| This article discusses the development and changes of the financial institution in1800-1937in modern China from the perspective of the evolution of financial functions.The central point is: Changes of Modern Chinese financial institutions are a product ofthe evolution of financial functions, the evolution of financial functions is essentiallythe continuous differentiation and realization process of the functions, the basicoperating mechanism in this process is coordinating mechanism. It is derived from twopurposes presented as follows: on the one hand, it tries to explore the main financialinstitutions in different stages and better understand the truth behind the laws governingthe evolution. On the other hand, it provides the historical reference for the furtherdevelopment of the banking industry.Based upon the two purposes, this article is derived from the theoretical andhistorical analysis of two aspects around the changing mechanism of financialinstitutions. On theoretical derivation, this study attempts to combine principles offinancial changes and socio-economic changes, by analyzing these concepts such associal function, structure, initiative, and extracts “the function is inherent simplificativedemand of system complexities, the structure is the actual operation of the demand, andfunction is the internal mechanism of the structural changes". Based on the analysis ofthese basic views, the paper analyses the concept of the financial function,differentiation, and implementation, financial changes, and analyzes the key issues suchas the relationship between the function and structure of the financial system, and theinternal mechanism of the financial institutions changes, and theories integration relatedfinancial changes. The view of function coordination of the financial changes arguesthat the financial function is the simplificative needs of the financial system complexityessentially and its evolution is the continual process to simplify the complexity arounddifferentiation and implementation of the financial function. As one of the financialelements of the financial system, a financial institution changes also focuseddifferentiation and implementation of financial functions. Financial institutions adapt tothis differentiation process or dynamic coordination process. Like the other socialevolutionary phenomena, it appeals that the evolution of financial institution lies in thestructural changes, but behind it is the process of functional differentiation and the adaptation and dynamic coordination for dealing with the coordination. Thecoordination with the external development plays the vital role in maintaining the stableoperation of financial institution and the coordination is mainly achieved through thecoordination with the function. Once the coordination cannot be successfully achieved,the economic crisis is likely to occur. The function differentiation and system evolutionis motivated by the human initiative, including the induced and mandatory motivations.Under normal circumstance, the two motives interact to the evolutionary process, butthey play different roles in the different stages. Sometimes the induced motives playsthe major role, sometimes the mandatory motives plays the major influence.The article divides the evolution of modern China financial institution into threestages in1800-1937from the perspective of financial function coordination, and mainlyanalyzes the change of coordinating degree of the different financial institution in thedifferent stages for satisfying the financial demands. From the perspective of serviceobject of the financial system, roughly evolution sequence of financial function isBusiness Financial Services-Government Financial Services-Industry FinancialServices. The first phase is the growth phase of modern China traditional financialinstitution in1800-1840. During the period, the combination of the market inducedincentives with the chaotic and complicated monetary system brought about the newdemands of financial functions which in turn brought about the change of financialstructure, the increase in number of traditional financial institutions such as draft bank,private bank, pawn shops, and the expansion in their business. The second phase is thetransformation of the modern China traditional financial institution. The adaptation tothe financing business of the importing-exporting trade for the private bank and to thefinancing business of governmental public funds is constructed in this period. Themarket induced motives still play the leading role in the external influence on thefinancial system, but the mandatory effect brought from foreign forces and the dynamicreform of the domestic government also increase, promoting the new change ofdomestic traditional financial functional requirements and supply. Business paymentand financing functions still expand, producing the industrial financing demands and thepublic funds flow. Meanwhile, the status of risk management function of the wholefinancial system rises. The third phase sees the great China economic and politicalchange in1895-1937and the fast development of official-private industry andcommerce. Though the period experiences the great shift from Late Qing Dynastygovernment, Beiyang government to Nanjing government, the authority of central government is characterized with the overall strengthening trend. In this period, byintroducing a great amount of western financial theories and systems, the Chinesefinancial system speeds up to move closer to the West and marches along the twodirections: first, the financial function sets out to shift towards the demands of themodern industry and commerce; second, the governmental initiative graduallystrengthens and develops towards the monopoly, which results in the competitivestrengthening of financial institutions and the great change of distribution pattern ofbanking sectors. The article makes an exploration into the governmental role in theimplementation process of modern financial function and its achieved ways.Furthermore, it investigates the influence of institutional innovation on the financialinstitution based on the governmental intervention of finance.Through the analysis above, the article proposes that the evolutionary principleought to be built upon the function-centered financial coordinating mechanisms. Thecoordination degree of interior and exterior financial system is balanced by therealization of function in the dynamic process. Similarly, the various mobility changesand the complicated relation of financial evolution can be investigated by theachievement of function. From the functional perspective, the prosperity of the financialinstitutions is decided by its adaptation to the function and its efficiency. In other words,the institution will develop steadily if the institutional adaptation is strong; theinstitution will be eliminated if the institutional adaptation is weak. The change ofmodern China financial institutions is the reflection of the adaptation of institution tothe functional demands and it is characterized with the passive adaptation which causesthe lagging behind the time of the risk management function and innovative function ofthe governmental system. The two functions play a critical role in the transformation ofmodern China financial institutions and become the main prerequisite for the shift offinancial institution towards the industrial financing subject.There are two inadequacies about this paper. The first problem is that this paperdoes not make deeper analyze about financial function formation mechanism and thespecific relationship among the various elements of the financial system. Second, it isnot enough from a view of functional coordinate that the studies focus on therelationships among financial instruments, financial institutions and financial markets inthe process of modern Chinese financial institutions changes. |
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