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The Risk Control of Qianzhuang ISSN 1923-841X [Print] International Business and Management ISSN 1923-8428 [Online] Vol. 16, No. 2, 2018, pp. 38-47 www.cscanada.net DOI:10.3968/10849 www.cscanada.org The Risk Control of Qianzhuang WANG Yanfen[a],* [a]Doctoral student. School of Economics, Central University of Finance was everywhere, and played an important role in the and Economics, Beijing, China. social economy and the modernization of China’s industry *Corresponding author. and commerce.1 Through the financial exchanges between Received 16 September 2018; accepted 22 November 2018 Qianzhuang and Qianzhuang, Qianzhuang and Piaohao Published online 26 December 2018 , Qianzhuang and domestic and foreign banks, a huge financial network was established to communicate Abstract cross-regional trade and foreign trade. As we can see, Qianzhuang is the traditional bank born in China. During Qianzhuang is one of the most representative forms of the late Qing Dynasty to the Republic of China, plenty of business development in China’s financial industry. It historical data proves that Qianzhuang has always been plays an indispensable role in the history of finance and a true financial service provider for Chinese agribusiness even economic history, as well as the transition from and commercial households. The control of deposit and traditional economy to modernization. loan risk in Qianzhuang is a concentrated expression of the The internal organization structure of Qianzhuang localization advantages of Qianzhuang, and it still has a is following the figure 1: eight butlers structure strong enlightenment for the risk control of contemporary . Apart from the manager and manager’s associates, other financial institutions. This paper elaborates the risk staff members’ positions are based on the “eight butlers”. control mechanism of Qianzhuang by explaining the risk control of Qianzhuang credit loan and the prevention Accountant mechanism of the credit risk, and further discusses the Salesman effectiveness of the risk control in Qianzhuang. Money Financial Marketer Industry Association was built mainly to resist industrial Cashier risk. So there also is a discussion about Money Industry Supervisor — Manager — Apprentic Association’s function to resist industrial risk. Associates Exchange Manager e Key words: Qianzhuang; Risk control; Credit loans; Interbank Manager Money Industry Association Clerical staff Wang, Y. F. (2017). The Risk Control of Qianzhuang. International Business and Management, 14(2), 38-47. Available from: Receptionists http://www.cscanada.net/index.php/ibm/article/view/10849 Figure 1 DOI: http://dx.doi.org/10.3968/10849 Eight Butlers Structure Every position in the “eight butlers” is ranked according to its importance to Qianzhuang, so the 1. THE MAIN FUNCTIONS AND ORGANIZATIONAL STRUCTURE OF 1 “Qing Gao Zong Shi Lu”, Volume 165, Qianlong seven years in April. This was the official literature for the first time to record QIANZHUANG Qianzhuang. It says: the shopkeepers are different, the government From the late Qing Dynasty to the Republic of China, from should check out how many shopkeepers and Qianzhuang for every townships and cities to the general public, Qianzhuang territory, and list as a book. Copyright © Canadian Research & Development Center of Sciences and Cultures 38 WANG Yanfen (2017). International Business and Management, 14(3), 38-47 order of their positions is slightly different for different have enough collateral. Qianzhuang. Qianzhuang in short supply relies on The lending business of Qianzhuang is entirely based interbank manager lending money. Rich Qianzhuang on credit, which seems to be very risky. In fact, there ranks salesman first to expand business, while interbank exists an implicit and effective risk control mechanism. manager and accountant rank second and third. So the The risk control of modern banks pays special attention specific arrangement totally depends on the business to objective data, the most typical example is financial strategy. information, so the modern risk control investigation Within Qianzhuang, the manager has great power and must check the accounts of credit granting enterprises. is the highest decision maker, the manager is responsible However, for Qianzhuang in the traditional banking for all the daily trifles, transactions and staff transfers. industry, no auditing is allowed. The fact that Qianzhuang Therefore, in order to achieve the sustainable operation do not check accounts is not that credit-granting of the Qianzhuang, shareholders should first carefully enterprises do not have accounts to check. Traditional select a qualified manager, and then give him the greatest firms, of course, own their traditional accounting, which trust. At the meantime, in order to ensure