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The Economic Power of Chinese Bidding Roscas 中國標會的經濟力量 December 9, 2013

Paul Vander Meer 米嘉德, Hung Mu-shan 洪木山, William F. Slusser, Luo Na 羅娜1 For instance, according to history, the people of the prefecture Yung-chou (in modern Hunan Province) were poor and used only man power in plowing. Wei Chou, who was the prefect c. 850, organized them into twenty she or clubs. Each household was to contribute a certain sum per month to its club. The person whose lot was drawn had the first opportunity to use the fund to buy a cow. After a long period, there was no shortage of cattle (Yang Lien-sheng, 1952, p. 75-76).

1. Introduction Over a millennium after the first documented Chinese microfinance club began in 850 AD, Zhu Sheng-bo and nine fellow teachers used that identical instrument to pool 20 Renminbi (RMB) each (a share) at 10 monthly meetings and draw lots to buy bicycles that cost 200 RMB. Today, that financial instrument is found around the world and is known as a rotating savings and credit association or “rosca.” However, because that type of rosca was interest-free, it was restricted to circulating small sums over short periods and had limited economic utility. Therefore, by trial and error, the Chinese have used different winner selection methods and different accounting techniques to craft interest-bearing roscas that can circulate unlimited sums over long periods and serve different business purposes. For example, in 1931 Wang Tsung-p’ei described bidding or auction roscas (interest-bearing by definition) that extended credit to businessmen who needed cash in a timely manner, lottery roscas with fixed interest rates that benefited savers/investors intent on earning interest, and discussion roscas that served members of disparate financial means as each contributed a different amount of money. Wang also mentioned roscas with deputy-leaders, each of whom brought three or four of their most trusted friends to support the leader when exceptionally large sums were circulated. Still other roscas provided leaders with enlarged sums or functioned as businesses. Later, in 1939, Fei Hsiao-tung, pp. 267-274, described a rosca especially designed to help impoverished households. It used several accounting techniques to minimize each member’s inputs so as to reduce their losses if the leader, the major beneficiary, failed to make repayments. While all roscas promote saving and extend credit, some serve specific purposes better than others. What follows comes largely from a study of 60 bidding roscas recruited and led by residents of Chulin Village, a rice farming community of 147 households in Changhua County in west central Taiwan. The first rosca began in 1970 and ended in 1975, while the last began in 1984 and ended in 1990. This created a 21-year study period with a core decade, 1975–1984, in which all the roscas operated at some time. This essay has seven parts, including the introduction. Parts 2-4 deal with three facets of rosca operation in Chulin Village: accounting techniques in bidding roscas, increasing monetary dimensions of roscas, and the role of roscas in the Chulin economy. Part 5 highlights three under-appreciated features of bidding rosca management—operating with legal protection, joining multiple “small” roscas, and joining 1

We are indebted to many people and institutions. We are especially grateful to the people of Chulin Village, Taiwan, and to Chang Hui-po, Hu Yi-hsin, Kuo Pei-chiu, Leung Chi-kin, Charles L. Radke, Asunta Spigarelli, Tsai Tien-kai, Canute Vander Meer, Randy Vaughn-Dotta, Wang Jin-kang, Wang Jun, Wang Yin-ho, Yin Chang-fu, and Zhu Sheng-bo. For direct or indirect financial support the lead author is indebted to the National Academy of Sciences-National Research Council, the National Science Foundation and California State University-Fresno in the United States, and to the National Science Council and the Pacific Cultural Foundation in Taiwan, the Republic of China. Chinese names are written with the surname first. Paul Vander Meer can be contacted at paulv@mail. fresnostate.edu.


