The School of Finance, Renmin University of China;China Financial Policy Research Center, Renmin University of China
China has a long tradition of documenting and evaluating historic events in association with monetary issues. Since the first such study by Sima Qian in Shi Ji (refer to the sections of Huo Zhi Lie Zhuan (货殖列传) and Ping Zhun Shu (平准书)), such assessments have become essential aspects of the official historical record. The many detailed accounts of monetary practices and the relevant theoretical explorations of policy implications gave rise to propositions for a quantitative theory of money in the Guanzi. During the Northern Song Dynasty, Shen Kuo examined how the velocity of monetary circulation affects the economy. These were the first studies of such monetary issues anywhere in the world. However, as the economy of China declined for hundreds of years afterward, these valuable studies came to be neglected, and they failed to inform the broader world. Only after the introduction of the Western paradigm in modern times did Chinese leaders begin to reconsider the study of economics, money, and finance as a scholarly discipline. Altogether, there were three waves of learning about economics from the West. The first wave lasted about a century, and it involved a process of introduction, digestion, and imitation, thus laying the foundation for the modern science of economics, money, and finance in China. It should be noted that the spread of Marxism during this period directly set the orientation for this discipline after 1949. The second wave lasted only a little over 20 years. During this period, China turned from the Western model to the Soviet model of education in economics, and followed Soviet practices for constructing departments, majors, and courses. Indeed, this large-scale imitation limited the development of the discipline, but even in this period, innovative Chinese research in economics continued. The work of economists during this period provided valuable preparation for the reconstruction of the discipline in both theory and practice. The third wave was accompanied by the opening reform and the rapid rise of China’s economy. From the initially comprehensive introduction of the Western paradigm to its gradual integration with China’s traditional theories of monetary banking, the study of economics has taken shape and matured as an international discipline with Chinese characteristics. The most important achievement during the third wave was the construction of a macro-micro compatible structure of finance. The emergence of new economic theories informed the actual practice of economic expansion in China, which enabled a long-term process of healthy development in the discipline of economics. During the three waves of learning from the West, consistent efforts were made to localize theory and practice. During the early 1940s, Chinese economists explicitly indicated the need to compile China’s own textbooks on finance to suit the nation’s particular needs. Since then, numerous scholars have advocated the integration Chinese and Western knowledge, and the practical application of such knowledge. It has become customary to compile textbooks that are relevant to the specific localities concerned. Even during the second wave, such efforts never ceased. In the 21st century, with China’s financial success capturing the attention of the world, practitioners of economics with Chinese characteristics are sure to explore new opportunities and challenges. Nowadays, the most urgent problems are how to rebuild the philosophical foundation of finance and how to apply traditional Chinese culture as a basic component of the economics framework. Only by rooting economics studies in China’s local conditions while pursuing compatibility with the Western paradigm can Chinese researchers on economics, money, and finance build their theoretical confidence and embark on the road toward more robust development. During this process, it is necessary to reconstruct the relationship between the discipline of finance and the philosophy of finance on the basis of Chinese realities, with a focus on deepening the interaction between mainstream theory and the particular practices developed in China. This localization effort is in no way intended as a rejection of established theory and of the prevailing system of knowledge. Rather, it aims to incorporate the practical approach of traditional Chinese philosophy and culture into the prevailing economic system to formulate a better and more inclusive interpretative framework.
Economics of Money and Finance;introduction and learning of Western paradigm;Chinese financial story;localization effort