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Published by EH.NET (December 2003)

Brett Sheehan, Trust in Troubled Times: Money, Banks, and State-Society Relations in Republican Tianjin. Cambridge, MA: Harvard University Press, 2003. xi + 269 pp. $59.95 (cloth), ISBN: 0-674-01080-9.

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

In the early twentieth century, Chinese modern banks survived, and even thrived, in spite of political upheaval, financial crises and a confused monetary system. To do so, banks had to have the impersonal trust of the public. Trust in money lay at the center of the bankers’ efforts to cultivate impersonal trust since many banks, including foreign banks in China, issued their own paper money. In this study, Brett Sheehan (University of Wisconsin, Madison) focuses on how bankers in the northern city of Tianjin developed trust in their organizations during the troubled times between 1916 and 1937. Sheehan first lays the theoretical foundations with discussions of the nature of money, its relationship to trust, and strategies for developing impersonal trust which fell into four categories — guardianship, reliance on authority, rhetorical appeals, and institutional arrangements. He weaves these strategies into a chronological narrative which encompasses interactions among professional bankers who were largely from outside of Tianjin, native Tianjin elites, and local and central government authorities in the midst of financial crises. He examines the measures they took to maintain trust, to what extent they were successful, and the changing balance of power among these groups. The study is based on extensive archival research in China and the United States and enlivened with personal experiences and views recorded in the diary of Bian Baimei of the Bank of China, one of Tianjin’s most powerful bankers.

Financial crises in Tianjin between 1916 and 1928 resulted from excessive loan demands from political authorities — central, provincial, and warlord governments — which forced banks to issue unbacked paper money and led to runs on Tianjin banks. Because of Tianjin’s proximity to Beijing, the capital, its banks were more vulnerable to political manipulations than those in other parts of the country, notably Shanghai. Efforts by Tianjin’s native elites to take responsibility for “guardianship” of the local money during these financial crises were limited by insufficient resources, the fragmentation of the elite structure, and the temporary nature of their efforts. Tianjin’s professional bankers were more successful in promoting long term trust in the money supply.

After 1916, Tianjin’s professional bankers became increasingly powerful in local society as the size and scope of the resources they managed increased. To maintain trust in the face of demands from often short-lived warlord governments, professional bankers developed a set of practices which Sheehan labels the “rules of the game”: dealing with on-going government organizations, requiring reliable collateral, and sharing the risks of the loan. They successfully cultivated trust in their expert knowledge. Like their foreign counterparts, they built large and readily identified buildings which “created an impression of permanence”(p. 105).

Before 1928, governments’ attempts to use state authority to promote trust in the money supply had been ineffective. This changed after the establishment of the Nationalist government in 1928 which increasingly used its authority to regulate banking. In 1935, the government took effective control of the state/private Bank of China and Bank of Communications and eventually over a number of private banks. Later that year, it successfully unified China’s currency under government control. By this time, due in large extent to the efforts of professional bankers, the public had come to trust paper money and this trust facilitated the unification of the currency.

As the Nationalist government was extending its control over money and finance, Japanese aggression was creating pressure on the Tianjin’s money supply. Nationalist government policies left Tianjin bankers and local elites largely on their own to deal with Japanese pressure and the ensuing financial crises. In 1937, after Tianjin had fallen to the Japanese, local bankers had little choice but to comply with the financial demands of the puppet government based in Beijing.

Money in the sense of profit and loss is not the subject of Sheehan’s study. Information on growth in deposits and the volume of banknotes is related to gauging the growth of impersonal trust, not to income. Rather the study is about how money is socially produced and about how the producers (banks, in this case) developed the trust required for a network of users to accept it in exchange for goods and services. The analysis is multi-layered examining the changing balance of power within and among Tianjin’s native merchants, between native elites and the largely non-native bankers, and between society (native elites and bankers) and the state. In addition, the study contains material on bankers’ personal histories, the role of personal networks, and the history of Tianjin. So many organizations and actors are involved that the details can sometimes be confusing. What stands out is that Sheehan was able to bring so much together in a coherent narrative. The book makes a major contribution to the still sparse scholarly research on Chinese banking and finance. And it will be of value to all scholars interested in questions of money and trust.

Andrea McElderry is Professor of History at the University of Louisville. Her current research is on shareholding and securities exchanges in Shanghai in the early twentieth century.