“networking” roscas—which add appreciably to their economic power. Part 6 explains why the Chulin roscas self-liquidated as Clifford Geertz predicted in 1962, and places the role of roscas in the context of W.W. Rostow’s (1961) five stages of economic growth. Part 7 is the summary and conclusion. 2. Accounting in Bidding Roscas In Taiwan, people who need money recruit their friends and relatives into roscas, piao-hui. They refer to the rosca leader as the association head, hui t’ou, and the invited members as association legs, hui chiao. The association legs are, in turn, either live associates, huo hui,who may actively compete for the pot, or dead associates, szu hui, who have won the pot and are ineligible to compete. We prefer the terms leader, associate members, active associates, and inactive associates. Chinese bidding roscas operate on several simple rules. Imagine that a villager, A, needs $600 and that he has six peers, B–G, who will each lend him $100 (a share). As the leader, A is the person who needs money, so he recruits the associate members and receives the $600 pot at the first meeting without paying interest (Table 1). There, beneath each numbered meeting, the underlined number is the sum each winner receives, while the other numbers are the other members’ contributions, which must equal the sum the winner receives. At the second meeting, the six associates competitively bid for the pot and the person who offers the highest rebate for each associate’s share/contribution is the winner. As B made the highest bid ($25) in our hypothetical model, members C–G subtract that sum (negative accounting) from their $100 contribution and contribute $75. Thus, B receives $475: $100 from A and $375 from C–G and then becomes an inactive associate. Note that winners do not contribute when they win and that they must make the full contribution after winning. At the third meeting, C made the highest bid ($20) so associates D–G each contribute $80 and C receives $520: $200 from A–B and $320 from D–G. Thus, the bidding and contributing continue until G receives $600 without competition. Simply put, excepting the leader, those who have not won the pot earn interest by subtracting the bid from their contributions (negative accounting), while those who have won the pot pay interest by making the full contribution. Table 1. A hypothetical bidding rosca with negative accounting, as the bid is subtracted from the contributions of those who have yet to win.* Member

Highest bid

1

2

3

Meeting 4

5

6

7

Total input

A B C D E F G

--25 20 15 10 5 ---

600 100 100 100 100 100 100

100 475 75 75 75 75 75

100 100 520 80 80 80 80

100 100 100 555 85 85 85

100 100 100 100 580 90 90

100 100 100 100 100 595 95

100 100 100 100 100 100 600

600 600 575 555 540 530 525

*Adapted from Wang Tsung-p’ei, 1931, p. 62 and Chen Shui-tang, 1969, p. 535.

Table 2 depicts a bidding rosca with positive accounting, as the bid is added to each inactive associate’s contribution after receiving the pot while the active associates make the full contribution. As positive accounting circulates larger sums, it is popular in more affluent settings. Table 2. A hypothetical bidding rosca with positive accounting, as the bid is added to the contributions of those who have already won. Member

Highest bid

1

2

3

A B C D E F G

--25 20 15 10 5 ---

600 100 100 100 100 100 100

100 600 100 100 100 100 100

100 125 625 100 100 100 100

2

Meeting 4 100 125 120 645 100 100 100

5

6

7

Total debit

100 125 120 115 660 100 100

100 125 120 115 110 670 100

100 125 120 115 110 105 675

600 725 680 645 620 605 600


When a wealthy leader needs a large sum of money that requires the help of many associates, he may limit the rosca life span by having two shares in his own rosca and selecting two winners at each meeting. In this case, the associates must have an even number of shares and the bids must be in even numbers. Table 3 depicts such a bidding rosca with negative accounting. The two highest bidders are the winners at each meeting and the mean of their bids is the sum the active associates subtract from their contributions. If the two highest bids are not identical, pro rata accounting is used to determine the sum each winner receives. Using the same operating principles, a three-winner rosca is also possible. Table 3. A hypothetical two-winner bidding rosca with negative and pro rata accounting. It was frequently used in Chulin Village, 1970–1990. Members

Winning bids

1

2

A B C D E F G H I J K

… 30 26 20 16 24 16 14 10 0 0

1000 100 100 100 100 100 100 100 100 100 100

200 380 396 72 72 72 72 72 72 72 72

Meetings 3 4 200 100 100 440 452 82 82 82 82 82 82

200 100 100 100 100 452 468 80 80 80 80

5

6

Total debit

200 100 100 100 100 100 100 486 490 88 88

200 100 100 100 100 100 100 100 100 500 500

1000 500 500 472 472 454 454 434 434 422 422

As paddy was the currency of the Chulin roscas, price fluctuations in the rice market brought uncertainty to the rosca bids, which generally declined through the life cycle of each rosca (Table 1). This changed, however, after the government introduced a rice support program that either stabilized or increased the rice prices, without their ever dropping. This gave greater certainty to the villagers’ rosca activities, so that judiciously calculated rising bids allowed each successive winner to win more than the previous winner (Table 4). This occurs as a growing number of inactive associates must contribute $100. As these contributions are unaffected by the bids, an assured sum is created and it grows at each meeting (Vander Meer, 2011). Table 4. A hypothetical bidding rosca with negative accounting and ascending bids. This bidding pattern occurred in Chulin in the 1980s. Member

