheng No. 2 mill from 1907 do we find a descriptive reference to the unskilled workforce.169 There Zhang Jian pointed out the advantage of recruiting female workers from lo­ cal villages. Since these women had unbound feet, they were able to walk long distances to the factory and to stand for a long time during work. In addition to good-quality cotton and cheaper land prices than could be found in Tangjiazha, Zhang Jian obviously considered a hard-working, robust fe­ male workforce a valuable asset of the mill operation in Chongming.170 These considerations were presumably important to the management of the Dasheng No. 1 mill as well. Reflecting the same practical concerns, the 1897 regulations for the No. 1 mill show that management regarded child workers as a normal and indis­ pensable part of the workforce.171 Only a W estern visitor would describe his impressions of the working conditions for child workers at the Dasheng mill in 1921 in a critical way: "When I visited the extensive cotton mills erected by his Excellency Chang Ch*ien [i.e., Zhang Jian] at Nant*ungchou, Kiangsu, in December 1921 I saw that a very large number of children were employed there, with little or no provision for their safety from accidents with machin­ ery, and in sanitary surroundings of the most primitive sort."172 As a firstgeneration entrepreneur and industrialist in China, Zhang Jian certainly had no ambitions to become a philanthropic entrepreneur in the style of Robert Owen, who was genuinely interested in the welfare of his workers, especially the children in his factories at New Lanark.173 Zhang Jians social ambitions were always directed at the improvement of educational and welfare institu­ tions in Nantong city (see Chapter 7) and not at the Dasheng No. 1 mill and its huge unskilled workforce in Tangjiazha. One searches in vain for com­ pany-owned schools, hospitals, or other facilities that so often characterize social policies o f big companies.174 A park, opened in the early 1920s, was the only facility donated by Zhang Jian to Tangjiazha. A local source from 1925 stated that the purpose of the park was to provide recreation for the "ordi-

The Realities of Industrial W ork


nary people" (pingmin) o f Tangjiazha and th a t it was n o t a place for "work­ ers" (gongren) from the nearby factory to loiter in.175 T h e irony o f this state­ m en t is th a t th e m ajority o f the workforce w ho appeared as "workers" to the villagers o f T angjiazha and w ho therefore were n o t encouraged to use the p ark m ost probably did n o t see themselves as "workers" b u t as "ordinary people" from nearby villages.

In an interview I conducted in Tangjiazha in 1995, a retired machinist from the Dasheng No. 1 mill, who had lived all his life in company housing, told me that he visited Nantong city only two or three times a year in the 1930s.176 However, he admitted that he always called himself a local from Nantong (Nantong ren). Although in this case Nantong designates the city as well as the county, his remarks could indicate that skilled workers aspired to identify themselves rather with Nantong city. Tangjiazha disappeared as a memorable place. Nobody identified with it, neither Zhang Jian nor man­ agement nor the skilled workers. As for the unskilled workers, their roots remained in the village.



The Characteristics of Big Business



The Corporate Structure

F o r m o st people— businessm en, visitors, a n d locals— the factories in T an g jia zh a w ere D asheng. T h e re was m uch m ore, however, to D ash en g th a n ju s t th e p ro d u ctio n o f c o tto n yarn a n d cloth. T h is chapter explores these o th e r aspects, particularly co n tro l a n d accountability structures, ow nership, an d financial a n d personnel m anagem ent, using archival records a n d docum ents prod u ced by the in stitu tio n itself.

Certainly, the cotton mills in the Nantong area were a crucial part of the enterprise, and the Dasheng No. i Cotton Mill remained the backbone o f the Dasheng business complex, even after the creation of affiliated enter* prises. The Guangsheng Oil Mill, the Dasheng Steamship Company, and the Tonghai Land Reclamation Company were established in 1901, the Hanmolin Publishing House and the Dalong Soap Factory in 190z, the Zisheng Iron Workshop in 1905, and the Fuxin Flour Mill in 1909, to name just a few. In addition, Dasheng branch mills were opened on Chongming island in 1907 and in Haimen county in 1921. W hen Dasheng acquired the legal status o f a limited liability enterprise in 1907, it began to develop into a business group and by 1910 comprised seventeen different affiliated compa­ nies.1However, neither the cotton mills, especially the No. 1 mill, nor any of the other manufacturing units was institutionally the most significant part of the business group. As I show in this chapter, financial and managerial con­ trol within the Dasheng business group was exerted from an office outside the structure o f the affiliated and subsidiary companies. D ash en g s incorporation a n d its continuing expansion offer valuable in ­ sights in to the m anifold problem s faced by the directors, m anagers, a n d sh areh o lders o f a large co m pany during the process o f establishing legal iden­ tities a n d financial responsibilities. T h e fact th a t D ash en g w as never quite a


The Corporate Structure

family business or a government-backed enterprise with official patronage such as the industries managed by Sheng Xuanhuai made its transformation into a corporation in the Western sense even more complicated. As a result, the Dasheng enterprise represented a new category of business institution in the early twentieth century. It transformed and applied business practices and institutional tools with historical roots in traditional Chinese business cus­ toms to the institutional framework of a limited liability shareholding com­ pany. Thus the discussion in this chapter ultimately leads to the question whether the process of incorporation is an appropriate measure of the "mod­ ernization" of business institutions and structures in China.

Legal Status as a C om pany It is difficult to establish the exact date when Dasheng, or more precisely the No. i mill, became a privately owned legal entity. Based on my extensive searches in various archives, I think that it is safe to say that no document exists that formally dissolved the initial structure of the enterprise as a guan* sbang heban operation. The text printed on share certificates from 1897 and from 1903 states that the spinning mills "were established in Tongzhou with approval granted by edict in response to a memorial from the Imperial Commissioner of the Southern Ports [Zhang Z hidong]. . . , by contract set up for perpetuity to be jointly managed (yongyuan heban) by officials and gen­ try"2 (see Fig. 5.1). In March 1905 the Dagpngbao newspaper published an an­ nouncement listing the Dasheng No. 1 Cotton Mill as approved and regis­ tered by the Ministry of Commerce (Shangbu) together with ten other companies (gongsi) established by Zhang Jian.3 This was the official recogni­ tion of the company registration required by the Company Law (Gongsi lü) promulgated in 1904. Finally, the published report of the first shareholder meeting in 1907 reveals that the Dasheng No. 1 Cotton Mill had by that time taken the form o f a stockholding company with limited liability ( gufen

youxian gongsi).5 The shareholders seem to have greeted the new legal status of the com­ pany with great enthusiasm. Although Dasheng had been operating with private share capital since its establishment in 1898, shareholders had no public forum within the enterprise to voice suggestions or criticisms. Zheng Xiaoxu, one of the most prominent shareholders and active in both business and national politics,6 is quoted in the 1907 shareholder report, which



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Fig. 5.5 Page from the account book for one of Zhang Jian's private accounts under the name Dunyu ta n g (NTD: B 40i-3ii'2,1897-1900, p. 59).

