Zhaoxin Stocks were the first negotiable securities paper called “stocks” in China.
Taking the advice of imperial scholar Huang Siyong to ease the shortage of funds to compensate for the 1894 Sino-Japanese War, Emperor Guangxu granted his permission to issue 1 million Zhaoxin stocks on February 4, 1898 with a total value of 100 million taels of silver, with face values of 100, 500 and 1,000 taels. Annual dividend was 5 li and would be paid off in 20 years. The stocks were allowed to be impawned or sold.
The stocks were issued nationally. Officials and the public were encouraged to purchase. The Emperor promised payoff, no confiscation. The Zhaoxin Bureau was set up in the Ministry of Finance to take charge of the issuance. Provincial, regional, prefecture and county branches were also set up with designated officials in charge.
The whole country was called upon to react positively to the issuance of the stocks. However, neither officials nor the public were enthusiastic to buy because they were not sure if the Emperor would keep his words. They believed “should there be no return on the investment, the government would do nothing other than giving out empty titles or rewards.”
As a result, the whole process evolved from “persuasion” to “forced purchase”, with incidents of deaths happening due to forces.
After 20 million taels of silver of the stocks were sold by using force, the issuance was challenged by the increasing resentment from the public. In August of the same year, the Emperor’s reform failed, and the supporters including Tan Sitong were executed. Empress Dowager Cixi started her reign behind the curtain. She ordered an immediate stop to the issuance of the stocks, and announced that whoever that held the stocks would be rewarded with official positions, real vacancies of positions.
This generated very positive reaction from the investors, making Zhaoxin Stocks a hot one.