Abstract

"Trade Associations, Taxation, and Contract Enforcement in Early Modern China"

Meng Zhang, Loyola Marymount University (meng.zhang@lmu.edu)

Early modern China saw the increasing formalization of merchant networks into trade associations with permanent estates, written regulations, and registered members. This study focuses on the fiscal and economic roles of trade associations in domestic long-distance trades. Contrary to traditional viewpoints, a trade association’s revenue contribution to the local government by no means granted it a market monopoly in return. However, by providing a shield from the direct (sometimes arbitrary) taxations by state agencies, a trade association’s collective taxation regime (a form of tax farming) became an attractive service to its members, so much so that the threat of being excluded from such coverages could do much in keeping the members in line with the trade association’s other regulations, including those that dealt with contract enforcement and dispute resolution.

At the center of the trade associations’ contract enforcement capacity was reputation mechanisms based on information sharing and collective punishment strategies. Moreover, such measures were complemented by the formal court system’s recognition and upholding of the business customs in different lines of trade. The continuum from informal to more formal mechanisms was further enhanced by the network of the chamber of commerce since the first decade of the twentieth century, which facilitated vertical inter-institutional communication as well as horizontal cross-regional dispute resolution. These market institutions played a crucial role in lowering entrance barriers, facilitating the circulation of goods and capital, and checking speculative and fraudulent behavior.