Research On Functions Of Shanghai Financial Center 1927-1937

Rise of big country in the modern history of the world, you will find that the common character among them is that they all have one powerful financial center. Those centers will not only provide sufficient money to the development of the economy of the host country, but also will expand the influence of the host country on the world economy. With the more-than-30-year development of the reform and opening-up, our country has become the NO.2 largest economy and the NO.1 trading nation of the world, coming along with the incessant promotion of the comprehensive national strength. In such a context, to promote the construction of the Shanghai financial center to be the strategy of the development of our nation will the inevitable choice to bring about a great rejuvenation of the Chinese nation. The current construction of Shanghai international financial center has made gratifying achievements. But the construction of Shanghai international financial center also faces obstacles, such as institutional constraints, low level of internationalization and lack of talent and so on. Solve these problems need to consider the positioning Shanghai financial center. Draw lessons from history, in the 1930 s, Shanghai already had the reputation of the International financial center in the Far East, the Wall Street in the Far East. In this paper the functions of the modern financial center of Shanghai between 1927 and 1937 are studied, hoping to afford some lessons for the construction and the definition of the functions of the Shanghai financial center and today.This article focuses on the functions of the modern financial center of Shanghai, trying to deeply study the modern financial center of Shanghai from the angle of functions. The paper is mainly composed of four parts.The first part is about the establishment of Shanghai financial center, analyzing the context in which Shanghai financial center came into being, introducing the physio geographic conditions of Shanghai and analyzing the reasons why Shanghai became the multifunctional economy center of China based on the background when Shanghai financial center formed from the angle of globalization, introducing the development of the modern financial industry in Shanghai before and after its opening up, which laid the foundation for Shanghai financial center. The complete establishment of Shanghai financial center was between the end of the 1920 s and the beginning of the 1930 s. After the rapid development in the period of the Bei Yang Government and the steady development in the National Government, Shanghai had become the financial center of China.The second part is mainly about the aggregation function of financial resources of Shanghai. The modern Shanghai was the center of currency issue, the center of monetary fund accumulation and the center of all kinds of financial instruments which could satisfy the investors and the needs of money raising. There were all kinds of financial agencies in Shanghai, such as banks and non-bank financial agencies, modern financial agencies and traditional financial agencies, foreign financial agencies and other kinds of auxiliary financial organs. The financial market in modern Shanghai included the currency market, securities market, bill market, standard gold market and silver market, becoming the financial market with great influence in China.The third part is mainly about the Shanghai as the center of financial human resources, information, institutions and service. The development of the financial industry of the modern Shanghai and the exertion of its functions as the financial center couldn’t do without the bankers who had the experiences of modern management. At the same time Shanghai also gathered and fostered a lot of financial employees with abundant experiences. As the center of the communication industry of modern China, naturally Shanghai became the information center. The development of the modern communication technology provided a basis for the aggregation and distribution of information, accelerating the speed of aggregating and distributing information. The early banks all fought for themselves and built their own investigation agencies. Later they united to found the credit information bureau, enhancing the ability of aggregation and distribution of information. The modern Shanghai was the center of the innovation of the financial institutions. The foundation of the National Government laid the basis for the macro financial system. The financial organizations had built the industry regulations and the standard business system. With the belief of serving the society, the innovative bankers had consistently innovated the service and products, promoting the ability and the level of banks’ service. Many kinds of financial services and products are initiatives domestically with the effects of demonstration and bellwether.The last part is mainly about the three embodiments of the radiation functions of Shanghai financial center in the later period of the agricultural economy. Firstly, the payment and settlement system was established, facilitating payment and settlement in trading, promoting the import and export trade and the trade between the Chinese ports, with the operational remittance becoming one of the principal sources of the profit of the commercial banks. Secondly, with becoming the leader in the capital definition, Shanghai financial center greatly influenced the economy regionally and nationally by means of interbank lending rate, Shen Currency price, and foreign currency price and deposit and loan interest rate. Thirdly, as the investment center of China, the modern Shanghai was not only the investment center of the foreign funds and the overseas Chinese capital, but also the place for the domestic capital coming and going. So Shanghai became the place for the National Government to raise capital. And the commercial and industrial enterprises in modern China also depended on the financial circle in Shanghai to collect funds.From the above these conclusions can be drawn. Firstly, the advantage of gathering financial resources of the modern Shanghai was very strong. It was the issuing center of the monetary and financial instruments, with a sound system of financial institutions and the financial institutions such as modern banks, insurance and trust, also with the traditional financial organizations with finical houses as a representative of the Chinese local characteristics, plus a variety of financial organizations, forming the financial institutions system of modern Shanghai. A sound financial market system was established, with the interbank lending market leading the national capital pricing, the biggest stock market in the Far East and the international exchange market of China composed of standard gold market, silver market and the currency. Secondly, the modern Shanghai showed the aggregation advantage in such aspects as financial talent, information, system and services. The gathering of financial professionals specially the bankers in Shanghai promoted the development of the financial industry in Shanghai and even the national financial industry. Shanghai was the distribution center of the economic and financial information in the modern China. With the aid of modern communication facilities, the banks established research department collect and process information, transfer information through the internal publication or financial industry journals. Shanghai was the center of the financial system innovation in modern China. When the National Government took office, they took the mandatory measures of the financial changes, laying the foundation for the macro financial system. And the financial industry and business system were adjusted accordingly. In the field of financial services Shanghai had taken the first step, being followed and imitated by all over China. Thirdly, as to the modern China still in the transitional period from agriculture economy to commodity economy, Shanghai as the financial center showed the radiation ability on the national and regional economy mainly by means of the functions of payment and settlement, capital pricing, investment