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Bank of China as a Specialized Foreign Exchange Bank (1949 - 1952)


 

After the founding of the People's Republic of China, Bank of China became a specialized foreign exchange bank authorized by the Government Administrative Department of Central People's Government, functioning as the foreign exchange division in the whole banking system led by the People's Bank of China. To meet the requirements of this banking system, Bank of China had to make its business operation and organizational structure more professional.

In the early days of Shanghai's liberation, the People's Government took over the old Bank of China and established the Bank of China General Management Department, after which the East China Branch of the People's Bank of China drew a specialized business scope for Bank of China based on the instructions of the head office. Compared with Bank of China's business scope before liberation, there were two main differences:

I. Bank of China before liberation was a designated bank for foreign exchange operation without responsibility of foreign exchange management. After liberation, it would be responsible for both operation and management of foreign exchange business as entrusted by the People's Bank of China.

II. Bank of China used to be engaged not only in foreign exchange business, but also in deposit, loan and remittance as well as trust and savings based on the domestic currency. After specialization, it would only do foreign exchange operation, deposit, loan and remittance business based on domestic and foreign currencies which were related to import and export trade, as well as other relevant business activities, besides entrusted management of foreign exchange. With such focused business scope, Bank of China would be able to give full play to its advantages and perform in a more specialized way.

With the establishment and gradual improvement of centralized leadership of People's Bank of China, Bank of China's system also experienced necessary reform.

On April 6, 1950, head office of People's Bank of China determined that its overseas business department and Bank of China General Management Department should work jointly, specifying that domestic branches of Bank of China should be under the dual leadership of Bank of China General Management Department and local branches of People's Bank of China, and overseas branches be led by the Bank of China General Management Department.

In 1952, all branches of Bank of China were changed into the internal foreign exchange department subordinated to local branch of People's Bank of China, but the name of Bank of China was maintained. Bank of China General Management Department shared one office with Overseas Business Administration (instead of Overseas Business Department in early period) of the head office of People's Bank of China under the "one system, two names" mechanism.

The name of Bank of China remained unchanged because:

I. With private shares, directors and supervisors, Bank of China needed to convene meetings of board of directors, supervisors and shareholders as well as distribute dividend on a regular basis, which would be carried out in the name of Bank of China.

II. Overseas branches were registered locally as commercial banks; thus it was necessary to maintain the name of Bank of China and the status as a commercial bank to avoid unnecessary complicated procedures of re-registration.

III. Bank of China needed to handle final settlement, calculate profit and loss every year, which should be carried out in the name of Bank of China.

After a series of reform, Bank of China's advantage in foreign exchange business was further strengthened.

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