was not built until 1915, and in contrast to his son, he never pursued an ex­ pensive urban lifestyle (see Chapter 8). Zhang Jian s contemporaries who have been interviewed for local oral history projects since the mid-1980s con­ tinue to popularize this frugal image by describing Zhang Jian s simple diet and his habit of binding scraps of paper into the booklets in which he kept his diary.141 In c o m b in atio n w ith his claim s o f fru g ality a n d self-sacrifice, Z h a n g Jian trie d to convince sh a re h o ld e rs as w ell as th e g en eral p u b lic o f his m orally


The Corporate Structure

superior motives in pursuing business. The following statement from the factory regulations, published in 1910, purveys his untiring dedication to building a successful enterprise solely for the benefit of shareholders and business associates: In the midst of the many mouths that violendy attacked me, and at a place where the attitude was blind and bigoted, my position deteriorated as I tried harder and harder before all this was achieved. I did not do this [for the benefit] of a single per* son or family, as you honorable gentlemen already know! With firmness and determination, one can rise above defeat and achieve success. With wasteful negligence and concern only for ones private ends, even success will end in defeat. How can success and defeat be the glory or shame of only one person, my humble self?142 The traditional perceptions of merchants and commercial activities as mor­ ally tainted might have prompted Zhang Jian to make these humble and self-deprecating statements. Obviously they also helped smooth negotiations with dissatisfied shareholders, fractious managers, and skeptical business associates. Considering the modest shareholdings of the family in Dasheng, just how wealthy were Zhang Jian and his family? A special issue of the Nantong newspaper, published for his funeral in October 1926, is the only source that gives information about the real estate assets and other possessions of the Zhang family.143 One article describes Zhang Jian s and Zhang Chas provi­ sions for distribution of the family's property. It is interesting that the will was made public at a time when Zhang Jian s elder brother was still alive and representing the family. Each brother had expanded his own family resi­ dence over many years, but according to the will the descendants of both brothers were to share the family land and real estate. Most of the buildings were to go to the eastern branch of the family, that is, to Zhang Chas branch; Zhang Jian s books and art collections were destined for his son's, western branch of the family. The land was to remain "eternally under the mutual management of both branches" but divided by right of ownership.144 The deeds for sacrificial land and for the land on which the girls' school was built and the land set aside for its upkeep, altogether 707 mu of land, were to stay with Zhang Xiaoruo's branch. The son's branch was also to receive the deeds to 1,560 mu of various categories of land rented to tenants. Zhang Cha's branch of the family was to receive the deeds to 1,575 mu of land rented to tenants, as well as to several large properties in Nantong city and

The Corporate Structure


the rental income from them. In the end, Zhang Jian's son received more land because his share included the fields of the ancestral trust, whereas Zhang C has branch of the family obtained not only agricultural land but also all the urban real estate. Although it is difficult to assign a concrete value to the urban real estate, this settlement suggests that Zhang Cha, rather than Zhang Jian and his branch, controlled more of the family's finances and assets. The impression that Zhang Cha s personal wealth surpassed that of Zhang Jian was con­ firmed by Zhang Jian's granddaughter, Zhang Rouwu, in an interview in 1995: "Zhang Cha had the money, and Zhang Jian had the reputation" (Sanfangyou qian, sifangyou ming).146 Corroboration of this can be seen in the mansions the two built in Nantong. Zhang Cha established his grand residence in the southern section of the city two years before Zhang Jian built his in 1915.147 The fact that the residences faced each other across the Haohe canal— Zhang C has being larger and more impressive than Zhang Jians— tells us some­ thing about both brothers' wealth and their competition for status and recog­ nition in local society, a subject further discussed in Chapter 7. Zhang Jian's will also specified the distribution of his business assets. All his shares in the cotton mills, oil mill, flour mill, and land-reclamation com­ panies were to be divided equally between the western branch of the family, represented by the Z unsu tang (the business name of Zhang Xiaoruo's ac­ count), and the eastern branch, represented by the Dunyu tang account.148 It appears that by 1926 Zhang Jian's shares in these firms were worth around 200,000 taels. Neither Zhang Jian nor his brother could have accumulated these assets from their company salaries, bonuses, and interest income. The amount of real estate and financial assets, owned not only by Zhang Jian but by the family as a whole, points to additional sources of income from other business opportunities and investments in land reclamation, which I analyze in the following chapter. Further evidence of the extensiveness of the family's financial assets came to light in 1928, two years after Zhang Jian's death, when Tonghai xinbao, a local newspaper, reported that the provincial authorities were investigating Zhang Cha's private property.149 According to the newspaper, Zhang Cha was said to have private financial assets of more than 2 million yuan, in addi­ tion to real estate estimated at another million yuan in Haimen and other counties, acquired mainly through the purchase of reclaimed land»150 Obvi-


The Corporate Structure

ously, the very size of Zhang C has holdings lent themselves to suspicions that he might not have acquired them legally, but in the climate of this period that would not in itself have led to a government investigation. As one might suspect, there was a hidden agenda at work here. The investigation was apparently initiated by the Guomindang government in retaliation for Zhang Jian s and Zhang Cha s financial support of Sun Chuanfang (18851935)» the Beiyang warlord, who in 1926 had controlled the five provinces around the lower Yangzi, including the Nantong area (see Chapter 8). Sun Chuanfang was the political enemy of Chiang Kai-shek (1887-1975) and was one o f Chiang s primary targets during the Northern Expedition. This mili­ tary campaign, which began in the summer of 1926 and moved from Guang­ dong province toward the Yangzi region, eliminated Chiang s political ene­ mies and established him in power. W ith the help of Zhang Zuolin, the warlord in control of Manchuria, Sun Chuanfang was able to hold on to power in the economically strategic provinces around the Yangzi until March 1927, when Chiang Kai-sheks troops took over the area, including the cities o f Nanjing and Shanghai.151 Because of Sun Chuanfang s defeat, Zhang Cha had lost power and support in local and provincial politics by 1928. Obviously fearing further investigations and pressure from the new Guomindang government in Nanjing, Zhang Cha fled to Beijing and re­ turned to Shanghai only in 1931. It is not clear what happened to his land and financial assets after his move north. Apparently most of his property remained in the hands o f the Zhang family, since his son stayed in Nantong and began to work for the Dasheng No. 1 mill in the 1930s.

