ABSTRACT
Institutionalisation may be the basic characteristic of the establishment of modern credit, so the establishment thereof cannot be taken for granted. In order to understand the relationship between institution and trust, let's take domestic traffic rules for illustration: Smooth traffic depends on most drivers’ understanding and abiding by the rules stipulated by the specific area. The function of institutions is that people are encouraged or punished through their subscription to the stipulations. Institutions may confine people's behaviour within a certain boundary so as to attain certainty from social uncertainty, and thus they compel people to form some expectation of the pending actions. The moral of the story is clear, that is, if the efficacy of an institution is to be fully brought out, the first thing is to make people have faith in it. The Chinese manifest distrust in practical life; absent external institutional constraints, the people would, as a rule, manifest no self-discipline.
