A study on Local government debt in modern China

A study on Local government debt in modern China Jinhua Ma 2015.08.01 WEHC Chinese Public Finance Session Introduction Modern local government debt in China began in the late Qing dynasty, and developed rapidly through Nanjing provisional government, the Beiyang government and the Nanjing national government, and was banned in the late national government period. The ups and downs of the development history of modern local government debt in China for hundreds of years was closely related to the collapse of the feudal-centralized dominance in the period of Republic of China, the social context of internal and external problems, historical changes in the fiscal and financial area, and the evolution of the relationship between Central and local governments. The whole process of the development of modern local government debt, including the germination, overflow, regulated development, and ban, was subordinated to the political and economic demands of government, the degree on how much the central government approved and restricted on local government debt, and was also influenced by the power structure decided by the power game of property rights, administrative rights and obligations between central and local governments. The management of local government debt in China evolved from disorganized to regulated, from microcosmic to macroscopic, which was associated with the gradually mature and stable political and economic situation in China. Local government debt refers to the modern China s all local governments raise internal bonds openly for the purpose to meet the local public finance and social undertakings need, including local government issuing bonds, treasury bills to ticket form of debt, including debt contract, contract and other forms. Local government debt in modern China generated from the declined centralization in the late Qing Dynasty(1840-1911), active issanced in Nanjing 1

Provisional Government (1911-1912),flooded in the political division of the period of Beiyang government(1912-1927), developed in Nanking decade (1927-1937), restricted and banned in Late Nanjing normal government(1937-1945). In previous study, scholars are more concerned about the financial relationship between central and local governments, or the central government debt, and the local government debt less attention. For Chinese historians, public debts throughout this period are mainly seen as symptoms of the dysfunctional political and fiscal arrangements, with little redeeming features. Although these debates have yielded significant discoveries in terms of archival and quantitative sources, this Marxist, normative and state-centered perspective limits the scope of discussion on the topic. the systematic study of the overall situation is very rare. The data of this paper mostly comes from archival records and historical materials, with fewer amount of local chronicles and financial records. In this research, the following problems will be involved: How much debts the modern China local governments actually borrowed? What is reason and source structure about the formation of these debts? What is application about debts? What influence is Debts on the economic development? I The cause of modern local government in China Affecting by many factors, the cause of the emergence and development of modern local government debt in China was very complicated, which can be concluded into the following aspects: 1. The gradual collapse of the centralized fiscal system The fiscal system in Early Qing was the peak in the history of Chinese feudal finance system development. Compatible with the feudal autocratic political rule, the Qing Government established a central financial system of highly centralized, and controlled strictly on the financial process of local governments revenue and expenditure. First of all, on the financial management organization, the Qing Government set up financial institutions, and Provincial Administration 2

Commission is set up in every provinces responsible for managing financial matters of the province. Secondly, in the financial management system, The government revenue coordination system was established to control and distribute national financial resource. Remittance meant the payment of local government to higher levels of government; association revenue meant financial transfer between local governments of parallel levels. The orders of Remittance and association revenue were all given by central governments. Audit system is a kind of financial statement system. At the end of the fiscal year, financial drafts were made by every country and province, and drafts were summarized and reported to the Ministry of Revenue after verifying by Provincial Administration Commission. However, with the outbreak of 1840 Opium War, western power successfully broke the gate of China, and the dominance of Qing Dynasty transferred from prosperity to decline. Coupled with the outbreak of the movement of Taiping Heavenly Kingdom, the highly centralized financial system in China has undergone profound changes. First of all, because of the war, The government revenue coordination system and audit system were greatly affected and failed to operate normally. In order to raise funds for defense, local governments intercepted not only the obligated association revenue, but also the association revenue in transit of other provinces. The authority and stability of Qing Central Government has been largely diminished. Secondly, under the hit of the movement of Taiping Heavenly Kingdom, the amount of administrative and military defense organizations and personnel had been largely increased in order for defense, and the administrative and military expenditure expanded as well. The Qing Government was forced to agree to the fund-raising of local governments, which definitely enhance the independence of local finance. Local government not only began to collect transit tax(likin), but also initiated local government debt even earlier than Qing central government. As a result, fiscal power was gradually out of central government s control, and Qing government also failed to perform its functions due to the empty Treasury. The power of the government began to transfer from central government to local government and local inspector thus began to have more political and military power, which had provided the powerful safeguard for the expansion of its property rights. The highly centralized financial system in China began to disintegrate with the decline of central authority. 2. The formation and deepening of modern financial crisis 3

In the late Qing Dynasty, local finance was involved into serious crisis.failing to make the ends meet, local government was forced to issue debts. The reason contributing to this situation can be included as follows: First, the large number of indemnity by Qing government. In order to pay huge indemnities, ceding territory and rebuilding the country after the war, the central government began to levy heavily on local government. For example, in addition to Boxer indemnity as much as 4.5 million taels of silver, there was still Boxer local compensation with the total amount of 22.2727 million taels 1. Among these indemnities, except for 5.386 million taels divided into the overall indemnity, the actual number of the indemnity shared by local government was still as much as more than 16.21 million taels. The huge indemnity quickly ran out of local financial resources, and local government must raise funds to meet the immediate needs. Secondly, local government fiscal revenue had shrunk. The main component of local government revenue was tax revenue and the level of tax revenue was closely related to the level of local economic development. At the end of Qing Dynasty, provinces hit by the war were involved into economic stagnation, plant shut down and local government tax revenue had shrunk severely, leading to the widening fiscal gap. According to Provincial Description of Finance written by Liu Jinzao, in Guang Xu year 34,local government had the annual revenue of 2.348 hundred million taels, the annual expenditure of 2.37 hundred million taels,and the annual deficit of 2.2 million taels 2, thus it was clear that the local government had huge fiscal gap. Third, the Westernization Movement needs huge financial support. The major advocates of Westernization Movement including the development of modern military industry, establish of military school, coal mining administration and promote modern light industry,needed huge capital support. As the major supporter of the Movement, local government needed to raise fund in short time by borrowing debt, so as to support these industries. Fourth, the New Deal carried out by Qing Dynasty at the beginning of the twentieth century. Under the heavy pressure from both internal and foreign invasion, the Qing government began to implement the New Deal,which requires local government to pay troops, train new military recruits, develop business and promote industry using their self-raising fund. Under that circumstances, in addition to relying on heavy taxes and levies, local government 1 Zhou Yu-min: fiscal and social change in late Qing dynasty, Shanghai people's publishing house, 2000, p. 380. 2 Liu Jin-zao: the archives of the Qing dynasty, vol 68, Beijing: the commercial press, 1936, 8249 4