Highest bid

1

2

3

Meeting 4

5

6

7

Total input

A B C D E F G

--25 30 35 40 45 ---

600 100 100 100 100 100 100

100 475 75 75 75 75 75

100 100 480 70 70 70 70

100 100 100 495 65 65 65

100 100 100 100 520 60 60

100 100 100 100 100 555 55

100 100 100 100 100 100 600

600 600 575 545 510 470 425

Several points about bidding roscas warrant attention:  Each member usually has one share, but some may have two or more shares, while two members may hold one half-share each. In such cases, they contribute and withdraw accordingly.  In return for receiving the first pot interest-free, the leader manages all rosca affairs. He collects and disburses funds, keeps simple records in the event that repayments are necessary, hosts a banquet at every meeting and, by Taiwanese civil law, serves as guarantor for every member.  Associate members may use the rosca winnings for any purpose, but leaders are enjoined by conscience from using the money to gamble or lend out to earn interest.  The bids are inappropriate indicators of the interest paid.

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These operating principles are deemed just and all members are considered equals. Thus, Hill Gates (1996) p. 229, wrote: “The lending club (a common form in Taiwan is the biao hui), well known in many Chinese communities, is the characteristic way of borrowing from relatives and friends for whom the direct charging of interest would be an embarrassment” 3. Increasing the Monetary Dimensions of Roscas The first post-World War II rosca in Chulin started in 1959. It had 11 members, a leader and 10 associates, each with one share. The contributions were 1,000 Taiwanese catties (1,315 lbs.) of paddy per share, but it was converted into cash at the prevailing price of rice at the time of each semiannual harvest-time meeting. With one winner per meeting, it concluded in 5½ years. As this type of rosca was easy to recruit and manage, their number quickly multiplied. To keep pace with the growing demand for cash, five initiatives were used to increase the sum circulated in each rosca. The first was to recruit roscas with more members and shares, whereby one Chulin rosca had 17 members and shares, semiannual meetings, and an 8½-year life span. As long life spans brought unwanted risks and inconveniences, the second initiative was to select two winners at each meeting (Table 3). Even so, many Chulin leaders continued to have one-winner roscas, and it was only in 1976 and 1981 that all starting roscas in our study selected two winners. The third and most difficult initiative was to increase the contributions from 1,000 to 2,000 catties of paddy. This began in 1975 and subsequently the average contribution of the starting roscas reached 2,000 catties in 1981 and 1983. This produced the largest rosca in the Chulin study. The leader had two shares, 22 associates held 24 shares, and two winners were selected at each meeting. It used negative accounting, held semiannual meetings, and lasted 6½ years. In 1982, the leader of one such rosca received the cash equivalent of US ≈$13,000, and the entire rosca circulated a gross sum of US ≈$170,000. The fourth and fifth initiatives were found during a visit to Chulin in 2007. The fourth was the introduction of roscas that circulated larger sums by using positive instead of negative accounting (compare Tables 1 and 2). These roscas also had maximum bids that deterred bidding in desperation and minimum bids that protected the active associates from borrowers who, near the end of the rosca life cycle, would gladly have paid little or nothing for their loans. The fifth initiative was to replace paddy with cash as the rosca currency. This allowed roscas to meet monthly, bimonthly, or quarterly, instead of semiannually at harvest time, and enabled villagers to circulate in 1 or 2 years what once took 5½ years. Concurrently, light refreshments replaced the banquets in response to the quickening pace of business. Clearly, by 2007 the villagers had moved well beyond the dependence upon paddy as the most secure source of income, while the growing wealth of Chulin households suggests there was no limit to the sum a single rosca might circulate. In 1994, 4 years after our study concluded, co-researcher Hung Mu-shan met the leader of the largest Chulin rosca known to us. It had a leader who had three shares, 30 associates with one share each, three winners per semiannual meeting, contributions of New Taiwan $50,000 per share, and negative accounting. At the first meeting, the leader received NT $1.5 million (US ≈$55,000) to build a house in Chulin. Thereafter, the three highest bidders won at each meeting, and they were each competing for NT $500,000 (US ≈$18,335). The life span of this 31-member rosca was 5½ years, identical to the first postWorld War II Chulin rosca that started in 1959. Given that such a large sum circulated in one Chulin Village rosca, one can only imagine how much money might have circulated in roscas with deputy leaders led by businessmen in Taipei, Wenzhou, or Shanghai. 4. Roscas in the Chulin Economy The role of roscas in the Chulin economy is evident from several expressions of their dimensions. The 60 bidding roscas circulated US ≈$3.5 million, of which 5.14% went to pay interest (the bids) while the rest was disbursed to winners. Given that most roscas lasted 5½ years or longer, the annual interest paid was close to 1% per year. While this interest rate does not portray the interest rates individuals paid, it does suggest the rates were considerably lower than those for borrowing in either the formal or informal financial markets.

