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Cash and Note Transferred to Finance Anti-Japanese War (1938 - 1942)


 

After outbreak of the Anti-Japanese War, most affluent regions along the coast in China were occupied one after another with fiscal revenue decreasing and military expenditure increasing significantly. Despite the large amounts of domestic and foreign debts raised, the government was unable to make up for the expanded fiscal deficit and had to resort to bank advance. From 1937 to 1942, the government fiscal deficit was 35.72 billion yuan, military expenditure 29.44 billion yuan, and bank advance up to 37.71 billion yuan. With the huge amount of military expenditure and urgent need for money without sufficient pre-arrangement, prominent contradiction emerged in banknote supply and demand.

Facing the scarce notes at that time and prominent contradiction in supply and demand, in order to guarantee demand for all kinds of payments, especially for military expenditure, Bank of China took active measures to organize transfer and absorption of cash and notes.

I. A shift from decentralized issuance to centralized issuance. Before the Anti-Japanese War, the total issuance of legal tender by four banks was 1.407 billion yuan, among which Bank of China issued the biggest portion of 510 million yuan which accounted for 36.2% of the total amount. After outbreak of the Anti-Japanese War, the government moved westward, and financial networks also extended to the southwest and northwest regions, hence expanded range of circulation for cash and notes of Bank of China. As the decentralized issuance system implemented by Bank of China before the war could not meet the immediate requirements, in order to make centralized and greater use of funds and flexibly regulate cash positions of affiliated banks, the Bank of China head office decided to shift from decentralized issuance to centralized issuance in June 1939 with establishment of a centralized allocation committee and a centralized issuance center in Hong Kong.

From August 1, 1939, issuance and funds allocation of Bank of China was centralized in the head office so that cash positions of affiliated banks were regulated in a uniform way, which meant that the notes needed by all branches were arranged by the head office according to priority. This method played an active role in guaranteeing military supply for alleviating contradiction in supply and demand of cash and notes at that time.

II. Self-handled internal transfer of cash and notes. Since Guangzhou was occupied, most cash and notes of Bank of China were transferred internally from Hong Kong via the coast defense authority. In June 1940, Japan forced the government of France to forbid transporting materials from Vietnam to Chinese mainland, so that the coast defense authority could not be resorted to. Thereafter, materials were transported via the Yunnan-Burma highway, but transfer of cash and notes might be delayed because this road was used mainly for rush transport of military supplies. In such situation, Bank of China decided to purchase trucks and established a temporary transport center in October 1940 to handle internal transfer of cash and notes.

The items transported by Bank of China mainly included cash and notes of its own and those of Bank of Communications and Farmers Bank of China, materials of Bank of China and its branches and affiliates, medicines of the Red Cross Society and so on. The transport center was based in Lashio, Burma, with several transport stations and garages. By October 1941, staff in the transport center increased to over 500.

During the two years after the Bank of China transport center was established, it transported 1,022 tons of cash and notes, 2,080 tons of machines, 395 tons of automobile parts, 383 tons of gasoline and engine oil, 2,000 sets of tyres, 70 tons of materials of ordnance department, 92 tons of materials for the industrial and mineral adjustment center, 171 tons of medicines of the Red Cross Society, and over 2000 tons of the state-operated export materials, such as tungsten, tin, tung oil, raw silk and so on.


Anniversary of the Transport Center of Bank of China head office

III. Establishment of radio stations to facilitate fund allocation and remittance. During the Anti-Japanese War, post and communication were impacted so significantly that it took three to five days for a piece of telegram to be received with wrong texts sometimes, and ten days to half a month for a letter with frequent missing. Hence, Bank of China established its own network of radio stations after relevant approval.

In the winter of 1937, the leading center of Bank of China moved to Hong Kong. Radio stations were set up in Guangzhou to transfer telegrams in March 1938 in order to contact with nationwide branches. In July, 1938, radio stations were also set up in Shenzhen. Thereafter, the Bank of China head office moved to Chongqing, gradually expanding the network of radio stations. Its radio station network was constructed on a three-level basis, namely the head station, the branch stations and the sub-branch stations. The head station was established in Chongqing, and the branch stations were established in major cities with large business volume.

The establishment of radio stations enabled Bank of China improve its internal connection and business development, contributing to timely military and government remittance as well as flexible allocation of cash and notes of branches and affiliates.

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