Next to the incorporation process itself, the relationship between control and ownership is one of the central issues for understanding business in China. Recent scholarship has shown that because of the strong family in­ fluence the control o f equity was rarely separated from the control of man­ agement and that succession disputes were of great significance for the con­ tinuity of the company.152Historians generally agree that the influence of shareholders in China's first stockholding companies, such as the China Merchants' Steamship Navigation Company, was restricted and limited. T he general scholarly evaluation of Dasheng is much more positive. Histori­ ans like Z hu Yingui have, however, praised Zhang Jian s role in introducing

The Corporate Structure


incorporation too uncritically by seeing this step as automatically empower* ing shareholders and restricting the power of Zhang Jian, who M himself set the boundaries o f his influence,”153 In contrast, I argue that another conclusion is plausible: although the Dasheng No. 1 Cotton Mill adopted the legal form of a limited liability company as early as 1907, it was not managed in such a way as to allow the shareholders to curtail the power of the founder*director. The mills and the Dasheng business group as a whole obviously continued traditional business practices and institutions characteristic of Chinese family enterprises. In ad* dition, members o f the Zhang family remained involved in the financial and managerial organization of the company, even as a hierarchy of salaried ex* ecutives came into existence to manage the different parts of the business on a day*to*day basis. In fact, despite Dashengs incorporation, the gap between ownership and control widened considerably until the early 1920s because of Zhang Jian s skillful institutional use of the Shanghai office. Nevertheless, Dasheng was in many ways a new type of business in early twentieth*century China: it satisfied the new legal requirements by adopting limited liability, holding shareholder meetings, publishing annual company reports, and observing the existing regulations for accounting. These "mod* ern” aspects of Dashengs internal management, that is, modern by W estern standards o f business organization and legislation, complemented the "mod* ern" aspects o f its factory management and shop*floor discipline discussed above. Despite the modern, rational, and efficient appearance of Dashengs workshops and administrative offices, however, they ultimately were run under Zhang Jian s personal patronage. As a business group with cross*asset subsidization, Dasheng is an excellent example of management by paternal* ism, which was institutionalized through the Shanghai office.154 If we con* sider paternalism in the contexts of individual control, freedom of choice, and accountability, then it is obvious why the Shanghai office never was sub* jected to the strict company regulations that directed every other aspect of the business. For Zhang Jian, direct control over information and channels o f command and financial flexibility without strict accountability were this office s functions. It would have been awkward to acknowledge these aspects o f the Shanghai office in Dashengs official company regulations. N o t sur* prisingly, the Shanghai office as an institution of control worked only as


The Corporate Structure

long as Zhang Jian dominated the business* Once third parties such as creditor^ banks began to restructure management, the function of the Shanghai office as a traditional institution within a modern corporate enterprise came under attack (see Chapter 6). Until recently, China business historians have tried to capture the essence of Chinese enterprises by focusing on personal relations, particularly in fam­ ily businesses. Frequently, a business organization is more or less reduced to being a network, often in the context of a search for the "spirit of Chinese capitalism."155 Scholars have argued that "kinship and collegiality in China play roles analogous to those played by law and individuality in the West," and the growth o f the Chinese economy has been explained in terms of in­ creased economic opportunities and the simultaneous expansion of net­ works.156 Scholars who discuss Zhang Jian and his relationship with the Dasheng business complex always refer to his clout as a public figure and to his personal connections in the political and intellectual arena.157 O f course, business always involves networks, and as I have shown, personal relation­ ships played a significant role in the management of the enterprise's various parts. However, Dasheng s internal organization into departments and its overall structure, with the Shanghai office as the controlling unit, suggest that "networking" is an inadequate explanation. Essentially, in Dasheng, we find conflicts of interest between the founder-director and his shareholders and divided loyalties between people whose positions relied either on the au­ thority of the founder or on the holding of shares. Private influence was also a problem in W estern firms in the late nine­ teenth and early twentieth centuries. For example, Leslie Hannah has dem­ onstrated that in Britain in 1914 the majority of registered joint stock com­ panies "were private rather than public companies."158 Even now, the fact that networks play an important role in W estern joint-stock companies in­ fluences the general debate over the future of corporations.159 And most cer­ tainly, poor disclosure and weak regulations are well-known and persistent problems o f companies and the stock market in contemporary China. T u ­ multuous shareholder meetings with angry minority shareholders are not unknown.160 Even Japanese corporations have only recently started to re­ spond to shareholder complaints and concerns through improved disclosure and regular meetings, especially since economic developments have forced them to rely more on investors than on banks as a source o f funds.161

The Corporate Structure


Dasheng's structure within the new institutional framework allowed Zhang Jian to dominate the enterprise without having to consider shareholders' interests. As the analysis of financial records in the next chapter shows, Zhang Jian was held answerable neither to the shareholders nor to the company's accountants. Thus, with Dasheng we witness the conflict be­ tween accountability and paternalism in the emergence o f a new business in­ stitution in twentieth-century China.



Business Performance and Crisis Management

As we saw in the preceding chapter, accountability and control practices de­ fined and sustained the role of an authoritarian director in the Dasheng business complex* In this chapter, we will investigate how these institutional mechanisms created an environment for financial strategies that almost led to the bankruptcy of one of China's most successful industrial enterprises in the early Republican period. Dasheng s financial vulnerability became appar­ ent during the crisis in the Chinese textile industry in 1923-24. In the words o f Marie-Claire Bergère, this crisis "brought into question not only the fu­ ture o f Chinese industry but also its recent past and the nature of the prog­ ress accomplished."1 In contrast to many Chinese industrial enterprises, Dasheng managed to survive this crisis and others that followed. How profitable and financially sound was Dasheng in the 1910s and 1920s? In retrospect and from the vantage point of the outsider, from 1900 on the Dasheng No. 1 mill operated at a fairly stable profit, which improved dra­ matically during the postwar boom of 1919-20. The subsidiaries and affili­ ated companies were also profitable, and plans were made to found two new branch mills, which materialized in the early 1920s. In 1921 profits dropped sharply, and from 1922 on the company operated at a substantial loss. Bor­ rowing from banks to cover the losses led in the end to a takeover of Dasheng by a banking consortium in 1924. How did an enterprise that seemed so profitable get into such a predicament? This troubled period is often neglected in the literature or explained away as the result o f external economic factors such as fluctuations in raw cotton and yam prices and foreign competition.2 In a recent article, Tang Keke and Qian Jiang have argued indirectly along the same lines by linking Dasheng s

Business Performance and Crisis Management


financial problems co increasing raw material costs.3 In contrast to these tra­ ditional interpretations, this chapter uses a detailed analysis of account and balance sheets to argue that internal financial practices led to Dashengs cri­ sis in 1922. O f course, external economic factors did play a role. However, the events leading up to the debacle did not happen randomly. Although it may seem that the crisis caught the company— shareholders, management, and even Zhang Jian himself—by surprise, many financial problems and inappropri­ ate decisions developed out of Dashengs established business practices and were already visible in the 1910s. I begin by explaining how and why things went wrong in the Dasheng cotton mills by exploring their profitability and indebtedness and then present a structural analysis of expenditures and pro­ duction costs. Although my analysis focuses on the No* 1 cotton mill be­ cause of its centrality in the business complex, we need to investigate the cri­ sis in the context of the whole business group and not just the mill business. Thus the third part of this chapter relates the crisis in the land-reclamation companies to the cotton mills' development. After exploring the financial crisis and the flow of funds from Dashengs books, I conclude by discussing the input of the banks and their loan strategies during the 1920s.

Profitability and Indebtedness Profitability and indebtedness are the two most obvious indices of business performance. For contemporary observers, the profit-and-loss accounts in the annual business reports of the Dasheng No. 1 mill provided information on the company's surpluses or losses in a particular fiscal year.4 These state­ ments recorded the annual net profit. In contrast to present-day accounting practices, items such as depreciation of assets were deducted only after 1907, and taxation figured only in the form of the so-called transit tax ( lijuan ) paid for raw cotton and yarn.5 The annual net profit should not be confused with the retained profit (net profit minus bonuses, reserves, and donations), which was carried forward to the next year and appeared as an accumulated sum under the company's liabilities on the balance sheet. As Fig. 6.1 shows, from 1900 on the No. 1 mill made an annual profit, which rose steadily to its first peak of 483,070 taels in 1905.6 Profits de­ creased sharply to only 55,904 taels in 1907 because of machinery purchases and repairs and the establishment of the N o. 2 branch m ill From then until

net profit

yam-sales surplus

Fig. 6.1 Net profit and yam-sales surplus of the Dasheng No. i Cotton Mill, 1899-1928 (based on the mills annual company reports in D S Q X D X ) . See Table Ai, p. 295.

