Abstract
This paper examines the role of Western institutions in shaping China’s modernization and financial development. We study how Christian missionaries facilitated the adoption of modern banking and enterprises in China from 1857 to 2022. Using a staggered Difference-in-Differences design, we find that missionary presence led to a 31% increase in modern banks and enterprises by 20% before 1936. Our evidence highlights two primary mechanisms: human capital formation and trade expansion. Missionaries, particularly Protestants, introduced Western education, accelerating the transition from traditional finance to modern banking, while also opening new trade routes that spurred financial growth. We further document that the effects of missionary exposure weakened between 1949 and 1978 under Communist rule but re-emerged after the 1980s economic reforms, revealing a “latent market orientation” that persisted through the Cultural Revolution. These findings underscore how missionaries played a pivotal role in advancing China’s modernization and shaping its financial system.