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Chulin households held approximately two-thirds of the shares in the 60 roscas and each had an average of five shares. On the other hand, non-resident households had about one-third of the shares and typically had only one share in one of the 60 roscas. During the core decade, 1975–1984, an average of 26 roscas operated each year. In that period, 147 households lived in Chulin and 130 of them (88%) joined a rosca. Three households held only one half-share each, while one household had 21 shares in 20 roscas. During the core decade, Chulin households received a total of US ≈$1,574,395 from their roscas, while the mean sum disbursed to each winning household rose from US ≈$4,576 in 1975 to US ≈$15,200 in 1984. Of all the money disbursed to Chulin residents, approximately 40% went to household economic growth (mainly paddy land purchases and service enterprises), another 40% went to domestic consumption (mainly new house construction and weddings), while 20% went to uncommitted uses such as savings, contributing in other roscas, and rosca repayments. Proportionately, more money went to economic growth in the 1970s, while more went to domestic consumption in the 1980s. The data reflect both the growing prosperity of the village households and a psychological transition in household priorities as they invested first in securing their economic well-being and later in improving their living standards. 5. Three Under-appreciated Features of Rosca Operation Legal protection, joining multiple “small” roscas, and networking roscas, together, add greatly to the economic power of bidding roscas. Legal Protection. Taiwanese civil law fosters compliance in roscas (Chen Shui-tang, 1969). Drawn from centuries of rosca operation in rural settings, the laws are embedded in traditional village mores which are predicated upon inter-household dependency and trust built through residential propinquity, life-long friendships, farm labor exchanges, and inter-household marriages. As rosca leaders ask their friends and relatives for help, they are accountable for any losses through single-line contracts between the leader and each associate member. No contracts exist between the associates. Thus, full repayments were made in five of the six collapsed Chulin roscas, while arbitration settled the sixth. In two cases, however, the leaders took nearly a decade to make repayments, which they might well have ignored but for the prospect of legal action. Protected by law, the Chulin villagers not only felt free, but were encouraged to pool their financial resources whereby both borrower and lender benefitted. Without codified laws protecting the members, the unscrupulous benefit as their victims have no recourse because in many countries they themselves are breaking the law by joining privately operated roscas. As Philip C.C. Huang (1990) p. 108 put it, “...the key element was reciprocity for mutual benefit, not the investment logic of costs and returns.” Regarding roscas in Hong Kong, Henry Litton and Denis Chang (1972) p. 83, wrote: “...the Government’s duty is to legislate for proper control so that the small businessman and investor is safeguarded in his legitimate enterprise.” Joining Multiple “Small” Roscas. Just as it is prudent not to place all of one’s eggs in one basket, an important principle of rosca management is that it is safer to join multiple roscas with small contributions rather than one or two roscas with large contributions. This is self-evident. For this reason, individual roscas usually appear monetarily insignificant and seem to have been neglected in the research and literature relating to economic growth in developing countries. What is not self-evident, however, is that petty capitalists (farmers and non-farm businessmen) may join 8, 12, or even more small bidding roscas operating concurrently, some meeting monthly, bimonthly, quarterly, semiannually, or annually. But there is more to it than that. Having shares in multiple bidding roscas gives members a standing line of credit that can be accessed at any time. Just as important, this allows them to win simultaneously, consecutively, or both, in several roscas when extra large sums are needed. It also allows them to win in the rosca that best fits the monetary sum they need, or that requires the smallest bid (interest payment) to win. This explains why farmers and businessmen prefer bidding roscas to lottery or discussion roscas, which cannot accommodate the timeliness of bidding roscas. For these reasons, the financial utility and power of roscas

