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Published online by Cambridge University Press: 17 February 2009
In 1979 when debate over economic reform gained momentum, the future role of China's banking system became a major topic. Having fallen into obscurity during its merger of 1970–77 with the Ministry of Finance, the newly independent People's Bank of China became an aggressive advocate of reform. With its aim directed at the Ministry of Finance as well as local party “barons,” the bank's advocates called for an end to the Sovietinspired “Big Budget, Small Bank” financial system and to local Party interference in the bank's operations. Under this system, of which the 1956 credit reforms were a crucial part, the People's Bank had two principal functions. First, by carefully auditing the financial operations of all state enterprises, the bank was to ensure their adherence to the state plan. Bank credit was meant to compel enterprise management adherence to the state plans. The second function was a quantitative control of the nation's money supply. Bank supervision of enterprise finances was meant to be one way to this objective. But from its first efforts in 1955 to implement such micro-financial controls over the economy, the People's Bank encountered strong opposition from enterprise management, local bureaus of finance, the Ministry of Finance, and the Party apparatus. As a result, its supervisory function began to atrophy, leaving the bank to pursue control over the money supply. This it did primarily through reliance on its savings operations which, in contrast to enterprise supervision, enjoyed the strong support of the Party apparatus. By the height of the Cultural Revolution Party leftists saw the bank as a perfect object for bureaucratic “simplification.” Aside from its savings operations, its credit and even financial planning functions had become vestigal. Consequently, in 1970 the headquarters of the bank was dissolved and local bank branches merged with the budgetary system.
1. The political and structural aspects of the reform effort are treated in detail in the author's monograph, “China's banking system: structure and reform” (Stanford, Northeast Asia Forum, 1983). See also Hsiao, Katharine H., “Money and banking in the People's Republic of China: recent developments,” CQ, No. 91 (09 1982), pp. 462–77.CrossRefGoogle Scholar
2. For a description of this financial system see Hsiao, Katharine H., Money and Monetary Policy in Communist China (New York: Columbia University Press, 1971), pp. 17–37.Google Scholar
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28. Heng, Cheng, “Thoroughly do well research and investigation work, p. 19.Google Scholar
29. Jiangxi yinhang tongxun, No. 1 (15 01 1956), pp. 2 and 17.Google Scholar
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32. Jiangxi yinhang tongxun, No. 14 (30 07 1956), p. 10.Google Scholar
33. See PBC, Jiangxi Provincial Branch Bank, “1956 nian diyici kuoda hangwu huiyi zonghe jilu” (“Summary record of the 1956 first expanded banking affairs conference”), Jiangxi yinhang tongxun, No. 13 (15 07 1956), p. 7Google Scholar; and Heng, Cheng, “Thoroughly do well research and investigation work,” p. 19.Google Scholar
34. Complaints about the paperwork required by the credit regulations were heard before the audit began. See Yujie, Shen, “Renzhen guanche zhixing guoying gongye shengchan qiye xinfangkuan banfa” (“Earnestly carry out the new credit methods for the state industrial enterprises),” Zhongguo jinrong, No. 24 (22 12 1955), p. 22Google Scholar. The bank audit provoked outright revolt in 1956 since it, in effect, gave substance to the new regulations. See the self-criticism of Cao Juru, the director of the PBC, “Zai quanguo xindai jiesuan xianjin gongzuozhe daibiaohui kaimushishang de ci”Google Scholar (“Remarks at the opening ceremony of the national conference of credit and settlement advanced workers' representatives”), ibid. No. 22 (22 November 1956), p. 1; and PBC, “Wei xiafa zonghang wuyue huiyi de zonghe jilu xijiao zhixing de tongzhi” (“Notice of the transmission downward of the comprehensive record of the main office May conference, to be consulted and implemented”), 4 07 1956Google Scholar, Compendium of Financial Laws and Regulations, 1956, p. 19.Google Scholar
35. This speech to the author's knowledge has not been made public. Chen's criticism provoked a sharp debate among the Bank's personnel over how to amend the credit systems to make them acceptable to enterprises and the Party. For example, see Zhongguo jinrong, No. 17 (7 09 1956), pp. 19–20.Google Scholar
36. Jiangxi yinhang tongxun, No. 5 (15 03 1957), p. 19.Google Scholar
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43. PBC, Bureau of Education, “Liangnian guoying gongye xindai gongzuo zongjie – chubu zhaiyao” (“A summary of state industrial credit work of the past two years – preliminary excerpts”), Yinhang jiaoxue cankaoziliao (Bank Educational Reference Materials), no publisher, 01 1957, p. 4.Google Scholar
44. These percentages are based on the following materials. Yujie, Shen, “Earnestly carry out the new credit methods for state industrial enterprises,” p. 21Google Scholar. In 1955 and 1956 Shen Yujie was the bureau chief of state industrial enterprise credit management in the Bank's main office. He noted that 532 enterprises, or 61% of all state industry, had adopted the new credit systems by the end of November 1955. The 1956 audit can, therefore, be said to have succeeded in 175 of these. However, the total number of state-run enterprises was increasing rapidly at this time, decreasing the overall weight of the accomplishment. According to Jiefang ribao (Liberation Daily) (16 04 1956), p. 1Google Scholar, there were at the time 3,501 “keypoint” industrial enterprises, a category including both centrally- and locally-managed enterprises.
45. Editorial, “Clarify the purpose and requirements, continue to thoroughly unfold the research and investigation work,” p. 1.Google Scholar
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47. See Perkins, Dwight H., Market Control and Planning in Communist China (Cambridge, Mass.Harvard University Press, 1966), p. 132.Google Scholar
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50. PBC, “Directive on the stipulation of the basic duties of bank cadre management work and on the abolition of the temporary system for personnel work,” p. 445.Google Scholar
51. That promotion did favour Party members is substantiated in Zhongguo jinrong, No. 1 (01 1981), pp. 16–19Google Scholar; ibid. No. 4 (April 1981), p. 24; and ibid. No. 5 (May 1981), p. 23.
52. Zhongguo jinrong, No. 12 (22 06 1957), p. 12Google Scholar. In 1981 it was frequently stated that only 33% of the directors of the key county level branches understood their jobs well. For example, see ibid. No. 1 (January 1981), p. 16. For a description of the career path of one county bank director during the Cultural Revolution see Guarong, Wang, “Zuo yige jinchangde wuchanjieji geming zhanshi” (“Be a staunch proletarian revolutionary warrior”), in Finance and Trade Office, Gansu Provincial Revolutionary Committee,” (ed.), Caimao zhanxian hongqipiao (Lanzhou: Gansu renmin chubanshe, 1975), pp. 130–37.Google Scholar
53. Zhongguo jinrong, No. 12 (22 06 1957), p. 12.Google Scholar
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55. Zhongguo jinrong, No. 8 (08 1981), p. 25.Google Scholar
56. An amendment to the credit regulations was finally approved in March 1957. Under this regulation the local banks became dependent on financial information compiled by the enterprises to carry out their monitoring of the enterprise operations. In the absence of generally accepted accounting principles and without the authority to ascertain the accuracy of this information, the new regulations amounted to an acceptance of the status quo. See PBC, “Guanyu gaijin guoying gongye shengchan qiye duanqi fangkuan zhanxing banfa de zhishi” (“Directive on improving the temporary method for state industrial enterprise short-term credit”) (27 03 1957)Google Scholar, Compendium of Financial Laws and Regulations, 1957, pp. 15–16.Google Scholar