began to issue local debts. 3. The development of modern capitalism in China With the outbreak of the Opium War, western power successfully broke the gate of China, along with the heavy hit of western capitalism ideology and foreign capital, which had great impact on Chinese natural economy. After that, natural economy in China began to disintegrate quickly. After the Opium War, China was forced to open ports in coastal provinces. However, China was still in the stage of capitalis mat that period, and the lack of right to speak in foreign trade made China endure great shock by western capitalism in the process of opening up. Lack of autonomy seriously inhibited the development of Chinese economy. In the late 1840s, foreign enterprises appeared in China successively. In 1860s,some internal compradors, merchants and landlords required to invest by setting up factories and other economic entities. The emergence of modern capitalism had aroused high capital concentration, which contributed a lot to the promotion of industries. For example, it was less than one month when Shanghai Bureau of Weaving published the news of IPO in newspaper until the Bureau raised three hundred thousand taels, and the participators were every active 3.Founded in 1872, Chinese Merchants Steamship Company raised business stocks of eleven hundred thousand taels,but in 1873, it had successfully raised eighteen hundred thousand taels,and in 1881 increased into one million 4. Most of the modern enterprises started locally and won the support of local government to the largest degree. The emergence of modern capitalism and establishment of modern enterprises significantly enhanced the strength of local economy, which led to the heavy reliance of central government on local government. The accumulation of capital and the enhanced financial power implied that the political power of local government was not controlled strictly by central government, thus it was very difficult for central government to constrain debt issuing behavior of local government. 4. The emergence and development of modern banking industry in China 3 "declaration", Guangxu six years on October 14. 4 Duan Ben-luo: "the emergence of Chinese capitalist and the early bourgeois", Suzhou university press, 1996, p. 139. 5

In the late Qing Dynasty, the local government had the ability to issue debts, which was closely related to the emergence and development of banking industry and the necessary technological conditions for debts issuing. Generally speaking, modern banking system was a kind of product of the development of capitalism mode of production. In the late Qing Dynasty, the emergence of modern capitalism in China provided conditions for the development of banking industry. After the Sino-Japanese War, the output of foreign capital flooded into China. With the rapid expansion of Chinese industrial and mining enterprises, the number and scope of business trading, it became much more urgent for national financial institutions to make the service by providing funds and foreign exchanges. Founded in 1897, Chinese Imperial Bank was the start of the modern banking industry. In 1911 the basis of modern banking industry had been established. According to Chinese Local Banking History, from the period of Xianfeng to Jiawu, the number of official banks were only 12, and from Jiawu to Gengzi, there were another 8 banks established. While from Gengzi War to the collapse of Qing Dynasty, there were another 19 banks established. It was clear that banking industry had a rapid development. The modern bank in China was not developed from traditional financial capital like money exchange shop, old bank,it was established after the development of new industry capital. In the local area, the local banks were developed from official funded banks, and had become an important part in Chinese modern banking system. It also served an important role in local government financing institutions and maintaining provincial finance in the late Qing Dynasty. The fiscal borrowing behavior also contributed to the tendency of borrowing behavior of local government and exacerbated the market segmentation and the power of local inspectors. II The development of local government debt in modern China Modern China's local government debt emerge in the late Qing dynasty when central centralization gradually collapse, flood in the Bei Yang government period when political division arise, be specified in the early Nanjing national government, be restricted during the Anti-Japanese War and be completely banned during civil war. The chra The characteristics of development of the local government bonds is reflected in the ups and downs of its issuance size. 6

1. The late Qing dynasty: first insurance of local government debt and disorderly management During the late Qing dynasty, when Boxer indemnity occur and the industrial boom rise, in order to apportion huge debt and encourage local governments to support the "New Deal", central government starts to allow local government offering internal bonds in public. In March 1905, the Zhili province governor Yuan Shi-kai is badly in need of funding due to military expansion, has issued 4.8 million local government bonds with the central government approval, which has become the first local government debt in the history. However, Chinese citizen have no ability to buy these bonds, finally most bonds are purchased by the bank of yokohama, Japan, local government bonds has turned into local foreign debt. During the late Qing dynasty local government has issued 11 internal debt, amounted to 32546400 yuan. The provinces which have issued bonds in late Qing dynasty are Hebei, Shanghai, Hunan, Guangdong, Hubei and Anhui provinces, each bond line is 3 million yuan on average, annual interest rates is seven or eight per cent or so, the average distribution period is six years, debt financing source is government officials, local consortium and foreign financial institutions, collateral are local tax revenue, local government financial assets, and officer battalion enterprise surplus. Bond issuance channels are: folk raise, foreign capital bank loan, the internal bank loan, commercial bureau issuance. As shown in figure 1, during the late Qing dynasty, internal debt capital mainly comes from foreign Banks loan (68.77% of total issuance), followed by folk raise and internal bank loans (each takes up 11.15% of total issuance), the last one is forced commercial bureau issuance (8.92% of total issuance). In general. 7

Figure 1: pie chart of local internal capital sources from 1905 to 1911 in late Qing dynasty The internal bonds issued in this period has the following characteristics: first, the internal bonds of local government in the late Qing dynasty are mostly the replica of "Yuan Shi-kai" bond (i.e., Zhili province government bonds). As the first issued local government bond ever, Zhili province government bonds has the model significance at that time and with no doubt becomes the example of other internal bonds, other provinces have issued their internal bonds in reference to zhili bond; Second, the debt income is mainly used for military and political affairs and municipal construction. During late Qing period, the use of local government debt has expanded from pure munitions to maintain market, industrial development and administrative costs. In fact, at the beginning of the 20th century, a large number of local government debt emerge because the implement of the New Deal by Qing government, which has intensified the conflicts between local finance and the military training and the establishment of industries; Third, the credit of internal bond is not high, bond issuance has achieved little. The war during the late Qing period has seriously disturbed the normal development of social economy, local citizens have no spare money to buy government bonds, the local government debt issuance has little effect and can barely raise enough revenue. Local government debt management is a confusion in late Qing dynasty with no special debt issuance institutions nor specialized debt management institutions. This situation has a close 8