Business Performance and Crisis Management


che micUiçios, che No. i mill made moderace profits before plunging inco debe in 1916 wich a loss of 97,080 taels. This loss is linked to an expansion in che N o. i mill as che numbers of spindles was increased, 400 looms for weav­ ing were purchased, and new factory workshops for che new spinning and weaving machinery were builc.7 According co a supplementary report on the mill's financial situation, the loss was accompanied by an increase in assets of 850,000 taels in machinery and buildings in 1916. In 1917, profits rose dra­ matically to 661,769 taels and reached a record high of 2.5 million taels in 1919. In 1920 a profit of 1.9 million taels was recorded, but 1921 brought a 64 per­ cent decline in profits to 691,092 taels. The negative trend continued from 1922 until 1926; only in 1927 did the mill move into the black again. How does Dasheng s profit history compare with that of commercial cot­ ton production as a whole? One would expect the overall profitability of the company to follow the general market conditions closely. In the case of the Dasheng No. 1 mill, however, the returns in the form of revenues from yarn sales were only partly responsible for the company's overall profitability. T he figure for Dasheng s income from yarn sales was based on a peculiar bookkeeping principle.9 Throughout the company's history, purchases of raw cotton were not listed under expenditures in the annual profit-and-loss accounts presented to the shareholders. Instead, these expenses were sub­ tracted from the income for yarn sales, and the surplus was then entered as a lump sum. 0 This surplus (jinhua chusha heyu) was recorded under income as a net figure in the profit-and-loss accounts. Figure 6.1 shows the N o. 1 mill's income from yarn sales less the payments for raw cotton, which I shall refer to as the "yarn-sales surplus." Between 1900 and 1921, the yarn-sales surplus closely parallels the changes in the an­ nual profit. After a steady increase, the yarn-sales surplus peaked at 894,202 taels in 1905, then dropped to slightly more than half this level to 425,759 taels in 1907. During the following years, the yarn-sales surplus generated a steady but moderate income. The year 1916 is an exception: despite a yarnsales surplus o f 623,849 taels, the company recorded a loss because of its sub­ stantial expansion. In 1917 the yam-sales surplus rose dramatically and reached a peak o f 3.6 million taels in 1919. T he gradually widening gap between the two lines in Fig. 6.1 beginning in 1916 illustrates a significant change in the relationship between the two fac­ tors. During the mill's early history, the gap between net profits and the yarn-sales surplus was fairly small, an indication that the yarn-sales surplus


Business Performance and Crisis Management

counted for a substantial percentage of the mill's annual net profit. For ex­ ample, in 1905 annual profits were 54 percent of the yarn-sales surplus, and in 1912, 42 percent. However, from 1916 on, this percentage decreased significandy, for example, to 32 percent in 1918 and 1919. The widening gap be­ tween the two figures reveals that factors other than market conditions for yam sales were curtailing the mills net profits. A case in point is 1922, when the N o. i mill had severe net losses despite a substantial yam-sales surplus of 996,813 taels. And in 1925, even a yam-sales surplus of 1.1 million taels could not prevent an overall net loss of 241,454 taels for Dasheng No. i.11 If signifi­ cant income from product sales could not prevent the company from sliding into the red, then we have to ask why. Between 1917 and 1921, the excellent yarn-sales surpluses mitigated the ex­ tent to which the Dasheng No. 1 mill was suffering from indebtedness. Fig­ ure 6.2 shows the aggregate amount of loans and the annual interest the company owed on these loans.12 After 1900 debts rose slowly to 1.5 million taels in 1909, then decreased again and averaged roughly 1 million taels per year until the mid-i9ios. In 1915 the company's indebtedness amounted to 1.83 million taels per year and rose steadily to 2.9 million taels in 1920. After that date the No. 1 mills indebtedness skyrocketed to 9.15 million taels in 1925 and decreased only slightly to 8.1 million taels in the following year. As Fig. 6.2 shows, interest payments rose with the increasing indebted­ ness. Between 1900 and 1905, the annual interest amounted to less than 100,000 taels per year. Following a rise to 152,489 taels in 1906, interest pay­ ments remained fairly stable at an annual average of roughly 100,000 taels. After 1915 interest payments grew sharply to the maximum of 1 million taels in 1922. The dramatic increase in bank loans after 1922 did not, however, lead to commensurate growth in interest payments. W ith Dasheng s insolvency and the takeover by the banks, the amount and scheduling of the No. 1 mill's interest payments were repeatedly renegotiated and extended, as the com­ pany encountered difficulties in meeting the annual interest payments. It is difficult to comment on the interest rates charged by Dasheng's creditors, since until 1921 loans were recorded only as one lump sum on the balance sheet, whether they were short- or long-term loans. Presumably, dif­ ferent creditors charged different interest rates.13 It is, however, obvious that from 1919 to 1922 interest rates rose significantly. O n average, during the first years of its operation the No. 1 mill had to pay interest rates of more than 10

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% > # . rfe A ("Zhang Jian and China's unique path of early moderniza­ tion: analysis of the land-reclamation business in Huainan). Zhongguo jingjishi yan­ jiu ^ fL 1997# no. 1:14-24. Lin Jubai . Jindai Nantong tubu shi. i t , f t ï$j U JL jtL (History of native cot­ ton cloth in modem Nantong). Nanjing: Nanjing daxue xuebao bianjibu, 1984.

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cd Xiao Zheng J 6 ^ , 61: 31785-952. Reprinted—Taibei: Chengwen chubanshe, 1977Zhang Jian îfeŸ* H ui shijuan (Paper for the metropolitan examination). N.p., n.d (ca. 1895-96). --------- . Nantong Zhang shi Changle zhipu d q iiL ifc fa lfr (Genealogy of the Changle branch of the Zhang family in Nantong). 1921. --------- . Riji 0 t i (Diary). In Zhang Jian quanji (Complete works of Zhang Jian), ed Zhang Jian yanjiu zhongxin tfT4 Dongbei dong gongfang dongshi dongshiju i f M j Du Yuesheng i t ft Dunji $fcti Dunyutang ffc fë jt fahuan FanDangshi ¿ $ $ ‘1fr Fan Fen FanXuqing faqiren # f e A faren >fcA fatuan fenhu fucheng xiang WJ#,#!* Fuxin 41.Iff fuzhai lei 'f+ffrlK

