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Home , Cash (unit), Ching chong, Comprador, David Sassoon, Masuda Takashi, Qianzhuang

75

Japanese Research in Business History 2017 │ 34

Utilizing and Eliminating the Networks: Turn of the Century British and Japanese Trading Companies in Imperial

Ryutaro Yamafuji Yokohama City University

Abstract DISTINCTIVE FEATURE of foreign trading companies in Imperial China in the late 19th and early 20th Century was their A relationships with Chinese intermediaries or . The background of this paper is the expanding business of Japanese and British trading companies in the Chinese market and their divergent methods of working with the comprador system. British trading companies playing a major role in the 19th Century Chinese market maintained their relationship with their compradors, attempting reform by creating commonalities between the two financial systems and tightening guarantees. Japanese trading companies, in contrast, had been gradually decreasing their reliance on compradors since 1899 even as they expanded trade initiatives. The focus of this paper is & Co., the first trading company to do away the comprador system. To this end, I have detailed how the same company, later known as Mitsui Bussan (Mitsui Trading Company) trained their Japanese staff with the aim of eliminating the system, and how their compradors and those in their employ were treated when the system was finally dissolved. 76 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34

I. Introduction

1. Objective With the end First War and the conclusion of the Treaty of in 1842, the British trading companies immediately moved to exploit the Chinese market. However, after the signing of the in 1895, particularly after 1897, cotton yarn exports to China by Japanese trading companies were taking over the Chinese market. After two tax and tariff laws came to an end, yarn exports and the cotton-spinning industry expanded in the mid-1890’s. “Imports of yarn decreased, and exports exceeded imports for the first time in 1897.” Fletcher (1996: 72) By the 1900’s, Japanese trading companies had expanded not only their Japanese cotton yarn exports but their overall business there. The elimination of the comprador system is one of the factors that can be attributed to this growth. First, British trading companies that primarily relied on the personal network of compradors will be compared to Japanese trading companies that ended their dependence on it. This will be followed by an account of how Mitsui Bussan eliminated the comprador system from their business dealings. Since 2010, when China’s GDP was ranked second in the world, and its presence in the global economy soared, there has been renewed interest in its economic and business history. In August 2013, Business History held a conference on the History and Evolution of Entrepreneurship and Finance in China. A special edition of the journal from this conference was published in 2016 (Vol 58, No. 3) dealing primarily with the period between the Opium War in 1842 and the establishment of the People’s of China in 1949. Why the intense attention on this period from 1842 to 1949? The signing of the Treaty of Nanjing in 1842 forced the to open its doors to international trade and China was gradually brought into the international market. The establishment of the communist government under the People’s Republic of China in 1949 saw a temporary break in trade until 1978. Thus, prior to the 1978 policy change to reform and open China economically, it had been part of the free trade market between 1842 and 1949, the period now inviting the scrutiny of scholars of economic history and business history. This paper explores the comprador system from the midpoint of this period to 1900 and beyond. Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 77

2. The Comprador System The word comprador is derived from the Portuguese word compradore for buyer. Prior to 1842, it was the compradors through whom foreign trading companies purchased their daily necessities. Also, until 1842, international trade in China had been monopolized by the Co , a merchant’s guild comprised of thirteen privileged Hong each with staffs of translators and compradors at their disposal. The had regarded the monopoly of the Co Hong as a barrier to free trade. Following its victory in the Opium War, the British demands in the Treaty of Nanjing not only stipulated that China open up five , including , but also the dissolution of the Co Hong. Thus, in 1842, the Co Hong was eliminated and all the foreign trading companies began dealing with Chinese merchants through compradors. The position of the compradors continues to invite controversy among historians of business. Some assert that the comprador received a salary from foreign entities such as trading companies and , and as their employee, carried out business transactions in their name. King and others (1991: 511) maintain that “the comprador was a salaried employee of the foreign firm”. There is an opposing view: that the comprador, with his own staff of runners and warehouse workers, was an independent merchant who even conducted business under his own name. Hao (1986: 217) asserts that “a comprador was an independent merchant in his own right.” In fact, the comprador functioned simultaneously as “employee” and “independent merchant.” Suzuki (1941: 154) defines the comprador as one who “both works for someone else and has the characteristics of an independent merchant.” Negishi (1948:115) also points out that “the comprador is complex entity” who typically combines the roles of manager, contractor, agent, broker, and dealer. More recent research by Cox and Chan (2000: 98) asserts that “the comprador needed to operate with a degree of latitude which made his actual position more in the nature of an agent than a managed employee.” Even as Cox and Chan (2000) describe compradors as independent merchants, they also recognize that they were in the employ of others.

3. Outline This paper is made up of four sections. The first section introduces the aim of the paper and previous research on the subject. The second section 78 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 is a comparative analysis of British and Japanese trading companies. I first establish the need for an intermediary such as the comprador. Second, in order to clarify why British trading firms continued to utilize the comprador system, I look at how common elements between Chinese and British business practices and guarantees between the two were strengthened. Third, I look into the reasons why the Japanese trading firms stopped using the comprador system and how they made their transition to another system. Section three examines Mitsui Bussan, a Japanese trading firm that did away with the comprador system. Previous research such as this has shown that the transition of Japanese trading companies, in particular Mitsui & Co., was made possible by training their Japanese employees in Chinese. This paper analyzes how Mitsui Bussan terminated their comprador system through their extensive program of human resource education in Chinese business practices and language for their Japanese employees. A detailed account of how their Chinese employees were treated after the system came to an end is also included. In the fourth and concluding section, sections two and three are summarized and topics for future research are considered. The second section concludes that both British trading companies that retained the comprador system and the Japanese trading companies that terminated it had their respective rationales. The British firms had the advantage of avoiding duplicity on the part of the compradors by building common business practices and strengthening guarantees in the system. On the other hand, not only language training but education in Chinese business practices enabled Japanese trading companies to overcome their dependence on compradors. Past research asserts that it took only a year and a half, at most, from the implementation of Mitsui’s training program to their termination of their compradors. However, Section 3 reveals that employees in that program started working several years after the termination of the system. Therefore, Mitsui Bussan was already training personnel who were not only capable of operating in Chinese but proficient in local business practices prior to the formal introduction of its Chinese language program. Swiftly positioning these employees to work in the local market instead of compradors enabled Mitsui Bussan to stand apart from the comprador system. In the future, I would like to carry out in-depth analyses of certain British trading firms to better compare them to Japanese firms such as Mitsui Bussan. Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 79

II. A comparative study of British and Japanese trading companies

1. The need for intermediaries Drawing on the work of Suzuki (1941), Negishi (1948) and Cox and Chan (2000), this paper defines compradors as merchants who are “employed by foreign companies and take care of their trading, while at the same time, dealing with their own accounts as independent merchants.” While there are enormous advantages to employing such a merchant as a middleman, there are also significant disadvantages. After discussing the various pros and cons of such an arrangement, I will offer a hypothesis on ways such disadvantages were mitigated. One distinct advantage of the system was the trust placed in a merchant employed as a comprador. This feature proved significant whether from the observation that Chinese tradition placed a higher regard on interpersonal trust than in formal arrangements; or from the fact that China was an uncharted trading environment. First of all, from a Chinese merchant’s standpoint, rather than dealing directly with a foreign company whose credibility was uncertain, there was a greater sense of security in going through a Chinese businessman whom he could trust. In the same way, foreign trading companies felt more at ease going through a known Chinese comprador than dealing directly with a Chinese businessman whose reputation they were uncertain of. According to Motono (2004. 241-242), the trust was based on a contract between the foreign merchant and the comprador stipulating that the comprador must guarantee expenses or losses incurred should a business deal go awry. Thus, by employing the services of a comprador, there was a possibility of mitigating risk. On the other hand, there was the cost. The costs included the comprador’s salary and his service charges. Granted, these were necessary costs; the salary levels were suitable and service charges could be set and calculated within a reasonable range. More problematic was the risk of misappropriation of the foreign firm’s funds by an unscrupulous comprador. Of course, the possibility of embezzlement was ever present no matter what the business. Even so, as evident from our definition, because the comprador was responsible for both his own and the foreign company’s accounts and dealings, there was a tendency for this risk to be all the greater. 80 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34

2. Dependence on compradors as intermediaries If a foreign company were to decide that using a comprador was advantageous, the challenge was how to offset the disadvantages of employing such an intermediary. Critically important was how to reduce the cost of oversight of his dealings. Figures 1 to 4 give an overall picture of the situation. Figure 1 shows the reason why a comprador is needed and to this is added the disadvantages. Figures 2 to 4 show that such disadvantages can be overcome by: 1) building a common business system; 2) strengthening regulations; and 3) looking to alternative means.

