South China Research Resource Station Newsletter = 華南研究資料中心通訊, 第三期

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South

China Research Resource Station Newsletter

Chinese Business History:

A

Survey of the Sources

Rajeswary Ampalavanar Brown

University

of

London

The single most important source of Chinese business history is Government records, largely fiom the Ministries of Commerce and Industry, Registrar of Companies and the Stock Exchanges in S. E. Asia.

These contain important details of the company, its capitalization, the directors and shareholders, the structure whether it was a private partnership, a joint stock company or had a single owner manager. These records can thus be used to locate the origins of the firm, its size, forms of security used in raising equity which could be debentures, preference shares etc. and the researcher can also estimate the average gearing ratio. Sources of capital, the networks of the directors and the forms of separation between ownership (proprietor, shareholders) and control (directors/managers) are also often revealed in

these official documents. However, there is a word of caution here; since registration was only introduced in the early 20th century in China as

well as in S. E. Asia and take up of registration was slow, these records may in essence cover only the l&gest and most prominent of the Chinese firms. For these large Chinese companies, one is able to trace and investigate annual fluctuations in capitalization as wdl as in financial gearing. Equity and liabilities are frequently noted. Thus longer term economic trends can be established. Essential material gleaned includes idea or purpose of incorporation, capital base, and longevity of the

company.

.An crisis, fraud or difficulty would often merit great detail on the company's history, including detailed financial statements on company's loans, its creditors, its assets, etc. Thus failure or bankruptcy yields invaluable bformation on how large Chinese businesses were organized

.

Thus Tan Kab Kee & Co., a multinational in S. E. Asia and China fiom the late 1890s with interests in commodity production, manufacturing and banking failed in 1932. This attracted detailed reports from accountants Rennie and Lowick as well as from Western and Chinese banks affected by the collapse. For the years 1922-1934, detailed reports on production, finance, export

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import data for the various subsidiaries of TKK were collected by the accountants. These are easily located in both the HongKong Bank Archives as well as in the Chartered Bank

Archives, both of whom were major creditors of

TKK.

The intricate details in the manufacture of shoes,

cycle tyres, that are contained in these reports as

well as the Chinese networks responsible for retailing the manufactured goods, inform the business historian of how TKK used assets in S E Asia to sustain industrial ventures in S..E. Asia, China and Hong Kong. Important information on Chinese retailing techniques are also detailed in these reports.

Thus

when these bankruptcy records are used in combination with macro- economic data for the period, they help explain

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the responses of Chinese entrepreneurs to international cycles of growth and decline. The commodity slumps of the early 1920s and early 1930s as well as the early 1970s unleashed important phases in the restructuring of Chinese business in S. E. Asia. The takeovers, mergers occurring simultaneously with the demise of some Chinese companies can be better understood from a detailed study of these bankruptcy records.

The stock exchange and securities Commissions in the major cities of

S.E.

Asia also possess documents essential for business history. Directors' reports, balance sheet, share issue, redemption or coversion of a class of share or stock, reports and minutes of company meetings were deposited here. Thus one can estimate a time scale of changes in the capitalization of the firm, replacement of directors, how the comapny preformed,. and some explanations as to why certain policies were pursued, where annual balance sheets were included. This would provide valuable insights into sources of capital, land buildings and other assets, some idea of liquidity, gearing and information on profits and losses of the fm. However since many Chinese entrepreneurs treated shares issues and loans to subsidiaries in a cavalier fashion, this could also confuse the researcher on overall information.

Gross sales, detailed breakdown of operating costs, net sales revenue, dircetors fees, dividend payments, depreciation and balance carried forward, can all be traced from the records both at the Ministry of Commerce and Industry and the Stock Exchange. .

One could then construct trends in profit ratio of the company, as well as use to appraise competition, efficiency of the regional location and explain the basic financing policy of the company. With the Stock Exchange reports and prospectuses, some caution needs fo be execercised. Some government were lax

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thus optimistic statements rather than accurate statistics were deposited. But nevertheless, the tranche of documents which include prospectuses, articles of associations, details of

allotment of shares, copies of shares certificates, as well as financial statements fiom company's bankers all provide critical snapshots of the company at integral points of fmancial and organizational restructuring taking place within the company.

This time series of capital usage or sources of capital may be constructed and these are of some value in appraising Chinese entrepreneurial attitude to fmance and financial risk. Here again, the unsophisticated use often by major Chinese

firms even in the contemporary period of essential items such as depreciation and assessment of assets, payment of dividends, maintaining reserves, etc., make it difficult for accurate business interpretations.

The complicated relationship of the main company, its subsidiaries, networks, lineage and charity trusts further add to this problem. There is also the issue of bias in many of these reports, often used to encourage investors rather than persent accuracy of reporting.

Third source of Chinese business history are the press reports in business and fmancial journals, and weeklies such as the Far Eastern Economic Review ,the Asian Business, and Business Times;

the latter 2 published in Singapore, the other in Hong Kong.

Thus fiom specialist papers and journals like

Asian Business to daily newspapers like the Straits Times, Bangkok Post, editorals, features

articles on specific Chinese companies are immensely valuable.

The newspapers also carried information on the index of share prices as well as new products, and price changes of commodities. Advertisements are equally important for information on the products available, pricing, detailed specifications of product itself, and indicating trends in marketing it. For example in the mid-l93Os, Chinese capitalists such as Lee Kong-chian attempted to diversify into beer production in Singapore. The competition here was with Heineken and details on their separate brews, their retailers etc. were condensed in these advertising strips.