relationship with the social, political, and economic conditions at that time.on the issue of bond, On the surface, the ministry of finance in Qing government has the right to review the local government debt, but in fact, it is only a form, local governments have issued lots of bonds without the approval the branch of the ministry of finance provincial. In the late Qing dynasty, in order to restore the central finance, Qing government has tried to clear up local government accounts for several times, all ended in failure. The Qing court has no ability nor effective means to prevent the decline of central authority and local government debt mess. Table 1 Statistics of the local internal debt in late Qing dynasty sequence debtor year bond amount rate distribution period 1 Zhili 1905 6672000 7-1.2 6 2 Shanghai 1906 41700 unknown 3 Shanghai 1908 41700 8 4 Hubei 1909 3336000 7-1.2 6 5 Hunan 1910 1200000 7 6 Shanghai 1910 139000 8 7 Anhui 1910 1668000 7-1.2 6 8 Zhili 1910 4448000 unknown 9 Zhili 1911 10 Guangdong 1911 10000000 8 11 Hunan 1911 5000000 4 Source: Wan Bi-xuan: "the local government debt", daito publishing house, 1948 edition; Xiao-hui Zhang editor: "fiscal policy change during the period of the republic of China guangdong", economic science press, 2011. Xiao-hui zhang: "the history of modern local government of guangdong (1912-1936)", jinan university journal(philosophy and social science edition), 1992, 02; Local Chronicles and Chronicles compilation committee of guangdong province: "The local Chronicles of guangdong province", guangdong people's publishing house, 1999. Chen Ke-jian, Ren-chuan Lin editor: "the financial history of fujian", xiamen university, 1989; Pan Guo-qi: "studies of modern Chinese local government debt, take jiangsu, zhejiang and Shanghai as 9

example", Zhejiang university press, 2009; Jiangsu province finance editor office: "jiangsu financial history books" the second series of the second volume, local press, 1999; Chorography editing committee of jiangsu province editor: "Jiangsu province, a fiscal" (below), jiangsu ancient books publishing house, 1996; Pu-sen Jin: "Zhejiang general history, volume of the republic of China, up", Zhejiang people's publishing house, 2005; Jia Shiyi compilation: "The financial history of the republic of China," the commercial press, 1917; The second historical archives of China :" the Chinese history record data collection" (3) finance, jiangsu ancient books publishing house, 1991. "China financial history data compilation" 9-12 series, China's financial economic publishing house, 1987-1990. 2. Nanjing provisional government : local government bond active issuance and management suppression During Wuchang uprising, several provinces have announced "independence", although Nanjing provisional authority has set up, the "independent" way used by local governments have revealed the stirring of local independent consciousness. On January 1, 1912, Nanjing Provisional Government has formed. But the new bourgeois revolutionary regime was plagued by serious financial crisis in the beginning. The capital Nanjing has no capital storage, local governments at all levels has submitted nothing, they not only have no financial support to the central government, but also ask for funding duties from central government, the custom, salt tax and other tax revenue have been used for the collateral of central government debt in the beginning of late Qing dynasty. Nanjing provisional government has no revenue, but has consumed a lot, only the army reimbursement of need is several times more than before. Faced with financial distress, the contradiction between the central and local government is characterized by competition for financial sources, in order to alleviate the crisis, many provinces have issued bonds in the name of local district (see chart 2). Some local government even ues the banner of "republic of China", deliberately make local government debt look like the central government debt without being limited by the central authority, which reflects the disorder of local government debt issuance. Nanjing provisional government period is an unprecedented active period in the history of 10

local bonds issuance, on the one hand, the provincial and local has financial crisis during the war and need to survive relying on borrowed money, on the other hand, the issuance of local government bonds also provide the consolidation of new bourgeois revolutionary regime with large amount of money. During Nanjing Provisional Government period, the local government has issued 10 internal bonds, amounted to 55780044 yuan, the bonds offering provinces include Hubei, Fujian, Jiangxi, Shaanxi, Jiangsu, Zhejiang and Shanghai, the annual average interest rate is around 5 to 7 per cent, the distribution period of local bonds are 6.34 years on average, the main collateral are local tax revenue and officer enterprise surplus, debt capital mainly comes from the folk financing, the reason for this is that in view of the shortcomings of the Qing government borrowing, Chinese citizen has seen foreign debt as "poisoned wine", as long as the government ask for foreign loan, they instinctively resisted and opposed. The internal debt issued by local governments at this stage has the following characteristics: first, internal debt is mainly used to raise military expenses. During Nanjing Provisional Government period, the military government issued bonds to consolidate the revolutionary regime, as an important fiscal policy measures, local government debt has provided the material guarantee to ease financial crisis and protect the victory of the revolution; Second, the internal debt issuance mostly failed to achieve their goals. The ratio of the actual debt issuance size and planned debt issuance size in Nanjing Provisional Government is the lowest compared with other periods in modern China, only 40%. The reason for this situation are various: one is that in the late Nanjing Provisional Government, central government has made the policy of stop local bond issuance. The second reason is that the capitalist economic development during the period of Nanjing interim government is not sufficient, the modern financial institutions and financial market is still underdeveloped, citizens life are poor, the debtor can only rely on the merchants to raise a small amount of funds, the local government bonds issuance is restricted by the economic conditions. The third reason is that the government bond credit has not yet been established. The control range of provincial revolutionary regime is extremely limited, the common recognition of the new revolutionary regime is not obtained, thus people question its solvency. To rectify the local government debt chaos, Sun Yat-sen ordered many times that the 11

provincial military government stopped issuing local government bonds, but with little effect. On March 17, 1912, Sun Yat-sen issued <unified financial restrains to local government bonds>, specifically asks all provinces for the purpose of fiscal unification, the bond issuance should stop according to the ministry of finance. Since Shanghai ignores central orders and still published the issuance advertisement of government bonds, Sun Yat-sen once again issued the Order Shanghai military viceroy to stop issuing local bonds ", it is pointed out that "in order to avoid divergence, since the central Treasury tickets have been issued, Shanghai bond issuance shall immediately stop. 5 " Since then, Nanjing interim government has formulated and promulgated the "government bonds perform general rules" article 14 and "Treasury client provincial debt issuance method" article 12, specify the working procedures of bonds management institutions, standardize the actual bonds issuance. Due to the limitation and the repression of the interim government and government bond credit has not yet been established, the results of most of the local government debts issuance is far from target and is of little help to ease financial crisis. Nanjing Provisional Government attempts to suppress provincial government bond issuance in order to raise fundraising ability of the central government, but eventually backfire, ultimately unable to save the poor fiscal condition and precarious revolutionary regime, the Nanjing temporary regime eventually came to an end. Table 2 Local bonds issued during Nanjing Provisional Government sequence province year planned real rate distribution issuance issuance period amount amount 1 Hubei 1911.1 2000 24000000 5 10 0000 2 Shanghai 1911.12 10000000 unknown 9 4 3 Zhejiang 1911.12 5000000 499000 7 4 4 Zhejiang 1912.2 1000000 unknown 6 0.5 5 Jiangxi 1912.1 6000000 229000 unknown unknown 6 Fujian 1912.1 3000000 307000 20 2 5 Liu Xiao-quan: a preliminary study of the military supplies bonds in the first year of modern China, journal of Southwest University (humanities and social science edition), in 2008. 12

