Shanxi Draft Decline Institutional Factors

During the period from the 1820s to the 1920s, Shanxi draft banks, as the representative of draft banking industry, became a highly active financial force in most of the big commercial ports and once led China's financial industry development trends. However, with the change of economic requirements, Shanxi draft banks met more and more difficulties. In the same time, some new financial enterprises came up, like domestic government banks, foreign banks etc. Those new institutions took away almost all the business which belonged to draft banks before. In the end, Shanxi draft banks disappeared from the view of the history.This article carried out research and analysis, from the angle of principle theories of institutional economics, on typical structure and system which played an important role in the development of draft banks, such as the system between partner and shopkeeper, the labor-sharing system, operating management and marking strategies and so on. In the detailed analysis process, first we outline the evolution of Shanxi draft banks history based on historical data to understand characteristics of various systems through its different stages of development at different times; Secondly, analyze the system and institution of Shanxi draft banks in the modern theory of economic management framework. For example: the introduction of the modern system of agency by agreement in the relationship study between partner and shopkeeper, the modern incentive mechanisms by property rights in the labor-sharing system. Finally, we conclude reasons for the failure of institutional innovation and terminal alienation of Shanxi draft banks.During the late period of traditional Chinese feudal economic development, draft banks, as other economic organizations, are closely dependent on economic development under the macro circumstances in modern China. Draft banks have its inherent law of development with the relevant huge economic entities. It is hoped that wide views be shown through the systematic study of the institutional question of draft banks.