Figure 1: Dependence on compradors as intermediaries

Differences in + Dependence on + Risk of Comprador + Financial Losses Business Practices Intermediaries Irregularities

Figure 1 shows that the greater the differences in business practices between China and its European and American trading partners, the greater the reliance on compradors, resulting in more indiscretions. The situation that arose from opening the five harbors after the Treaty of Nanjing in 1842 to the financial crisis in 1866 is one such instance. At this time, compradors were taking liberties when conducting business in the name of companies which hired them, resulting in frequent charges of fraud. Even so, as long as the deals were showing a profit, these kinds of violations did not necessarily arise. Nevertheless, with the 1866 financial crisis these practices came to the surface. Figure 2 shows the mechanisms designed to avert these types of problems.

3. Building a common system Figure 2 shows that by introducing a Western business model, differences between Chinese and European and American business practices decreased, raising the possibility that dependence on compradors could also be decreased. Specifically, there was an attempt to bring the Figure 2: Forging a common system

Differences in + Dependence on + Risk of Comprador + Financial Losses Business Practices Compradors Irregularities

-

Introduction of Common Practices Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 81 time needed for clearance into accord with Western standards. It was often observed that bills or zhuangpiao issued by the banks (Chinese-style banks) took a long time to clear. Motono (2003: 240) points out that these zhuangpiao are described in English language materials as long dated bills or long dated paper1. Even when goods were sold in the harbor contracted, zhuangpiao bills took at the very least six weeks, and sometimes as long as eight to twelve weeks to clear. Furthermore, when dealing with destinations as far as from Shanghai to , they could take up to six to eight months. Foreign firms recognized a problem when long dated bills were used in speculative buying. The first way of dealing with this occurred in February 1865 when a foreign trading company in Hankow conveyed to Chinese merchants that in principle, their importing business would only be conducted in , and zhuangpiao honored only up to five days2. However, with the 1866 economic crisis, foreign trading companies in Hankow experienced losses in their market share. The shortened credit time for zhuangpiao now worked against them as Chinese merchants who maintained the former credit times took over the market3. For example, looking at the increase in market share for Grey Shirting, the main item in cotton imports for Chinese merchants, we note that imports grew from 23% to 44% between 1866 to 1867 and by 1868 had reached 53% of the market share. For this reason, the foreign trading companies were again forced to accept longer time periods for zhuangpiao; to clear from 5 to 10 days in 1866, those that had not cleared in 7 days had to be given an additional 10 days in 18674. Instead of shortening the credit period for the zhuangpiao, China’s largest foreign exchange the and Shanghai Banking

1. “Retrospect of events in the North China during the year 1865,” The North-China Herald and Supreme Court and Consular Gazette, Jan. 27, 1866, 14; “Commercial report on the ports of China, 1865, Foochow,” Embassy and consular commercial reports, China, (7), 56; “Commercial report on Hankow, 1869,” Embassy and consular commercial reports, China, (9), 78; “Commercial report on Kiukiang, 1872,” Embassy and consular commercial reports, China, (10), 7. 2. “Commercial report on China, 1865, Hankow,” Embassy and consular commercial reports, China, (7), 135. 3. “Commercial report on Hankow, 1869-1870,” Embassy and consular commercial reports, China, (9), 188. 4. “Commercial report on the ports of China, 1865-66, Hankow,” Embassy and consular commercial reports, China, (7), 157; “The Credit System (Hankow Times),” The North- China Herald and Supreme Court and Consular Gazette, Jan. 26, 1867, 16. 82 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34

Corporation Ltd. (HSBC), took steps to shorten the time it took for the qianzhuang banks to procure funds. Starting in 1869, the Hong Kong and Shanghai Banking Corporation Ltd. availed the qianzhuang of several million in short term financing through its comprador Wang Huai Shan. The Hong Kong and Shanghai Banking Corporation Ltd., promoted by British firms such as Jardine Matheson, and other British, American and German trading companies was established in Hong Kong in 1864. Thus, even though the Hong Kong and Shanghai Banking Corporation Ltd. was a bank, not a trading company, it is reasonable to assume that it acted to some extent in favor of the foreign trading companies. After this, the other foreign banks in China followed suit, offering the same financing as the Hong Kong and Shanghai Banking Corporation Ltd. called “chop loans”. Chop loans, the short-term bills issued by the qianzhuang banks would be bought by the foreign banks upon reaching maturity in two days.

4. Strengthening Security With the qianzhuang banks subject to short-term credit funding, it became somewhat more difficult for the compradors to avail themselves of long term financial arrangements which formerly had enabled them to raise funds. However, this alone was not sufficient to prevent double-dealing by compradors as evident from the major problems which arose during the economic crises of 1873 and 1883. At this point, aside from attempting to bring the Chinese system into alignment with the Western business practices, another way was found to constrain the compradors. Figure 3 illustrates this solution.

Figure 3: Strengthening Guarantees

Differences in + Dependence on + Risk of Comprador + Financial Losses Business Practices Intermediaries Irregularities - -

Strengthening Guarantees

By strengthening the guarantees of compradors as shown in Figure 3, it was possible to lower the possibility of profiteering by compradors, and this, in turn, would directly decrease financial losses. Furthermore, by strengthening guarantees, compradors would refrain from taking Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 83 advantage of their position because the financial losses incurred by their actions would have to be borne by the guarantors. Stronger guarantees would thus have the effect of lowering comprador wrongdoing. The rationale for this was that making the guarantor bear the financial losses, made it difficult for him to recover. In a country such as China where face was so important, losing trust was more devastating than going into debt or simply going bankrupt. In fact, in the many court cases that took place, each time comprador wrongs came to light due to a financial crisis, British companies pressed for a broader appreciation of guarantees in Chinese society and attempted to tighten up guarantor contracts. The David Sassoon Sons & Co. trial is an instructive case in how guarantees were tightened5. When Chen YinTang, the company’s comprador went bankrupt during the 1883 financial crisis, David Sassoon Sons & Co. sued Chen YinTang and his guarantor, Fan DeSheng for 13,298 taels in losses incurred by the company. Chen YinTang then proposed that he be permitted to cover this sum by an advance totaling 12,500 taels he had made to the company between 1867 and 1873, and 5,000 taels in back wages. Further, Fan DeShang disclaimed any responsibility for reparation. This was because the word She in the guarantor’s contract meant that the guarantor was responsible to press for payment but not to compensate for losses. The first judgement was in favor of the plaintiff and Fan DeSheng was ordered to pay for the losses. However, the decision was later overturned and the judgement stipulated that the losses be covered by the advance and back wages owing the defendant. At this point, even though David Sassoon Sons & Co. appealed to Nicolaus R. O’Connor, a British embassy official in Peking to mediate, the response was that the company should not expect to be compensated by Fan DeShang6. This in itself could be said to illustrate failure in controlling financial improprieties by compradors. However, Motono (2004: 241-242) points out that this case provided the opportunity to clearly set out the guarantor’s responsibility not only to press for payment but to compensate for losses.

5. The North-China Herald and Supreme Court and Consular Gazette, Mar. 25, 1885, pp.359-360; The North-China Herald and Supreme Court and Consular Gazette, May. 15, 1885, pp.554-555; The North-China Herald and Supreme Court and Consular Gazette, May. 15, 1885, 564-565. 6. “Mr. O’Connor to Mr. Alabaster,” No.76, Oct. 3, 1885, Consular Archives (FO228). 84 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34

5. An alternate system Although clarifying the responsibility to compensate for losses in guarantor contracts did have the effect of remedying the situation where compradors with British firms overstepped their authority, this alone was not enough. Figure 4 illustrates this fact.

