Bonds of Love: Patriotism and the Rise of Modern Banks

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.