Banking in Modern China: Entrepreneurs, Professional Managers, and the Development of Chinese Banks, 1897-1937, by Linsun Cheng. Cambridge: Cambridge University Press, 2003. xvi + 277 pp. £47.50/US$65.00 (hardcover).
Banking was possibly the most important sector in pre-war China's modern economy, so Linsun Cheng's book on the development of that sector makes a major contribution to the field of modern Chinese economic history. The book starts with three chronological chapters tracing the development of the modern banks, then four thematic chapters deal with the role of government bonds in banking, with innovations in the banks' relationship to their customers and in their internal management, and with the bankers as Schumpeterian entrepreneurs.
Cheng contributes to a number of major debates in modern China's economic and political history. First, he goes far towards refuting the common assumption that the business of the modern Chinese banks in the pre-war period was heavily dominated by trading, and possibly speculation, in government bonds. To the contrary, he shows that the value of government bonds never accounted for much more than 10 per cent of bank assets. Still less were government bonds important for bank profits: despite the large discounts at which they were sold, the frequent defaults meant that real returns from government bonds were low and uncertain, and in fact most of the banks were very reluctant to take on such business. Rather than see the growth of the modern banks as a function of the increase in business in government bonds-or even a consequence of the growth of Chinese industry-Cheng argues that the banks' success was essentially internally generated by a group of dedicated and skilled managers.
Second, he argues that the banks were models of the "modern enterprise" in China. While the ownership and management of the great majority of industrial and commercial enterprises were dominated by individuals or families, the banks were genuine joint-stock companies, run by professional managers and owned by large numbers of small shareholders, few of whom had sufficiently large holdings, or possibly even the wish, to interfere in bank business. On the other hand, Cheng does point out that most banks were dominated by a single figure as general manager for most of the pre-war period.
Cheng's analysis supports Thomas Rawski's view of the positive role of the modern Chinese banks in rural development, though the point is made largely in passing. …