Development and diffusion of Savings and Savings Banks in China: A Historical Perspective

Abstract

Modern savings banking began 200 years ago in Scotland. It then spread to the United States, Europe, Japan and China. China had a long history of savings but did not become institutionalised until the early 20th century. The Chinese philosophy of savings emphasises safety. As Confucius said, "Ren wu yuanlei, biyou jinyou" ("A person is subject to either long-term concerns or short-term troubles"). In order to manage these concerns and troubles, Chinese usually save for emergencies. It is not easy to answer the question of how much China was challenged by the West in importing the ideas of modern savings. Does China have its own model of modern savings? According to documents found in Dunhuang, the earliest history of "yinhui" (savings club) can be traced back to the Tang Dynasty (618-907). Chinese organised different "hui" (clubs) for different purposes, including savings, insurance and mutual assistance for weddings, funerals, health care, etc. A proto-type of savings banks called "guifang" was also traced to the Tang Dynasty. There were three features about these savings clubs: firstly, the club members were usually a group of people of similar background. They relied much upon personal trust. Secondly, money was paid in instalments, mostly on a half-year or yearly basis. Thirdly, depositors did expect a good rate of interest. Why weren't these private savings organisations institutionalised? Regional ties, kinship ties and personal trust may be the answer.

Ordinary Chinese joined different types of savings societies instead of depositing money in banks. It was not until the end of the 19th century that China had its first modern bank, the Imperial Bank of China, which was based on the Western model. Savings then became institutionalised in the first decade of the 20th century when, in 1906, the first savings bank, Sin Chun Savings Bank of China, was established.