THE Beijing-Hangzhou Grand Canal is the jewel on the crown of the vast Grand Canal of China, and the well-preserved Hangzhou segment still operates today. Hangzhou is the southern terminus. Yao Minji reports.

The street is called Xiao He Zhi Jie, literally the Small River Straight Street, because the Small River runs through and divides it. In the northern part of Hangzhou City, the 1-kilometer-long street and the small two-story houses on either side create a nostalgic scene of water towns in Zhejiang Province.

The street is right at the junction where the Grand Canal of China, the Small River and the Yuhangtang River meet.

In old times, many ships were unloaded here.

Hangzhou is the last stop on the Beijing-Hangzhou Grand Canal, the best known and most significant component of the Grand Canal of China's bidding for UNESCO Cultural Heritage Site status.

The canal in Hangzhou was first built more than 2,200 years ago to connect Jiaxing and Hangzhou, and it was expanded in the Han Dynasty (206 BC-AD 220) to be further connected with Suzhou in Jiangsu Province.

In the Southern Song Dynasty (1127-1279), when the emperor and his court retreated and moved the capital to Hangzhou, the canal in this area suddenly got much busier and this part of the city also became a major traffic hub and distribution center.

In the Qing Dynasty (1644-1911), Emperor Qianlong (1711-1799) traveled six times along the canal to inspect the rich Zhejiang and Jiangsu provinces, and he also stayed in Hangzhou, a regional business and cultural center at the time.

Ships from all over the country came down the Grand Canal and business boomed along the street. All kinds of shops opened, selling food and snacks, tea, rice, alcohol, shipping supplies and other commodities.

Visitors can still get a suggestion of the bustle and prosperity of the old days; the street is still filled with many shops, quite a few in the old style of architecture.

Some houses on the river are around 100 years old and have been renovated.

Typical are the two-story wooden structures that were both for commercial and residential use; shops were on the first floor, bedrooms on the second floor. Many of the facades appear old. The interiors have been renovated with modern facilities and plumbing.

Behind these old houses stand new and larger structures that were built in the old style.

Today, ships are not allowed in the narrow Small River, but ships carrying coal, sand and construction materials constantly are moving south along the wider grand canal, just five minutes from the street.

The grayish wooden houses closest to the river are all similar, except for the Yao family house, which stands out because of the size and architecture. It's the largest house on the street and stands near where the canal and Small River meet.

The strategically located building was once the headquarters of a family lumber company, but now it has been divided between 62-year-old Yao Tongzhi and his brother.

His name Tongzhi, given by his lumber dealer father, is related to wood. Tong means candlenut and zhi is tree branch. His father was born in the mountains near Hangzhou, moved to the city when he was age 13 and worked in many businesses until he saved enough money to start his own company.

At that time, wood processing was mainly done by experienced woodworkers, not machines. Wood was first soaked in water for years, then dried in the sun so that the wood grain tightened and the wood was not easily chipped.

The company was based there because of convenient water transport. Back then the wood was shipped from the mountains and then soaked in the Small River.

"When I was little, the river was filled with wood. The process is much shorter and more efficient today with machines, but the quality is hardly as good," Yao recalls.

He points at an old-style wooden table in the first-floor living room. "That was made by my father's worker 60 or 70 years ago, and it is still good today. But today's wooden furniture is always easily chipped."

The first floor, now Yao's living room, was the company's flagship store with a conference room. The second floor where Yao and his family sleep used to be a dormitory for senior craftsmen and their families. The family also owns a smaller house.

"My father, like all the old merchants then, was very different from today's Chinese businessmen, who show off their money and like to order people around," Yao says. "My father's company was big and he made a lot of money, but he almost never ate chicken in his entire life and my mother helped the servants cook for the whole company every day."

Yao remembers being jealous of the senior woodworkers because they were always the first to have dinner. "Then came around 20 ordinary workers who ate the same dishes. Then my father and our family would eat - we all ate the same food," he adds.

"It may sound absurd to young people today like you, but for businessmen at that time, it was important to keep workers happy and loyal, especially those experienced craftsmen who were difficult and costly to train," Yao says.

"My father treated them like family members and cared for their needs. In return, they worked hard and the company expanded quickly. His wood was sold all over the country and some eve house n overseas to East Asian countries."

Yao has also become a businessman and had always wanted to be one like his father, but "the times changed and I couldn't copy what he did."

The Yao house was a famous "mansion" in the area that was mostly populated by small vendors and canal laborers. The parents and grandparents of many people who live on this street were involved in the canal business, from ship building and loading cargoes, to selling food and supplies.

In renovating the street, the local government has retained the original layout and appearance. The interiors were renovated and modernized, but on the outside they still look like old-time stores.

Residents were relocated to temporary housing in 2008 during the renovation, but were given the option of returning when the street reopened in the summer of 2009.

The new houses were built according to the style of the old times, but the interiors are brand new, with modern toilets and plumbing. The streets have a modern drainage system.

"Hangzhou already has one UNESCO heritage landscape site, the West Lake, and now we are applying for UNESCO status for the Grand Canal, along with many cities," says architect Huang Zi, an expert member of the UNESCO bidding committee. He is also a researcher at the Traditional Architecture Design Institute of Zhejiang Province.

"The history of the West Lake was filled with upper-class intellectuals and government officials, who lived by the lake, sailed on the lake, painted the lake and created poems that glorified the lake and made it famous," Huang tells Shanghai Daily. "It represented a sophisticated and casual lifestyle."

By contrast, the Grand Canal is quite the opposite, he says. "It encapsulates how lower-class workers and small vendors lived and worked. And the lives of both intellectuals and laborers were part of Hangzhou's history and culture."