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accountability, 19,20; in Dasheng, 20, 129,155,157,208 accounting, 133-35* 142, 203-4, 336*152. See also Shanghai office accounts analysis, see individual entries under Dasheng No, 1Cotton Mill accounts office (zhangfang), 91,99,130, 133; as traditional institution, 14446,148,150, See also Shanghai office administrative office, 133 affiliated companies, 137-38,140-41, 143 agency costs, 147 Allgemeine Elektrizitätsgesellschaft (AEG), 269 annual company reports, 133,134, 341*14 appropriation fund, 174 archival sources in Nantong, 6-7,307 Arnold College, 258 auditors (chazhangyuan), 129 audit: of Dasheng in 1924,127,194-99, 201 Aurora University, 258 banking consortium (yintuan ): landreclamation companies, 188-89,204; Dasheng cotton mills, 200-205; fi­ nancial and economic integration, 207; management during the late 1920s and early 1930s, 264,267-68

Bank of China, 188,190,200,204-5, 207. See also banking consortium Bank of Communications, 49,188, 190,200. See also banking consor­ tium baogongzhi (contract work system), 95 baoshenzhi (contract labor system), 95 Bastid, Marianne, 61 Bergère, Marie-Claire, 158,178 Bian, Linan, 93 board of directors (dongshiju), 129 bonus (huahong), 101,126,127,174-76,

345»35 bookkeeping, 5ee accounting Braudel, Fernand, 20 Brokerages, 7 4 - 7 6 # 96,142 Brown, Rajeswary, 19,288 Buddhist temples and monasteries in Nantong, 234-35 business: firms, 16-18,21; institutions, 124» 131 business accounts, 128-29,146,335*124. See also hao;ji; tang business group, 23,288; Dasheng, 69, 123,131,135,136,155» 168,190 capital investment, 130 capitalism, 29 capitalization: Dasheng No. 1Cotton Mill, 64,65,67


cash flow, see under Dasheng No. i Cot' ton Mill; Dasheng No. 2 Cotton Mill; Dasheng No. 3 Cotton Mill chambers of commerce (shanghui), 46, 61-62,237-38» 246 Chan, Wellington, 18 Chandler, Alfred, 22,131,135 chang (factory), 84 Chang Zonghu, 26 Changle, 56,94 Chen Baochu, 244,274-75,279 Chen Guangfii, 178,189,255 Chen San, 105 Chen Shiyun (Zhang Xiaoruo's wife), 257,277

Chiang Kaishek, 154,251-52,263 child labor, see Dasheng No. 1Cotton Mill child workers (tonggong), 99 China Merchants' Steamship Naviga­ tion Company, 17» 34-35» 37» 65,68, 154,263, 278 Chinese Cotton Mills Owners' Asso­ ciation (Huashang shachang lianhehui), 75,149» 245 Chinese economic history in the Re­ publican period, 29 Choi, Chi-cheung, 18 Chongming, 42-43,68,102,114,238, 242,332*153 Chu, Samuel, 25 Chung, Stephanie, 249,335*24 civil society, 249 cloth shop (buzhuang), 66 coal, 138,172 Coase, Ronald, 23 Coble, Parks, 269-70,277 Cochran, Sherman, 17,245,278,283-

«4 Commercial law, 17,20,40. See also Company law Communist activities in the Nantong region, 275-76; Wang Minzhi, 277; and Zhang Jingli, 277


company culture, see Dasheng No. 1 Cotton Mill company housing, see Dasheng No. 1 Cotton Mill Company law (gongsi lü), 124,126-30,133 company patrol force (xunding), 104-5, 273»275» 329*93 company registration, 124-25 company reports: balance sheet struc­ ture, accounting terms, 342*4» 342*19 See also under Dasheng No. 1 Cotton Mill compradors (maiban), 60,61 Confucianism, 59 conglomerate, see business group contract labor, 95 control: managerial, 135; of costs, 135; and ownership, 19,146-47,154-56» 287-88,290-91 controlled economy (tongzhi jingji ),

274-75 corporation, 16,19-20,23,156,283,285; as definition for Dasheng, 284-85 cotton cultivation, 43-44» 212; and land reclamation, 68,222-26 cotton mills in Japan, 93-94» 117-18 cotton prices, see raw material costs un­ der Dasheng No. 1Cotton Mill cotton textile production, 43-44» 7879» 106-7,265 cotton trade, 45,46 Dada Steamship Company, 260-64 Dafeng Land Reclamation Company, 186-87,195» 220 Dalai Land Reclamation Company, 186-87 Dalong Machine Works, 75,269, 362*114 Dalong soap factory, 123,138,143 danwei (work unit), 13,92-93 Dasheng model, 291 Dasheng No. 1Cotton Mill, 18; raising capital, 63-66; machinery, 64-65,

Index 67» 73-74* 87,89,100,127,320*152; land purchases, 77,322*1104; con« sanction of factory, 77-78; factory compound, 82-84,95» 99; work­ shops, 84-87,89-91,99-100, 324*115; workers, 84,86-87; workers' iden­ tity, 89-91,115-17» 119; unskilled workers, 89-92,94-95» 101,103; skilled workers, 91-92,94,96,101; employees, 91-92,94-95; company housing, 9^-94» 104; company cul­ ture, 94-95; managers, 94,99» 101, 103; factory regulations and disci­ pline, 98-104; shop-floor routine, 99-100; child labor, 99,112-13,118; female workers, 99-100,105,111; profitability, 158-62; annual reve­ nues from yam sales, 161; indebted­ ness, 158,162,164,190-96,267; labor costs (wages and salaries), 169-70; raw material costs, 169-70,178-81, 185; fuel costs (coal), 170-72; divi­ dend payments, 172-74; bonus dis­ tribution, 174-76; depreciation, 176; reserves, 176-78; assets and liabili­ ties, 191-95; accounting function of charity projects, 197-98; flow of funds, 198-99; impact of creditor banks, 199-205; problem of succes­ sion, 256-57, 262-63; yam produc­ tion for the Manchurian market, 265-66; changing marketing and distribution, 266-67; Japanese man­ agement and reaction of the work­ force, 270-74; transition to nation­ alization, 277; state-owned enterprise since the 1980s, 281-82 Dasheng No. 2 Cotton Mill: 74; land purchases, 77; workers, 96,118; fac­ tory regulations, 102; accounts, 143; profitability, 164; indebtedness, 164-65; and creditor banks, 200-201, 203


Dasheng No. 3 Cotton Mill, 43,69,78; profitability, 164; indebtedness, 164-65; and creditor banks, 200202 D asheng N o . 8 C o tto n Mill, 200-201 D asheng shareholders, 66,139-41,147 D asheng Steam ship Com pany, 123,136, 143 Dasheng xitong qiyeshi, 27-29,206,312*172 D atong Spinning and W eaving C o m ­ pany, 238 D ayoujin Land Reclam ation Com pany,

186-87,196 D ayu L and Reclam ation Com pany,

186-87,195 Deji company, 67 Deji qianzhuang, 48 depreciation, 159,176 diandang (paw nshops), 48 dianyue (ten an t agreement), see T onghai L and Reclam ation C om pany under com pany regulations and discipline dike managers (tijingli ), 224 dividends, seeguanli Dongfang, 229 dongshi (senior m anager), 131 D u X uncheng, 21-22 D u Yuesheng, 253,260,262-64

economic reforms, 289-91; property rights and privatization, 289,291; “hollowing out" of state power, 290 Economy and Society, see Weber, Max employees, see Dasheng No. 1Cotton Mill engineering, 75-76,324*116 engineers: foreign, 74-75» 96; Chinese, 75- 76,92, 94, 96,109 E nron C orporation, 208 enterprise reform, 15,290 entrepreneurs, 56,60,285; and p atrio t­ ism, 290. See also Z h a n g Jian exam ination system, 61

