Some China scholars have suggested that 'business groups' in pre-Communist China adopted a 'hierarchical' structure of management. This perception is re-examined in a study of the inter-firm relationship among the firms in which the Rong brothers, prominent industrialists of the 1910-30s, invested. We find that equity control, marketing, purchasing, and financing of these firms show a high degree of individuality among the firms, while the Headquarters Company functioned as their coordinator. It suggests that the hierarchical-controlled 'business group' structure in pre-war China is either a phantom creation of historians or the projected image of later generations who created it during the nationalisation of firms in the 1950s.
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