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The editorials of these newspapers were wide ranging and often included feature articles on particular f m s , reports of new appointments to the board, obituaries of famous industrialists, details of new products, technological advances, information on competitors, dividends paid contracts for tender, the list of firms facing bankruptcy, state of trade and negotiations with Government over legislative changes. This wealth of information could form the background for company histories.

The fourth source is company archives itself. This is undoubtedly the richest source but is frequently limited because of a company's access policy. Company archives include minute books, ledgers, journals litterbooks, directors' correspondence etc., The range is simply enormous. Company archives may also include documents relating to the general development of the industry, monitoring fluctuation in a particular locality to identify

fm's

operation. These internal records may also shed light on competition and the competitors. Inevitably the bias in this source is towards large businesses which maintain private archives.

The

fifth

important source is that of bank archives. They can prove to be the most accurate and valuable. They not only provide details on

the frnancial transactions of Chinese businessmen, but also the purchase of bullion, and foreign exchange on a day to day basis.

Bank

frequently hold Chinese companies audited accounts, balance sheets, since they were vital in assisting the banks to evaluate their lending to these compaines. Bank archives also contain share price data as well as miscellaneous economic information, providing a background to company transactions. That is how far geographical location, local economic conditions, local interest rates, specie flows in the region etc., affected the performance of a Chinese enterprise. Detailed comparisons can be made through the records of the banks branches which operated multinationally. For example, the HongKong

Bank

in Singapore had access to the credit rating of major Chinese multinationals operating in

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Asia, through its headquarters in Hong Kong which collated such information. This would idenify not only the bizarre behaviour of some Chinese entrepreneurs but also ensured that vast multinational lending operations were possible with sufficient guarantees for the lender. Banks are naturally sensitive to disclosing information relating to private accounts and maintain a strict 30 years limit but often access is provided on an individual basis, depending on whether the Chinese capitalist involved was still on this planet.

The sixth source is that of country record offices, local history collections, collections of private papers relating to land, buildings, local directories, wills and inventories, records of local Chambers of Commerce and business and clan associations such as Hui, Gongsi, and lineage. Dr. Choi Chi-cheung's innovative research on the Sino-Thai rice company, Wanglee, (1870-to the present) has used these local records both in Wanglee's home village near Shantou, as well as diverse records in Bangkok.

Among the most impressive of private collections is that of Tan Cheng-lock in the Malaysian and Singapore Archives. There are also important collections of Chinese private papers in the Universities of Malaysia, Singapore, Thailand and Indonesia. The Oral History Archives in Singapore is the focus of much archival collection on Chinese entrepreneurs of the more recent past. These manuscripts are essential when investigating Chinese business in S.E. Asia and abroad.

Records of professional bodies also contain useful information. These organizations relating to brewing, manufacturing banking, shipping, industrial and argicultural activities are often located in major cities in S.E. Asia and access is

readily available. The Malayan breweries Archives in Singapore contains materials relating to Lee Kong-chian and the Chinese networks in soft drinks manufacture when they attempted to move into beer production in the early 1930s. The Rice Growers Association in London has an

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impressive collection of materials on Chinese rice traders in Asia in the 19th and 20th centuries.

Finally, the use of corporate biographies in constructing details of Chinese business is rampant among sociologists, anthropologists as well as business historians. Caution is necessary here. They are effusive in their praise of the entrepreneur, and often provide little insight into

how he accumulated capital nor how the fm

was organised. A more rigorous interpretative

volume is Stepping Out: The Making of Chinese Entrepreneurs in Singapore by Chan Kwok-bun

and Claire Chiang Sue-ngoh.

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Within this type of source on Chinese businessmen are the cremation volumes of major Chinese capitalists. They contain essential data on village origins, networks, achievements etc. This tradition of producing a cremation publication is particularly popular in Thailand. These can be located in clan association libraries

as well as on the stalls in the Central Market in Bangkok, when families disposing of their household paraphernalia, they also reject their ancestors‘ cremation volumes. These can fill the gaps in existing Chinese business history resources.

. . .

Speaker:

Dr.

Rajeswary Arnpalavanar Brown

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Title: Research Agenda for Chinese Business Culture and History

Lecture 1 : Organization and International Competitives

Lecture 2: Research and Development

Lecture 3: Firms, hierarchies and networks

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. _ . Lecture 4: Chinese business and the economic growth of NICs: a historical

perspective

Schedule: Lecture 1 : July 15

(am)

Lecture 2: July 15 (pm) Lecture 3: July 20 (am) Lecture 4: July 20 (pm)

Summary

The analysis will focus on the ways in which history, culture and environment have shaped the organizational evolution of Chinese business, and assess its ability to make the transition to rapid globalization in the next century. First, Chinese business initiatives

in

the nineteenth and twentieth centuries were built upon traditions and network in an evolutionary manner. But can this be sustained in the hture? Second, it is possible to assess Chinese responses to these challenges only by comparisons with American, European, and Japanese businesses.

About the speaker

Dr. Raj. Brown

,

an economic historian specializing in Chinese business enterprises in

South East Asia, received her Ph.D. fiom the School of Oriental and Aiiican Studies, the University of London. She taught economic history at the University of Malaya, University of Cambridge and London School of Economics, University of London. She is currently research fellow at the School of Oriental and Afiican Studies, University of London. Dr.

Brown is author of The Indian Minori2y and Political Change in Malaya, 1945-1957

(Oxford University Press, Kuala Lumpur, 198 I), Capital and Enterpreneurship in South

East Asia (Macmillan, London, 1994), co-author of Malaysia [World Bibliographicd Series, vo1.12], (Clio Press, Oxford, 1986), and editor

of

Capital and Enterpreneurship in South East Asia (Routledge, London, 1995) and Chinese Business Enterprise, 4 volumes

(Routledge, London, forthcoming).

. .