Business Expansion and Structural Change in Pre-War China: Liu Hongsheng and His Enterprises, 1920-1937

1. Introduction

Chapter 1 In the last 25 years, China has witnessed a period ofrapid economic development. Not only has trade grown, foreign direct investment increased, and the number offactories multiplied but the instÏtutional framework 品r business has also begun to alter. From the 1980s on, the government introduced new laws on ‘companies' or 'corporations', allowing gradually the confìrmation of private ownership and a corporate form of business organizatÏon.1 With the introduction of the stock exchange in the 1990s,2 Chinàs business environment seemed to have turned the clock back to pre-1937 days, with most similar institutions standing side by side with Chinese businessmen. History has often been employed to draw analogi白， or even lessons, from the past for solutions to problems of the present. However, history is also full of irony. In the mid-1950s, when enterprises were leaving private ownership for nationalization, Chinese businessmen of that generation seem to have become a bygone era, and reportedly expressed their joy and happiness. One of these businessmen is the main character ofthis book; Liu Hongsheng, known as O. S. Lieu3 in the pre-1949 period. On 4 October 19多6， a mainland Chinese newspaper published an interview passage which summarized the life story of a dying businessman, Liu Hongsheng, who expressed his goodwill and pride at witnessing his enterprises going through the process of nationalization.4 In this interview, Liu sketched his reasons for supporting the Chinese Communist Party. These included oppr臼sion from bureaucratic capitalism of Chinese Nationalist Party's leaders, the penetration of economic imperialism from Western countries, as well as the policies of the Chinese Communist Party in encouraging and promoting Chinese industry and business. For his support of the CCp, he was referred to as a ‘national capitalist' (minzu zibenjia) in the passage and remains so named in subsequent mainland Chinese publications.5 2 Business E吧仰的ion and Structural Change in Pre-Wár China Paradoxically, the passage also reveals a self-proclamation of a Chinese businessman's success story in the early twentieth century. ‘By the age of forty some,' as Liu himself proclaimed,‘[1] had already become a nationwide famous entrepreneur who possessed quite a number of [industria1] enterprises.'6 In fact, not only was he the major shareholder of Chinàs largest native-owned matchmanufacturing enterprise (and for that he was called ‘Chinàs king of matches') but also of a huge wharf operation and coa1 distribution network in the Lower Yangzi region before the outbreak ofthe Second Sino-Japanese War in July 1937. Hism司 or investment a1so spread to coa1 mining, coa1 briquette making, banking, woollen-textiles, and Shanghai's only cement factory. His name appeared on either the top management or board of directors in most of these enterprises. These achievements credited him as one of the 'industrialists' (gongyejia or shiyejia), a group of people important to 'the order of the day' in China of the early 1950s.7 The story ofLiu Hongsheng's success in business, similar to other Chinese businessmen, has attracted scholarly and non-scholarly attention. One of his sons wrote about his beloved father, portraying him as an ‘industrialist'.8 Two biographers wrote about him, and a group of scholars catalogued his archives and selected some of the docum凹的 for publication.9 Some others have used him and some ofhis enterprises as cases for understanding business strategies10 and ‘managerial thought'll in the late nineteenth and early twentieth century Chinese business. Recen你 Sherman Cochran has even l配d one ofLiu's enterprises to examine the adaptation ofcorporate hierarchies in modern China.12 This book is interested in the expansion ofLiu's business empire. However, it does not concern itself about his whole life story up to his dea出， as his sons, biographers, or the compilers and scholars who had catalogued his archives did. Despite the fact that these people might have insider's stories, unfolded sources or documents, or supplementary not白， they basica11y followed the themes, re油onmg， and interpretations having been put forward by the interview of Liu Hongsheng in the 1956 newspaper passage just mentioned - a ‘national capitalist' after a11. Nor does this book concern itselfwith 出e expansion ofallofhis enterprises. Some of them (such as his native banks) did not a1ways expand. Some might be very short-lived (such Introduction 3 Why does institutional development matter? The multifarious outlook of Liu's businesses, similar to those ofother prominent Chinese...