Figure 4: An alternate system

Differences in + Dependence on + Risk of Comprador + Financial Losses Business Practices Intermediaries Irregularities -

Replace with an Alternate System

The notion that bringing the work of compradors in-house would decrease a company’s dependence on them is illustrated in Figure 4. By making their function part of the company, it would be possible to completely change intermediaries. And even if the switch was total, compared to leaving the function of intermediary completely up to a comprador, this made it possible to strengthen the company’s negotiating position vis-a-vis the comprador. Beginning with Mitsui Bussan, many other Japanese and German trading companies started training staff from their own countries, and as noted by Cochran (2000), this led to the development of other systems whereby American trading companies trained their local employees. Mitsui Bussan’s Shanghai branch set a precedent when it eliminated its comprador system in 1899. Uchida (1938a: 29) points out that the branch dissolved its comprador system in 1899 and thereafter began dealing directly with Chinese merchants. Behind this decision, Togai (1976: 54-55) and Wakabayashi (1999: 32-33) point out the role played by in-house training programs for employees working in international business, especially in China. Mitsui Bussan went on to eliminate the comprador system from its branches in (1900), Taipei (1901) and Hong Kong (1902). This does not mean, however, that the firm stopped hiring foreigners entirely, including Chinese. Mitsui Bussan switched from employing compradors to hiring non-Japanese as employees who could be supervised as such. As explained above, the British companies strove to devise ways of preventing comprador profiteering while keeping them in their employ. On the other hand, Japanese firms eliminated compradors altogether through Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 85 company training programs for their Japanese staff and hiring Chinese only at employee status.

III. Dissolution of Mitsui Bussan’s comprador system

1. Shanghai branch of Mitsui Bussan After founding Senshu Kaisha, and Masuda Takashi, went on to establish Mitsui Bussan on July 1, 1876. That year, in response to a request for a loan of 10,000,000 Yen from the Qing Dynasty, Shibusawa Eiichi president of the Daiichi Kokuritsu Bank and Masuda Takashi general manager of Mitsui Bussan set out for Shanghai in January of the following year. As Masuda pursued the Yen loan negotiations, he was also opening up market outlets for Miike coal for which he had acquired exclusive selling rights, and handed over the responsibility for the sales of the coal to Julius Josef Bryner, a Swiss, who was managing the company in Shanghai. Although the circumstances surrounding the Qing Dynasty government prevented the loan agreement from going through, Mitsui Bussan dispatched Ueda Yasusaburo to Shanghai in July 1877 and with Bryner’s assistance established the Shanghai Branch in November that year. Mitsui Bussan’s first foreign branch in Shanghai was soon followed by others in Paris and Hong Kong in1878, and and London in 1879. The London branch had been established previously as an agency in 1877 by Robert Walker Irwin. This network of agencies and outlets subsequently spread to other parts of Asia: Tianjin in 1888, in 1891, and Bombay in 1893. Subsequent years saw the rapid establishment of new branches and outlets: Yingkou and Taipei in 1896; San Francisco in 1898; Incheon , , Zhifu, and Hamburg in 1899; and Hankow, Seoul, Guandong and Manila in 1900. To verify how important the Shanghai branch was for Mitsui Bussan’s overseas business, see Tables 1 to 5. Table 1 represents the total exports of each branch from 1897 to 1904. The Chinese branches comprised about 60% of the business of the combined branches. It was during this time, that Chinese markets were being opened up after the Sino-Japanese War (1894 - 1895). Noteworthy was the post -1897 period when exports of Japanese cotton to China rose. With the exception of 1901, the Shanghai Branch made up over 50% of the total business of the Chinese branches, making it the pivotal branch in that country. 86 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34

Table 1: Total exports of all Mitsui Bussan branches (1897-1904, in 1,000 Yen units) Year 1897 1898 1899 1900 1901 1902 1903 1904 Total Domestic Branches 9,032 14,392 25,593 20,986 n.a. 23,732 23,840 24,180 Total Foreign Branches 10,431 13,404 25,439 22,093 20,952 24,099 32,547 41,976 Subtotal for Chinese Branches 6,815 9,187 14,804 10,640 11,418 13,354 19,247 25,828 (Ratio of Foreign Branches) 65.3% 68.5% 58.2% 48.2% 54.5% 55.4% 59.1% 61.5% Shanghai 3,720 5,066 7,440 5,969 5,343 6,809 12,397 15,847 (Ratio of Foreign Branches) 35.7% 37.8% 29.2% 27.0% 25.5% 28.3% 38.1% 37.8% (Ratio of Chinese Branches) 54.6% 55.1% 50.3% 56.1% 46.8% 51.0% 64.4% 61.4% Hong Kong 2,878 3,352 4,777 4,671 5,409 5,273 5,373 7,513 (Ratio of Foreign Branches) 27.6% 25.0% 18.8% 21.1% 25.8% 21.9% 16.5% 17.9% (Ratio of Chinese Branches) 42.2% 36.5% 32.3% 43.9% 47.4% 39.5% 27.9% 29.1% Tianjin 217 769 2,587 n.a. 666 1,272 1,477 2,468 (Ratio of Foreign Branches) 2.1% 5.7% 10.2% n.a. 3.2% 5.3% 4.5% 5.9% (Ratio of Chinese Branches) 3.2% 8.4% 17.5% n.a. 5.8% 9.5% 7.7% 9.6% Yingkou n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. (Ratio of Foreign Branches) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. (Ratio of Foreign Branches) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Reference: Business Report, Annual Publications.

Table 2 represents the total imports of each Mitsui Bussan branch from 1897 to 1904. The branches in China made up approximately 15% of all the imports of its overseas branches. Vital imports for Mitsui Bussan at that time were raw cotton and cotton spinning machines. In 1886, Mitsui Bussan and Platt Brothers & Co. signed an inter-agency agreement which enabled them to import of large quantities of spinning machines through the London branch. They also imported mainly raw cotton, the raw material for spinning cotton yarn, through their Bombay Branch.

Table 2: Total imports for all Mitsui Bussan branches (1897-1904 in 1,000 Yen units) Year 1897 1898 1899 1900 1901 1902 1903 1904 Total Domestic Branches 33,539 38,787 40,015 45,247 n.a. 44,860 48,499 60,752 Total Foreign Branches 31,465 34,793 23,783 33,144 37,218 20,330 39,710 117,069 Subtotal for Chinese Branches 3,868 7,136 3,662 5,054 3,158 4,290 8,058 4,483 (Ratio of Foreign Branches) 12.3% 20.5% 15.4% 15.2% 8.5% 21.1% 20.3% 3.8% Shanghai 1,613 1,161 1,145 3,245 1,758 3,245 5,042 875 (Ratio of Foreign Branches) 5.1% 3.3% 4.8% 9.8% 4.7% 16.0% 12.7% 0.7% (Ratio of Chinese Branches) 41.7% 16.3% 31.3% 64.2% 55.7% 75.6% 62.6% 19.5% Hong Kong 1,488 4,824 2,283 1,809 1,294 933 2,934 2,304 (Ratio of Foreign Branches) 4.7% 13.9% 9.6% 5.5% 3.5% 4.6% 7.4% 2.0% (Ratio of Chinese Branches) 38.5% 67.6% 62.3% 35.8% 41.0% 21.7% 36.4% 51.4% Tianjin 78 304 234 n.a. 106 112 82 1,304 (Ratio of Foreign Branches) 0.2% 0.9% 1.0% n.a. 0.3% 0.6% 0.2% 1.1% (Ratio of Chinese Branches) 2.0% 4.3% 6.4% n.a. 3.4% 2.6% 1.0% 29.1% Yingkou 689 847 n.a. n.a. n.a. n.a. n.a. n.a. (Ratio of Foreign Branches) 2.2% 2.4% n.a. n.a. n.a. n.a. n.a. n.a. (Ratio of Foreign Branches) 17.8% 11.9% n.a. n.a. n.a. n.a. n.a. n.a. Reference: Business Report, Annual Publications. Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 87

