The Meaning of Financial Management

Research on Chinese Financial Thought History

Tan Jianli

China Financial and Economic Publishing House （CFEPH）

January 2021

99.00 （CNY）

Tan Jianli

Director of the Institute of Finance and Taxation， Shanxi University of Finance and Economics， head of the taxation tutor group， professor， and doctoral tutor. Over the years， he has published more than 140 papers， 15 monographs and textbooks， and presided over 38 topics.

In China， the term “financial management” can trace back to the record of the Book of Changes， and is also recorded in other historical records. It mainly means that managing people’s wealth comes first， followed by managing the state’s wealth. The state should set up official branches for financial management， with the principle of natural development and people’s interest. Wealth means food and clothing. Food refers to edible crops and livestock; clothing refers to clothes and metals. Financial management began with food and clothing. With the development of the times and the progress of social productivity， it was expanded and extended from content to means. It can be said that finance （financial management） is the foundation of governing the country and the people， and it dominates all social formations. Its detailed meaning can be explained as follows：

1. What is financial management？

Wang Anshi， an official in the Northern Song Dynasty， pointed out that financial management is also a formal content in politics and a justiciary behavior. According to Wang Anshi， apart from the finance of a feudal state， financial management also means organizing the production of national wealth and coordinating its distribution and circulation. It covers very extensive content. Qiu Jun in the Ming Dynasty believed that financial management refers to the management of grains and goods. In his view， the essence of financial management is artificial distribution and circulation， that is， managing and controlling production， distribution， circulation， and consumption. Qiu Jun claimed that financial management falls into people’s wealth management and the state’s wealth management. The understanding of Wang Tao in the Qing Dynasty of financial management is similar to that of western capitalists of finance. He believed that we should develop state-owned economic affairs and private industry and commerce to increase fiscal revenue. This breaks through the financial awareness of stressing agriculture and restraining commerce or encouraging trade. Thus， it has the characteristics of capitalist financial awareness in modern times.

2. Financial management is different from accumulation.

Influenced by the thought of avoiding talking about money and profit， people generally thought that financial management meant seeking profits and accumulation. On this issue， Ye Shi in the Southern Song Dynasty compared financial management with accumulation and revealed the meaning of financial management based on their differences. At the beginning of Financial Plan I， Ye Shi pointed out that financial management had lost its original meaning since the decline of the Zhou Dynasty and the establishment of the Qin and Han dynasties. People regarded financial management as accumulation， thinking that financial management meant collecting people’s money for the use of rulers. Subjectively， the emperors clung to the empty tenet of “virtue and justice” but avoided financial management. In reality， the villains in charge of financial management did what they could to plunder money and control the assets they collected. This caused the double confusion of financial management in concept and practice and continued until Ye Shi’s time. Therefore， Ye Shi claimed that financial management should be distinguished from accumulation to clarify the meaning of financial management.

Ye Shi expounded the differences between financial management and accumulation in the following aspects：

Firstly， from the subject of operation， the subjects of financial management include government officials， the emperor， and the common people. As Ye Shi said， the subjects of accumulation are only government officials， the villains who control the financial power. According to Ye Shi， wise emperors and virtuous ministers must be good at financial management and are， of course， the subjects of financial management. However， the main wealth that emperors and ministers should manage is the “food and clothing” of the “common people，” which are closely related to the people. Therefore， they should manage the wealth together with the people. The subjects of financial management should include the emperor， government officials， and the common people. The subjects of financial management represent obvious multilayer and extensive sociality. Accumulation is very different. As people of noble character keep “virtue and justice，” ordinary people， as the object of accumulation， cannot become the subject of accumulation. Therefore， the accumulation operators are only some government officials “in charge of financial management.” It can be seen that financial management and accumulation are different subjects.

Secondly， in terms of motivation， purpose， and service object， financial management serves the people， with the purpose of managing people’s wealth and benefiting the people. As the emperor and ministers， only by managing people’s wealth and ensuring the people’s “food and clothing” can they be regarded as wise emperors and virtuous ministers who are “good at financial management.” Different from financial management， accumulation is aimed at meeting the luxurious living needs of princes and ministers. Wealth is collected from people through good or bad methods. The bad methods include extorting excessive taxes and levies， while the good ways are used “so subtly that the people don’t know， and the officials have enough to spare but the people are not in difficulty.” However， no matter what methods they use， as long as the money collected from the people is “used for rulers，” it is accumulation rather than financial management. Ye Shi believed that from the perspective of moral evaluation， financial management is a way of virtue and justice， while accumulation is an act of injustice. In Ye Shi’s opinion， it is another difference， even the fundamental difference， between financial management and accumulation， whether managing or collecting money， whether for people’s or their own benefits， and whether used for the people or for rulers.

Finally， from the perspective of objective effect and social function， Ye Shi thought that financial management can promote the coordinated operation of all links in social production and life. It can increase revenue and reduce expenditure， adjust resources， promote circulation， guide resources to demanding places， and ensure the people’s “food and clothing.” Therefore， financial management contributes to people’s livelihood， national prosperity， and social progress. Ye Shi also recognized that a state is bound to collect taxes from the people， but the money must be managed and used by the people. As long as the money is collected not completely for “the benefits and use of rulers，” they will be supported by the people. It can be seen that financial management has positive and significant social effects. Accumulation is very different. Accumulation means competing with the people for profits and seeking benefits for the rulers regardless of the people. They plunder money recklessly by all means. This will inevitably “cause disasters to the people and destroy the state.”

Based on the analysis of the difference between financial management and accumulation， Ye Shi defined the concept of financial management. In his view， financial management refers to coordinating the operation of all links in social production. Accordingly， financial management， as Ye Shi stated， refers to the management of the national economy， including the management of both the state’s wealth and the people’s wealth.

In a word， financial management serves the state for the people’s benefit. Financial management is not only conducted for the fiscal revenue of a feudal state， but more importantly for economic development and growth of wealth. Therefore， financial management plays a positive and key role in society.