Modern Chinese Banking Networks during the Republican Era

2019-01-10T10:35:57Z (GMT) by Florian Ploeckl Lingyu Kong
<div>Domestic western-style banks emerged as China’s leading financial sector during the Republican era, an environment characterized by economic and political uncertainty and weak property rights. We document that these modern banks nevertheless flourished, especially during the Nanjing decade in the 1930s, with strong social and commercial relationships throughout the sector. </div><div>Focusing on interlocking directorates we trace the shape, structure and development of the network of cooperation between these banks. This network shows a dominating central cluster, indicating that the sector was characterized by internal cooperation rather than competition. Similarly, new entrants were strongly linked to existing banks, indicating that entry was driven by the expansion of existing banks rather than the rise of new competition. Finally, central locations of public banks within the cluster indicate that the government gained influence over the sector </div><div>through direct bank ownership. This paper shows that the domestic financial sector reactedsuccessfully to the threats of the external environment by weaving a close web of interdependence, including with the government.</div>