"Many a Long Day": HSBC and Its Note Issue in Republican China, 1912-1935

This article utilizes the local banknote circulation volumesof HSBC, the largest foreign bank in China, as a gauge withwhich to explore political stability and state-building duringthe Republican era (1912–1935). It will challenge theprevailing view that British banks faced little resistance inChina through the 1920s–1930s, and expose new archivalevidence on the perception of, and mobilization against, foreignbanks.     

Forum Selection in International Business Contracts: Home Bias Portfolio Puzzle and Managerial Moral Hazard

We provide an economic analysis of forum selection in international business contracts. International business contracts or multi-state transactions within federally structured countries might be subject to more than one sovereign adjudication system. In case of conflict between the transacting parties, the appropriate tribunal must be identified. We examine the question of business firms' optimal choice of the forums to adjudicate future business disputes. We extend the investment model approach to litigation by applying a portfolio theory type analysis. We show that firms that prefer higher expected income and lower income volatility are better off diversifying the forums under which they litigate business disputes. This stands in contrast to real-world business practice that consistently shows a clear preference to selecting the home court and legal system to settle international business disputes. In a fraction of the cases, both parties gain by selecting a certain forum, because of specialization for example, and it becomes optimal to ignore diversification. In most cases, however, the relevant factors that affect forum selection are zero sum and priced ex ante, court bias, for example. Once priced, there is no incentive to disregard diversification. We hypothesize that, in addition to specialization, factors such as managerial moral hazard explain the real-world behavior of firms: managers are less likely to be blamed, ex post, for choosing the home court. We suggest that, as international barriers decline and international trade grows, firms will diversify the forums in which they adjudicate international business disputes.     

Gerschenkron Redux? Analysing New Evidence on Joint‐Stock Enterprise in Pre‐War Shanghai

Alexander Gerschenkron (1904–78) famously postulated that the more backward an economy was at the outset of industrialisation, the more reliant it would be on state‐backed banks as a means of directing investment. Gerschenkron thereby implied that impersonal equity markets were likely to play a less significant role in countries aiming to catch up with the West. This article is aimed at examining Gerschenkron's thesis primarily through an analysis of shareholding in 1930s Shanghai. Drawing on newly discovered archival material as well as on recent studies, the paper clarifies the magnitude of joint‐stock enterprise and the ubiquity of stock‐exchange trade in a city that was by far China's most important economic hub. The pattern of joint‐stock enterprise in pre‐war China is compared with that of Japan, the first non‐Western society to become fully industrialised. The argument advanced is that Gerschenkron's thesis incorrectly played down the significance of impersonal equity markets to pre‐war Japan's successful industrialisation and to the limited nature of pre‐war China's industrialisation. Japan could sustain its industrialisation thrust in the early 20th century on a nation‐wide scale partly because of the growing vitality of its equity markets in Tokyo and Osaka. By contrast, China's pre‐war industrialisation was much less extensive because its equity markets were more limited.     

Development trajectories: Hong Kong vs. Shanghai

Over the past three decades, Shanghai and Hong Kong, leading cities in China's Yangzi River Delta and Pearl River Delta, respectively, have seen rapid economic development and institutional transformation. Shanghai has experienced a major breakthrough in its export‐driven economy and in industrial upgrading since the opening of the Pudong area in the 1990s. Shanghai has also ramped up its efforts to catch up with Hong Kong and has already become one of the world's foremost manufacturing and export hubs. At the same time, and particularly following the 1997 Asian economic crisis, Hong Kong has redoubled efforts to identify shortcomings in its economic architecture; and has explored plans to transcend its traditional role as a financial hub, to attract entrepreneurial hi‐tech talent, and to overcome inequitable income growth. This paper explores the development trajectories of these two cities and how they depart from the pre‐1978 development models. The paper also examines the extent to which the current trajectories are complementary or in competition.