4 i6


factories, 16. See also wwfer Dasheng No. i Cotton Mill Factory Acts, 113,332*1147 factory compound, see Dasheng No. 1 Cotton Mill factory discipline, 97-98,100,103. See also Dasheng No. 1Cotton Mill factory regulations (ehangyue), 98,99, 100. See also Dasheng No. 1Cotton Mill family business, 17-18,20,258,286-87 Fan Dangshi, 238-39 Fan Xujing, 148 farmers' association (nonghui ), 238 farm work, 107,111-12; and cash income from factory work, in, 116 fatuan (professional organizations), 237 Faure, David, 16,29,287 female workers (nügong), see Dasheng No. i Cotton Mill Feng Hefa, 221 Feuerwerker, Albert, 17,35,3207151 Finnane, Antonia, 44,48,316*178 fire prevention, 100-101,104,328*178 firm as concept, 2,21-22. See also busi­ ness Fitkin, Gretchen, 244 Ford, Henry, 281 foremen, 91,95. See also gongtou Foucault, Michel, 235-36 Fu Xiao'an, 263 funds, flow of, 126 Funing, 42,229 Futai qianzhuang, 224 Fuxin Flour Mill, 94,123,136,143,167 Gao Anjiu, 240 Gao Qing, 132 Gaoming bao (The Rugao announcer), 245-46 German registration of Dasheng, 26870 gong (factory work), 112 gongchang (factory), 83-84,323*16

gongfang (workers' housing), 92 gongren (worker), 90-91,119 gongst (industrial company), 34,124 gongtou, 95-96,102-5,109,112,271-73# 275 government role in business, 288-89 government sponsorship, 36-41,50,79, 80 Granovetter, Mark, 23 Green Gang (Qing bang), 49,115,252, 260,262-64,278 Grove, Linda, 265 guan (official), 39 guandu sbangban (government supervi­ sion and merchant management), 16,

34-35 Guangsheng Oil Mill, 94,123,136-38, 167-68,237-38 guanli (guaranteed dividend), 67,130, 134# 172-74 guanshang beban (joint governmentmerchant management), 16,36,39, 65# 124 guanzhuang (cloth firms), 47 gufen (shares), 138 Guomindang, 252,263-64,275, 277-79 Habermas, Jürgen, 243 Haifuzhen, 217-18,224 Haimen, 42-43# 48,56-57, 68,213,218, 220-21,229-30 Hamilton, Gary G., 283 hang (administrative section), 83,91 hanjian (traitor), 274 Hanlin scholar, 58,67,235 Hanmolin Publishing House, 123,243 Hannah, Leslie, 156 Hanyang Ironworks, 65,320*151 Hanyeping Company, 17 bao (business name), 128,142, 335*124 Haohe canal, 153 Hengfeng Spinning Mill, 17 Hengji, 66,133 Henriot, Christian, 274-75



Hershatter, Gail, 81 H etherington ÔC Sons, 74-75

Japan: economic presence in China, 59, 63

H ew lett-Packard C orporation, 287-88 holding company, 136,288 H o n g Lanyou, 277 Honggui (Red Devil) brand, 266 H onig, Emily, 81,95,115 H ow ard ÔC Bullough, 74-75 Hu Zuofii, 261 huabu hang (doth merchants' associa­ tion), 241 Huacheng Land Reclamation Com­ pany, 186-87,189,195 Huaihai Industrial Bank (Huaihai shiye yinhang), 49,148,254-55,258 Huainan Salt Yards, 42-43 Huang Jinrong, 253,260 Huang, Philip G C , 27,311*170 Huasheng, 37# 65, 328*176 Hubei Weaving Mill, 38

Japanese cotton yam and cloth im ports,

Im azeki T em pö, 248 Imperial Railroad Administration, 65 imperial workshops, 32 income: management, 108-9; staff, 109; engineers, 109 incorporation, 16,18; in Dasheng, 21,39, 123,126-31,155,251 industrial architecture, see Dasheng No* i Cotton Mill under workshops Industrial Company (Tonghai shiye gongsi), 77,139-41,338W85 Industrial Revolution, 22 industrial work, 81. See also under Dasheng No. 1Cotton Mill industrialization, 16, 31,33-39,50,59,63; Japan, 3 4 , 98 institutional analysis of business, 4,1819,21-22,28,282 interest rates, 162-63 interlocking directorships, 137 International Anti-Opium Assoriation, 253

International Labor Organization, 113

265-66 Japanese developm ent companies: Jiangbei xingye gongsi, 271 Japanese occupadon, 115; in N antong, 268-74; reaction o f Chinese entrepreneurs, 277-78 ji (business nam e), 128,144,146,150,

195-96,203 Jian Z haonan, 245 Jiang X ishen, 132 Jiangnan, 41-42 Jiangnan Arsenal, 33,76 jin chang (entering th e factory), 90 Jincheng Bank, 200,202,204-5,207.

See also banking consortium Jinsha, 4 5 , 132 jinshi degree, 58 ju (governmental bureau), 34 juren degree, 58 Kaiping Coal Mines, 34-35,37,327*159 Kanegafuchi Company, 270-73; in Shanghai, 324*113 Kirby, William, 130-31 Krupp, Alfred, 94,325*137 Kubo Töru, 18,265 labor hands (xiaogong), 99-100 labor organization: C om m unist party, 114-16,279; unions, 115; sisterhoods and inform al networks, 115 labor protest, 114; sabotage, 116; patriotic resistance, 273-74; reaction to Japanese occupation, 278-79

Lai, Chi-kong, 17,24,35 lanbu (blue-dyed cotton cloth), 43, 315^48

land purchases, see Dasheng N o . 1C o t­ to n Mill; Dasheng N o . 2 C o tto n Mill



land reclamation, 14» 42-43» 68,213-14 land-reclamation companies, 43,185-87; and the 1921-22 crisis, 187-90; and flow of funds in Dasheng, 195-96. See also Tonghai Land Reclamation Company Lanzhou Mining Company, 41 late Qing reforms, 32,61-62 Levy, Marion, 56 Li Fuchu, 260 Li Guangquan, 92,3257*30 Li Hongzhang, 33» 35-37» 58 Li Shengbo, 203-4 Li, Lillian, 145 lijin (transit tax), 33 lijuan (transit tax), 159 limited liability, see incorporation Lin Jubai, 47 Lin Lansheng, 142,148 Lin Zuobo, 266 lingong (supervisory work), 272 Liu Hongsheng, 126,135,146,278 Liu Housheng, 196 Liu Kunyi, 64 Liu Yishan, 67,240 Liu Zhengda cloth business, 67 local state corporatism, 289 Lowell: textile machinery, 74-75; Tex­ tile College, 258 Lu Jingwei, 113 Lu Runxiang, 80 Lu Xiaojia, 259 Lu Yongxiang, 259 luddite-like protests, 78-79 Lüsi, 254 Ma Min, 60 machinery, see Dasheng No. 1Cotton Mill machinists, 91,109,111 management: structure, 131; autocratic management style, 285-86. See also under Dasheng No. 1Cotton Mill; Zhangjian