At this time, the Shanghai branch dealt in sales of Miike coal, purchase of raw cotton, sales of cotton yarn, consignment sales of sundry goods, and shipping. Although the time line is short, Table 3 illustrates the above. Product departments included coal, agricultural products, marine products, machinery, and miscellaneous goods. (Miscellaneous goods are listed as domestic or foreign only for the latter half of fiscal 1896). Coal brought in a steady income of approximately 10,000 taels each two quarters. Income from the major products of raw cotton, cotton yarn and cloth were subject to wide price fluctuations. In the first half of 1896, cotton-related losses soared to 25,684 taels, the main reason behind the overall deficit for that period. The General Administrative Report also records a high income from shipping. Products in the income column of the Statement of Income included not only raw cotton, cotton yarn and cloth but agricultural products, machinery, and miscellaneous goods which also show a deficit. In fact, the gross profit for each product group is shown as income. Roughly calculated, this represented the difference between the sales price and the cost price. As I will explain later, when deals are done through a comprador, his commission is not included in the sales price and the cost price so that Table 4 does not include his payment. Mitsui Bussan Shanghai Office’s expenditures corresponding to Table 3 are shown on Table 4, and profits and losses calculated from Tables 3 and 4 are shown on Table 5. The large expenditures, according to Table 4, are wages and miscellaneous expenses. The latter half of 1894 saw the accumulation of as much as 19,671 taels in undelivered goods, thought to be debts from irrecoverable loans resulting from the Sino-Japanese War. Looking at the profit-loss calculation in Table 5, the accumulation of undelivered goods worth 19,671 taels in the latter part of 1894 and losses amounting to 25,684 taels in raw cotton, cotton yarn and cloth in the first part of 1896 led to a deficit for those years. From the above, it is evident that Mitsui Bussan’s Shanghai branch played a key role among its foreign branches, particularly in exports. After the branch opened in 1877, Miike coal was its leading product, and the most stable and profitable, during this time. However, after the Sino- Japanese War, especially after 1897, exports of Japanese cotton yarn became more important, further contributing to expanding the Chinese market. This was the era during which the comprador system was, according to Wakabayashi (1999: 32) “a trading custom whereby foreign 88 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34

Table 3: Income for Mitsui Bussan Shanghai branch (second half of 1893 - second half of 1896, in taels) 1893 1894 1894 1895 1896 1896 Second Half First Half Second Half First Half First Half Second Half Coal 8,133 12,274 6,685 4,229 11,024 10,867 Raw cotton, cotton yarn 4,335 7,488 0 0 -25,684 -66 and cloth Agricultural Products -144 4,536 1,032 5,444 -8,424 0 Product Marine Products 1,498 3,252 0 0 0 0 Machinery 1,257 0 0 -489 0 0 Miscellaneous Domestic 3,587 Goods 1,400 7,177 -7,023 3,825 2,608 Foreign Domestic Goods 1,805 Miscellaneous Profit 0 -992 2,526 1,757 3,515 1,056 and Loss Miscellaneous Storehouse Expenses 0 1,123 619 0 0 0 Income Shipping and Handling 8,317 12,246 2,091 1,619 8,273 4,408 Insurance Arrangements 447 2,293 273 0 1,501 951 Interest 3,791 -2,110 -3,220 -6,101 -602 2,631 Total 29,034 47,287 2,982 10,283 -7,789 25,241 Reference: Profit-Loss Tabulations, Semi-Annual Publications (Bussan 557-562) Note: No differentiation was made between Domestic and Foreign Miscellaneous Goods until the second half of 1896.

Table 4: Expenditures for Mitsui Bussan Shanghai branch (second half of 1893 - second half of 1896, in taels) 1893 1894 1894 1895 1896 1896 Second Half First Half Second Half First Half First Half Second Half Wages 3,812 4,112 3,720 4,061 5,424 5,575 Property and Rents 1,600 1,589 1,343 2,880 2,055 2,266 Miscellaneous Expenses 3,715 4,079 2,813 1,214 4,710 4,123 Printing 0 2 0 0 0 0 Postal Tax 0 273 0 0 195 187 Telegraphic Company 602 586 496 488 941 326 Communications Expenses Transportation & 145 121 68 7 290 192 Shipping Expense Accounts 1,180 1,608 624 156 1,843 914 Taxes 141 140 142 44 329 332 Travel 1,030 567 470 224 268 562 Repairs & Renovations 1,437 269 55 3 242 370 Furniture and other Depreciation 803 430 444 448 516 500 items Fund Backlog preparedness 0 0 19,671 0 0 0 Total 14,466 13,777 29,844 9,525 16,812 15,348 Reference: Profit-Loss Tabulations, Semi-Annual Publications (Bussan 557-562)

Table 5: Statement of profit and loss for Mitsui Bussan Shanghai branch (second half of 1893 - second half of 1896, in taels) 1893 1894 1894 1895 1896 1896 Second Half First Half Second Half First half First Half Second Half Income 29,034 47,287 2,982 10,283 -7,789 25,241 Expenditures 14,466 13,777 29,844 9,525 16,812 15,348 Total 14,568 33,511 -26,862 758 -24,601 9,893 Reference: Profit-Loss Tabulations, Semi-Annual Publications (Bussan 557-562) Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 89 trading companies were compelled to employ the services of a comprador in order to do business”. This was also when the Shanghai branch terminated its comprador system in 1899.

2. The comprador at the Shanghai branch of Mitsui Bussan Before describing the dissolution of the comprador system at the Shanghai branch, let us consider the comprador’s situation there. When Jin YangShen was dismissed in 1899, his compensation (See Table 6) was discussed at the Mitsui Bussan directors’ meeting. This compensation for dismissal was calculated according to Mitsui Bussan’s company regulations at the time: monthly salary X number of years employed X ¼. In the case of the comprador, the monthly salary for the first 13 years of employment was 25 Dollars, the following 7 years was 50 dollars bringing the compensation to about 2,000 dollars or 3,000 taels. We can see from Table 6 that three persons, the comprador, the assistant comprador, and the helper who had been with him the longest, were being paid directly by Mitsui Bussan. For those not paid directly by Mitsui Bussan, it is possible to ascertain average wages by calculating backwards from the comprador’s compensation.

Table 6: Comprador compensation upon dismissal at Mitsui Bussan Shanghai branch Compensation at Dismissal Wages calculated Number of Years Rough Yen by working Position Name Wage Employed Equivalent backwards from compensation ($) Comprador Jin YangShen $50 20 years, 3 months 3,000 4,000 33.3 Assistant Yang DingXie $10 7 years, 5 months 350 466 11.1 Comprador Accounts Yang JingFu 6 years, 5 months 150 200 5.6 Collector Bookkeeper Zhou SongXiang 4 years, 1 month 85 113 5.6 Accounts Gu KeQing 4 years, 5 months 85 113 5.6 Collector Cashier Su ShaoQuan 4 years, 2 months 85 113 5.6 Bookkeeper Wu ChengLiu 1 year, 3 months 25 33 5.6 Boy A Rong $3 9 years, 5 months 75 100 1.9 Boy A Er 3 years, 4 months 40 53 3.0 Boy A shou 3 years, 4 months 40 53 3.0 Total 3,935 5,246 Note: Where wages are not indicated, the individuals were employed and paid by the comprador Reference: Mitsui Bussan Shanghai Branch, Compensation Paid to Comprador and His Staff at Dismissal Agenda from Director's Meeting No.106, 1898- 1899 (Bussan121). Note: 1 Yen ≠ 0.75 tael ≠ 0.5 Dollar 90 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34