7 Shanghai 1912 55600 unknown 8 5 8 Guangdong 1912 6940000 4320000 8 10 9 Jiangsu 1912 1000000 unknown 7 3 10 Shanxi 1912.1 1000000 unknown 6 3 Source: the same as table 1 3. Beiyang government period: local government bonds are out of control and the management failure On March 10, 1912 Yuan Shi-kai became provisional President, China entered the period of reign of the Beiyang warlords. At the beginning of the reign, because of Yuan Shi-kai s powerful forces, local power is temporarily suppressed and there's not much chance to perform their wills. After the death of Yuan Shi-kai, Beiyang group divided with no strong central regime, the local authority is becoming more and more independent,, all the provinces start to issue local government debt. Although the ministry of finance has formulated several regulations to strictly limit excessive local debts. But under that political situation with little central authority, there are no certain rules for bonds issuance procedures throughout the Beiyang period, all local government issue large amount of bonds without following the central government rules. During the period of Beiyang government, the local government has issued 62 internal bonds, amounted to 110917462 yuan, the local government which have issued bonds include Hubei, Sichuan, Anhui, Guangdong, Fujian, Jiangxi, Jiangsu, Zhejiang, Shanghai, Tianjin, Hunan, Gansu and Hebei, the average annual interest rate is 8.36 per cent, the distribution period of bonds is 4.84 years on average, the main collateral are local tax revenue, local government financial assets, officer enterprise surplus income and the income of mineral resources, the situation that local government bonds failed to be paid back is common in Beiyang government period, according to statistics, during Beiyang period, among 29 bonds which have imbursement records, only 12 have been really paid off. 13

In this period, the local government debt has following characteristics: First, in terms of the debt composition, in addition to borrowing external debt from foreign countries, the northern warlords also issued a number of public bonds and military votes to raise funds. According to statistics, from 1911 to the late November of 1912, all of the provinces borrowed more than 1210 liang,actual received more than 1100 liang 6. Second, in the terms of raising process, a large number of local governments signed the debt contracts before the central government admitting them. Some local governments even kept the borrowing from the central government, which led to local government debt out of control. The local foreign debt during Beiyang Government sees table 3.Third, in terms of the debt purposes, the local debt issued by the Chinese provinces during this period is mainly used for military and civilian non-productive expenditure. During Beiyang Government, the internal debt issued by local governments is mainly used for military and administrative cost, repaying the debt before, making up for the finance budget deficits, disaster relief and industrial construction. Nearly half of the debt during Beiyang Governmentis used to make up for the military expenditure, which is closely related to the special times background. Fourth, in terms of the characteristics of debt, local government debt built close ties with local banks. Under the control of local warlords, local banks issued debt and acted for military expenditure, acting as the financial instruments of the warlords regime. The wide development of the banks also provides local government debt issue organization condition, and the spread of local government debt, in turn, led to the development of the banking sector whose purpose is speculation. Fifth, debt is mainly raised by forced apportion. During Beiyang Government, the local governments apportion patterns emerged in an endless streaming the internal debt issuance. The local governments imposed the debt burden on the counties and villages, making the local financial burden very heavy. During Beiyang government period, central government has set up the national debt management agency and a bond fund, all the local government have set up a national Treasury bureau to set about organizing local government debt confusion. But because that bond funds are often in the hands of imperialist powers, these measures enhance the confidence of the Banks to 66 Jiang Hong-ye editor: the history of China's local bank, hunan press, 1991, p. 158. 14

buy government bonds and exacerbate the bond issuance and bank acquisitions. In August 1927, for example, the Beiyang government set up a review committee using salt tax and custom for foreign debts mortgage ( to review central and local government debt) to protect the interests of the holder and maintain the government credit. But with the collapse of the Beiyang government in 1928, the debt reorganizing work stopped. Table 3 Local bonds issued during Beiyang government period sequence debtor year debt amount rate distribution period real amount 1 Anhui 1913 417000 5 2 Anhui 1914 400000 2--4 4 3 Guangdong 1916 2083333 6 694444 4 Jiangxi 1917 286000 6 1 5 Jiangxi 1917 195000 5 1 6 Hunan 1917 300000 7 7 Jiangxi 1917 460000 3 8 Jiangxi 1918 800000 10 3 9 Fujian 1919 1000000 6 5 1099000 10 Hunan 1919 1520000 7 1 11 Guangdong 1919 1500000 8 483000 12 Gansu 1919 680000 7 42291 13 Anhui 1919 586580 8 4 14 Fujian 1919 1218000 7 20 897000 15 Zhejiang 1920 1500000 12 3 16 Gansu 1920 390000 6 10 17 Sichuan 1920 3000000 6 1 18 Anhui 1920 337770 19 Fujian 1920 1000000 14 2 897000 20 Hebei 1920 1160000 14 10 21 Hubei 1921 2000000 1 15

22 Sichuan 1921 3000000 8 23 Anhui 1921 300000 18 90000 24 Jiangsu 1921 2000000 14 5 25 Anhui 1921 140390 14 26 Guangdong 1922 3472222 8 3 1653472 27 Jiangxi 1921 8000000 12 6 28 Hebei 1921 3000000 10 6 29 Zhejiang 1922 2000000 12 3 30 Hunan 1922 200000 6 3 31 Jiangsu 1922 7000000 10 5 32 Anhui 1922 650000 6 33 Shanghai 1922 278000 10 5 34 Zhejiang 1923 1500000 12 3 35 Guangdong 1923 4166667 36 Anhui 1923 600000 6 446000 37 Hebei 1923 2100000 10 10 38 Zhejiang 1924 2000000 12 3 39 Jiangsu 1924 1000000 1 40 Zhejiang 1924 3000000 10 6 41 Anhui 1924 300000 300000 42 Fujian 1925 1200000 8 5 1200000 43 Fujian 1925 800000 44 Hubei 1924 2400000 1 45 Anhui 1925 600000 8 600000 46 Tianjin 1925 3000000 10 47 Anhui 1925 400000 12 400000 48 Shanghai 1925 278000 20 10 49 Hebei 1925 9000000 10 16

