Bonds of Love: Patriotism and the Rise of Modern Banks

77 Pages Posted: 7 Mar 2024 Last revised: 1 May 2024

See all articles by Yuchen Sun

Yuchen Sun

University of International Business and Economics (UIBE) - School of Banking and Finance

Wanda Wang

HKU Business School, The University of Hong Kong

Yuchen Xu

UNSW Business School

Date Written: May 1, 2024

Abstract

This study illuminates the role of patriotism in banking development within the context of state formation, exploring the hypothesis that the initial trust vested in modern banks was a synergistic extension of the public’s patriotic sentiment. The cessation of Western financial support in WWI (1914) prompted China to rely on its domestic government bond market. Despite the new Republican government’s unproven creditworthiness, patriotic civilians subscribed to government bonds, which nurtured the rise of nascent official banks that underwrote these bonds. This trust in official banks gradually extended to the private banks, fostering the development of the entire modern banking system. Our findings highlight that patriotism could serve as an alternative source of trust in government and financial institutions, particularly during challenging periods.

Keywords: Patriotism, social contract, trust, modern banks, government bonds, financial development.

JEL Classification: G21, N25, N45, P16

Suggested Citation

Sun, Yuchen and Wang, Wanda and Xu, Yuchen, Bonds of Love: Patriotism and the Rise of Modern Banks (May 1, 2024). UNSW Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=4720595 or http://dx.doi.org/10.2139/ssrn.4720595

Yuchen Sun

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Wanda Wang

HKU Business School, The University of Hong Kong ( email )

Hong Kong
China

Yuchen Xu (Contact Author)

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

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