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Business Customs:
The System of Go-Betweens

Procursus:

Widespread fraud and false dealing are found in any market in which outside authorities do not intervene in the interest of keeping at least a minimal standard of accurate information about what is really happening. This is seen in law codes and market descriptions from Hammurabi’s Babylon and Moteuczoma’s Tenochtitlan to newspaper accounts of stock manipulation in Frankfurt or New York.

The following brief selection is from a comprehensive description of life in Fúzhōu 福州, in northern Fújiàn 福建 Province, in the 1850s. The author was the American missionary Justus Doolittle. Doolittle lived in Fúzhou for 14 years, and there was little that he did not see or seek to understand. The extract here focuses on the use of “go-betweens” (pǎohér 跑合儿) in local commerce. Go-betweens provided crucial advice to both buyer and seller and helped to avoid disputes by being both witnesses and negotiators, just as they do today in, say, real estate transactions. Unlike our realtors, who work for the seller, the Chinese go-betweens were paid a standardized amount shared by both buyer and seller, theoretically making them unbiased participants in the transactions.

Nevertheless, they were in fact easily corrupted.

To facilitate on-line reading, I have inserted subtitles, slightly edited the text and modified the punctuation, and have broken longer paragraphs into shorter ones.

DKJ


Source:

DOOLITTLE, Justus
1865 Social life of the Chinese. New York: Harper & Brothers. Two volumes. Vol. 2 pp. 134-137.

Chapter V: Business Customs, Part I:

The System of Go-Betweens
in the Transaction of
Important Business

1. How the System Works

The employment of go-betweens or middle persons between the two principals in the transaction of many kinds of business is one of the “peculiar institutions” of society as existing here, and probably all over the [Chinese] empire with local modifications. The native importer of goods from another port does not personally negotiate with the retail or the wholesale buyer. The owner of a house. or farm, in market for sale or for rent, may not be called upon by those who wish to purchase or rent for themselves. Instead, professional persons are employed, who are the acknowledged “ go-betweens” betwixt the owners and the buyers, or the owners and the renters.

2. Specialization and Pay

The system does not extend to business between ordinary retailers and their customers, but to importers, wholesale dealers, and owners of houses and lands. Some men are go-betweens in the sale and purchase of rice, others of oil, others of medicines, etc. Generally, the same person does not negotiate the sale and purchase or more than one class of merchandise or property.

The pay of these go-betweens is usually five percent on the sum of money given by the buyer to the seller. Of this percentage, the buyer pays three and the seller pays two parts, which on large sums is a very handsome compensation for his trouble and responsibility. It amounts to the same thing as clearing five percent commission, all the expense of porterage and transfer being defrayed by the buyer,*and the middleman being at no expense for a clerk, office, or store.

The go-betweens, who probably in this city alone amount to thousands, are constantly on the lookout for an opportunity to close a bargain in view of the five percent commission. He acts the part of an advertising medium, a living perambulating newspaper, the use of which costs the owner of property and the prospective buyer of it nothing, unless an actual transfer is effected.

He spends his time principally in traversing the streets, calling on the wholesale dealers and the retailers, extracting and giving information relating to his particular branch of business.

There are no “dailies” or “weeklies” circulating among the Chinese in this part of the empire, in which the arrival of cargoes of fresh goods is announced to the public, or the offer for sale of landed property, etc., is advertised. The work of ascertaining where different kinds of merchandise and landed property for sale or rent are to be found, and the quality, condition, and price, etc., is virtually entrusted by retailers and buyers or renters to middle-men. It becomes their business to gain information from the holders or owners of purchasable or rentable property, and impart it to those who may wish to purchase or rent. It is necessary for them to be diligent, not only in ascertaining facts from the sellers in regard to particular kinds of merchandise offered for sale, but also in seeking out those who deal in it, for their remuneration depends wholly on their effecting a transfer.

3. Duping the Buyer

It will be readily perceived that the buyer is liable to be duped by the go-between in regard to quality, and particularly with regard to the price. There is a great inducement for him to prevaricate or falsify while negotiating on the subject in question with the two principals, and oftentimes there is an opportunity to do so with comparative impunity, or with few chances of detection.

It is the interest of the seller and the go-between to close a bargain at high rates. Sometimes the latter is led to ask of the buyer a higher price than the one actually demanded by the seller or owner, in the hope of making a larger sum than his ordinary percentage would be. The seller is sometimes privy to the deception practiced by the go-between, and comes to an understanding with him in regard to the manner of dividing between them the extra sum paid by the buyer, over and above what was really demanded by the seller.

4. Duping Foreigners

Foreigners in China have often been thus swindled by the rascality and the duplicity of those whom they have been obliged, by the established customs of society and pressure of circumstances, to employ as their go-betweens in buying or renting property. The go-between, by coming to a private understanding with the buyer, is able sometimes, by dint of plausible prevarication or downright lying, to make more money for himself than the sum to which his regular commission or percentage would amount.

5. Deception Holds Back the Market

The facility for deception in regard to price, quality, and condition of property thus bought and sold is undoubtedly one of the worst features of this system of go-betweens in business as transacted among the Chinese. Except in regard to some staple commodities, the prices of which become generally known to the public, the seller and the buyer cannot ordinarily be certain as to the real state of the case between themselves. Of course each knows what the sum is which he has paid or received, as the case may be, but he cannot know the absolute truth in regard to the other party.

The buyer is particularly liable to be duped by the go-between through the complicity of the seller, provided the go-between thinks he can practice the deception without the probability of detection. A regard to their reputation, and to the prospect of future employment by the principals, doubtless often has a great restraining influence over middle-men who are tempted to dupe and defraud.

6. Shortage of Information Makes the System Unavoidable

Probably this system will be continued in China until newspapers and prices current shall have been established and patronized by owners and buyers of property generally, and until the numerous middle-men shall have embraced some other means of earning a living — a period which seems to be indefinitely remote.

At present, with all its objections, it is a necessary as well as peculiar institution; its abolition, without as good a substitute, would produce intolerable stagnation and confusion in the transaction of business. The Chinese who has a quantity of tea, oil, wood, sugar, cloth, or paper for sale, but who should decline to comply with the established customs of society in relation to this subject, would not readily find purchasers for his goods. The tea trade, with foreigners is almost exclusively carried on by the agency of go-betweens, the foreign principal on the one hand and the native principal on the other hand seldom negotiating with each other.

7. Go-Betweens’ Guilds

The go-betweens who devote themselves to the effecting of sales of the same general description of property, if quite numerous, often form themselves into a kind of union or club. The members of each of these associations meet in some temple once or twice annually, for the purpose of worshiping and rendering thanks unto the god it has adopted as patron.

Wholesale dealers, importers, retailers, and manufacturers must conform to the rules which the go-betweens make, or they would find it impracticable to dispose of their goods on profitable terms, and with dispatch.

8. Go-Between’s Signature Necessary on Documents

In important cases, especially in the case of the sale or the renting of houses or farms, or betrothal in marriage, the name and signature of the go-between are necessary to the validity of the written instrument. In case of future trouble in regard to the subject, the go-between is involved, and is required by custom, if not by law, to aid in its settlement. His responsibility ceases only with his life.

9. Another Class of Go-Between

There is another class of go-betweens who correspond more neatly to commission merchants in the West than the class above described, having extensive ware houses or godowns where the owner may deposit his goods for inspection and sale. The buyer in these cases

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