Social Sciences in China (Chinese Edition)

No.8, 2020

The Substitution of Banks for Piaohao and Late Qing and Early Republican Financial Reform

(Abstract)

Zhou Jianbo and Zeng Jiang

The process of financial development and innovation is usually a complete cycle consisting of the emergence and development of a new financial form and its replacement of an old one. At the end of the Qing dynasty and in the early Republican period, this cycle can be clearly seen in the process by which modern banks entered China, came to compete with piaohao (traditional Chinese banks), and finally completely replaced them. Modern banking first entered the late Qing financial market in the form of foreign banks, which exerted a huge competitive pressure on the piaohao after the first Sino-Japanese War. By the end of the 19th century and the beginning of the 20th century, Chinese banks had emerged in response to the activities of foreign banks. Chinese banks flourished after the Revolution of 1911; they seized much of the piaohao market and finally completely replaced the financial function of piaohao, driving the latter from the stage of history. In essence, the substitution of banks for piaohao was the result of financial innovation, of the role played under the new conditions of modern social production by the competitive institutional advantages of a new financial form that replaced an old one; it constituted an important sign of financial modernization.