50 Jiangxi 1925 1600000 10 1 51 Jiangxi 1926 8000000 10 52 Guangdong 1925 1687500 7 53 Anhui 1926 417000 8 378080 54 Anhui 1926 1200000 1200000 55 Zhejiang 1926 3600000 10 6 56 Fujian 1926 194000 57 Hubei 1927 3000000 2 58 Hebei 1927 4000000 8 3 59 Fujian 1927 0 60 Fujian 1927 3000000 6 6 61 Tianjin 1927 500000 6 0 62 Tianjin 1927 500000 6 Source: the same as table 1 4. The Nanjing national government period: changing and supervision of local debt s style Since the Nanjing national government was set up in 1927, it faced the scraped financial situation which was left by Beiyang national government. Although the war was not so frequent than it was in the period of Beiyang national government, financial situation was still messy and the outlay of government was distributed around the whole country. Also, there was no definite limitation between the central government and local government, which led to a difficult situation to the central government. Therefore, the Nanjing national government held the first national financial meeting in 1928, in which the division standard of the national income and local income and the different standard of the national spending local spending past, establishing the range of provincial government outlay and clearing that the county finance was just an attachment to the provincial finance, which made the county finance becoming more unstable and messy. In 1934, the government held the second meeting, establishing the range of county government outlay, which confined the power of provincial government to some certain. From then on, the 17

local budget is made up from two levels: the provincial government and the county government. But due to the strengthening of the central finance and restriction to local finance, local finance could not satisfied the growth of spending, and debt became a major method. From the national government was set up to eve of the Anti-Japanese War, the Kuomintang headed by Chiang Kai-shek, put forward a series of fiscal and economic policies, strengthening the central financial and standardizing the national financial system. To some extent, it improved the financial state of the economy. Calm on the surface, however, in fact there was still a struggle between the parties, the Chiang Kai-shek regime to exclude all others at the same time. "intolerance" warlords made the local government's military spending was high, so most of the provinces and cities in the period of Nanjing national government remained financially strapped, not covering the charge of the situation. This also became a reason why local government at the beginning of the national government issued bonds. The Nanjing national government issued bonds in all 94, amounting to 507,905,267 Yuan, the province of issuing bonds were Anhui, Hubei, Sichuan, Guangdong, Fujian, Beijing, Tianjin, Hunan, Gansu, Hebei, Shanxi, Liaoning, Jiangsu, Zhejiang and Shanghai. The average interest rate was 8.51 annual interest, and the releasing period is 7.59 years on average. The main collateral included local tax revenue, local government financial assets and officer of the camp enterprise surplus bonds pay in good condition, and the debt capital mainly came from internal Banks and bank borrowing, local firms and the financial group as well as the central bank. Nanjing national government s internal debt of local government basically had the following characteristics: first, the local governments issuing internal debt to develop industrial and infrastructure construction. One of the most obvious feature of the government in the early of the republic of China government was that the main purpose of the government to issue internal debt was no longer in order to raise military expenses or to pay reparations. It is mainly used for industrial construction, powering provinces to develop the local economy, investing industry building; Second, the local government debt was relatively low, which were all below 10%, as shown in table 5; Third, various forms of local government debt raised during this period. Mainly include: (1) bonds in the province. The new local Banks still played for the military government to 18

raise the function of the military, and abuse and agent were the main military supplies bonds form. For example, Guangdong in December 1929 -April 1932 issued the national Treasury bond of munitions and other 6 kinds of bond, amounting to 59.5 million Yuan. (2) The central province to issue bonds. Such as 1935 Sichuan issued 70 million Yuan bonds and organized financial problems arising from national Treasury bond 30 million Yuan. Arranging for Guangdong financial, 1936 the government issued of financial national Treasury bond 120 million Yuan in Guangdong. According to statistics, the Nanjing national government subsidies for local and raising debt amounted to 235 million Yuan 7. (3) Mortgages. For bonds issued by a certain time, it may take part directly to the market to sell to raise, part of the borrowed from financial institutions to form to raise the funds required for the government. Obviously, mortgage had greatly enhanced the provincial government's ability to borrow, accelerated the expansion of the local government debt. Table 5 The proportion of debt income accounting for government revenue in 18 provinces from 1931 to 1936 year Debt income(thousand yuan) Debt income/government revunue(%) 1931 29245 9.64 1932 16785 7.29 1933 10684 5.47 1934 12599 4.10 1935 19982 7.38 1936 33316 9.64 Data Source: China's financial history writting editorial: <Financial History of the People's Republic of China>, China financial and economic press, 1987, p. 595. During the Nanjing national government period, the central government regime from the legal norms, the administrative power, the supervision and management of various aspects of local government bonds issue to circulation and repay the specification. In the stage of local government bonds issue, the central government restricted local government bond issuance in the 7 Zhang Lian-hong: the study of relationship between central and local finance during the period of the republic of China, nanjing normal university press, 1999, pp. 47 19

legal norms. In 1928, the national government announced the ministry of finance on issuing bonds and book borrowing limit case ", making the following rules: Municipal bond issuance must supervised by the ministry of finance, or the Treasury could notice to cancel; Provincial income solution, allocated funds and servicing of paragraph number should be monthly reported to the Treasury for verification. In addition to legal norms, the central government's administrative power also set the threshold of supervision for the issue of local government debt. The supreme organ of authority of the nationalist government in Nanjing Kuomintang central executive committee of the political committee shall have the right to veto the bond issue. At the same time, also the establishment of fundraising institutions promoted the issue of local government bonds. The provinces set up fundraising committee during the period of Nanjing national government. The establishment of the agency helped local government bonds to raise more capital, and it was also an expression of the provincial Treasury management system constantly improving. In the circulation stages of local government bonds, regulators of the establishment safeguarded the post-loan management of municipal bonds. During the Nanjing national government period, compared to the Beiyang government, the biggest progress is from representative regulating bond fund to establishing special bond guarantee fund management institutions, and members of the foundation trustees increased. In local government debt repayment phase, the central government set up the internal and external debt commission security. In order to safeguard the government credit, ensuring sustainable debt financing, the government organized and sort out the internal and external debt commission in 1929, approving all foreign debt during the Beiyang government. Table 4 Local bonds issued during Nanjing national government period sequence debtor year debt amount rate distribution period real assuance amount 1 Zhejiang 1928 6000000 10 9 2 Zhejiang 1928 2500000 10 8 3 Hebei 1929 5000000 8 8 4 Zhejiang 1929 10000000 8 9 5 Jiangsu 1929 3000000 8 10 20