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are best understood by studying households and the roscas they join, not by studying dozens or even hundreds of roscas. So it is that 30 (23%) of the 130 participating Chulin households held 50% of the shares held by Chulin households. Each of them withdrew an average of US ≈$36,533 from the Chulin roscas and together they withdrew a total of US ≈$1,096,000. The most active Chulin household was a village shopkeeper who owned little land and represented his son—a rebar contractor in Taipei. He had 21 shares in 20 of the 60 roscas. He won simultaneously on six occasions; one involved three shares while the other five each involved two shares. Most striking was a simultaneous win in two roscas that netted him US ≈$17,600. As several of the simultaneous wins were affiliated with consecutive wins, this household had one consecutive win involving six shares, and others involving five, four, and three shares. The longest series of consecutive and simultaneous wins netted him US ≈$35,430. This household received a total of US ≈$78,005 from the Chulin roscas, from which 75% went to his construction business and a restaurant he owned, while 16% went to savings and contributions in other roscas, and 9% went to domestic consumption. In another case the uncle of the co-researcher, Hung Mu-shan, coordinated rosca winnings with formal sector loans. He had 3 half-shares and 10 whole shares in 11 Chulin roscas, from which he received US $29,763. In 1974, he organized a rosca and negotiated a loan from the Land Bank of Taiwan to buy paddy land. However, within months of the land purchase, he and a friend embarked on a plan to assemble and export electric fans. Thus, 2½ shares went to start-up costs. They began production in 1975 at his partner’s house and made a few small shipments. Early in 1976, the plant moved to Hung’s farmstead in Chulin, where it expanded to 15 employees, about half of whom were Chulin residents. For this move and expansion, Hung received two loans from the Cooperative Bank of Taiwan and two from private moneylenders, all of which had liens recorded at the local land office. Unfortunately, the operation ended in the middle of 1976 when a consignment of 5,000 fans was entrusted to an inexperienced exporter who willfully or unwittingly lost the entire shipment. With debts amounting to NT $2 million, Hung began repayments with 3½ shares withdrawn from Chulin roscas from 1977 through 1979. Subsequently, the Hung family recovered from the incident and devoted 2 shares to contributing in other roscas, 1½ shares to a noodle stall and a catfish stall, while the last share did not materialize because the rosca collapsed and repayments came in small increments over time. Networking Roscas. Chulin rosca meetings were informal affairs with a banquet preceding the bidding. The banquets provided the opportunity to renew friendships and share business experiences. Thus, it came as no surprise to learn that one of the Chulin roscas was composed largely of farmers who owned small trucks and hauled freight as a secondary or even primary source of income. The truckers used the meetings to discuss the jobs they’d had, set common fees for particular services, and to identify qualified mechanics, honest parts dealers, worthy part-time workers, all the while building trust (Clifton A. Barton, 1983, p 59; Donald R. DeGlopper, 1995, p. 258). Not until 1994, however, after the Chulin study had formally ended, did the implications of such networking begin to take shape in the lead author’s mind. This occurred while interviewing a Chulin poultry farmer who mentioned that he was a member of an outsider-led rosca composed almost entirely of poultry farmers living in neighboring villages and townships. As these were his competitors, not his kin or fellow villagers, I asked about the risk this might entail. At this he smiled and explained that although they all raised laying hens, most had a sideline business relating to eggs and poultry. One sold chicken feed, another sold and installed wire cages, while others specialized in pharmaceuticals, egg refrigeration, incubating and raising chicks, cleaning and sanitary equipment, and wholesaling eggs. Rather than being competitors, these men were friends who made referrals, extended credit, accepted post-dated checks, provided advice, gave manual assistance as needed, and offered discounts and finder’s fees to one another. He also mentioned that such networking bound them closer together. Much later, I realized that if such networking were occurring in roscas operating in remote villages such as Chulin, then urban businessmen were bound to act similarly. Surely, general contractors were in roscas composed of other specialists (e.g., electricians, plumbers, roofers, carpenters, masons,