The 50 Dollar monthly salary paid to the comprador provided for the salaries of the payment collectors and bookkeepers that he employed. In fact, the total average wage of those not directly paid by Mitsui Bussan came to 33.6 Dollars which was almost the same as the comprador’s average wage of 33.3 Dollars. Thus, we can confirm that the salary Mitsui Bussan paid the comprador is in keeping with Naito’s observation that (1938b: 16) “the comprador’s salary was inclusive of the salaries and expenses of the Chinese in his employ.” Jin YangShen, Mitsui Bussan Shanghai’s comprador, received a salary of 50 dollars (approximately 75 taels) from 1892 to his dismissal in 1899 This falls within the average range noted by Negishi (1948: 179). For example, between 40-50 taels at the lower end of the scale and 100 taels at the upper end. Therefore, even though the comprador’s salary at the Shanghai branch included paying those he hired, his salary was perfectly congruent with that of the average comprador. Although simple comparisons can’t be made between the comprador’s monthly salary of 50 Dollars (approximately 100 Yen) and the average Japanese employee in 1898, it can be said to be considerably higher. The comprador’s salary was approximately half that of Komuro Sankichi, the manager of the Shanghai branch and a 1883 graduate of the Commercial College (now ), who received a monthly wage of 200 Yen. However, the comprador enjoyed better treatment than other salaried employees such as Ishida Kiyonao who was in charge of raw cotton and received 80 Yen a month; and fared considerably better than Iwashita Kiyotomo, a 1892 graduate of the Higher Commercial School (now Hitotsubashi University), who was in charge of coal and insurance at 40 Yen a month. It should be noted that the comprador’s income also included fees not shown in Table 6. According to Masuda Takashi’s report, we can see that the comprador was charging Mitsui Bussan 0.25% and his client 0.5%, a total of 0.75% for each transaction. This corresponds to Uchida’s (1938b: 16) observation that, “Import fees paid by foreign trading companies are close to ¼%”. In other words, the Shanghai branch comprador’s commission was in line with the average comprador of the time. In order to compare Mitsui Bussan’s treatment of their comprador as shown on Table 2 with that of the average comprador, see Table 7 which shows the official position of the Comprador’s Office according to Negishi. Although Table 7 does not include an item corresponding to Business Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 91

Table 7: The comprador's office 部署 Position 買辧 Comprador 副買辧 Assistant Comprador 跑街的 Market Shroff 賣貨手又買貨手 Selling and Purchasing Shroff 管錢的 Accountant 管帳的 Office Shroff 報關的 Custom Shroff 管棧的 Godown Shroff 學生意的 Apprentice Note: The word “Boy” is also used in English. Reference: Negishi Tadashi (1948: 142-143)

Apprenticeship found in Table 6, the two are generally in alignment. From this, we can surmise that Mitsui Bussan’s comprador system followed the norm before its termination. It is clear from the above that the comprador at Mitsui Bussan’s Shanghai branch was much like the average comprador employed by European and American trading companies such as Jardin Matheson Trading Co. The typical comprador’s singular quality that he worked both sides: that of a salaried employee of a foreign firm and that of an independent merchant working with foreign companies and clients, and receiving commissions from both. This monetary reward was in line for the times because the Shanghai branch comprador had multiple people working under him in a group or organization, and was distributing his salary from Mitsui Bussan to them. Jin YangShen, worked continuously as Mitsui Bussan’s comprador for 20 years and 3 months. If we calculate backwards from July 1899 when the comprador system was brought to an end we will see that he had been working for them from April 1879. He had worked for them since the opening of the Shanghai branch in November 1877. The question arises: why would Mitsui Bussan dismiss a comprador who had worked for them for such a long time?

3. The decision to dissolve the comprador system Togai (1974: 273) discovered that the idea of doing away with the comprador system “started with Masuda Takashi and Yamamoto Jotaro” and described why and how they carried it out. Masuda’s two investigative tours to China in 1896 and 1898 was central to the decision. In 1896, he made a tour of Shanghai, Zhifu, Tianjin and Yingkou to ascertain 92 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 conditions in China at the end of the Sino-Japanese War. Yamamoto, hired by the Mitsui Bussan Yokohama branch as an apprentice in 1881, had been working at the Shanghai branch from 1891, was his guide for this trip. As the result of accompanying Masuda on the tour, Yamamoto was transferred to the Osaka branch as its Vice General Manager in October of the following year in 1897. Yamamoto’s promotion came from his experience in procuring Chinese cotton, in the spinning industry (having set up the Shanghai Spinning Co.), and because he was optimistic about trading conditions in China. On August 1, 1898, the Osaka headquarters became the first to deal in raw cotton, cotton thread and cloth with Yamamoto as section chief of that department. On October 16, 1898 Masuda left to check in on the , Hong Kong and Shanghai branches and to conclude a sales contract for coal in Hong Kong. After returning on November 4, he submitted a report which described the problem of foreign trading companies unable to do business independent of compradors who were absorbing company profits. From the year prior, Masuda had been proposing a policy change to terminate the comprador system, and now insisted that this could be achieved by training their staff in Chinese language skills so that they could interact directly with the Chinese. The fundamental reason for doing away with the comprador system was cost. Masusda was clear about this in his assessment of the situation at the time. For example, for the sales of raw cotton in Hong Kong, Mitsui Bussan’s profit was 0.5-0.7% while the comprador’s charges came to 0.75% (0.25% from the seller, Mitsui Bussan; 0.5% from the buyer). This meant that over half of what could have been its total profit of 1.25% - 1.45% went to the comprador. Mitsui Bussan’s Ishida Kiyonao noted that after the comprador system was terminated, charges and commissions formerly going to the comprador now represented company income. Consequently, in half a year, income from cotton yarn alone totaled 35,000 Yen.

4. Chinese employees after the end of the comprador system Even though the Shanghai branch dissolved the comprador system in July 1899, in reality, Chinese employees were still needed for some of the work. The Shanghai branch Work Regulations of December 10, 1898 indicate that besides ten heads of sections including those in charge of raw cotton and coal sales, there were Chinese secretaries and runners. Article 13 Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 93 of the Shanghai branch Work Regulations lists duties for runners as well as hiring guidelines for those who had worked at the qianzhuang banks. After the comprador system was terminated, not only runners but cooks, chauffeurs and other Chinese workers were hired by the Shanghai branch. Table 8 illustrates the bonuses given to these employees. A total of 1,104 dollars in annual bonuses were given to 34 Chinese employees in December 1899. Immediately following the end of the comprador system in July 1899, five head clerks received written notices of dismissal in August 1899. Judging from the length of time employed (Table 6), we find that neither the comprador who had been dismissed or his subordinates were rehired as

Table 8: Chinese employees at the Shanghai branch (December1899)

Notification of No. Position Name Period Employed Wages Former Wages Bonus for 1899 Dismissal 1 Head Clerk Zhu LiShan 5 Months 1,000 taels annually August 1899 $600.00 2 Head Clerk Chen WeiXian 5 Months $20.00 August 1899 $50.00 3 Head Clerk Wang GanSheng 5 Months $20.00 August 1899 $50.00 4 Head Clerk He ZhenLin 5 Months $20.00 August 1899 $50.00 5 Head Clerk He FangBo 5 Months $16.00 August 1899 $40.00 6 House Servant A Wu 20 Years $9.50 August 1899 $22.00 $27.00 7 House Servant A Xian 10 Years $8.50 August 1899 $17.00 $22.00 8 House Servant DongLai 2 Years, 2 Months $6.50 August 1899 $6.50 $7.50 9 House Servant YingHua 1 Year $6.00 August 1899 $6.00 10 House Servant A Sheng 7 Months $6.50 August 1899 $2.50 11 Additional House Servant FangJin 2 Months $4.50 August 1899 $1.50 12 Cook A Dang 17 Years $9.00 August 1899 $20.00 $25.00 13 Cook RongCai 4 Years, 4 Months $14.50 August 1899 $15.00 $17.50 14 Cook MaoTou 10 Months $4.50 August 1899 $2.00 15 Store Servant ChunZhen 4 Years, 5 Months $8.50 August 1899 $15.00 $19.50 16 Store Servant ZhouSheng 3 Years, 5 Months $5.00 August 1899 $6.00 $8.00 17 Store Servant JiShang 3 Months $5.00 August 1899 $2.00 18 Store Servant DingAn 1 Year, 1 Month $4.50 August 1899 $4.00 $5.50 19 Chit Servant A Wu 11 Years $6.50 August 1899 $17.00 $22.00 20 Chit Servant A Bao 6 Years, 3 Months $5.50 August 1899 $13.00 $17.00 21 Errand Boy FangHui 3 Years, 4 Months $6.50 August 1899 $12.00 $17.00 22 Deliveryman A 20 Years, 3 Months $9.00 August 1899 $20.00 $25.00 23 Deliveryman JinRong 8 Years $9.50 August 1899 $22.00 $27.00 24 Deliveryman JinChun 3 Years, 6 Months $7.00 August 1899 $20.00 $25.00 25 Deliveryman MiaoGui 4 Months $9.50 August 1899 $3.00 $5.00 26 Deliveryman QiSheng 4 Months $9.50 August 1899 $3.00 $5.00 27 Deliveryman HongZuo 3 Months $7.50 August 1899 $2.00 28 Deliveryman RuLin 3 Months $7.50 August 1899 $2.00 29 Deliveryman BingJin 1 Month $8.00 August 1899 $2.00 30 Chauffeur No.1 4 Months $8.00 August 1899 $2.00 31 Chauffeur No.2 4 Months $8.00 August 1899 $2.00 32 Chauffeur No.3 4 Months $8.00 August 1899 $2.00 33 Chauffeur No.4 4 Months $8.00 August 1899 $2.00 34 Rider (horses)  8 Years - August 1899 $8.00 $11.00 Total $1,104.00 Reference: “Wages for Chinese employed at Shanghai branch”, Company Minutes, Bussan 143. 94 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 head clerks. However, workers other than head clerks who had worked for the company for more than 20 years such as A Yuan, a deliveryman and A Wu, a house servant were included. These employees, too, had received formal notices of dismissal and their wages reconfigured so that A Yuan now received from 9 Dollars, instead of the 20 Dollars he had formerly been paid, and A Wu received 9.50 Dollars instead of 22 Dollars. In other words, they were paid less than half of their former wages.