6 Shanghai 1929 3000000 8 8 7 Hebei 1929 2400000 8 10 8 Jiangxi 1929 3000000 8 9 Liaoning 1929 20000000 8 10 Hubei 1930 10000000 8 11 Anhui 1930 1000000 10 237000 12 Hubei 1929 1500000 8 8 13 Guangdong 1929 2777778 10 0 2777778 14 Guangdong 1930 10416667 10 2 2319444 15 Jiangsu 1930 7000000 8 10 16 Zhejiang 1930 1000000 8 9 17 Anhui 1930 4560000 18 Anhui 1930 1060000 19 Hubei 1931 10000000 20 Guangdong 1931 347222 5 347222.2 21 Hebei 1930 1000000 22 Shanxi 1930 24000000 8 8 23 Anhui 1931 229400 5 24 Fujian 1931 500000 12 1 194000 25 Fujian 1931 500000 12 26 Zhejiang 1931 8000000 8 10 27 Jiangsu 1931 5000000 8 5 28 Hubei 1931 3000000 8 1 29 Guangdong 1932 7288194 10 2 5993056 30 Zhejiang 1932 6000000 5 2 31 Jiangsu 1932 4000000 8 32 Shanghai 1932 6000000 7 20 33 Jiangsu 1932 3000000 6 4 21

34 Anhui 1932 250000 7 35 Anhui 1932 500000 7 500000 36 Guangdong 1932 20833333 4 5 4700694 37 Sichuan 1932 2000000 14 38 Sichuan 1933 1500000 12 1 39 Sichuan 1933 5000000 12 5 40 Sichuan 1933 1200000 5 41 Hubei 1933 1500000 8 42 Sichuan 1933 5000000 43 Guangdong 1932 3472222 8 3472222 44 Hubei 1932 3000000 8 45 Anhui 1932 500000 10 8 500000 46 Sichuan 1932 1000000 4 47 Gansu 1932 1000000 6 48 Sichuan 1932 3000000 14 49 Hunan 1933 3030000 6 20 50 Sichuan 1933 15000000 10 51 Sichuan 1933 5000000 10 4 52 Sichuan 1934 3000000 1 53 Sichuan 1933 500000 12 1 54 Sichuan 1933 500000 12 55 Sichuan 1933 2000000 14 56 Sichuan 1933 500000 12 57 Sichuan 1933 500000 12 58 Sichuan 1934 20000000 6 14 59 Fujian 1934 900000 8 900000 60 Shanghai 1934 3500000 7 20 61 Jiangsu 1934 20000000 6 13 22

62 Guangdong 1934 1388889 12 1 1291667 63 Hubei 1934 3289340 6 12 64 Sichuan 1935 10000000 10 5 65 Sichuan 1935 6000000 66 Sichuan 1934 500000 12 67 Sichuan 1934 500000 12 68 Sichuan 1934 3000000 14 2 69 Guangdong 1935 1388889 12 1 3819444 70 Guangdong 1935 6944444 12 1 6944444 71 Anhui 1935 800000 7 6 800000 72 Guangdong 1935 4166667 12 0 73 Guangdong 1935 3472222 7 8 74 Hunan 1935 10000000 6 75 Zhejiang 1935 2000000 76 Jiangsu 1935 2000000 4 15 77 Hunan 1935 2000000 78 Hubei 1936 1500000 6 79 Sichuan 1936 80 Hubei 1936 6000000 6 12 81 Fujian 1936 50000 8 1 48500 82 Fujian 1935 3000000 6 8 294000 83 Fujian 1935 900000 8 900000 84 Gansu 1935 2000000 85 Fujian 1935 480000 5 1 480000 86 Sichuan 1936 30000000 87 Zhejiang 1936 17000000 7 15 88 Zhejiang 1936 10500000 6 18 89 Zhejiang 1936 28000000 6 20 23

90 Zhejiang 1936 4500000 8 14 91 Fujian 1937 900000 8 900000 92 Sichuan 1937 45000000 6 15 93 Fujian 1937 360000 6 360000 94 Beiping 1936 3000000 6 Source: the same as table 1 5. The late national government: the issue of local government debt turmoil and eventually banned After the outbreak of Anti-Japanese War, the national government fiscal system went through a large adjustment. In June 1941, the national government divided the national fiscal into national and autonomy fiscal system, and canceled the provincial public finance and demanded the right to terminate the provincial issuing local government bonds. All issued and listed debt of unsold tickets shall pay the state Treasury, the ticket was also moved to pay for mortgage debt. At this point, the modern system of China's local government bonds with the strengthening of the Nanjing national government authoritarian rule during the Anti-Japanese War ended. Since 1937 the war of resistance to clamp down on local government debt in 1942, the provinces issued bonds a total of 33, amounting to 274815357 Yuan. The province included Guangdong, Fujian, Shaanxi, Shandong, Jiangxi, Hunan, Gansu, Zhejiang, Hubei, Sichuan, Guangxi, Sichuan, Xikang, Jiangsu and Anhui, and bond interest rates was 5.91 annual interest, and average were issued for the first 10 years, the main collateral were local tax revenue, officer battalion enterprise surplus and mineral resource income. Debt capital mainly came from internal Banks and local residents. During this period, the issue of bonds was chaos. Most bonds didn t have the ministry of finance for approval. Average release rate was less than 6 mm, and the issued shall account for 80% of its issuance. Internal debt of local government during the Anti-Japanese War had the following characteristics: first, the local government debt scale and debt repayment period were long. In around just four years, the government issued the debt of about 270 million Yuan, the average debt of 8.32 million Yuan, which was the highest at various stages. The average service time had 24

reached more than ten years which was associated with higher capital requirements of local government during the Anti-Japanese War; Second, the purpose of debt from raising military spending to promoting economic development. Around 1938, bond issued by government was mainly used to raise money, support national defense construction, wartime self-defense, support the war of resistance, etc. And in 1939, debt issuance purpose changed to adjust social economic, lively local finance and the establishment of economic construction, increasing the Banks' capital, debt, etc. Visibly, bond in our country after decades of development became mature gradually. Although in wartime, it still relied on local government debt to fill the military expenses of the bottomless pit, the more debt financed business for the local economy and infrastructure projects such as loaned, and help bond form a virtuous cycle. The national government during the Anti-Japanese War finally completely monopoly local bonds issuance. Since 1941, the national government has set up Reorganize provincial treasury committee in the ministry of finance to carry out the provincial bond receiving and finishing affairs, all listed debt but unsold tickets will be stored by Treasury, the bonds used in mortgage will also be transferred to central government, the principal and interest of provincial government bonds are drawn from the Treasury, but all maturing unpaid bonds before January 1942 should still be paid by local government. In 1943, in order to settle all the provincial government bonds, the ministry of finance issued "Reorganize provincial debt bonds" 17.5 million yuan, switch back original various provincial bonds respectively, this bond reorganization not only unify all the provincial bonds and make the liquidation procedures simple, but also help the national government ministry of finance completely monopoly bonds issuance and strengthen the financial control to local government. Table 5 Local bonds issued during anti-japanese war period sequence debtor year debt amount rate distribution period real assuance amount 1 Fujian 1938 8000000 6 15 2 Hunan 1938 18000000 6 25