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painters, rebar specialists, etc.) while each of them was, in turn, in roscas composed largely of their own business cohorts and their suppliers. Likewise, retailers undoubtedly joined roscas with their many suppliers. The point is, these men were not merely building trust by lending money to one another; they were proactive in helping one another find jobs, identifying qualified workmen, procuring raw material or parts, purchasing merchandise at discount rates, and more. By helping each other, they were helping themselves. Taking this to its logical extreme, the rural and urban landscape must have been quilted with networking roscas. With the successful conclusion of such networking roscas, it is logical to assume that one or more members might step forward to recruit many, if not all of the same people in new roscas. In fact, that does not occur. The domino effect is serious enough when one person causes the collapse of six roscas composed entirely of different people. Consider then the greater devastation if a group of five people were all in the same six collapsed roscas. However, given that Chulin had only 147 households and an average of four new rosca starts each year of the core decade, it is only natural that the same two or three households would have members in several different roscas, some operating at over-lapping time periods. More to the point, informal conversations indicated that leaders preferred their own closest and most trusted friends and relatives rather than someone else’s trusted friends. Furthermore, it was unlikely that all the people making up a group, even a small group, would be financially prepared to join another rosca at the same time. 6. Bidding Roscas Self-liquidate Certainly the most significant finding from the 2007 visit to Chulin was that not one Chulin-led rosca was operating where once an annual average of 26 roscas had operated during the core decade, 1975–1984. All the examples cited above in the fourth and fifth initiatives pertaining to expanding rosca dimensions (Part 3) were provided by Chulin residents who were in roscas led by outsiders. For today’s agrobusinessmen in Chulin, roscas now belong to the old generation as they are too small and unreliable for modern business purposes. While some Chulin residents indicated that roscas were useful only to poor people, others suggested they were used by people with poor credit ratings. Still others allowed that they would join a rosca, but only if the leader were a good friend. From the latter group, I received computer generated rosters of several active roscas. The 2007 findings comport with Clifford Geertz’s 1962, p. 263, prediction that economic roscas would “self-liquidate” with the advent of banks and other formal sector financial institutions. In fact, the gradual liberalization of the formal sector lending institutions began in Taiwan in the early 1980s as small credit unions spread to rural cities and towns. They offered loans at competitive rates, while also providing revolving lines of credit and other financial and bookkeeping services. While it is not surprising that the villagers would abandon their roscas and “reach up” to the formal sector institutions, it was critical that the formal sector “came down” to the villagers by becoming spatially more accessible while providing more appealing interest rates and other financial services. As such, the Chulin roscas were a “middle-rung” in economic growth, not so much for helping “peasants learn to be traders” as Geertz had suggested, but for financially propelling the village through W.W. Rostow’s take-off stage of economic growth and into the drive-to-maturity stage.2 The take-off stage is that period when people in developing countries willingly incorporate changes that benefit their economic and social wellbeing, while change itself becomes a way of life. The drive-to-maturity stage is defined by W.W. Rostow (1961) page 59, as

2

Rostow posits five stages of economic growth leading to a highly developed industrial society. Crudely put, they are: the traditional agricultural society stage when economic growth is limited almost entirely to opening new land or expanding irrigation; the preconditions to take-off stage when a society reluctantly accepts new ideas and technical innovations whereby economic growth is slow; the take-off stage when new ideas and technical innovations are welcomed and economic growth is rapid; the drive-to-maturity stage, when modern technology and progressive ideas spread to all sectors of the economy and society; and the age of high mass consumptions stage when economic prosperity is spread to all parts of society.

