Banking on Social Capital in the Era of Globalization: Chinese Ethnobanks in Los Angeles

Global migration is transforming not just urban populations, but the nature and economic roles of ethnic banks—that is, banking institutions owned and operated by minorities. Academic research on ethnic banks has until now focused on the circumstances of African-American-owned banks. This paper explores the rise of a new set of ethnic banks—the Chinese American banks of Los Angeles County. These older and newer ethnic banking communities occupy very different roles in the banking market. African-American-owned banks arose largely because mainstream banks' inadequate services in minority communities left unoccupied market ‘niches’. Despite similar origins, the newer generation of Chinese American banks, by contrast, has prospered for two additional reasons. The first is economic globalization. These ethnobanks' resources have grown tremendously both because of migration and cross-border money flows, and also because they have maintained networks extending across national borders. The second is these banks' ability to tap into their communities' extensive social capital—that is, the networks of information, norms, and disciplinary mechanisms that crisscross the Chinese American community. This social capital permits ethnobanks to mobilize resources and direct development in a way that nonethnic banks cannot imitate. We conclude by considering whether the Chinese ethnobanks are a transient phenomenon, and whether other minority banks can adopt their model.