Dasheng Cotton Mills

Question 1

Is Dasheng a family enterprise?

Answer 1

NO, family controls but does not own , but it is a defacto family business

• succession issues and family ownership issues
• succession from within the family
• family even when it was public

Question 2

Transformation

Answer 2

• in 1895 as a government-sponsored textile industry
• 1904: shareholding companies with limited liability
• private enterprise
• today: state-owned, public Western-style corporation

Question 3

Beginnings

Answer 3

• state patronage
• lack of accountability and transparency
• no capital market before the 1910s: government capital
• to be an entrepreneur, you needed educational and professional background (Zhang Jian: bureaucrat)

Question 4

How was it a modern factory management

Answer 4

autocratic, efficient, productivity-oriented, company culture, imported technology

Question 5

vertical integration

Answer 5

into land reclamation, transportation, services

Question 6

Incorporation/company law of 1904

Answer 6

improved access to capital from foreign banks in Shanghai
but registration only for compliance, no place to sue, no enforcement of violation
-does not decrease exposure to risk

Question 7

No separation of ownership and control

Answer 7

family owned only 6.5%

control not tied to majority shareholding (most had btw 1-5%)

Question 8

concerns if you invest in a chinese public company today

Answer 8

• who is the major shareholder?
• who sits on the BoD?
• Would I be able to sue? legal framework weak
• How are auditors selected?

Question 9

Chinese business environment today

Answer 9

• political power by government officials and social power by local elites families
• government patronage at various levels
• enforcement of existing Chinese business legislation difficult: minority shareholders without real power

Question 10

How did Dasheng exist?

Answer 10

governor-general wanted to recruit merchants to establish factories for the production of local goods (to prevent Western and Japanese businesses from expanding)

Question 11

How did Zhang Jian raise capital?

Answer 11

• at first through merchant networks in Shanghai (but didn’t work)
• so government capital
• then 50% government and 50% private investment “joint official merchant management”
• then many investors with small number of shares

Question 12

Dividend

Answer 12

before 1949: a guaranteed 8% dividend regardless of company’s performance

Question 13

The first incorporated company in China

Answer 13

Dasheng’s transformation from a government-sponsored to a private enterprise

Question 14

How where the shares holded?

Answer 14

under a business name to conceal ownership and true identity as private involvement in businesses still prohibited

Question 15

How was the accounting system?

Answer 15

Until 1930 no modern western-style accounting, simple a record of past transactions