5. Overseas trainees at Mitsui Bussan Shanghai branch Both Togai (1976: 54-55) and Wakabayashi (1999: 32-33) mention the Program for Apprentices in Chinese Commerce and the Program for China Trainees as two of the major factors contributing to Mitsui Bussan’s success in terminating its comprador system. The trainees of these two programs are the subject of Table 9.

Table 9: Overseas trainees at Mitsui Bussan (1900-1907)

1900 1901 1903 1905 1906 1907 No. Name Job Job Job Job Job Job Branch Branch Branch Branch Branch Branch Description Description Description Description Description Description 1 YN Wuchang China Trainee 2 US Nanjing China Trainee Tianjin China Trainee China Trainee Hankow Paid monthly Hankow Paid monthly 3 TM Nanjing China Trainee Tianjin China Trainee China Trainee 4 DT Tianjin China Trainee Tianjin Paid monthly In charge of In charge of miscellaneous 5 II Tianjin China Trainee Tianjin Paid monthly Tianjin Paid monthly Tianjin Osaka Fenchenzi Paid monthly wood, lumber import goods, Section 2 6 SK China Trainee Head of cotton Head of cotton 7 OM Tianjin China Trainee Tianjin Paid monthly Tianjin Paid monthly Tianjin Tianjin yarn & cloth yarn & cloth In charge of In charge of 8 AH Guangdong China Trainee Guangdong China Trainee Hong Kong Paid monthly Hong Kong Paid monthly Hong Kong selling and Hong Kong miscellaneous purchasing export goods 9 HN Hankow China Trainee Tianjin China Trainee 10 AE Xiamen China Trainee Guangdong China Trainee n.a. China Trainee Guangdong Paid monthly Guangdong Paid monthly 11 YA Guangdong China Trainee Guangdong China Trainee 12 SY Guangdong China Trainee In charge of In charge of 13 DS Guangdong China Trainee Guangdong China Trainee Hong Kong Paid monthly Hong Kong Shanghai Guangdong Paid monthly coal coal 14 AI Shanghai China Trainee Shanghai China Trainee n.a. China Trainee Zhifu Paid monthly Zhifu Paid monthly Zhifu Paid monthly In charge of Business dept., 15 TK Shanghai China Trainee Tianjin China Trainee n.a. China Trainee miscellaneous Niuzhuang in charge of goods fertilizer In charge of In charge of From the 16 UN Shanghai China Trainee Shanghai China Trainee n.a. China Trainee Shanghai cotton yarn & Shanghai cotton yarn & Shanghai Aoshima cloth cloth Branch Chinese Chinese Chinese In charge of Head of cotton 17 YT n.a. Commerce Tianjin Commerce n.a. Commerce Tianjin cotton yarn & Tianjin yarn & cloth Apprentice Apprentice Apprentice cloth Chinese Chinese Chinese 18 YY Wuchang Commerce Tianjin Commerce n.a. Commerce Apprentice Apprentice Apprentice Chinese Chinese Chinese In charge of In charge of In charge of 19 TH Shanghai Commerce Hong Kong Commerce n.a. Commerce Hong Kong Hong Kong Hong Kong coal, Sections coal coal Apprentice Apprentice Apprentice 1, 2 Chinese 20 NF Yingkou Commerce Apprentice Reference: Employee Records, Annual Publication (Bussan 50.8-50.13). Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 95

Mitsui Bussan’s overseas trainees from1900 to 1907 are listed in the Record of Employees with their jobs and places of employment (See Table 9). First, it should be pointed out that since the Program for Apprentices in Chinese Commerce was instituted in 1898 and the Program for China Trainees in 1899, none of the trainees of these programs had actually started working in 1900. Two of them were working as salaried employees at the Tianjin Branch in 1901 but it is only after 1905 that graduates of overseas training programs begin working at the Shanghai branch. Secondly, it is important to look at how many among those who were working were in charge of trading. One of them was put in charge of cotton yarn and cloth at the Tianjin Branch in 1906, and he is replaced by another graduate of the overseas trainee program in 1907. However, no trainees were put in managerial positions in either the Shanghai or Hong Kong branches. According Wakabayashi (1999: 32-33), Mitsui’s “Regulations for Apprentices in Chinese Commerce was instituted in April 1898 in as an alternative to the comprador system within the company and in order to avoid paying unnecessary commissions. That same year, two employees, and in the following year, two more, making a total of four were dispatched to China. Again, the Regulations for China Trainees were instituted on January 6, 1899 and eleven graduates were sent to China that year. . . . Building on this achievement, the Shanghai branch was able to completely do away with the comprador system as early as 1899”. These statements are problematic for this reason. When the comprador system was terminated at the Shanghai branch in 1899, none of the overseas trainees in the Program for Apprentices in Chinese Commerce and the Program for China Trainees were yet to be employed. Furthermore, according to Wakabayashi (1999: 32): “Foreign companies were being obliged do business through compradors able to guarantee trading on the basis of decidedly high information gathering abilities,” and that “Mitsui Bussan had created an in-house system to replace them”. If this were the case, would not the employees replacing the compradors be at the very least those in charge of trading, and not those with lowest monthly salaries? Examining the personnel above the managerial level who were trained within Mitsui Bussan will further complete the picture.

6. Employees and the organization of Mitsui Bussan Shanghai branch Before looking at individual managers above the level of those charged 96 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 with trading in specific products, let us look at 54 employees who appeared at least once on the employee list over the roughly four-year period from 1887 to 1901 when the comprador system was abolished in 1899. (See Table 10) It is evident that the number of employees almost doubled from 12 in 1898 to 23 in 1899. Most of them, or eight, were paid daily while three were monthly salaried employees, 11 in all. From 1899 to 1900, the number of monthly salaried employees rose from 15 to 20, while the day workers stayed at eight and three overseas trainees were newly employed, raising the total number of employees from 23 to 31. I would submit that since overseas trainees do not appear on the list of employees until 1900, they could not have been instrumental in ending the comprador system in July 1899.

Table 10: List of employees at Mitsui Bussan Shanghai branch (1897-1901)

1897 (M30) 1898( M31) 1899 ( 32) 1900 (M33) 1901 (M34) Paid monthly 13 12 15 20 21 Paid daily 8 8 5 Trainees 3 4 Total 13 12 23 31 30 Reference: List of Employees, Annual Publication (Inclusive of 1990; Bussan 50.1-50.13). Higher Commercial School: An Overview, Annual Publication. Tokyo Higher Commercial School, Record of Annual Employee Reunions, 1915.

