The Telegraph and Modern Banking Development, 1881-1936

The telegraph was introduced to China in the late 19th century, a time when China also saw the rise of modern banks. Based on this historical context, this paper documents the importance of information technology in banking development. We constructed a data set on the distributions of telegraph stations and banks across 287 prefectures between 1881 and 1936. The results show that the telegraph significantly expanded banks’ branch networks in terms of both number and geographic scope. The effect of the telegraph remains robust when we instrument it using proximity to the early military telegraph trunk.

Keywords: Information technology; telegraph; bank; finance; modern China

JEL Classification: G21, G14, O14, N75

Suggested Citation: Suggested Citation

Lin, Chen and Ma, Chicheng and Sun, Yuchen and Xu, Yuchen, The Telegraph and Modern Banking Development, 1881-1936 (July 10, 2020). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3483419 or http://dx.doi.org/10.2139/ssrn.3483419