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09: Loan Societies

In a country where money is only obtainable at such an exorbitant rate of interest as in China, it is but natural that some attempt should be made to obviate the necessity of appealing to a professional money-lender. Three per cent. per month is the maximum rate permitted by Chinese law, which cannot be regarded as excessive if the full risk of the lender is taken into consideration. He has the security of one or more "middlemen," generally shopkeepers whose solvency is unimpeachable; but these gentlemen may, and often do, repudiate their liability without deigning to explain either why or wherefore. His course is then not so plain as it ought to be under a system of government which has had some two thousand years to mature. Creditors as well as debtors shun the painted portals of the magistrate's yamen[*] as they would the gates of hell. Above them is traced the same desperate legend that frightened the soul of Dante when he stood before the entrance to the infernal regions. Truly there is no hope for those who enter here. Both sides are _squeezed_ by the gate-keeper --a very lucrative post in all yamens--before they are allowed to present their petitions. It then becomes necessary for plaintiff and defendant alike to go through the process of (in Peking slang) "making a slit," i.e., making a present of money to the magistrate and his subordinates proportionate to the interests involved. In many yamens there is a regular scale of charges, answering to our Table of Fees, but this is almost always exceeded in practice. The case is then heard: occasionally, on its merits. We say occasionally, because nine times out of ten one of the parties bids privately for the benefit of his honour's good opinions. Sometimes both suitors do this, and then judgment is knocked down to the highest bidder. The loser departs incontinently cursing the law and its myrmidons to the very top of his bent, and perhaps meditating an appeal to a higher court, from which he is only deterred by prospects of further expense and repeated failure. As to the successful litigant, he would go on his way rejoicing, but that he has a duty to perform before which he is not a free man. The "slit" he made on entering the yamen needs to be repaired, and on him devolves the necessity of "sewing it up." The case is then at an end, and the prophecy fulfilled, which says:--

"The yamen doors are open wide To those with _money_ on their side."

[*] Official and private residence, all in one.

Wiser and more determined creditors take the law into their own hands. With a tea-pot, a pipe, and a mattress, they proceed to the shop of the recalcitrant debtor or security as circumstances may dictate, and there take up their abode until the amount is paid. If inability to meet the debt has been pleaded, then this self-made bailiff will insist on taking so much per cent. out of the daily receipts; if it is a mere case of obstinacy, a desire to shirk a just responsibility, the place is made so hot for its owner that he is glad to get rid of his visitor at any price whatever. Were manual violence resorted to, the interference of the local officials would be absolutely necessary; and in all cases where personal injuries are an element, their action is not characterised by the same tyranny and corruption as where only property is at stake. The chances are that the aggressor would come off worst.

To protect themselves, however, from such a prohibitive rate of usury as that mentioned above, Chinese merchants are in the habit of combining together and forming what are called Loan Societies for the mutual benefit of all concerned. Such a society may be started in the first instance by a deposit of so much per member, which sum, in the absence of a volunteer, is handed over to a manager, elected by a throw of dice, whose business it is to lay out the money during the ensuing month to the best possible advantage. Frequently one of the members, being himself in want of funds, will undertake the job; and he, in common with all managers, is held responsible for the safety of the loan. At the end of the month there is a meeting at which the past manager is bound to produce the entire sum entrusted to his charge, together with any profits that may have accrued meanwhile. Another member volunteers, or is elected manager, and so the thing goes on, a running fund from which any member may borrow, paying interest at a very low rate indeed. Dividends are never declared, and consequently some of these clubs are enormously rich; but any member is at liberty to withdraw whenever he likes, and he takes with him his share of all moneys in the hands of the Society at the moment of his retirement. To outsiders, the market rate of interest is charged, or perhaps a trifle less, but loans are only made upon the very best securities.