SPECIFIC ACTIONS

This section focuses on the ways the Qing and the Meiji governments aided particular industries or companies. In general the Chinese government provided only limited subsidies to assist Chinese companies, whereas the Meiji government helped Japanese companies in a more systematic way.

The first was subsidies including both capital and assets to selected companies. As stated above, Mitsubishi alone received eight million yen and a number of ships from the government free of charge. Likewise the two large Japanese companies established later were given financial support and operational privilege. In contrast, the Chinese company, Shanghai Steamboat Company, received little governmental support. If one yen was equal to 1.15 silver dollars (Liang 1992: 333), then eight million yen amounted to 9.2 million silver dollars, whereas the Chinese government’s subsidy in the form of loan to Shanghai Steamship Company was 1.928 million taels of silver. If a silver dollar was equal to 0.7 tael of silver (Zhou 2000: 79), then 1.928 milion taels were equal to 2.76 million silver dollars, far less than what Mitsubishi received from the Japanese government.

The only privilege the Chinese company received from the government was exclusive operational rights on the Grand Canal at the time of its establishment, which proved to be of little value as canal transportation shifted to coastal transportation soon afterwards. Once it was established, the company was left to its own devices. When it needed more capital to expand its business, it had to borrow money from private investors. From 1882 to 1883, the company issued two million taels worth of stocks. In 1883, however, a financial crisis broke out in Shanghai and the surrounding areas. To pay back the money it had borrowed from private lenders, the company had to borrow 748,000 taels of silver from two foreign banks by mortgaging its real estate. In 1885 the debt was due to return. Then the company had to borrow

another 300,000 pounds, or 1,217,140 taels of silver from a British bank to pay back the first loan (Zhu 1992: 300). In a sense the company had to rob Peter to pay Paul due to capital shortage, which in turn was caused by insufficient governmental support.

Second, the Meiji government stopped unhealthy competition among Japanese companies in some sectors, ordered the merger of the competing companies, and thus fostered the development of the industry as a whole. For instance, in the early 1880s the Common Transportation Company competed with Mitsubishi on the sea transportation market; consequently both suffered losses. The sea

transportation industry at the time was still an infant sector in Japan, hence the losses of the companies were not beneficial to the development of the industry. Therefore in 1885 the Meiji government ordered the merger of the two companies, and provided further assistance to the new company (Kajinishi 1967: 102). In contrast, the Qing government did nothing comparable to the Meiji government on this count. Third, governmental support protected Japanese companies against more advanced western companies, whereas the Chinese company had to negotiate and compromise with stronger foreign competitors. I discuss the Chinese company first. When the company was just established, the two Western companies by the names of Yihe and Taigu lowered their transport fees on lines on which the Chinese company operated in order to constrain the newcomer. In 1877 Li Hongzhang entrusted the merchant Tang Tingshu with negotiating with the Western companies. Tang signed a “price agreement” with the two foreign companies, stipulating the wage of daily laborers on the piers, the way the three

companies would divide up the customer base, and a commonly accepted standard of fees. As the joint portions of the two Western companies were superior to the Chinese company, the latter suffered loss in the long-run. Between 1877 and 1893 the total tonnage of Yihe increased by two times, and Taigu increased by nearly four times, whereas Shanghai Steamship Company’s total tonnage decreased. In contrast, in their competition with Western companies Japanese companies received great protection from their government. Mitsubishi faced challenge from the American company the Pacific Mailer, which lowered transport fees in the hope of driving Mitsubishi out of the Japanese market. Backed by the Meiji government, Mitsubishi lowered its fees correspondingly. Thus the American company felt hard to win the price competition. At the juncture the government further lent 810,000 yen to Mitsubishi to help it to purchase the Shanghai line of the American company, including ships and land facilities. The actual cost of the purchase was 780,000 yen. The purchase agreement further stipulated that the American company would not engage in the Shanghai line; thus the Japanese company virtually drove the American company out of Japanese domestic market. Later Mitsubishi successfully forced the British company by the name of P. O to evacuate from Japan unconditionally (Jiang 1992).

Fourth, the Meiji government assisted in the emergence of the so-called “private railways companies.” Five major railway enterprises were established by private investors in the 1880s: Nihon, Hokkaido Coal Mine (both in eastern Japan), Kansai, Kyushu, and Sanyo (all in western Japan). The largest one, Nihon Railway Company, was established by 16 people of the kazoku class headed by

Iwakura Tomomi, himself a member of the kazoku and a high-ranking official in the Meiji government.

The kazoku was a new social class created by the Meiji government in 1872, whose members were

originally noblemen and high-ranking officials of the court at Kyoto, and the daimyo prior to the Meiji Restoration. In early 1872 the Meiji government abolished the Tokugawa four strata including samurai, peasants, handicraftsmen, and merchants, and created three classes instead: kazoku, shizoku (former low-

ranking samurai), and heimin (common people). The kazoku were deprived of their noble titles but were

offered by the government a huge amount of money as compensation. Later they invested in banks, industries, and railways.

Nihon Railway Company was a good example. Its investment came primarily from members of the kazoku. After the establishment of the company, the Railway Department of the Meiji government took full charge of the company’s businesses, from construction and maintenance of railways to operation of trains. Furthermore, government officials were appointed as the first two presidents of the company, and the government sent managers and engineers to the company to run its businesses. Therefore

contemporary Japanese viewed the company as not different from state enterprises. This was true with Hokkaido Coal Mine Railway Company as well. The three companies in Western Japan were relatively independent from the Meiji government as it was busied with helping the two companies in eastern Japan, but nevertheless all of the three companies were initiated and organized by prefectural governments. Moreover, the two companies Kyushu and Kansai appointed officials as their presidents (Kokaze 1994: 93-96).

I have argued that two major reasons accounted for the disparity in modern development between China and Japan: direct governmental investment, and more generally governmental leadership. In the previous chapter, I have pointed out that ethnic rebellions had damaged Qing state power severely, and that to a large extent the government was deprived of the ability to lead China’s economic transformation. In the next section, I revisit the first question and examine it from a different angle: Was it possible for the government to invest more in modern projects?