Besides the capital, these banks have few other resources to fall back upon by means of which they could prosecute a large volume of business. Excepting foreign exchange, the native banks do practically all other kinds of business done by the foreign banks; and knowing that their capital is very small, as compared with the volume of business passing through them, it is necessary to enquire into the means they employ to obtain capital and to finance the business that comes in their way. It is as well to know at the outset that rarely has a native bank a capital of over Tls. 100,000, and rarely has a native bank a branch outside of the province in which the head office is situated - as a matter of fact the great majority of the institutions do not work beyond the limits of the town or district in which the head office is situated. There are, of course, a large number of these institutions in all parts of the country, but not sufficiently numerous, as compared with the number of branches of banks that exist in the several European countries. In any case, it is beyond doubt that these banks must have much more than their capital to do the business they are, and have been, doing. Of course there are the Chinese deposits. But there are no public deposits in this country as known in other countries in the world. The average citizen of China has always been too poor to be able to have anything to do with even the smallest bank. The moneyed classes in this country have for centuries been either officials or merchants. The intercourse between these two classes is quite natural, and it is a curious fact that while the official is always anxious to do some business or other with his own money or the Government's money under his control, the merchants usually hopes to become an official some day. Owing to the very nature of the Government, the businessman must be in the good graces of the officials to get on in life; the official cannot afford to antagonize the merchant who is usually a member of some guild or other; and it is well known that, while merchants as individuals are absolutely powerless, as members of a guild they are extremely powerful. It thus happens, therefore, that the merchant and the official work hand in hand. One of the principal sources of working capital for the native banks is the deposit of official money with the banks. The financial system of the Government is on the basis of each district sending its surplus to provincial administrations and each province sending its surplus or a fixed amount to Peking. After the taxes are collected the disbursements have to be made, totalling the larger part of the collection and the money has to remain somewhere in the interval. Until recently there were no Government treasuries or banks and, even when they came into being, the officials with the tacit agreement of the Government deposited the revenue among all the native banks that were members of the guild. No doubt, they received a small interest which became the perquisite of the local officials; but the banks were able to utilize the money very profitably to themselves.
Besides official money there are, of course, the deposits of all the merchants. These deposits were made not with a view to safe-keeping of the amount with the banks, but in order to be able to overdraw from the bank when necessary. It is understood that no one in the world does business just to the total of his capital and no more. The bigger the business the larger the credit which it has to depend upon. The position with regard to Chinese trade is no different in this respect from business in other countries.* And like the banks, the Chinese dealers did a business, enormously large in proportion to the capital they employed. Therefore the deposits with the native banks were of very little value in the way of sustaining the credit or business of banking. As I have already stated, there are very few idle depositors with the banks, like the investors of England or the rentiers of France.
Under ordinary conditions, it would mean that trade was carried on with the aid of the Government deposits with the banks. Of course this was so, for a while; but that even proved insufficient. The native banks had soon to find fresh means of obtaining working capital,* and the business of the bank had to be maintained. In the last two decades of the last century they turned to the foreign banks for help.
* Only in China it was clean credit. There never was credit in business - as it is understood in foreign countries - in China.