Study On "Trust Company & Exchange Crisis

After World War I, foreign capital investment in China regained its momentum. China's national capitalistic industry passed its heyday. The silver exchange rate fell down sharply. This caused a big loss of fortune and confusion among the investors. A large sum of capital was shifted into speculation activities. In the summer and autumn of 1921 exchanges and trust companies mushroomed, and only in Shanghai 136 exchanges and 12 trust companies were established. Most companies didn't abide by the regulations and oniy speculated in stock business,which led to the emergence of the bubble economy.China then lacked the economy base for so rapid adevelopment of exchanges and trust companies.So by the winter of 1921,with the bubble economy crashed down,China saw a serious financial crisis in its history-"Trust Company & Exchange Crisis".This resulted in a large amount of staff unemployment, company bankrupt and a sever social turbulence.lt also led to low efficiency of resource distribution, infux of capital and excellent talents into the speculation sectors.This at the same time distorted the image and function of the capital market and brought about bad effect on the development of social economy.Nevertheless, the crisis induced the government to improve the legislation system and strengthened the supervision of the capital market.This article, on the basis of historical materialism,attempts to make a research of the bankground ,process,and effect of the crisis in financial and historical methods and try to reach an enlighting conclusion benifical to the development of mordern China's capital market.