Institutional Supply & The Modernization Of Traditional Finance

As financial revolution representatives of their respective countries,the development paths and the path selection of Shanxi Draft Bank and the Bank of England were deeply influenced by their own national system and policies.This paper is divided into six parts and carries out a comparative study,which focuses on the profound influence that Chinese and British governments have given on the development path of these two financial institutions.The first and the last chapters introduce the research background,the literature review,research methods and innovation,and conclusion.Apart from them,the other four parts are mainly focus on the followings: 1.Referring to the institutional supply of Western Europe in the course of establishing modern financial system,it examines the evolution path from traditional banking to modern banking;2.It summarizes the modernization of Chinese and British traditional banking,and compares Shanxi Draft Bank and the Bank of England from aspects such as strength,business and government etc.Both of them had the basic conditions of transforming;however,three transformation attempts of Shanxi Draft Bank were all unsuccessful,so it missed the best historical opportunity period to consolidate modern banks,while the Bank of England established its central position in banking at one stroke;3.It analyzes system demanding in the development process of Shanxi Draft Bank and the institutional supply that the Qing government's provided.After the war of the Taiping Heavenly Kingdom,as a result of the system demanding for Shanxi Draft Bank to agent our national treasury,Shanxi Draft Bank began to deal with government funds business.It formed a balanced situation with the institutional supply that the Qing government changed money transporting by man power to transferred by exchange shops.However,in the developing process to “Bank of Money Issue”,the right to issue banknotes changed from a certain sense of freedom to be banned at last,and the legitimacy of the related business of Shanxi Draft Bank had not yet been given by the government.Both contributed to insufficient system supply for its further development.Shanxi Draft Bank had no right to issue notes or legitimacy of its business,and at the same time the silver standard currency system evolved to currency standard system,foreign banks entered China and government's banks established.Therefore,Shanxi Draft Bank could not escape from its fate of falling and dying;4.It analyzes the reasons of the lack of institutional supply from a deeper level.It holds the idea that the traditional relationship between the government and businessmen decided that the Qing Government lacked motivation to protect private economy including nongovernmental banking business.Besides,Chinese businessmen who were bounded by traditional cultural beliefs couldn't determine to get rid of feudal ethics completely.As a result,the government's commitment lacks credible-threatened institutional arrangements.It proceeded to the next step that the government supervision system was deficient and creditor's rights could not be defined and protected.The government acted as the market player,as well as the game rule maker.Its excessive intervention in the market or even completely replacing the market directly affected the effectiveness of the system.Therefore,the security and stability of the public debt market in Qing Dynasty could not be guaranteed all the way through,or an effective public financial system could not be established under the highly centralized feudal autocracy,which seriously hindered the modernization process of Shanxi Draft Banks.However,institutional change has its own law.Copying the institution of other countries can separate China from its own facts.Even if the system is advanced and perfect,placing others in is inefficient or even invalid.As a developing socialist China,it should be based on its own cultural traditions and the actual characteristics of social and economic development,so that it can make effective institutional arrangements.Therefore,the achievements of reform and opening up can be consolidated,the vitality and creativity of market players can be stimulated,and the great rejuvenation of the Chinese nation can be achieved.