Before the advent of foreign commerce in China, the Shansi banks did this kind of business even without the intervention of native banks; but they gradually withdrew from having direct business relations with merchants and private individuals for two reasons. The first was the gradual increasing power of the native banks. The Shansi banks did well at the time, but came to arrangements with the new banks, according to which there was equitable division of the business - the native banks doing the local business and derving profit therefrom and the Shansi banks doing inter-provincial business and profiting therefrom. Such division of labour led to smooth working of both these kinds of institutions. Apart from this, especially during the early years of foreign trade - when the East India Company was being ousted in favour of individual merchants - the Shansi banks played a very important part as custodians of Government money. They received large sums from the officials in many places, they even collected taxes on behalf of the officials; therefore it suited them to let the native banks have the local business in all provincial cities.
For over fifty years this arrangement worked well - even up to the last two decades of the last century. Neither of the banks lost in prestige or power, for obvious reasons. The volume of foreign trade was increasing year after year, thus leading to an increase in the volume of business of both of these kinds of institutions. The native banks became more and more necessary for local merchants for credit and for other regular business. The Shansi banks became even more absolutely necessary, in view of the fact that money had to be constantly dispatched to and fro, or accounts adjusted; and there was certainly no other medium by which it could be done, even as late as 1910.