A Finance Crisis In 1935 And The Unbalanced Development Of Chinese Banks

Western countries had suffered great economic crisis during the period of 1929-1933, and the depression spreaded to china since 1932. With decrease in purchasing power of farmers and increase in trade deficit, the chronic crisis in agriculture stroke China, followed with that was the crisis in industry and commerce. Additionally, the native banks close-related to economy in hinterland went bankrupt continually. But banking was an exception, it kept thriving uninterrupted until 1934 when it reached a new peak in development. In 1934 the United States government took policy of silver purchasing, after that the chronic economic depression turned into full-scaled finance crisis. Industry, commerce and native banks were all at risk of collapse in 1935, but banks still maintained their prosperity.The native banks took independent measures against the fate of crashing, and the banks also gave a hand to them, but all that were not effective. Under the circumstances, the government carried the burden of relieving. The measure of the government is to take in charge of the main body of the banks by buying their stocks, and then let them fulfill the task of relief. Besides that the government lay down some laws and ordinance to supervise the banks. At last, Chinese economy recovered from the crisis and got a new peak in 1936.The finance crisis of 1935 had great influence on the developmen-t of Chinese banks. Firstly, after the crisis the new banks got the dominant position in finance, but the core power of them fell into the hand of the government, and the absolute predominance of the state-owned banks restricted the development of commercial banks. Secondly, the relationship between banks and government had changed, and the government controlled the banks. Thirdly, the banks gave more great contribution to social economy.