Besides bookkeepers, the increase in employees included managers and heads of particular products. By 1896, the bookkeeper is listed in the employees list as “Bookkeeping Managers” who was the equivalent of an “Accounts Manager”. In addition, others were charged with the responsibility of overseeing certain departments depending on the product (raw cotton, coal, or miscellaneous goods) or the service (insurance, shipping, deliveries, expenses, book keeping, or cashier). Each product or service area also had its own manager. In 1876, Mitsui Bussan was established as non-capitalized private limited company, and in 1893 became a general partnership company with capital of 1,000,000 Yen. In the process of carrying out this organizational reform, the former director was changed to new clerk class 1; the former head clerks class 1 to class 3 were changed to new clerks class 2 to class 4; the former clerks class 1 to class 3 became new clerks class 5 to class 7. Promoted heads, other than those doing double-duty as both bookkeepers and cashiers, were paid over 35 Yen in 1898. This was more than the salary of those above new clerk Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 97 class 4, and more than that of the former head clerk class 3 according to the salary structures for 1897 and 1893, respectively. The former head clerks were administrators under the director; and were in charge of specific products or service areas. The new head clerks performed important duties equivalent to the former head clerks and received salaries on par with them. These posts and managerial positions are shown in Figure 5. The Organizational chart for Mitsui Bussan Shanghai branch 1898 as shown in Figure 5 lists only the branch managers and their bookkeepers, leaving the individuals in charge of various products unclear. By 1899, as seen in Table 6, the positions had been consolidated into those in charge of products such as raw cotton, coal (plus insurance), miscellaneous goods (plus raw cotton); as well as services such as expenditures (plus assistant manager), bookkeeper (plus receipts and dispursements), shipping (plus deliveries).

Figure 5: Organizational chart for Mitsui Bussan Shanghai branch (1898)

Manager

Bookkeeper

Figure 6: Organizational chart for Mitsui Bussan Shanghai branch (1898)

Manager

Assistant Manager, Head of Procurement

Head Bookkeeper and Cashier

Head of Shipping and Deliveries

Head of Raw Cotton Head of Coal and Head of Miscellaneous Goods Insurance and Raw Cotton

7. Product managers for Mitsui Bussan Shanghai branch As mentioned earlier, Masuda had become aware of the problems associated with compradors by 1896, and by the following year started to 98 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 prepare the ground to phase them out. After observing the Taipei, Hong Kong and Shanghai branches, he determined to dissolve the system in Shanghai but not in the Hong Kong and Taipei Branches. Masuda gives three reasons why it was possible to shut down the comprador system only in Shanghai: 1) the volume of business and level of trust associated with the Shanghai branch was greater than at the other branches; 2) those with whom they had business dealings had jangui or English-speaking Chinese staff; and 3) there were two or three Japanese staff in Shanghai who could do business in three languages. Since the first two reasons were not particular to Mitsui Bussan, it is my conclusion that it was the third that enabled it to become the forerunner in eliminating the comprador system from their business. The two or three Japanese staff members mentioned above are not specifically named but one can deduce that one of them is Ishida Kiyonao. In his report, Masuda gives high marks to Ishida who went to Zhifu and studied how Chinese stores were organized. Ishida himself dealt with his clients wearing Chinese clothing and speaking in the vernacular. Ishida is listed in Table 11 together with other managers in charge of various product areas. Ishida, who was the third on the Shanghai Employee List was hired in August 1889 as an employee limited to working in the Shanghai branch. He was promoted in December 1890 to clerk class 2, and in December 1891 to clerk class 1. As far as can be ascertained from the Employee List, he continued to work at the Shanghai branch from 1892 to 1901. His 1892 position as clerk class 1 put him at the same level as Yamamoto Jotaro, listed second. When Yamamoto was promoted from secretary at the Home Office to head of the Shanghai branch in 1901, Ishida took his place as secretary. It can be deduced that with the departure of Ishida, of the three employees most capable of conducting business in Chinese, the remaining two were Iwashita Kiyotomo (No. 6 on the Employee List) and Mikimoto Tokumatsu (No. 11 on the Employee List). They were responsible for coal, miscellaneous goods and cotton yarn, the three most important trading goods of the time. According to Table 3, coal, raw cotton and cloth, and miscellaneous goods brought in over 5,000 taels in two quarters. Iwashita and Mikimoto differed from Ishida in that they were both graduates of institutions of higher learning. After graduating from the Higher Commercial School, Iwashita enlisted for military service where Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 99

Table 11: Product managers at Mitsui Bussan Shanghai branch immediately following dissolution of comprador system (1892-1907) No. 3 in Shanghai Number No. 6 in Shanghai Employee List No. 11 in Shanghai Employee List Employee List Name Ishida Kiyonao Iwashita Kiyotomo Mikimoto Tokumatsu Name of Institution n.a. Higher Commercial School Higher Commercial School Education Graduation n.a. 1892 1893 Position Paid monthly 1892 (M25) Class Clerk Class 1 Salary 30-45 Yen Position Paid monthly 1893 (M26) Class Clerk Class 1 Salary 30-45 Yen Position Hong Kong Tokyo 1895 (M28) Class new Clerk Class 5 new Clerk Class 6 Salary Over 30 Yen Over 15 Yen Position Paid monthly Paid monthly Singapore 1896 (M29) Class new Clerk Class 5 new Clerk Class 7 new Clerk Class 6 Salary Over 30 Yen Over 10 Yen Over 20 Yen Position Paid monthly Paid monthly Paid monthly 1897 (M30) Class new Clerk Class 5 new Clerk Class 6 new Clerk Class 6 Salary Over 30 Yen Over 20 Yen Over 20 Yen Position Paid monthly Paid monthly In charge of bookkeeping 1898 (M31) Salary 80 Yen 40 Yen 45 Yen 1899 (M32) Position Head of raw cotton Head of insurance Head of miscellaneous goods and raw cotton 1900 (M33) Position Paid monthly New York Head of miscellaneous goods 1901 (M34) Position Head of raw cotton New York Head of imports 1903 (M36) Position Secretary at Home Office Head of machines and railways, New York Head of San Francisco Dispatch Office 1905 (M38) Position Secretary at Home Office Head of railways, New York Head of San Francisco Office 1906 (M39) Position Secretary at Home Office Head of railways, New York Secretary at Home Office 1907 (M40) Position Head of railways, New York Secretary at Home Office Reference: List of Employees. Annual Publication, (inclusive of 1990; Bussan 50.1- 50.13). Mitsui BussanGomei Kaisha, Regulations Concerning Renumeration1893 (Bussan 57-12) Higher Commercial School - An Overview, Annual Publication. Tokyo Higher Commercial School - Record of Annual Employee Reunions, 1915. Note: According to the1893 Organizational Reofrms, Clerk Class 1 of 1893 becomes new Clerk Class 5 in1895. Note: Employees not listed at the Shanghai Branch are shown in italics. he served for three years before joining Mitsui Bussan. He was promoted to a managerial position after three years’ experience in the Shanghai branch. Mikimoto entered Mitsui Bussan after graduating from Higher Commercial School and was promoted manager after working a total of three years in Singapore and Shanghai. As graduates of institutions of higher education, their climb up the company ladder was clearly faster than Yamamoto or Ishida who joined the company as an apprentice or limited to working in a particular branch. Even so, as Kiyama (1997) points out, it was those who gained their work experience over several years in the company who advanced to higher 100 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 managerial posts rather than those with experience in the West or the early graduates of institutions of higher education. Yamamura (1990) differentiates between overseas trainees or “whose trained within Mitsui Bussan” and graduates of institutions of higher education. However, it can be argued that because of the timing of the hiring season for new graduates, the length of time they worked in the company also makes them products of the working environment. There is one other important individual in human resource training: Obata Masabumi, No. 33 on the Shanghai Employee List. Obata was born in Nagasaki in 1859 and entered the Foreign Language Institute (now Tokyo University of Foreign Studies) in 1876. After graduation in 1879, he studied Chinese as a foreign student in and after returning home in 1882, worked as a Chinese teacher at the Kumamoto regional garrison. In 1890, he moved to Shanghai to assist in the establishment of the Nisshin boeki kenkyu sho (Sino-Japanese Trade Research Institute) and joined Mitsui Bussan in 1898. With the establishment of the Toa dobunsho-in (Tung Wen College) in Shanghai in 1901, he taught Chinese on Sundays while continuing to work at Mitsui Bussan where he was hired for his Chinese proficiency. In December 1898, Mitsui Bussan instituted the Regulations for the Study of Chinese and Taiwanese, making it mandatory for all its employees in China and Taiwan to study Chinese conversation, reading and writing every day for over an hour. Obata was central to this program, playing as he did, a key role in Chinese language education. Mitsui’s employee list describes him as the manager of human resources in 1905 and responsible for the training of employees at the Shanghai branch.