the interests is also very meticulous. of shareholders, some shareholders appoint supervisors However, the current capital situation of Chinese to supervise the manager’s work, so as to report to traditional firms is very liquid. For example, Chinese shareholders at any time. Besides, there are several traditional firms always carry out unlimited risk liability. associates assisting manager. There are two kinds of own funds, one is the equity In addition, from apprentice to manager, the number capital, the other is the demand deposit in firm deposited of employees in each position is uncertain, all employees by shareholders, which is called copy or passport. Because are shifting according to business scale and business shareholders often own many firms, their deposits in one focus. Staffs are mostly employed by shareholders or firm are often variable. For example, to withdraw from recommended by managers. No. A, or withdraw from No. C, deposit into No. B, as a Such an organizational structure can not only maintain relief fund to help No. B who is insufficient. Moreover, the authority of management, effectively implement if a firm is facing a broken capital chain, with poor policies and guidelines, but also could flexibly adjust liquidity, or debt crisis, shareholders will take unlimited to specific business with strong adaptability. There are risk responsibility to ensure the interests of creditors with not only checks and balances between the same level, all their capital strength outside Qianzhuang. Not only but also supervisory constraints between the upper and that, when necessary, shareholders can also use their own lower levels, which enhance the ability of enterprises to commercial credit to mobilize capital from the social withstand risks. network to maintain the credit of their business. Therefore, for the risk control of the granting capital to Qianzhuang, there is no practical significance to just 2. THE RISK CONTROL OF check the accounts of one firm. However, Qianzhuang QIANZHUANG CREDIT LOANS still check the details of their businesses, mainly depends on checking their credit. 2.1 The Objective Existence of Credit Loan for 2 the Local Business 2.2 Credit Investigation by “Street Running” The Qianzhuang loans are mainly credit loans, merely Chinese society has already formed the credit economic mortgages, as they have always been since Qianzhuang operation rules which is suitable for credit loan. It is was founded. said that since the middle ages, the rise of Commerce This is because credit loans are mostly needed for in the West has been adapted to the rise of civil and the local business. First, in modern China, agricultural commercial law. In China, up to the end of the Qing economy was the main economy, every year, a large Dynasty and the beginning of the Republic of China, there number of agricultural products would be purchased, was basically no civil and commercial law, but Chinese processed and trafficked, which requires a large amount have developed adequate commercial contacts depended of funds, but those business dealers could not provide on credit. The credit lending of Qianzhuang operates collateral. Second, traditional commerce in China are on the track of this credit economy. Credit survey is the not industrialized as the West, fixed assets investment is most important thing for Qianzhuang to lend money. rare in businesses, but liquidity accounts for the majority, Generally, the investigation contents include: the assets so it’s hard to mortgage. Third, even for some modern of the shareholders, the morality and management ability factories, the capital invested by entrepreneurs is often of the managers, the market conditions and prospects of only used for the purchase of fixed assets, while liquidity the invested projects. Even the private life of shareholders relies on borrowing, and even some enterprises rely on borrowing when purchasing fixed assets, so it is rare to 2 “street running” is the position of salesman in the “eight butlers” structure 39 Copyright © Canadian Research & Development Center of Sciences and Cultures The Risk Control of Qianzhuang and managers belongs to the scope of investigation. life. “A promise is weightier than one thousand bars of The accuracy of investigating information is largely gold”, which is often regarded as a basis morality, in related to the geographic relationship and human relations traditional society, such morality does exist widely. But between Qianzhuang and firms. Qianzhuang usually have in fact, once this habit is formed, it will form an effective a special position called “street running” (the position of exile mechanism. With good credit, even if business salesman in the “eight butlers” structure). As the name is in danger, some people are willing
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