3 Gansu 1938 2000000 15 4 Shandong 1938 2000000 6 5 Jiangxi 1938 20000000 6 6 Zhejiang 1938 10000000 6 25 7 Shanxi 1938 8000000 6 8 Fujian 1938 980000 5 9 Guangdong 1938 15000000 4 14070000 10 Fujian 1938 900000 7 1 11 Fujian 1939 360000 6 1 360000 12 Fujian 1938 980000 5 13 Fujian 1938 8000000 6 15 480000 14 Fujian 1939 360000 6 1 15 Guangdong 1939 3333333 6 2 2500000 16 Sichuan 1939 7500000 6 15 17 Hubei 1939 5592010 6 12 18 Guangxi 1939 8000000 6 19 Fujian 1940 900000 5 1 900000 20 Fujian 1940 480000 9 1 480000 21 Fujian 1939 480000 6 1 22 Xikang 1940 5000000 5 23 Fujian 1940 20000000 6 24 Guangdong 1940 15000000 6 2 12930000 25 Sichuan 1940 7500000 6 14 26 Sichuan 1940 29000000 6 15 27 Jiangsu 1940 10000000 6 10 28 Gansu 1941 8000000 6 30 29 Jiangxi 1941 15000000 6 30 Gansu 1941 15000000 6 30 26

31 Anhui 1941 2500000 6 15 32 Sichuan 1941 26230014 6 13 33 Fujian 1941 720000 5 1 Source: the same as table 1 III The analysis and enlightenment of modern local government debt 1. The scale of modern local government debt increased year by year. In the early Beiyang government and late Nanjing national government period, the number of local government debt even increased exponentially, and it was not reduced until the ban of central government in the war defense period. As the local government debt became more mature, more and more local governments began to issue internal local debt to raise money. Although the scale of local government debt fluctuated greatly, overall trend was upward, which reaching the increasing rate of 300% between the early and late Beiyang government period.(table 6). The scale of local government debt in Beiyang and Nanjing National government period was much greater than other period. This was mainly because in the period of Beiyang government, there were too many civil wars, and local governments started a large-scale borrowing for military expanses. This kind of irrational debt borrowing behavior led to the blind expansion of local government debt.until the period of Nanjing national government, the central government began to manage and supervise debt-borrowing behavior of local government. Thus, the higher credit and strong economy in Nanjing national government period boosted the rapid increase of local government debt. During the late Qing dynasty and the period of the republic of China, the local governments whose issuance scale are larger tended to have better level of economic development, or more frequent wars because of various warlords compete (as shown in table 7).Such as Sichuan province become the largest province in debt issuance mainly because during the period of the republic of China warlords needs to raise military and political costs. Sichuan province is in the southwest region of China, but due to the particularity of its political and military position and the superiority of its economic development, Sichuan Province has always been one of the most 27

important provinces in the China. Sichuan province was the most unrest province during the period of the republic of China, the numbers of warlords, armies and wars are unmatched in other provinces. In order to expand their military strength, the warlords issued local government debt wantonly in Sichuan, and the debt scale is very high. Reasons of debt issuance in Guangdong province had similarities with that in Sichuan province. Guangdong province was one of the richest provinces with highly developed economy and trade. During the war period, various warlords laid on exorbitant taxes to exaction and over issued debt to amassing wealth, most of which was eventually used to sustain military spending. In addition, the implementation of the "New Deal" in the late Qing dynasty and the development of various industrial projects had given rise to the issue of local government debt to a certain extent. The implementation of the"new Deal" in different provinces had close connection with the provincial governor's ability and boldness, such as Zhang Zhi-dong, Yuan Shi-kai, Xu Shi-chang aggressively implemented New Deal, and the implementation of New Deal in areas governed by them run well, including Hubei, Zhili province and northeast, therefore these areas need a lot of money, and Hubei and Hebei had larger debt Issuing Scale. Table 6 local debt issuance table in each period of modern China Period Bond issuance amount 1905-1910 17546400 1911-1915 71597044 1916-1920 18016683 1921-1925 75672779 1926-1930 230983601 1931-1935 218252351 1936-1941 414075357 Source: the same as table 1 Table 7 Debt issuance table of provinces during the period of modern China Province Bond insurance time Bond issuance(yuan) First issuance year Sichuan 29 216930014 1920 28

Zhejiang 21 137600000 1922 Guangdong 21 125684027 1911 Hubei 15 76117350 1911 Jiangsu 12 65000000 1912 Fujian 30 61162000 1912 Jiangxi 10 60341000 1912 Hunan 9 41250000 1910 Hebei 11 38780000 1905 Gansu 7 29070000 1919 Shanxi 2 27000000 1929 Shanghai 10 23334000 1906 Liaoning 1 20000000 1929 Anhui 23 19416140 1910 Shangxi 2 10780000 1912 Guangxi 1 8000000 1939 Xikang 1 5000000 1940 Tianjin 3 4000000 1905 Beiping 1 3000000 1936 Shandong 1 2000000 1938 Source: the same as table 1 2. Considering the purpose of debt issuance, more than half of the debt belongs to consumptive debt which is used as military expenditure. The local governments have different preferences of the debt issuing directions during various regimes periods. During the late Qing Dynasty, the purpose of issuing debt was to raise military expense as well as to develop enterprises to prepare well for the war and, at the same time, to support the new policies raised by the central government. During the Nanjing Provisional Government period, because the new government was still shaky and the local governments were all trying to strengthen their own power, the purpose of issuing debt was to collecting military 29

