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Anti-Blockade, Embargo and Freeze Campaign for Foreign Trade Progress (1950 - 1952)


 

In 1950, the U.S. launched a full round of blockade and embargo against China, plotting to form a "Coordinating Committee for Export Control" (CCEC) and a "China Sub-Commission" so as to manipulate the United Nations' adoption of proposal on embargo against China. The U.S. Congress also adopted a Battle Act to force the CCEC member states to restrict goods transportation to China by threatening to cancel its foreign assistance to these countries. On December 16, 1950, the U.S. Department of State issued a freeze order announcing Asset-Freezing Act Against China and North Korea to freeze the tangible and intangible assets, moveable and immoveable properties, contingent assets and equity of China and its nationals within the U.S. territory.

After U.S. launched the comprehensive blockade, embargo and freeze against China, some Western countries carried out embargo against China to different extents, having a negative effect on China's newly resumed foreign trade and foreign exchange business. To change the unfavorable situation, banks and foreign trade authorities joined hands in launching the anti-blockade, anti-embargo and anti-freeze combat.

Ⅰ. Banking and trade cooperation in the fight against blockade and embargo


Bank of China resisted blockade and embargo. The picture shows the bustling and hustling harbor in Shanghai.

A regular joint-meeting mechanism was set up between banks and foreign trade authorities to exchange business information, study issues existing in the implementation of foreign exchange revenue and expenditure plan and put solutions forward.

Bank of China spared no effort in supporting the new policy of foreign trade. In September, 1950, Bank of China General Management Department sent instructions to branches to change the concept of "encourage export and limit import" into the ideas of "enlarge export and import" and "import first, export second" so as to put import in the core position. During the second half of 1950, in addition to the existing business of foreign currencies and Renminbi loans including export packing credit and outward bill, Bank of China developed import Renminbi loan business for importers and exporters. By providing financial support for importers, Bank of China encouraged more import.

Purchase certificates were cleared in time to reduce losses. In order to clarify the amount of outstanding purchase certificates issued and to prevent the U.S. from freezing the purchase certificates and excess reserves, Trade Ministry of China and Bank of China General Management Department issued two joint notices in October, 1950 to require importers and exporters in various regions to check the utilization of purchase certificates and clear them immediately, and to basically revoke the USD denominated purchase certificates paid after December 31, 1950, or transit or switch them into L/C in case of failure of revoking.

Ⅱ. Banking and trade cooperation in launching the campaign of materials rescue and purchase certificate resurrection

In order to enhance the campaign of materials rescue and purchase certificate resurrection, Bank of China Shanghai Branch joined the Committee for Emergency Disposal of Imported Materials organized by the Trade Department and Foreign Trade Bureau of East China. Bank of China Tianjin Branch set up three groups in charge of this.

Foreign trade departments and banks in various regions took appropriate measures to rescue import and export materials based on specific situation. The export materials on their way to the U.S., which were shipped before the freeze, were required to be transported to Hong Kong, Rangoon, Singapore, Calcutta, Mumbai and Karachi, where the materials can be unloaded, processed, and payment can be made with the guarantee of Bank of China's local branches. The materials on the way to China were required to be unloaded in relatively safe ports in Calcutta, Mumbai, Rangoon, Karachi, Singapore and Hong Kong, where all procedures of delivery, custody and transit shipment would be completed by Bank of China's local branches.

Ⅲ. Change of Bank of China's trade and payment methods to capitalist countries

Barter trade was resumed on ports based on consultation between banks and foreign trade authorities in order to minimize spot exchange payment transactions so as to prevent freeze of funds and control, detention or interception of materials. In January, 1951, the National Foreign Trade Administration Meeting decided to set up a Barter Exchange led by Bank of China with the participation of trade authorities and designated foreign exchange banks as traders, so as to solve the problem that the same barter trade was completed by various merchants.

To support the barter trade to capitalist countries, Bank of China General Management Department required local branches without an international trade service division to set up one as soon as possible so as to provide more financial support and relevant service for barter traders.

The spot exchange payment method was altered. Bank of China and foreign trade authorities reached an agreement requiring overseas exporters to deliver the goods before payment which should be made upon the goods arrival at a Chinese port rather than payment prior to delivery as previously required by overseas exporters. To support the reform of import settlement payment method, Bank of China introduced letter of guarantee issued to exporters selling goods to China to make sure the payment was made after goods arrival at the Chinese port.

Ⅳ. Measures taken against freeze

Bank of China planned to increase the annual foreign exchange expenditure in 1950 and reduce the inventory. It was expected that the inventory of China's foreign exchange would reach USD 81.19 million by the end of 1950. If foreign trade authorities returned the loans of USD 87.86 million of the first half year in the second half of the year, the inventory of China's foreign exchange would reach USD 169 million by the end of 1950. Therefore, Bank of China proposed the import plan to add USD 70 million to state-owned import firms in the second half of the year so as to digest the foreign exchange position. Meanwhile it recommended restrictive relaxation over foreign exchange approval for private importers and exporters.

To reduce the inventory and prevent the risk of freeze and devaluation, Bank of China drafted the foreign exchange revenue and expenditure plan of 1951, in which expenditure would exceed revenue, a large number of foreign exchange inventories would be digested, and USD 53.96 million of the inventory was expected to be digested. Also measures were taken to purchase materials necessary in China with the foreign exchange inventory as soon as possible to digest foreign exchange position.

Overseas branches of Bank of China played an important role in the fight against freeze, not only assisting the General Management Department and domestic inter-banks in transferring and exchanging foreign exchange funds, issuing the letter of guarantee, shifting to L/C issuance, etc., but also attracting considerable deposits and providing anti-freeze information to support domestic fight against freeze.

With the joint efforts of banks and foreign trade authorities, the fight against blockade, embargo and freeze from the U.S. achieved great success. By rescuing materials, resurrecting purchase certificates, unfreezing funds and importing a large amount of materials including strategic materials, this round of actions provided strategic materials necessary for domestic economic development and the war to resist U.S. aggression and aid Korea, and promoted China's foreign trade.

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