8. Mitsui Bussan Shanghai branch business clients The credit balances for the Shanghai branch’s clients after the dissolution of the comprador system are shown in Table 12. The head of the coal division extended credit to 21 clients, of which one is a joint account with the miscellaneous goods division. A credit range of 30,000 taels for the German shipbuilding company, Farnham & Co. and Shanghai Engineering indicates that it was likely a locally established joint corporation or related company. The Shanghai branch was also selling coal to British firms such as Jardine Matheson & Co. and Butterfield & Swire, and cotton spinning companies such as Say Chee Cotton Mill and Tong Yi Gong. Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 101

Table 12: Shanghai branch customer credit ranking in taels (December 1900) No. Division Client Credit Limit (taels) 1 Coal Farnham & Co. 30,000 2 Coal Shanghai Engineering 3 Coal Jardine Matheson & Co. 30,000 4 Coal China Merchant S. N. Co. 30,000 5 Coal Butterfield & Swire 30,000 6 Coal Me Yregor Bros. 30,000 7 Coal & miscellaneous goods Bayd & Co. 20,000 8 Coal Yeo Me Bain 15,000 9 Coal Noh Jun Cotton Mill 10,000 10 Coal Say Chee Cotton Mill 10,000 11 Coal Melchers & Co. 10,000 12 Coal Lun Hwo Silk Filature 10,000 13 Coal Shanghai Ice Work 5,000 14 Coal Tong Yi Kong 10,000 15 Coal Ah Poon 10,000 16 Coal Dah Chong Hang 10,000 17 Coal Yung Chang 8,000 18 Coal Nie Tong Jeing 5,000 19 Coal Yung Chee 3,000 20 Coal Loong Shing 3,000 21 Coal Tong Shing 3,000 22 Cotton yarn & miscellaneous goods Kuong Shing 50,000 23 Cotton yarn & miscellaneous goods Son Moh Nie 5,000 24 Cotton yarn & miscellaneous goods Dah Moh Woo 5,000 25 Cotton yarn & miscellaneous goods Dah Moh Chong 5,000 26 Cotton yarn & miscellaneous goods Yi Chee 5,000 27 Miscellaneous goods Ku Chee 10,000 28 Miscellaneous goods Y. Ching Chong 10,000 29 Miscellaneous goods Don Shin Chee 10,000 30 Miscellaneous goods Yu Chong Tuck 5,000 31 Miscellaneous goods Mactavish & Co. 500 32 Miscellaneous goods Commercial Press 500 Total 338,000 Reference: “Investigation of client credit ratings as of December 1870 (Meiji 3)”, Meeting Agenda. (Bussan146). Other clients included China Merchant S. N. Co. (China Merchant Steam Navigation Co.) and Noh Jun Cotton Mill which were listed in the columns under Closely Related Companies and Credit Ratings, from which we can deduce that there were dealings with Qing government officials. Later, other sales, including coal to the Bureau in the latter half of 1904, show that the government demand for coal was rapidly increasing. Credit for various products was also being extended by other departments: five clients for cotton (raw cotton, cotton yarn, cotton cloth) 102 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 and miscellaneous goods, and six clients for miscellaneous goods. The largest credit was extended to Kuong Shing (Gong Xin) with whom business had been growing since 1898. Gong Xin’s main products, cotton yarn and cloth, enjoyed a steady increase in sales through its close association with the Shanghai branch’s solid business in these goods. This relationship with Gong Xin became even stronger after starting business with branch outlets of the Shanghai Spinning Co. which was made up of Gong Xin, Wu Zong Ji and Da Feng and others. Through its close relationship with the powerful cotton yarn and cloth industry, the Shanghai branch’s spinning industry sustained profitability even in bad years. The list of clients to whom credit was extended in Table 12 was increased by four more clients in 1901: Wheelock & Co. (Shanghai Cargo Boat Co.) for 5,000 taels; Arnhold Kerberg (Soy Lun S. F.) for 15,000 taels; Shanghai Pulp & Paper Mill for 10,000 taels; and Shanghai Gas Co. for 20,000 taels. Credit of this type was being extended for cotton yarn and cloth not only by the Shanghai branch, but also in northern China. Mitsui Bussan augmented its business in cotton yarn and cotton cloth by building close business ties involving extending credit. However, there was “a concern” that by continuing to depend on compradors who “tended to prefer dealing only in big ticket items, it would be difficult to expand the number of trade outlets in the future.” Since Mitsui Bussan had exclusive trade agreements with coal and cotton spinning companies, it was looking for customers for coal, cotton yarn and cloth. Mitsui Bussan needed to be able to assess credit viability on its own and expand its trading outlets by eliminating the comprador system that favored a fixed clientele.

IV. Conclusion

British trading companies that continued to rely on the comprador system and Japanese trading companies that broke off from it were compared in Section two of this paper highlighting the fact that compradors who managed their own accounts and the accounts of others were in a situation where duplicity was inevitable. A number of theories of how such problems could be prevented were presented and verified by examples were taken from British and Japanese companies. It became clear that initial attempts by British firms to bring about a common financial system Ryutaro Yamafuji: Utilizing and Eliminating the Comprador Networks: ... 103 were not always successful, but that strengthening guarantees brought a certain degree of success. Japanese firms, on the other hand, did away with compradors by establishing an alternate system. And when they hired Chinese they did so as employees working under management direction. The elimination of the comprador system, in section three, focused on Mitsui Bussan and shed light on three points. The first point concerned the comprador and his working conditions at Mitsui Bussan’s Shanghai branch. He received both a salary and commissions from the company. Further, his salary and commissions were average for the time, and the conditions of the group working for him very much like that of any other comprador. Clearly, the Shanghai branch comprador was working very much like his counterparts in other foreign companies. The second point was on how the Shanghai branch managed to stop using the comprador system, and referenced earlier research on the overseas trainee programs. The trainees who were sent abroad by the Program for Apprentices in Chinese Commerce established April 1898, and the Program for China Trainees established the following year January 1899 had not yet been employed when the comprador system ended in Shanghai in 1899. It is therefore evident that the comprador system could not have been brought to a close by the overseas trainees. The third point was the importance of employees trained on site who made it possible for Mitsui Bussan to eliminate the comprador system, prior to the impact of the overseas trainee programs. It was graduates of institutions of higher education, apprentices or limited to working at the Shanghai branch trained by working in Mitsui Bussan, who were instrumental. They were the ones who went on to become the managers responsible for trading after the comprador system was brought to an end. There are three reasons why the comprador system was terminated. The first was to eliminate the cost of salary and commission payouts to the compradors. Mitsui Bussan general manager, Masuda Takashi first raised concerns about the high salaries and commissions paid to them. By eliminating the comprador system, Shanghai branch was able to save 35,000 Yen in commissions in their cotton yarn business in six months. Although it is not possible to make simple comparisons between of the salaries paid to a comprador and to a Japanese employee of the time, a tentative comparison would put the comprador in a considerably higher pay scale. The second reason was to surmount the problem of the comprador’s 104 JAPANESE RESEARCH IN BUSINESS HISTORY 2017 │ 34 clientele base remaining small and fixed. This was because the comprador valued his relationships with his own special clients and could even obstruct a foreign trading company’s attempts to develop relationships with other customers. The third reason for eliminating the comprador system was the obstacle it presented in formulating a mid-to-long-term vision. Working through compradors who had the tendency to “choose products that give one-time big profits” made it difficult for Mitsui Bussan to strategically expand its brand, even if it meant sustaining losses for a few years. A topic for further research would be a solid analysis of the continuity of the comprador system in British trading companies. Although Mitsui Bussan is but one company, it’s records draw a vivid picture of how they phased out their compradors. There is evidence that other Japanese trading companies found Mitsui Bussan’s pioneering experience to be instructive as they went about terminating their contracts with their own compradors. On the other hand, although fragmentary analyses are available on British trading companies based on commercial reports and court records, we still await comprehensive research on a specific British trading company. In this light, I would like to do further research on a British trading company such as Jardine Matheson & Co. or Butterfield & Swire that shared business interests with Mitsui Bussan in China.

Acknowledgement This work was supported by JSPS KAKENHI Grant Number JP16K03799.

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