and financing. Shanghai financial center had not only promoted the local economic development of Shanghai, but also enhanced the economy prosperity of the hinterland, playing a positive role in the development of the national economy. Fourthly, the formation of the modern Shanghai financial center and the exertion of its functions benefited from Shanghai’s economic advantage. As the center of shipping, trade and economy of China, the radiation ability of the economy of Shanghai laid the economic basis for the exertion of the function of the financial center. The exertion of the function of Shanghai financial center also benefited from the introduction of the economic and financial policies after the National Government came to power. Especially the measures such as the establishment of the central bank, abolishment Silver in favor of the Yuan and the implementation of the Fabi policy further improved and expanded the function of aggregation and radiation of Shanghai financial center. Furthermore the financial interbank organizations played a key role on the functions of the financial center. In the modern China short of system guarantee, the financial interbank organizations not only played the functions of self-regulation, industry norms and the unity and coordination, but also assumed some of the functions of the government. The financial market of Shanghai was free, open and international, increasing Shanghai’s financial viability and aggregation. Fifthly, the aggregation function of Shanghai financial center was relatively strong, but the radiation capacity and range were restricted, mainly due to the agricultural economy in modern China and the years of war making the region segmentation serious and social environment unstable. Before the Fabi reform the power of financial capital pricing in Shanghai was completely in the hands of the foreign banks. They greatly affected the interest rates of interbank lending market and the capital soothing of Shanghai by controlling the credit scale of the banks. The foreign banks fully became the shadow central bank, controlling the financial market of China. The foreign exchange market was completely monopolized by the foreign banks, and the power of exchange rate pricing was also in the hold of the foreign banks. Thus the power of capital pricing was completely lost in modern Shanghai, at the mercy of foreign capital. The Shanghai stock market developed relatively slowly and did not provide the direct financing support to the development of the enterprises and economy. The internationality of the Shanghai financial market more existed as a connection and subsidiary, lack of enough influence, and did not become the international financial center with the functions of international financing and the pricing.The study on the functions of the modern Shanghai financial center provides beneficial enlightenment for the construction of the Shanghai financial center nowadays. Firstly, Clear positioning Shanghai financial center functions. The immediate objective Shanghai Financial Center building is to become regional international financial center. In the future with China raising the level of financial liberalization and internationalization of the RMB, Shanghai into an international financial center in the world. Based on the above location, recent Shanghai financial center aggregation function mainly funds, financial institutions and financial markets gathering centers in Far East,at the same time financial talent, information, systems and services that are at the leading position. The main radiation function is to cross-border payments and clearing functions, the pricing of financial assets and risk management capabilities, and through the price mechanism and risk transfer mechanisms, to achieve the redistribution of wealth and resource redistribution.In the long run, Shanghai become a global financial center, its aggregation and radiation extensions to the world.Secondly, Shanghai has now become the today center of China’s shipping, trade and industry, laying the basis of Shanghai’s becoming the financial center. But the economic strength of Shanghai still needs to be increased in order to make Shanghai become an international financial centre. First, we must vigorously develop the advanced manufacturing industry in Shanghai and the hinterland, encourage technological innovation, improve the added value of export products, change Made in China into Created in China, enhance the anti risk ability of export. Second, we should strengthen the economic connection between Shanghai and hinterland, expanding the scope of hinterland economy. Shanghai’s economic aggregation and radiation ability can be enhanced through industrial transition and industrial division and cooperation and exertion of the advantages of hinterland economy. At the same time the scope of Shanghai economic hinterland should be expanded along the Yangtze River to the vast central and western regions, promoting not only the economic development of the central and western regions but also the overall economic strength of Shanghai. Thirdly, before the Fabi reform in 1935 the financial industry in modern Shanghai was free and open. The development of the financial industry and the evolvement of financial system were of the induced transition with market playing a leading role. The typical performances were the relatively high degree of marketization of interest rate and exchange rate, flowing freely capital, both current and capital items passing in and out freely. Nowadays China’s interest rate and exchange rate is not fully market-oriented, the capital account is still not open, and capital is not free to come and go, which obviously are the institutional obstacles the construction of Shanghai international finance has to face. Therefore, it needs to further accelerate the interest rate marketization reform, deepen the reform of the exchange rate system, gradually open the capital account, realize RMB convertible, and promote the regionalization and internationalization of RMB. Fourthly, strengthen the aggregation effect of financial institutions. The current Shanghai is not only far less than the capacity of financial institutions gathered in New York and London, but also behind Tokyo, Hong Kong of China and Singapore. So Shanghai becoming an international financial center in the Far East, but also to strengthen the capacity of financial institutions gathered. First attracted major financial institutions at home and abroad; secondly to accelerate the development of Shanghai local corporate financial institutions; finally accelerate the development of new financial format.Fifthly, the current construction of Shanghai international financial center faces the problem of financial talent shortage, especially lack of high-end talents with work experience in the international financial market. Therefore it needs to make a short-term talent introduction plan and a mid-term and a long-term talent training scheme. First, the conditions should be created to attract top talent worldwide; second, the reform of personnel system and the development of talent market should be speeded up to create a favorable environment for the development of the cause; third, the education and training for the financial personnel must be strengthened.Innovations of this thesis are as follows. Firstly, it’s from the aspect of functions that the modern Shanghai financial center is studied. The former researches on Shanghai financial center were more focused on the background, conditions, influences, rarely on the functions. To study the functions of the modern Shanghai financial center can further perfect and deepen the research of the Shanghai financial center. Secondly, in this paper, the financial industry gathering and radiation theory as the theoretical foundation, dynamically defined the Modern Shanghai financial center functions. Thirdly, this article creatively think that finance talent, information, systems and service as a financial center aggregation function, Carried out a detailed analysis modern Shanghai financial center and financial personnel, information, systems and services. More fully characterize the features of modern Shanghai financial center.