History of Banking in China：Early Chinese Banks
Chinese financial institutions were conducting all major banking functions, including the acceptance of deposits, the making of loans, issuing notes, money exchange, and long-distance remittance of money by the Song Dynasty (960-1279). In 1024, the first paper currency was issued by the state in Sichuan. The institutions of piaohao (票号) and qianzhuang (钱庄) more often cooperated than competed in China's financial market.
Jiaozi, the world's first paper-printed currency, an innovation of the Song era (960-1279).
An early Chinese banking institution was called the piaohao, also known as Shanxi banks because they were owned primarily by natives of Shanxi. The first piaohao originated from the Xiyuecheng Dye Company of Pingyao. To deal with the transfer of large amounts of cash from one branch to another, the company introduced drafts, cashable in the company's many branches around China. Although this new method was originally designed for business transactions within the Xiyuecheng Company, it became so popular that in 1823 the owner gave up the dye business altogether and reorganised the company as a special remittance firm, Rishengchang Piaohao. In the next thirty years, eleven piaohao were established in Shanxi province, in the counties of Qixian, Taigu, and Pingyao. By the end of the nineteenth century, thirty-two piaohao with 475 branches were in business covering most of China.
All piaohao were organised as single proprietaries or partnerships, where the owners carried unlimited liability. They concentrated on interprovincial remittances, and later on conducting government services. From the time of the Taiping Rebellion, when transportation routes between the capital and the provinces were cut off, piaohao began involved with the delivery of government tax revenue. Piaohao grew by taking on a role in advancing funds and arranging foreign loans for provincial governments, issuing notes, and running regional treasuries.
Independent of the nationwide network of piaohao there were a large number of small native banks, generally called qianzhuang. These institutions first appeared in the Yangzi Delta region, in Shanghai, Ningbo, and Shaoxing. The first qianzhuang can be traced to at least the mid-eighteenth century. In 1776, several of these banks in Shanghai organised themselves into a guild under the name of qianye gongsuo. In contrast to piaohao, most qianzhuang were local and functioned as commercial banks by conducting local money exchange, issuing cash notes, exchanging bills and notes, and discounting for the local business community.
Qianzhuang maintained close relationships with Chinese merchants, and grew with the expansion of China's foreign trade. When Western banks first entered China, they issued "chop loans" (caipiao) to the qianzhuang, who would then lend this money to Chinese merchants who used it to purchase goods from foreign firms. It is estimated that there were around 10,000 qianzhuang in China in the early 1890s.