managers (jingli dongshi), 64* See also un­ der Dasheng No. 1Cotton Mill managing director (zongli), 126 Manchurian (Dongbei) cloth market, 47,66,264-66 Mao Dun, 11-12 Maojiaqi, 248 Martin, Brian, 260,264 Meiji restoration: economic policies, 40 Meng Guilin, 116,272-73 Meng Lin, 148,248 Merchants, 20,34,38,40,46-48, 5960,63,66 Midnight (Ziyc), see Mao Dun military influence on factory discipline, 98 Ministry of Commerce (Shangbu), 124-25 minsheng (livelihood), 59 Minsheng Shipping Company, 261 Mitsui, 74 modern as concept, 19; applied to Dasheng as business, 20,144,155, 208,282,284 modernization, see under Nantong city under modem schools and facilities mofan (model), 231,247; see also Nan­ tong city monopolies, 37 Mori Tokihiko, 178 Mu Ouchu, 75,3337*168,33371173 Muchou tang, 225 mufu (private secretariat), 58 namowen (number one), 272 Nantong chamber of commerce, 62, 237 N antong city, 4 2 ,44-45» 57»106,

3157156; as periphery, 45» 51»*sites and institutions, 70; image and Nantong culture, 119,230-31; modem schools and facilities, 212,231-34; welfare projects, 234-35; social order and control, 235-36; "middle class" and


urban society, 236-37; networks and associates among local elite, 237-39; architecture, 239-40; newspapers, local publications, and public dis« course, 242-45; since the 1980s, 281, 361m Nantong Combine, 254-55 Nantong culture, 239. See also Nantong city Nantong Friendship Club (Nantong youyi julebu), 237,240,243 Nantong merchants, 63,66-67 Nantong region, 13—15, 41-45* 56» 63,68, 106,213-14,229-30, 329*1106; ab­ sence of railways, 42,281,314*134; tenancy rates, 220-22 Nantong Textile School, 70,76,96 Nantong Yintie Hongfang Tinplate Factory, 12,289 Nanyang Brothers Tobacco Company, 17* 149»245 native banks (qianzhuang), 48,142,148» 204 native-place organizations (huiguan), 47- 48»241 networks, 23,39,156; and native-place, 39; and hierarchies, 283-84 Nie Qigui, 79,286 Nie Yuntai, 245,340*1128 Nishizawa, Haruhiko, 220 North China Herald, 38,70,244 Oi, Jean, 289-90 opium trade and business, 252-56,260 Owen, Robert, 118 ownership, 19,146-47. See also control passbook (xizhe), 68 paternalism, 155,157,248-49 patronage, 23. See also government sponsorship Pearse, Amo, 181 Perry, Elizabeth, 81,115 Pollard, Sidney, 22,135,284


Pomeranz, Kenneth, 29,285 porters (kuli ), 84,323*19,324*110 privatization, see economic reforms; in­ corporation professional managers, 284 property rights, see economic reforms provincial assemblies, 62 public sphere, 243,247,354*1127 Qian Jiang, 158,181 Qiao Qiming, 220-21,227 Qidong county, 220 Qiu Yunzhang, 223,226 Qixin Cement Company, 41 qiyejia (entrepreneur), 60 Rawski, Thomas, 29,75, hi , 207,331*1131 Redding, S. Gordon, 283 regional development, 15,212,230,248 regional enterprises, 11-13,15,17-18,211, 279,282,286-87# 290-91 reserves (gongji), see Dasheng No. 1 Cotton Mill risk management, 206 Rong family, 73,205,258,278-79,286 Rong Zongjing, 278,286 Rugao, 42# 44» 48, 213, 241, 245» 3I7»8o Ruifuxiang company, 145 salt: trade, 14,42; production, 213, 219 Salt Bureau, 147,219 scholar, see Zhang Jian scholar-officials, 58-59 Schoppa, Keith, 237 scientific management, 117» 264 self-government (difang zizhi), 61,228, 230,237,258 self-strengthening movement, 33 Sha Yuanbing, 137# 239 shachang (cotton mill), 84 shang (merchants), 60 shangban (merchant managed enter­ prise), 16,63



Shanghai, 45,71» 81; migration to, 4950; International Settlement, 57,74, 268-69; general chamber of commerce, 62; textile industry, 95,98, 108,111-12,117; cotton prices, 181-84; home to Zhang Xiaoruo, 257,25960; shipping business, 261,317*192 Shanghai Bankers* Association, 188 Shanghai Chamber of Commerce, 238, 263 Shanghai Commercial and Savings Bank (Shanghai Bank), 49,142,149» 178,188-90,191,199-202,20$, 207. See also banking consortium Shanghai Cotton Cloth Mill, 35-36, 100 Shanghai office (H u zongzhangfang), 135, 141-43,188; as private office for Zhang Jian, 144-47; changes under creditor banks, 203 Shanghai stock exchange, 130,174 Shanxi Central Bureau for Commercial Affairs, 74 Shao Xunzheng, 36-37 Shao, Qin, 26,248 share capital, 128 share certificates: Dasheng No. 1Cot­ ton Mill, 67,125; Dasheng No. 2 Cotton Mill, 125-26 shareholders, 124,126-27,130,134,13940,178,208,276-77 shareholding company with limited liability, 15 shazhuang (yam shops), 267 shen (gentry), 60 Shen Jingfu, see Shen Xiejun Shen Shou, 196 Shen Xiejun, 63-64,66-67,132,142, 237 Shen Yanmou, 203,348*1120 Shenbao, 130,243 Sheng Xuanhuai, 17,61,65,124, 320*151, 32 o



shertshang (gentry-merchants), 60

Shenxin mills, 109,205,286,324W13, 352*179 Shiliubu, 261,263 shiyejia (industrialist), 60 shop-floor routine, see Dasheng No. 1 Cotton Mill Shunkang, 48 sigongzi (Four lords), 259 Sino-Japanese war, see Treaty of Shimonoseki Skinner, G. William, 29,45-4$ Society for the Preparation of a Consti­ tutional Government (Yubei lixian gonghui), 61,144 stock exchanges, 130 stockholding company with limited liability (gufen youxian gongsi ), 124 strikes, see labor protest Subei, 41» 44» 48-49 subsidiary companies, 136-41,143; financial performance, 167-68. See also affiliated companies succession in business, 73 Sulun mill, 80 Sun Chuanfang, 154,253-56,263-64 Sun Zhixia, 239 SunYat-sen, 62 sushe (dormitory), 92,99 Swire, 74 Taiping Rebellion, 32 tang (family trust), 128-29,146,151# i55> 195»335*24 Tang Keke, 158,181 Tangjiazha, 46,63,77» 82,84, 92, 94, 95, 97,106,138 taxation, 129,159 technology, see engineering textile machinery, see under Dasheng No. i Cotton Mill Theory of the Firm, 19 Three Prosperities Company (Sanxin gongsi), 253 Tianjin, 81

