Chinese history, the system causes of the financial crisis

 Chinese history, causes of financial crisis, the system supports
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: Zhiwu Posted: blog China (
financial crisis on China is not new, not only because of the endless. of course, is because in addition to currency outside of China did not develop a broader securitization notes, and until 1897 before the establishment of the Imperial Bank of China, there is no bank in the modern sense, therefore, in the late Qing Dynasty in China before the financial crisis has only stay in the monetary level, the form is relatively simple.
The only exception may be considered long in the private sector banks and the popular in the 19th century, Shanxi number. especially the ticket number, although they are not really in the modern sense banks, but the latter half of the 19th century, the semicolon has been extended to them in Beijing, Shanghai, Guangzhou, Hankou and other cities. Thus, the coverage from the ticket numbers to see that they had reached many people's lives can affect the level of the financial crisis. only on the financial scale, since the ticket number in order to draft off-site based industry, not the deposits and lending the same time, they led to the financial crisis potential is limited. banks even more and do not network, originated independently of each other all over and serve the local economy, even if some local banks have problems, you will not be Xinghuoliaoyuan, leading to the crisis of the whole society. when the whole of Chinese society in a natural state of the economy, finance, when extremely low level, the seeds of the financial crisis does not much.
Modern finance has changed
the potential size of the financial crisis in the financial theory, we usually put money as one of the most simple securities, whose role is to store of value, to help the value of the different conversion between time and space, so it financial crisis generated by the most simple. However, with modern banking, stocks, bonds, futures, options and other stock market came to more complex modern society, the potential scale and breadth of the financial crisis has also undergone a fundamental qualitative change. < br> In China, the stock market before the modern banking, as early as the 1860s, Shanghai began to come out Matheson shares. After the Westernization Movement in China, driven by, the first Chinese business Steamship m m stock since the end of trading in 1872 . Next, Jiangnan Manufacturing Bureau, the Kaiping coal mines and other modern industrial enterprises, mining companies have issued shares, trading more and more fire. to 1882, the year on September 2 as a those who buy the stock, the company asked the United States is not evil, and can be profitable or not, but there is a new record company, mustered shares, then in any case, to compete with stocks. , as long as the stock to buy, do not ask the company's operating condition, regardless of down the drain. Because so many loans to investors, many banks have closed down, the next supply of industrial enterprises of the serious shortage of funds, to the Chinese economy turmoil.
1918 China's first official stock exchange was established in Peking .1919 In September the establishment of the Shanghai Stock Exchange objects, Shanghai stock business in 1920 and then reorganized as the Shanghai Chinese Business Association of Stock Exchange. to the end of 1921, only the Shanghai Stock Exchange have created as many as 140, there are 12 trust companies. The establishment of Exchange of the wave also affected the country, in Hankou, Tianjin, Guangzhou, Nanjing, Suzhou and other cities also set up 52 exchanges. It was the second time in Chinese history of modern securities bubble. In those years, money for the fund industry safety reasons start shrinking funds, tightening the money supply, which not only caused the stock price fell, and forced many speculators sold a lot of stocks, share prices plunged further, leading to closure of many banks, the exchange closed, trust a lot of bankruptcy, this is the so-called Letter Exchange Crisis In fact, China's bond market has been equipped with the basic scale. In 1912m1926 years, the Beijing government has issued bonds of 27, a total of over 6.12 billion. In addition, 108 million in various short-term Treasury bills and a variety of local bonds. Thus, In the , Bank and other means to establish a four-line monopoly of the Second Board of the national financial system, direct control by the government at the financial core. This is of course a larger scale for the government bond issue, provides a convenient financing. According to 5, 2001 Mr. Zhang Chunting period estimates, in 1927? 1936, the Nanjing government bonds were issued 2.6 billion bond trading volume of 2.4 .1927 billion in 1929 to 1.4 billion by 1931, is as high as 3.9 billion yuan, for all bonds issued more than 3 times the amount, fried Nanjing government has to sort of debt, marking the bankruptcy of the government debt to create two, including the banking, securities and money market, including a comprehensive modern financial crisis, a fundamental collapse of the securities of Chinese society, the modern bank, confidence in paper money, the people again back to silver coins and rely only on the traditional barter economy.
why the financial crisis, China's modernization process in such a vulnerable?
involved in the Late Qing Dynasty after the first 100 years of stock , and why the financial crisis, frequent? What makes China the nature. whether it is banking, or securities, the content of their transactions with full mobility, even the anonymous non-targeted distribution of financial contracts, the contractual nature of their essentially decided on the rule of law and institutional framework of the information environment, the high dependence, so that financial transactions than any other physical commodity markets more dependent on the rule of law. kind of tangible goods, colored, flavored itself can help significantly reduce the risk of their transactions, and transactions and financial contracts just do not have these natural features, which makes the financial market often contains a huge economic risk.