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“the period when a society has effectively applied the range of modern technology to the bulk of its resources.” As the timeliness of bidding roscas is less critical in matters of domestic consumption, it is logical to assume that lottery roscas that promote saving and interest earning will now flourish. Lottery roscas have fixed interest rates (say 10%) that do not decrease in size as do the bids in bidding roscas. This encourages investors (who earn tax free interest) to join and “stay the course” by trading their early winning positions for later winning positions held by members with compelling immediate needs. For these reasons, it is not uncommon for lottery rosca members to hold two or three shares in a single lottery rosca (Paul Vander Meer, unpublished manuscript). Moreover, if the win occurs early in the rosca life cycle, the proceeds can be invested in other roscas or deposited in long-term postal savings accounts that are tax free. In fact, just as the emergence of small credit unions undermined the use of bidding roscas for business purposes, so has the widespread use of credit cards in Taiwan undercut the use of lottery and bidding roscas that once generated funds for major domestic appliances. 7. Summary and Conclusion Conceptually, we have seen the rise and fall of bidding roscas in Chulin Village and probably Taiwan. Simple and flexible to operate, the village roscas circulated large and small sums, while serving borrowers and lenders, rich and poor, sophisticates and rustics. After systematically increasing the sums circulated in each rosca, the villagers further enhanced their utility by transitioning from paddy to cash, replacing the semiannual meetings with monthly or quarterly meetings, and incorporating upper and lower limits to the bids. Still, prudence dictated that members join roscas circulating small sums rather than large sums. This prompted petty capitalists to join multiple “small” roscas operating concurrently, thereby enabling them to win simultaneously or consecutively when large sums were needed. Further refining their methods, villagers used networking roscas to complement their monetary utility and help members build trust while promoting cooperation in their separate but allied businesses. And all of this was encouraged with legal protections. As such, bidding roscas helped the Chulin villagers expand and modernize their agricultural practices and diversify into non-farm businesses. Thus, their growing prosperity allowed them to redirect their rosca winnings away from economic growth and toward domestic consumption, which meant improving their living standards by building new homes and having finer weddings. Ultimately, with the liberalization of the formal financial markets, the villagers abandoned their bidding roscas and turned to the local credit unions, which better served their business purposes. References Barton, Clifton A. 1983. Trust and Credit: Some Observations Regarding Business Strategies of Overseas Chinese Traders in South Vietnam,” in Linda Y.C. Lim and L.A. Peter Gosling, eds., The Chinese in Southeast Asia. Volume I, Ethnicity and Economic Activity. Singapore: Maruzen Asia, pp. 46-64. Chen, Shui-tang 陳瑞堂. 1969. “Ho-hui” 合會 (Cooperative Associations). In Tai Yen-hui 戴言輝, ed., Taiwan min-shih hsi-kuan tiao-ch’a pao-kao 臺灣民事習慣調查報告 (Customary Civil Law in Taiwan: A Research Report). Szu-fa hsing-cheng pu 司法行政部 Taipei: Ministry of Justice, pp. 519– 604. DeGlopper, Donald R. 1995. Lukang: Commerce and Community in a Chinese City. Albany: State University of New York Press. Fei, Hsiao-tung. 1939. Peasant Life in China: A Field Study of Country Life in the Yangtze Valley. New York: E. P. Dutton. Gates, Hill. 1996. China’s Motor: A Thousand Years of Petty Capitalism. Ithaca, NY: Cornell University Press. Geertz, Clifford. 1962. “The Rotating Credit Association: A “Middle Rung” in Development,” Economic Development and Cultural Change, 10.3: 241-263.

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Huang, Philip C.C. 1990. The Peasant Family and Rural Development in the Yangzi Delta, 1350–1988. Stanford: Stanford University Press. Litton, Henry and Denis Chang. 1972. “Chit-fund Companies or “Ngan Wuis,” Hong Kong Law Journal, 2.1: 77–83. Rostow, W.W. 1961. The Stages of Economic Growth: A Non-Communist Manifesto. Cambridge: Cambridge University Press. Vander Meer, Paul. 2006, 2011. Rotating Savings and Credit Associations (Roscas) and the Economic Take-off of Chulin Village, Taiwan. Unpublished manuscript. Free download on internet. Google: Chulin village roscas, or contact the lead author, paulv@mail.fresnostate.edu. Wang, Tsung-p’ei 王宗培. 1931. Chung-kuo chih ho-hui 中國之合會 (Chinese Cooperative Associations). Nanking: Chung-kuo ho-tso hsueh-she 南京:中國合作學社 Nanking: Chinese Cooperative Study Group. Yang, Lien-sheng. 1952. Money and Credit in China: A Short History, Harvard University Press. Free on the internet.

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The Economic Power of Chinese Bidding Roscas