spending. During the period of Beiyang Government, there happened lots of wars and different governments fought for their own areas, at that time the debt income was mainly used for the army. During the Nanjing National Government period, there existed only one regime and the economy developed very well, so the debt revenue was mostly invested in infrastructure as well as the enterprises. In the early period of the Second Sino-Japanese War, the local debt was used to adjust currency and to promote the development of the economy, in the meantime, the local debt was used to repay the loans in the past. Table 8 Issuance purpose of local debt during modern China Purpose of bond issuance Issuance time Bond issuance(yuan) Account for total issuance amount(%) Military cost 55 872980142 51.51 Repay the debt, organize finance 49 415284163 24.50 Road and municipal construction 42 201867204 11.91 Make up for fiscal revenue 35 106026235 6.26 Run industries 6 62400000 3.68 Disaster relief 9 28543320 1.68 others 5 7720000 0.46 Note: The debt issuance purpose shown in table are recorded in issuers' announcement, whether the debt funds is used for this purpose is not clear. Source: the same as table 1 3. Local debt issuance in the vast majority of the republic of China specifies the source of repayment, indeed in unsecured debt issuance, mostly for the extension of the debt before (as shown in table 9). Specified does not mean that the repayment guarantee have really guarantee, the republic of China local government debt appeared after the release of default cases, the default seriously affected the local government credit. Makes local bonds lose the function itself, until it become a local government to rob the financial instruments of the people. During the period of the republic of China in late Qing dynasty credit promotion way for the local government bonds is mainly for the local government financial assets, local tax revenue, 30

income of mineral resources as well as the officer battalion enterprise surplus, a bond often jointly guaranteed by a variety of categories of collateral. Various types of collateral distribution more uniform in the late Qing dynasty, among them, the highest proportion of local government financial assets, the provincial libraries in the late Qing dynasty and more money, and as collateral to cooperate career surpluses mostly for the local set up under the chief secretary of related institutions and financial revenue and expenditure activity. To Nanjing interim government period, the late Qing dynasty when the "New Deal" to set up the industry has formed a certain scale, thus there is a bond is the iron works, paper mills etc. Eight industrial factory is the guarantee of the surplus. Beiyang period, the biggest guarantee category is local tax revenue, mainly local warlords during this period in order to raise military spending the extra various surtaxes, even to serve fees charged by the vendor as the collateral for bond issuance. Economy development around the Nanjing national government period, the financial revenue and expenditure in redrawing, increased local government financial resources, local tax revenue is relatively abundant, and local tax revenue as the collateral for the period of the highest, the stage of bonds to the more local infrastructure construction, and the infrastructure of earnings as collateral. Tax revenue during the Second Sino-Japanese War is still the most important bond collateral, camp officer also accounted for a higher proportion of enterprise surplus. Throughout the five local government debt during the period of collateral, the types of collateral is more and more rich, the expansion of the local government revenues have relations, began to appear in the later period of the republic of China collateral central fiscal subsidies for local bonds is central to the right place to a certain degree of control and management. Table 9 Local debt guarantee during modern China Guarantee collateral time Issuance (yuan) amount Accounting for total issuance (%) Regular tax and additional 130 740348440 68.17 Industry revenue 19 101981340 9.39 others 8 24200000 2.23 The central association revenue 7 7100000 0.65 No guarantee 37 212350313 19.55 31

Note: central association revenue means that according to the central and local fiscal revenue division, the part that belongs to the central income but subsidy to local government, like today's tax rebates. Source: the same as table 1 IV Revelation (1) The modern local government debt is not purely self-borrow, self-use and self-imbursement. The whole development procession of local government debt in modern China from generation, boom, development to limitation is closely related to the power game of the central government and local government in terms of finance rights, affair right and administrative right. (2) Modern Chinese local government debt is characterized by wide debt source range, complex debt management, high borrowing costs, long repayment period and complex collateral, various actual debt use, weak repaying ability, strong political nature and so on, it has a dual effect to the modern China's politics and economics and reflects the duality of the debt. (3) Governments should properly handle the financial relationship between the central government and the central government, take control of debt issuance amount of local government; Strengthen the debt management, maintain debt credit, foster and standardize intermediary institutions of local government bonds; Correctly deal with the problems like economic development gap between region caused by local government debt issuance. It is not only a historical experience and lessons but also the real economical need. Bibliography 1. Xu Yi, Foreign debt in the Qing dynasty ", China financial economic press, 1996. 2. The second historical archives of China, The historical archives of the republic of China foreign debt", file press, 1990. 3. Xu Yi-sheng, Statistics of the history of foreign debt in modern China, Zhong Hua press, 1962. 32

4. Fan Li-ming, Huang chun-lei, Li Qi-yun, Studies of Chinese local government debt management, Economic and science press, 2006. 5. Pan Guo-qi, the studies of modern Chinese local government debt take Jiangsu, Zhejiang and Shanghai as example, Zhejiang university press, 2009. 6. Qian Jia-ju, "The research of old China bond issuance history", <History research>, 1955 (2). 7. Ma Ling-he, "Studies on phased characteristics of local debt in late Qing dynasty", <Journal of Anhui University>, 1996 (1). 8. Pan Guo-qi, Zhu Jun-rui, "Studies on the internal bonds of local government in the late Qing dynasty ", <Economic Research Reference>, 2002 (30). 9. Zhang Kan, "Studies on local government debt during Beiyang period", <Chinese social and economic history research>, 2000 (1). 10. Chen Jun-zhu, "Studies on the development of local government debt in China from the late qing dynasty to Beiyang government period ", <financial times>, 2012 (12). 11.Linsun Chen, Banking in modern China: Entrepreneurs professional managers and the development of Chinese banks 1897-1937.Cambridge University Press,2003. 12.Chun-Yu Ho, Danli,Bond Market and War:Evidence from China1921-42.Georgia Institute of Technology.Fudan University, October 2008. 13.Zhiwu Chen,Financial Strategies for National Building, Capitalizing China, edited by Joseph P. H. Fan and Randall Morck, The University of Chicago Press,Ltd,London2012. 14.Haizhou Huang, Ning Zhu, The Chinese Bond Market: Historical lessons, Present Challenges, and Future Perspective. China s Emerging Financial Markets: Challenges and opportunities. Edited by James R. Barth, John A.Tatom and Glenn Yago. The Milken Inatitute Series on Financial Innovation and Economic Growth.2009,Volume 8,pp523-546. 15.Goetzmann, William, Andrey Ukhov and Ning Zhu (2007) China and the world financial markets 1870 1939: Modern lessons from historical globalization. Economic History Review, 60:2, 267 312 16.Kuhlmann, Wilhelm. 1983. China s Foreign Debt 1865-1982. Freiberg Druck, Hannover, West Ger many 17.Young, Arthur N., 1971. China's nation building effort - 1927-1937, the financial and economic record, Hoover Institution Press, Stanford University, Stanford, California. 33