State Building in a Multipolar World: Financial History and the Making of the Modern Chinese State in the Early Twentieth Century
1: Adjustments and Vicissitudes: The Indirect Banknote Issuance in Republican China, 1915-1949
Friday, March 25, 2022
1:30pm – 3:00pm EST
Virtual Paper Presenter(s)
University of Manchester, United Kingdom
University of Liaoning, China
This article studies the institution of indirect banknote issuance in Republican China. Imprinted with secret marks, such as numbers or Chinese characters, these indirectly issued banknotes were collected and issued by small trustworthy financial institutions on behalf of larger issuing banks. Drawing on comprehensive archival sources, our paper studies how the system evolved from an informal institutional arrangement between government banks and native banks for currency circulation into a mainstay of formal government monetary policy for issuing rights consolidation. In the turbulent conditions of early twentieth-century China, a time of great economic, political and social unrest, the indirect note issuance system fostered cooperation among Chinese financial institutions; crucially transformed China's monetary system from bimetallism to a fiat system; stretched the elasticity of money supply; and accelerated the rise of modern banking in China. Our study reveals that the indirect note issuance system enlarged both direct and indirect issuers’ banking business and increased indirect issuers’ profits. The indirect issuing rights were gradually withdrawn from large commercial banks to government banks for banknotes issuance consolidation and currency unification. However, as with the Second Sino-Japanese War broke out in 1937, the indirect note issuance became a handy tool for the Japanese puppet government to circulate their banknotes, at the cost of rampant inflation.