Money and Government : A Study of China and Japan From a Historical Perspective

This is the first book to focus comparatively on the development processes of finance in China and Japan during the prewar period. The key issue is how to evaluate the role of government in the establishing of modern financial system. Both China and Japan started from a similar pre-modern situation in the middle of 19th century in that the monetary conditions were primitive and complicated, the traditional financial institutions were money-exchange-based, and above all, both countries had faced serious challenging pressure from the Western powers. International or domestic military affairs largely affected the development processes in both countries. While Japan succeeded in establishing its modern financial system that consistently supported its economic growth, China failed to modernize its money and banking system effectively at least until the end of World War II and the government had to change hands to the socialists, which further delayed the financial development. The experience of Japan suggests that the establishment of modern financial system may not simply be as a result of "spontaneous order", a concept used by Hayek, at least for the case of a catching-up country. The evolution process of money and banking in China shows that the role of government, especially its enforcement ability of and compliance to the rule of law may be more important than the "legal origins". Preface Contents About the Author 1 A Preliminary Introduction 1.1 Definition of Money 1.2 The Role of Money 1.3 Money and Government 1.4 Money in Premodern China 1.5 A Comparison Between China and Japan 1.6 The Copper-Silver Price Ratio in the Qing Period References 2 Puzzles of the Monetary Regime in Premodern China 2.1 Introduction 2.2 Three Puzzles 2.2.1 Low Extraction of Seigniorage 2.2.2 Asymmetric Treatment to Copper Cash and Silver Bullion 2.2.3 Cautiousness for Paper Note Issuing 2.3 Some Previous Studies 2.4 Preconditions and Motivations 2.5 Weak but Despotic Government 2.5.1 Strength Might Be Different for Different Periods 2.5.2 Strength Might Have Different Dimensions 2.6 A Theoretical Framework 2.6.1 The Condition of No-extracting Policy 2.6.2 The Marginal Benefit of Silver Currency Provision 2.6.3 The Cautiousness to Paper Note Issuing 2.7 Conclusions References 3 The Divergence Between China and Japan 3.1 Introduction 3.2 A Comparison of the Monetary Regimes Between China and Japan 3.2.1 The Monetary Development in Modern Japan 3.2.2 The Monetary Development in Modern China 3.2.3 Some Other Differences in the Modernization Process Between China and Japan 3.3 The Explanations in the Previous Studies 3.3.1 A Perfect Plan May Not Be Necessary 3.3.2 Knowledge and Technology Could Be Imported from Abroad 3.3.3 Financial Support for Monetary Reform 3.3.4 Conflicts Between Central and Local Governments 3.3.5 Nationalist Sentiments 3.4 The Motivation of Monetary Reform 3.5 The State Capacity 3.6 Definition and Measurement 3.7 The Spontaneous Order 3.8 Conclusions References 4 ``The Worst Currency'' or ``The Best Arrangement''? 4.1 Introduction 4.2 ``The Worst Currency'' 4.3 ``The Best Possible Arrangement'' 4.4 A Simple Analysis Based on Optimum Currency Area Theory 4.5 Conclusions References 5 An Epilogue 5.1 The Recent Monetary Policy in Japan 5.2 The Conflicts Between China and USA 5.3 The Challenge of Monetary Digitalization References Index