W. A. Thomas, Western Capitalism in China: A History of the Shanghai Stock Exchange. Aldershot: Ashgate, 2001. xii + 328 pp. $74.95 (hardback), ISBN: 0-7546-0246-X.

Reviewed for EH.NET by Andrea McElderry, Department of History, University of Louisville.

W. Arthur Thomas of the University of Liverpool has written a very straightforward descriptive history of the securities market in Shanghai from the late nineteenth century to the present. The study centers on securities trading in Shanghai's International Settlement where the listed securities were almost exclusively those of foreign companies and organizations. Along the way Thomas provides glimpses of life in the International Concession and sketches of its foreign residents. In the final two chapters on Chinese stock markets, Thomas gives a useful summary of the Chinese government bond market until 1940, which was the main activity on the Chinese stock exchanges, and of the ins and outs of today's emerging markets in Shanghai and Shenzhen.

Thomas begins with a brief account of the development of foreign trade in China and of the foreign community in Shanghai. Crucial to both was the formation of the International Settlement in Shanghai as a result of the Treaty of Nanking, 1842 (which ended the Opium War) and subsequent agreements between Chinese and foreign governments. In the International Settlement, foreign residents lived under the jurisdiction of their own courts and at least some of them elected their own Municipal Council since "there were strict property qualifications attached to the franchise" (p. 20). Western banks and trading houses located in the Settlement and it quickly became a "flourishing emporium."

The bulk of the book is an account of securities trading centered in the International Settlement. Thomas's main source of information is the weekly share list and related material published in the Settlement's English-language newspaper, the North China Herald. In spite of "an extensive search of libraries and other depositories," Thomas did not find any records of the Shanghai Stock Exchange founded in 1904 or the earlier Shanghai Sharebrokers' Association, formed in 1898. The first share list appeared in 1866 and by then Shanghai's International Settlement had developed the conditions conducive to the emergence of a share market: several banks, a legal framework for joint-stock companies, and an interest in diversification among the established trading houses (although the trading houses themselves remained partnerships).

The supply of securities came primarily from local companies. In the early days, banks dominated private shares but, by 1880, only the Hong Kong and Shanghai (the local bank, so to speak) remained. Shipping, insurance, and docks persisted to 1940 but were overshadowed by industrial shares after the Treaty of Shiminoseki, 1895, which permitted Japan, and by extension other nations who had treaties with China, to establish factories in Shanghai and other treaty ports. Rubber plantations became the staple of stock trading beginning in the second decade of the twentieth century. Fixed securities balanced the "risky" shares of local companies, both in terms of dividends and capital value. Those of the Shanghai Municipal Council and local utilities, such as the Shanghai Waterworks, enjoyed the most consistent favor.

Shanghai had no shortage of people who were willing to risk investing in local companies. Thomas has gleaned information about the foreign investors from reports of company meetings in the North China Herald. Individuals, most connected in one way or another with Shanghai's foreign trading companies, provided the main "supply" of investors in the early days. From the mid-1890s, with the expansion of commercial activity and the introduction of manufacturing, "the securities of local companies became attractive trade investments for the corporate sector" (p. 83). Information on Chinese investors comes largely from Yen-p'ing Hao's work on compradors and Chinese business development in the late nineteenth century. (See, Yen-p'ing Hao, Commercial Revolution in Nineteenth Century China: The Rise of Sino-Western Mercantile Capitalism, University of California Press, 1986, and The Comprador in Nineteenth Century China: Bridge between East and West, Harvard University Press, 1970.)

What stands out in chapters 7 through 9 detailing the fluctuations of the market is the importance of rubber. In 1909-10 investment and speculation in rubber plantations in Southeast Asia "produced a transformation in the share list" (p. 145). By autumn 1910, 47 rubber companies were listed on the Shanghai exchange. Not surprisingly, the boom did not last. Thomas details the rise and subsequent crash of rubber shares, the general outlines of which are known to those familiar with Shanghai financial history. What is not so well known is that rubber recovered and remained a staple of the market until the Japanese occupation of International Settlement in December 1941 brought an end to the Shanghai Stock Exchange. For example, "a sharp and unexpected rise in the price of rubber produced a big increase in share business" (p. 199) in 1925 after a major strike among Chinese workers in Shanghai. Rubber prices collapsed in early 1928 on the heels of a crisis connected to Chiang Kai-shek consolidating control over the Chinese part of Shanghai. Perhaps, Thomas suggests, the fall in rubber prices was responsible for the ensuing enthusiasm for greyhound shares. Greyhound racing had arrived in Shanghai in 1928 and the shares in companies who ran the sport were briefly "the focus of all activity" (p. 203). However, when "the flirtation with 'the dogs' had ended the market returned to its main dealing medium, rubber shares" (p. 203).

Thomas's study is the first account of foreign stock trading in Shanghai and, as such, will be useful to those who examine various aspects of finance and business in Shanghai and China. The book is also an addition to literature on the history of stock trading. It would benefit from an analytical framework grounded either in Chinese economic history or in comparative stock market history. The latter is more realistic since the author is clearly not a China specialist but is quite conversant with stock markets.

The book has a sense of having been written and published in a hurry. Footnoting is inconsistent. At times, even quotations have no citations. Material from the Cambridge History of China, one of the main secondary sources on China, is sometimes cited by author but mostly cited only by volume and page. Also the book, or at least the copy I have, needs some serious copy-editing, especially for romanized Chinese words. Understandably spell check doesn't recognize the Chinese words, but even Hong Kong comes out variously as Kong Kong and Honk Kong. More serious, Chinese names of authors cited are sometimes, but not always, misspelled. For example, the frequently cited works of Yen-p'ing Hao are often footnoted as Hoa. Less serious is the lack of a standardized romanization system such as on page 138 where spellings of Kang Youwei and the Kuang-hsu emperor come from two different systems. Admittedly, the romanization of Chinese is a slippery slope and thus its inconsistency can be put down as a quibble from a Chinese specialist who will, no doubt, use the book as a reference.

Andrea McElderry's publications on Chinese business history include a study of Chinese stock exchanges, "Shanghai Securities Exchanges: Past and Present" (Occasional Paper Series in Asian Business History #4), Brisbane: Asian Business History Centre, University of Queensland, 2001.