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In 1920s, Tianjin was the second largest industrial city in China. The outbreak of the World War I served as a momentum for the remarkable, industrial development of China. Tianjin took this opportunity and its industry grew rapidly in a short period time. In 1920, there were over 6000 factories established in this city. Even if small and medium sized factories accounted for over 95% of all the factories, a few of the large factories were globally competitive, especially the textile and flour milling industries as well as some of the chemical industries. The early stage of commercial and industrial development in Tianjin owes its growth and success to the banking infrastructure that had been well organized since Ch'ing dynasty. On the other hand, as time went by, the rapid development of Tianjin industry in the early 20th century accelerated the growth of the financial market. During the early years of the Republic of China, there were three kinds of financial groups: the foreign banking group, the Chinese banking group, and the Chinese traditional banking group. Large enterprises borrowed the industrial funds from the foreign or Chinese banks, and most of the small and medium sized enterprises borrowed their industrial funds from the traditional Chinese banks called ChienChuang . Most of the small and medium sized enterprises didn't have enough collateral to take out the industrial funds and, therefore, they favored the Chinese traditional banks which had been loaning on a credit basis since Ch'ing dynasty. The development of the financial market made it possible for businesses in TianJin to secure their industrial funds easily. As it was mentioned earlier, the rapid development of industry in Tianjin influenced the growth of financial market, which can be summarized as follows; In the first place, banking facilities had a tendency to grow larger in size in order to better provide industrial capital funds to businesses. In the case of Chinese banks, large-sized banks began to secure large amount of banking capitals; in the case of traditional banks, they tried to meet the demand of businesses for increased industrial funds by intensifying the financial alliance among banks. Secondly, the financial institutions in Tianjin began to expand their banking branches into various areas in north China. With the rapid industrial development in Tianjin, many businesses expanded their activities into the inland of north China to purchase the agricultural products or stock farm products they needed, and transported them to Tianjin for processing. The banking facilities began to establish their branches in the major cities in north China in order to make the industrial funds readily available for businesses if need be. Thirdly, the industrial development prompted the prosperity of traditional banks. There were several factors that made it possible for traditional banks to prosper in 1920s. First, unlike Chinese modern banks, the traditional banks loaned industrial funds on credit basis. So they played a very important role in providing industrial funds to most of the small and midium sized enterprises that had no enough collateral to borrow money . This kind of banking policy of traditional banks became one of the most important factors that made many businessmen favor the traditional banks. Second, the exchange of financial capitals helped the traditional banks to maintain deep relations with Chinese modern banks. The Chinese banks took advantage of traditional banks to provide industrial funds to small and medium sized enterprises by giving financial assistance to them. It helped traditional banks secure enough financial capitals to loan industrial funds to businesses. Thirdly, it was the complicated monetary system of early Republic of China that helped tradition banks to prosper. China had adopted double metallic monetary standards called Eunliang and Eunwon which coexisted as standard currencies in the financial market. The exchange value of two currencies was decided by supply and demand in the financial market. All kinds of currency exchange had to be done in the exchange house. All exchange houses were under the control of traditional banks. Traditional banks took advantage of this kind of financial environment to expand their banking business in the financial market. Fourth, it can be said that Chinese financial market was free of the government control during early Republic of China. The Chinese government had no capability of controling the financial market. As a consequence, irregularity and speculation were rampant in the financial market. Particularly, speculation was a very important method of making profits for traditional banks in the financial market. Currency was a main object of speculation before currency reform was carried out in the early 1930s. The objects of speculation were shifted to actual goods after the currency reform. The laissez faire financial market caused speculation to be rampant in the Chinese society, which made it possible for traditional banks to make huge profits through speculation. As mentioned above, small and medium sized enterprises couldn't borrow industrial funds from modern banks, due to the lack of collateral. If it had not been for traditional banks, small and medium sized enterprises might have had to borrow money from private moneylenders who practiced usury. The prosperity of traditional banks contributed to weakening the private loan market in the Chinese society, and made it possible for businesses to use industrial funds at low interest.