Specifically, we can be understood from the following aspects of the system of financial security required to protect. First, there must be a reliable framework for contract enforcement, in particular, independent and impartial judiciary, parties to the transaction to ensure that contractual rights can be assured of their due. If there is no rule of law, independent of political power, financial transaction security contract is no guarantee would be difficult to deepen the financial market. Second, because the contents of financial transactions is a paper contract, the buyer information at the extreme disadvantage, on the one hand this means that financial markets are most conducive to speculation in the market, the trading value of the object of uncertainty into the best breeding ground for the bubble; the other hand, if the news media without freedom of information mechanisms, and other depositors of the bank's real situation, the investor the value of securities issuers to be more ignorant, so that financial problems could be eradicated Yunniang into a financial crisis. Third, because of bank assets, the high mobility of financial securities, banking, brokerage, insurance companies, funds and other financial institutions must be independent of power, especially executive power and political power, or under the control of these financial institutions highly liquid financial assets, those in power to become the most convenient ATM, or as authority for the image project, free for non-economic purpose tools to deploy financial resources. This course contains a huge financial risk.
by financial market triggered by the system of these three requirements, whether it is architecture independent and impartial implementation of the contract that the judicial, or a free press, or the constraints on executive power, so that they can not arbitrarily interfere with the financial resources, these have a direct return to the constitutional structure of the problem relates to constraints on executive power, independence of the judiciary, legislative neutrality. In the absence of constitutional society, all over the country's modern banking system, a modern stock market will only have the power to those in power relations between individuals and organizations to easily provide unlimited financial resources similar to the last brewing into a hazard The financial crisis in the whole society. We must see that the origin of modern financial regulation in the 14,15-century Italy and the Netherlands, but the scale of banks and securities markets is more modern things, mainly in the 16th century, and is accompanied the development of modern democratic constitutional system and develop. In other words, if the current constitutional system is not reliable development or deepening of modern finance is difficult at the time, or each bring more than a little on the development of new financial crisis, just as unchecked powers, judicial independence is not Indonesia, Korea and Thailand in 1997 and eventually triggered the Asian financial crisis in the same. modern financial development in the birthplace of constitutional democracy m Western Europe, but not in other countries, which in itself is not accidental, has its inevitability, perhaps because modern financial needs of the institutional framework in three areas.
then, this analysis mentioned above, our understanding of China, first introduced in 1872 that the modern publicly traded stock Co., Ltd. and the time allowed, when the Qing government system there has been no constitutional executive power constraints, there is no imperial power independent of the executive and judicial, and no western the sense of impersonal contract enforcement mechanism independent third party, such as is extremely strange, but also in the implementation level can not be supported, naturally can not be given too much real economic value. What's more, the first Chinese-language China Daily as a In that period was just starting, so they do not help investors understand the publicly traded shares of the company's operating and financial situation of the media. So, at the time of the The issuing company and its stock is almost entirely without any substantive relationship, but is completely independent of speculative securities. Thus, the stock bubble in 1882 and then in 1883 the financial crisis is almost inevitable.
course, After the founding of the Republic of China in 1911, although legislative, judicial and administrative framework designed to have a proper framework, but in the implementation of warlordism and civil war as the reason, the actual effect is greatly reduced. Therefore, 1921 ; Letter Exchange Crisis and the accompanying crisis.
