The Chinese Cornerstone of Modern Banking Legal History Library
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The Chinese Cornerstone of Modern Banking Legal History Library Volume 14 Studies in the History of Private Law Series Editors C.H. (Remco) van Rhee (Maastricht University) Dirk Heirbaut (University of Ghent) Matthew C. Mirow (Florida International University) Editorial Board Hamilton Bryson, University of Richmond – Thomas P. Gallanis, University of Iowa – James Gordley, Tulane University – Richard Helmholz, University of Chicago – Michael Hoeflich, University of Kansas – Neil Jones, University of Cambridge – Hector MacQueen, University of Edinburgh – Paul Oberhammer, University of Zurich – Marko Petrak, University of Zagreb – Jacques du Plessis, University of Stellenbosch – Mathias Reimann, University of Michigan – Jan M. Smits, University of Tilburg – Alain Wijffels, Université Catholique de Louvain, University of Leiden, CNRS – Reinhard Zimmermann, Max-Planck-Institut für ausländisches und internationales Privatrecht, Hamburg VOLUME 6 The titles published in this series are listed at brill.com/shpl The Chinese Cornerstone of Modern Banking The Canton Guaranty System and the Origins of Bank Deposit Insurance 1780–1933 By Frederic Delano Grant, Jr. LEIDEN | BOSTON Cover Illustration: Howqua II (Wu Bingjian), 1769-1843. Oil portrait by Lamqua (Guan Qiaochang), ca. 1840. (Private collection. Photograph by permission.) Library of Congress Cataloging-in-Publication Data Grant, Frederic Delano, Jr. author. The Chinese cornerstone of modern banking : the Canton guaranty system and the origins of bank deposit insurance 1780-1933 / By Frederic Delano Grant, Jr. p. cm. — (Legal history library ; v. 10) (Studies in the history of private law) Includes bibliographical references and index. ISBN 978-90-04-27655-0 (hardback : alk. paper)—ISBN 978-90-04-27656-7 (e-book) 1. Deposit insurance— China—Guangzhou—History. 2. Suretyship and guaranty—China—Guangzhou—History. 3. Banks and banking—China—History. I. Title. HG1662.C5G73 2014 368.8’5400951—dc23 2014027748 This publication has been typeset in the multilingual ‘Brill’ typeface. With over 5,100 characters covering Latin, ipa, Greek, and Cyrillic, this typeface is especially suitable for use in the humanities. For more information, please see brill.com/brill-typeface. issn 1��4-1��3 isbn ���-��-�4-��655-� (hardback) isbn ���-��-04-��656-� (e-book) Copyright 2014 by Koninklijke Brill nv, Leiden, The Netherlands. Koninklijke Brill nv incorporates the imprints Brill, Brill Nijhoff, Global Oriental and Hotei Publishing. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill nv provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, ma 01923, usa. Fees are subject to change. This book is printed on acid-free paper. Dedicated to Barbara who made it possible ∵ Contents Acknowledgements IX List of Illustrations XII List of Tables and Charts XIV Note on Spelling XV Glossary XVI 1 Introduction 1 1 Subject and Framework 3 2 Previous Research 8 3 The 1829 Crisis in the State of New York 13 4 The Crisis in the Chinese Port of Canton: 1829 15 5 The 1829 Crises as Prologue 16 2 Sources of the Canton Guaranty System 18 1 Conquest and Pacification 18 2 The Organization of Merchants Engaged in Maritime Trade 31 3 Official Roots of Collective Responsibility 39 4 Collective Responsibility in Chinese Tradition 47 3 Evolution of the Canton Guaranty System 54 1 Official Management of Maritime Foreign Trade 54 2 The Security Merchant System and Origins of Collective Responsibility 60 3 The Formal Regulation of Maritime Foreign Trade 71 4 Debt Collection Under the Canton System 93 5 The 1780 Crisis and Imposition of the Collective Guaranty 111 4 The Fund is Drained, 1780–1799 126 1 The Hong Merchants, 1780–1799 127 2 The Demands of Government, 1780–1799 129 3 Trading Conditions, 1780–1799 132 4 The Collective Guaranty of Debt, 1780–1799 138 5 Three Plagues: War, Piracy and Litigation, 1800–1814 146 1 The Hong Merchants, 1800–1814 148 2 The Demands of Government, 1800–1814 151 3 Trading Conditions, 1800–1814 154 4 The Collective Guaranty of Debt, 1800–1814 157 viii Contents 5 The Abortive 1810 Receivership of Gnewqua II and Ponqua 159 6 The 1813 Receivership of the Junior Hong Merchants 163 6 Years of Rebound and Opium, 1815–1828 166 1 The Hong Merchants, 1815–1828 166 2 The Demands of Government, 1815–1828 170 3 Trading Conditions, 1815–1828 171 4 The Experience of Conseequa, 1796–1823 173 5 The Collective Guaranty of Debt, 1815–1828 184 7 The Last Years of the Canton System, 1829–1842 192 1 The Hong Merchants, 1829–1842 194 2 Trading Conditions, 1829–1842 202 3 The Collective Guaranty of Debt, 1829–1842 207 8 From Safety Fund to Bank Deposit