"Bankers from Afar: A Comparative Study of Foreign Banking in China and Japan Before World War I"

Starting from the middle of the 19th century, Western bankers expanded their activities to East Asia. In both China and Japan, these foreign banks specialized in the exchange business, but also became involved in other business activities, such as the floating of loans for the Chinese and Japanese governments in Europe. However, despite similar beginnings, the development trajectory of foreign banks in both countries was very different. In China, foreign banks came to play an important role in the pre-WWI banking sector of the China coast and in Chinese public finance. In contrast, in Japan, foreign banks never came to rise to such a level of prominence and importance and largely remained marginal players in the Japanese banking sector and Japanese state finance.
Using German, English, Chinese and Japanese sources, this paper will explore the reasons for these different development trajectories and present the first comparative study of foreign banking in modern China and Japan. It will first do so from the perspective of the foreign bankers and compare their perceptions of the Chinese and Japanese markets in terms of the potential for investment and the business environment they found in each market. Then, this paper will turn to situating foreign banking in modern China and Japan within the larger institutional development of the Chinese and Japanese economies and investigate to what extent Chinese and Japanese banking reforms or the lack thereof influenced the performance of foreign banks in both countries. By shedding light on the reasons for the differences in the growth of foreign banking in pre-WWI China and Japan, this paper will not only improve our understanding of the development of international banking in East Asia, but also provide a new perspective on the emergence of modern banking in China and Japan.