Index Tianshenggang, 46,74,260 T ongcheng Com pany, 266 T onghai L and Reclam ation Com pany,

68,123,136,138-39» HO, 143» 186,213; land reclamation, construction work, and spatial organization, 214-18; salt workers ( zaomin ) and squatters ( shamin), 219-20; tenants and regu­ lated cultivation, 220-23; managerial and adm inistrative hierarchies, 22324,227; com pany regulations and discipline, 225-27; com pany schools,


Tonghai xinbao, 153,244-46,274 T ongm ing Electrical Com pany, 237 T ongrentai com pany, 143 T ongyang canal, 84 T ongzhou, 42. See also N an to n g City T ongzhou cotton, 43,59,63,212-13 township-village enterprises (T V E s)

(xiangchengqiye), 12-13,281-82, 28991 T reaty o f Shim onoseki (1895), 16, 32, 36- 37»59»63 T reaty ports, 40


wartime inflation and debt consolida­ tion, 270 Weber, Max, 21 Weng Tonghe, 78 Wong, R. Bin, 29 workers, 81. See also Dasheng No. 1 Cotton Mill workshops: during Ming and Qing, 8283. See also Dasheng No. 1Cotton Mill W u Changqing, 58,98 W u Jichen, 147-49,188-90,200, 203, 237,257,259. See also Shanghai office W u Peifu, 263 W u Yigao, 260 Wujin price index, 109-10,184-85 Wuxi, 286-87 X u Gengqi, 258, 35411116 X u Jingren, 188,200,205,237 X u Jingwen, 202 X u Xianglin, 132 X u Z hongzheng, 258 X ue N anm ing, 58 xuehui (study societies), 61

tubu (local hand-w oven cotto n cloth) 47,66, 265-66

tou, 109 waidiren (outsiders), 97,104

Yancheng, 42» 229 Yang Guanbei, 262 Yang Z onghan, 80 yanglou (foreign building), 86 Yangzi River, 41-43,46,84,253,281 Yanye Bank, 205. See also banking consortium yam -cotton exchange, 274 Ye X uyuan, 224 Yeh, W e n -H sin , 93 Yekaitai medicine store, 145 Yeqin spinning mills, 80 Y inhang zhoubao (Bankers' weekly),

W akem an, Frederic, 249,35411127 W älder, A ndrew , 290 W alker, K athy Le M ons, 27,248 W an g jin g w ei regime, 274-76,279 warlords, see S un C huanfang

Yisheng Distillery, 138 Y M C A , 113,245 Y okoham a Specie Bank, 202 Yong an (W in g O n ) Com pany, 17

tuchan tuxiao (local production and local sales), 265

tuhao lieshcn (local bully and

evil gentry),

263 villages, 105 wages: unskilled female workers, 107-8, n o , 3261143; child workers, 108; u n ­ skilled male workers, 108, no; gong'




Yongfeng qianzhuang, zoo . See also banking consortium Yongju qianzhuang, 200» See also bank­ ing consortium Yongzhong banking group, 200-201. See also banking consortium Yuan Hanyun, 259 Yuan Shikai, 41,62,259 Yuanfahang business, 150 Yun Zuqi, 142 Zeng Guofan, 33 Zesheng Hydraulic Company, 138 Zhang Bishi, 213 Zhang Cha, 57,62,69-71,149-50,15253,240; as shareholder, 126,128,139, 186; as manager, 132; Guomindang investigation, 154,263,335*124; as investor, 189; loss of position under creditor banks, 202-3; land reclama­ tion projects, 213-14 Zhang family: lineage, 56, ancestral home, 56-58; business, 69; family accounts, 128,147* 196, 277; assets, 152-54; involvement in Dasheng af­ ter W W II, 276-77,279 Zhang, Guohui, 35 Zhang Jiaao, 188,256 Zhang Jian: and Dasheng studies, 2425; as entrepreneur, 56,59-60,6365,79-80; as scholar, 58-60; politi­ cal career, 61-62; and local business community, 65-67; and land recla­ mation, 68; cooperation with his brother, 69-71,321*173; ritual role during construction process, 77; pa­ ternalistic and authoritarian man­ agement, 93,101-2,117-18,155,226; as shareholder, 126,128,139,143-44, 186; relationship with shareholders, 127,129,136-39,152,156; relationship with managers, 131,137,141,147; pri­ vate wealth, 150-53; as investor, 189; loss of position under creditor

banks, 202; vision for agricultural development and social stability, 212-13,228-29; land reclamation projects, 213-14,230; cultural and moral authority, 239-40,243-44; image as public figure, 62,70-71» 246-47; vision for regional devel­ opment, 248-49; cooperation with Sun Chuanfang, 255-56 Zhang Jingfii, 67 Zhang Jingli, 73» 276-77 Zhang Jizhi, see Zhang Jian Zhang Kaiyuan, 25-26,247,311*163 Zhang Pengnian, 57 Zhang Ren, 73 Zhang Rouwu, 153,257,260, 277, 318*17, 356*122,356*123 Zhang Sean, see Zhang Jian Zhang Seweng, see Zhang Jian Zhang Taiyan, 256 Zhang Xiaolin, 253 Zhang Xiaoruo, 62,71,73,128,149-50, 237,254,257-64,358*152 Zhang Xueliang, 259,263 Zhang Xuwu, 277 Zhang Zhidong, 37-39,59,63-65,68, 73-74, 80,124,127, 320*151 Zhang Zongchang, 254 Zhang Zuolin, 154,259 Zhang Zuoqi, 126 Zhang Zuosan, 188 zhangcheng (regulations), 327^9. See also factory regulations Zheng Xiaoxu, 61,124-26,139, 334*16 Zhou Xuexi, 41,79,286 Zhu Baosan, 245,358*141 Zhu Chou, 238 Zhu Yingui, 154 Zhu Zhenhua, 204 zhuangyuan, 58, 60,70,79 Zisheng Iron Workshop, 94,123,138, 143,168,197 zuo gong (doing work), 90-91 Zuo Zongtang, 33,80

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Alexander Barton Woodside, V ietnam and the Chinese M odel.: A Com parative S tu d y o f Vietnam ese and Chinese G overnm ent in the First H a lf o f the N ineteenth C entury


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Susan Daruvala, Z h o u Z u o ren and an A lternative Chinese Response to M o dernity


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Milena Dolezelová-Velingerová and Oldrich Kril, with Graham Sanders, eds., The


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the Japanese M onarchy, 1945-1995

a nd A m erica C ultural Change in L a te Q in g China

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Barbara Mittler, A N ew spaper fo r C hina ? Power, Identity, and

Change in Shanghai’s N ew s

M edia, 1872-1912


Joyce Madancy, T h e

Troublesom e Legacy o f C om m issioner Lin: T h e O p ium T ra d e and

O p iu m Suppression in F ujian Province, 1820s to 1920s


John Makeham, T ransm itters and

Creators: Chinese C om m entators and C om m entaries on the

A nalects


Elisabeth Köll, F rom in M o d e m C hina

Cotton M ill to Business Em pire: T h e Emergence o f Regional Enterprises