Insurance 218 1 Joshua Forman 221 2 The Power of Suggestion 224 3 The Banking Crisis in the State of New York 226 4 The 1829 New York Safety Fund Statute 230 5 Early State Bank Guaranty Programs 237 6 Implementation of National Deposit Insurance in the United States 240 9 Eighty Years of Bank Deposit Insurance 252 1 Federal Deposit Insurance in the United States 253 2 The International Progress of Bank Deposit Insurance 257 10 Epilogue 263 Appendices Appendix 1. The Original Five Regulations (1760) 283 Appendix 2. The Original Five Regulations (1760) 286 Appendix 3. The Eight Regulations (1831) 291 Appendix 4. The Eight Regulations (1835) 301 Appendix 5. The Eight Regulations (Per W.C. Hunter) 312 Bibliography 315 Index 333 Acknowledgements The gratitude that I feel for all of the assistance that I have received on this project reaches back many years. The seed was planted when I was a student at Boston College Law School, from which I graduated in 1983. My law classmate, Max Kumin, who worked with Carter Golembe, brought Mr. Golembe’s work on the Chinese origins of American bank deposit insurance to my attention while we were in school. I am very grateful to Max for that direction. My col- lege professor Geoffrey Suess Law (1944–1980), a gifted teacher who ignited the interest in Chinese economic and institutional history that I carry to this day, had given me the skills I needed to start to analyze this information when I finally made time for it. I shall always be grateful to Geoff Law. This account of the travel of an idea would not have been written without the travel of an individual. Early in 2006 I met Dr. Johan Leonard Blussé van Oud-Alblas, then a visiting professor at Harvard University, who was prepar- ing the Reischauer Lectures that he delivered in April 2006. My travels to the Netherlands began soon thereafter, and the scheme of this work gradually began to take shape with the guidance and encouragement of Dr. Blussé. The first steps toward this book were presented as a paper at the China Business Seminar at the John King Fairbank Center for Chinese Studies of Harvard University in February 2007. Comments made then helped focus my work. My initial research on guarantee process at Canton was presented at the conference “Americans, Macao and China 1784–1950: Historical Relations, Interactions and Connections” at the University of Macao (December 2008), and specific study on legal release from debt at Canton was presented in a talk at the East Asian Legal Studies Program at Harvard Law School (October 2009). The collegiality and the intellectual support that I have received from the officers, staff and others who now are or have been associated with the Fairbank Center and the East Asian Legal Studies Program have proven help- ful in so many ways. In particular, I wish to thank: William C. Kirby, William P. Alford, Regina Abrami, Peter K. Bol, Lydia Chen, Jerome Alan Cohen, Mark Elliott, James R. Fichter, Jonathan Goldstein, Elisbeth Kaske, Nelson Y.S. Kiang, Linda Kluz, Elisabeth Köll, Philip A. Kuhn, Raymond Lum, John Schrecker, Elizabeth Sinn, Joanna F. Handlin Smith, Ronald Suleski, Michael Szonyi, Ross Terrill, Wen-hao Tien, Rudolph Wagner, Jeffrey R. Williams, Winnie Wong and Silas Wu. The project was advanced with my admission to the doctoral program at Leiden University in 2007. The manuscript went through a series of iterations with the assistance of the always enthusiastic, ever questioning and constantly x Acknowledgements demanding Professor Leonard Blussé. Having him as my Leiden promotor, and guide through the historical thicket of the China coast during the tur- bulent years 1644–1842, was an extraordinary blessing. This good fortune was compounded when Dr. Egbert Koops agreed to join Leonard Blussé as doc- toral co-promotor. A specialist in law, legal history, and comparative law, Dr. Koops brought powerful legal discipline to his review of my work as it slowly advanced. Egbert Koops and Leonard Blussé devoted extraordinary amounts of time to this project, often at great inconvenience to them. My debt to them is profound. While this book has advanced much from its final dissertation form, I hope that it will be found equal to the high standards that Drs. Koops and Blussé each set as a scholar. I have had much additional assistance. I am deeply indebted to my friend and mentor Jacques M. Downs (1925-2006), a scholar of the early American trade with China who was unfailingly generous in sharing his knowledge with me and with many others. Special thanks go to Robert A. Falk, David A. Moss, Lincoln P. Paine, Winton Rossiter, James M. Stone, Cathleen Douglas Stone, Marijke van Wissen-van Staden and Paul A. Van Dyke, each of whom provided help at crucial moments.