It was a time of new wealth, a gilded age in which entire families came into fortunes overnight.
To move the money, businessmen here in this city in northern China opened banks, the first in the nation’s history. Soon branches sprang up across the country, and they began making loans. Money flowed this way and that.
Then, as quickly as it started, the entire system crumbled. The banks shut down and the city fell into ruin.
So went the history of China’s first banking capital, which bloomed in Pingyao in dusty Shanxi Province in the mid-19th century, during the Qing Dynasty. With the global economy now reeling from the banking crisis that began in the US, and as the explosive economic growth of China begins to slow, the rise and fall of Pingyao could be read by some as a cautionary tale.
But the present-day financial crisis has reinforced the sense of nostalgia surrounding Pingyao, which, with its 11m-tall Ming Dynasty walls, is one of the best-preserved medieval towns in the country.
“The banks tell a history of Chinese financial development, like how China started to transform from feudalism to capitalism,” said Ruan Yisan (阮儀三), a retired professor from the architecture department of Tongji University in Shanghai who has been instrumental in the restoration of Pingyao.
“The staffs of the banks were trained to be objective and highly responsible to the accounting of the banks. Now, corruption is common and people don’t place much value in moral qualities,” he said.
Today, the old center of Pingyao is a place of 40,000 people crammed into narrow alleyways and courtyard homes hidden behind decrepit wooden doors. The surrounding countryside is a dry patchwork of millet and cornfields covered with the fine yellow silt found across the Loess Plateau, one of the most erosion-prone places on earth.
At Pingyao’s height, the 22 banks here thrived on the flourishing trade in Shanxi Province, as silk and tea moved north to Mongolia and Russia from southern China and wool went south.
Compared with the excesses of today, academics say, the early days of banking were a time of solid business ethics. There were no toxic mortgages, no opaque financial instruments. Trust among businessmen was so strong that the banks were able to start a system of remittances, credit and check writing, the first of its kind in China. Currency was in silver ingots.
Yet, some of the banks’ practices might raise eyebrows today.
Still visible in the two-story courtyards of the defunct banks here are opium dens and mahjong tables, as well as rooms where prostitutes hired by the banks plied their trade to win over potential customers.
When the banking system collapsed before the Communist Revolution in 1949, it was not because of greed or incompetence on the part of the bankers, Ruan and other academics say. More important, they say, was the overthrow of the Qing Dynasty in 1911 and the country’s subsequent descent into warring chaos, as well as growing competition from well-financed foreign banks allowed to do business in China.
Pingyao’s plunge into poverty left the town frozen in time.
The local government had no money to modernize. So the Ming-era walls remained standing even as ancient walls in other Chinese cities, including the ramparts around Beijing, were torn down by the communists. Within the walls here, families continued living in old courtyards — some within the once thriving banks. (Imagine the headquarters of Lehman Brothers converted into a commune.)
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