Flexible capital management

Hui merchants were good at flexibly starting a business with limited capital money. Most of them did not have much money as business capital at the beginning of their business and trade. However, thanks to the sophisticated lineage system, which provided money support within a short time and thus minimized capital risks, they had large space to make profits in trade and business.

As distinguished from family, lineage has a distinctive "corporate" character: Properties were owned in the name of lineage with perpetuities lasting beyond the lives of any individual members; rights to partake in the distributions of lineage assets were regarded as shares (fen) that depended on contributions rather than descent; and the managers had the rights and responsibilities to manage, but not dispose of, the property without the consent of the lineage segments concerned.

More intriguingly, lineages could expand or contract through the so-called lineage union (lianzhong) - different lineages combining their genealogies (tongpu) and amalgamating under a common ancestor. Sometimes a lineage union could result in the formation of giant lineage encompassing several tens or even hundreds of thousands members across counties or even provinces governed by elaborate rules.

The motivation behind lineage unions seemed economic and political more than anything else. Resources pooled by lineages provided important local public goods: charities for the poor, education funds for the young and promising, and opportunities for commercial and financial expansion.

Honesty and morality

Hui merchants were called merchants of morality. They valued honesty and morality as an important way to make profits. Cheating customers were considered to be shortsighted and a damage to the long-term relationship between the businessman and customer. So Hui merchants saw honesty and credit as the insurance of their business prosperity.

Tea merchants of Huizhou, for example, did everything to ensure the quality of the tea they purchased, refusing fake and bad tea. They summarized the experience of selecting raw tea and wrote it in books to warn purchasers. After the raw tea was bought in, it would be processed under strict rules. The delicately produced tea found a big market overseas. To reach an even broader market, Huizhou tea merchants upgraded the processing technology and adjust the taste of tea to make it appealing for local consumption.