the Nanjing government was established, there was substantial progress in the constitutional framework, the judiciary is relatively more independent, the implementation of the contract is also more fair and reliable. However, the Government held a large scale since then Shares of Bank of China, Bank of Communications, Agricultural Bank, and founded the Central Bank, the pursuit and implementation of the national banking system and other financial markets, monopoly control over the use of these monopolies to the Nanjing government financial resources for the then state-owned enterprises and civil defense services, services for the country's military expenditure. In particular, on the one hand banks put money into the government machine, the other government-controlled system for the state bond sales to provide a large number of low-interest bond financing, the government's liabilities far exceeded its payment capacity. Therefore, the 1932 financial crisis in 1936 and 1921 with the 1883 financial crisis is essentially different from the first two should be said that the institutional framework to support securities trading are not in place in the case of the securities market itself would have a bubble, but also bubble will burst crisis. However, the crisis of 1932 and 1936 was more in government bonds, banks and currency credit, and is due to the state as shareholder control of the financial system and use this control to do a lot of low-interest loans by their own To.
countries to finance the identity of owners and operators in the financial system after its negative effects are manifold. First, since the country is the bank's shareholders and managers, then the courts and the market regulators can not independent, would fundamentally undermine the constitutional operation of the judicial power had been the impact of administrative and political parties. In other words, even if the state-controlled banks allowed to sacrifice the interests of depositors, the expense of other shareholders, they can not state shareholder litigation, because litigation is not necessarily useful; asymmetry of power and right in this case, banks and other financial institutions, government control will ignore the financial risks to the national and state-owned enterprises for loans, so bad debts unconstrained to expand, resulting in a financial crisis. Second, since the government control of financial, especially banking, then the relationship with the powers unique to individuals and enterprises, which is under state monopoly system of finance is another major source of financial risk. The third , as the Government's debt and finally borne by the state, and national monetary policy and has mastered the power of issuing currency, then once the debt crisis triggered by the Government in this crisis quickly turned into a currency crisis extended to the financial crisis aspects of social life. Fourth, the state monopoly of banks and other financial institutions throughout the country, so allow banks to control the maximum size of financial resources, of course, unchecked powers to the possible moral hazard posed the highest per excessive amount of credit will be amplified. In other words, the state monopoly of the financial results not only directly from the root of the financial transactions can not be guaranteed civil rights, undermine the constitutional operation of space, but also in the power of the risk under the pressure of financial crisis will be infinitely expanded. In the 1930s the experience of China during the Ming State proves that, before the 1997 Asian financial crisis, the experience of Asian countries also the case.
financial crisis in China will do?
with the Republic of China compared to today's China is still a lack of substantive constraints on power, contract execution, financial transactions, the rights and interests protection and judicial independence are also issues to be addressed, and they need to address these issues of constitutional reform. Despite the lack of substantive constraints of power Chinese state-owned enterprises dominate the economy Youyi, the financial system than any time in history more by the state monopoly, and the vast majority of banks and other financial institutions are the state. In particular, in the more developed transportation network and information flow network of support, under the control of the banking system reached 39 trillion of financial resources, financial resources controlled by the insurance industry is 10,006 more than one hundred billion. in government-controlled financial resources to scale up so high at the same time, power in the financial the allocation of resources has played a decisive role in the risk of moral hazard is put the maximum. In this context, the potential devastating financial crisis in the 1930s relative to China is not only not been reduced, but was expanded. One can only expect to stop institutional framework arising from bad debts.
addition to restricting administrative power to promote and protect judicial independence, constitutional reform, the moment at least two aspects from the other, to reduce the probability of financial crisis. The first is the state-owned banks and other Financial privatization, at least to encourage private financial development. According to the above mentioned, it would at least be able to narrow the power of unchecked production of bad debts that can scale to reduce the extent of the financial crisis, while allowing more judicial and market surveillance authorities operate independently.
followed by further release the news media reported the supervision of financial institutions. the freedom of the media reported the problem can be tracked in the event of early exposure, force the parties to an immediate solution to resolve the potential crisis. Conversely, if does not allow freedom of the media reports, so did the development of small problems can be accumulated into a financial crisis. to the 1997 Asian financial crisis, for example, then the least press freedom in Indonesia, Korea and Thailand, the most serious financial crisis, after the discovery stay the highest proportion of bad loans, its economic and social crisis are also the largest. In contrast, the press has always been more liberal in the Philippines, Singapore, Taiwan, the crisis did the basic, basic Asian financial crisis did not impact too much. Therefore, free The news media can reduce the probability of financial crisis.