China and the World Financial Markets 1870-1930: Modern Lessons From Historical Globalization

William N. Goetzmann
Andrey Ukhov
Yale School of Management

China began to borrow in the world capital markets in the late 19th century, issuing
bonds to pay for defense as well as for large-scale economic development.
Particularly interesting is the role that the clash between domestic and international
investors played in China’s 1911 revolution. The protection of external investor
rights was perceived at the time as an infringement on Chinese sovereignty. In this
paper we interpret the conflict over foreign investor rights in terms of a
disequilibrium in the development of financial markets. Europe’s high level of
investor diversification put her investors at a relative advantage in bidding for
development projects in China, while European investor expectations about
protection from expropriation and default, lowered Chinese cost of capital, but also
led to erosion of national sovereignty and a dramatic, grassroots political backlash.
Despite fundamental differences between China today and China 100 years ago it
is still important to consider the dangers of an imbalance between domestic and
international investor markets, and the mismatch between domestic and foreign
expectations about investor protection. The lessons of the last century suggest that
China today should consider opening Chinese investor access to foreign capital
markets in order to equilibrate the level of diversification between foreign and
domestic investors. In addition, protection of domestic corporate investor rights is
at least as important as protecting foreign investor rights.

[此贴子已经被xiaoyang于2009-3-14 16:19:09编辑过]