Pawnshops were banned after New China's founding but are re-emerging with a friendlier face. Xiao Xiangyi reports.

The traditional image of a pawnshop is dark and desperate. Typically in China, as elsewhere, they were a place where the poor went to put food on the table and entering one came with a large slice of social stigma attached.

That may have been true of traditional Chinese pawnshops, which disappeared nearly half a century ago, but the new model is quite different.

Diamonds and luxury goods are today common in China's pawnshops. [Photo by SHI HUILI / FOR CHINA DAILY]

The dusty rooms, abacuses and bean counters have been replaced by modern display cases, smartly dressed staff and computers. The clientele are also largely different, with wealthier individuals and businesspeople comprising the main customer base.

Pawnbrokers first appeared in China, Rome and Greece about 3,000 years ago, and are among the world's oldest financial institutions. The trade has re-emerged in China in recent years, mainly as a source of quick financing for small enterprises.

A typical customer is Wang Qinghong, who owns a small company that makes drinking straws in Tianjin. In October a supplier pushed forward the date of a down payment, and Wang had to raise all the money within two days.

"At first, the bank was the only lender I could think of, but it would have taken at least a week to get a loan from the bank," Wang says.

But the pawnshop was able to give him money a few minutes after it verified he owned an apartment.

"Efficiency, convenience, flexibility and customized service make pawnshops a sometimes preferred financial channel for individuals and enterprises," Beijing's Huaxia Pawnshop deputy general manager Yang Jingkun says.

Huaxia has grown to become one of China's biggest pawnshops since its 1993 founding. Its 21 Beijing branches offer evening services.

The re-emergence of pawnshops is relatively new. They were banned from New China's founding until 1989, when their renaissance began.

The first new pawnshops were located near hospitals or in communities and mainly accepted gold jewelry or household appliances, Yang says.

"Unlike the old days, people were no longer going to pawnshops for survival," Yang explains. "They became a way to deal with emergencies. When people wanted to buy something but didn't have enough money, they could pawn something valuable and redeem it another day."

Traditionally, people pawned clothes, antiques and ornaments made of gold, silver or jade. Today, diamonds and luxury goods, including bags and watches, are more common. Art and wine have also begun to appear on pawnshop shelves, as those markets have surged across China.

"The diversity of pawned objects is not limited to ordinary products," Yang says.

"Since 1997, such commodities as real estate, private cars, stock equity and receivable accounts have found places in pawnshops."

At Huaxia Pawnshop, the monthly interest on a pawned house is 3.2 percent; that for a private car is 4 percent; and that for common goods is 4.7 percent.

Pawnshops' current image is very different from in the past, Yang says. They used to be a place of shame. Entering one was a sign of absolute poverty, and people pawned goods only as an act of desperation.

"Many customers (today) are wealthy people who just want a quick loan," Yang says.

Pawnshops' staff, too, are different. Many employees are professional jewelry appraisers, bank clerks or secondhand car salespeople, Yang says, adding that they can tell whether an object is genuine or fake.

"The most difficult part is choosing a reasonable price to offer. If the price is too low, it won't satisfy the customer. But if the price is higher than it should be, there will be risks," Yang says.

"It's quite hard to control, and it is based on the examiners' observations and judgments of the market."

When the redemption period passes, goods are called "dead pawns", meaning the pawnshop has the right to sell them. At this stage, a whole new set of customers looking for bargain luxury deals comes in.

Zhang Yusi, a 28-year-old lawyer from Beijing, says: "I bought two Chanel bags from a pawnshop near Nanluogu-xiang. They are unlikely to be fakes as the lender approved a loan on them. I was able to buy an almost new Chanel bag at a 50 percent discount."

Traditional Chinese pawnshops were single stores, often opened by a husband and wife. Today, most are part of a chain.

"Every year, we open new stores in Beijing," Yang says.

"We locate our shops in commercial areas, usually in a shopping center, because there are still misunderstandings about pawnshops. We want to show potential customers what we're doing and tell them that they should not be embarrassed to visit one."

The industry differs among regions and cities, he says. In Zhejiang province, there are many small- and medium-sized enterprises. And stocks and receivable accounts are more than half of all pawnshop business.

In Beijing, the business is more diversified and international. Customers include a growing number of foreigners, most of whom pawn watches, he says.

Contact the writer at xiaoxiangyi@chinadaily.com.cn.