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Expansion of Foreign Exchange Business via Bank of China Overseas Branches (1929 - 1936)


 

As early as 1915, the Ministry of Finance approved Bank of China branches in Beijing, Tianjin, Shanghai, Hankou and Guangdong to run foreign exchange business on a pilot basis. In the early 1920s, Bei Zuyi, manager of Bank of China Hong Kong, attempted to establish branches in Japan and Singapore, but failed for certain reasons.

After Bank of China was reorganized into an international exchange bank, the focus of its operational policy shifted to the international financial market to raise foreign funds for domestic production and development by promoting export foreign exchange and overseas remittance. To achieve that goal and get rid of the exploitation and manipulation by foreign-funded banks, Bank of China started its plan to set up overseas branches.


Bank of China's site in London, 1936 to 1947

I. Establishment of Bank of China London Agency. As an international financial center, There were many banks in London that handled most of China's international fund transfers and foreign exchange business. As Bank of China prepared to operate government foreign debts, it needed to set up an office in London. During his overseas visiting tour in 1929, Zhang Jia'ao visited Philip Snowden, Chancellor of the Exchequer of UK, and Montague Norman, the Governor of Bank of England, stating that the purpose of establishing an agency of Bank of China in London was to promote trade between the two countries and facilitate the flow of private funds. Zhang's opinion was echoed by them. With only three months of preparation, Bank of China London Agency officially opened on November 4, 1929, with Bian Fusun appointed as the director. That was the first overseas branch of Bank of China, representing the first step taken by Chinese financial institutions towards the world.

The establishment of the London Agency played a significant role in developing Bank of China's foreign exchange business in several aspects. First, it regained the authority to handle government debts and foreign funds required by domestic production. Second, the London Agency, as the center of Bank of China head office and branches to collect and allocate foreign funds, prevented Chinese foreign exchange profits from flowing out. Third, it served as an intermediary for Chinese exporters and importers, thus pushing forward foreign trade.

II. Establishment of Osaka Branch. The trade relationship between China and Japan was close at that time. Between 1919 and 1931, Japan accounted for more than a quarter of China's foreign trade value, which was the largest above UK and the U.S. Bank of China attempted to open a branch in Japan as early as in 1920, but was rejected for its status as the central bank of China. Osaka, as an industrial center of Japan, was inhabited d by a large number of Chinese businessmen. When Zhang Jia'ao was back from his trip, he paid a visit to the Japanese Government to request for establishment of an Osaka branch, which was approved. But due to changes of Japanese Government's policies, the Osaka branch did not open until September 1, 1931. The main purpose of this branch was to provide service to Chinese businessmen in Japan and to cooperate with banks in North China to promote export of China.

At the founding ceremony of Bank of China Osaka branch, Zhang Jia'ao said in an interview with the East-China News Agency, "It is the mission of Bank of China to satisfy the overseas Chinese businessmen's needs and push forward China's export. ... That will not only bring benefits to the commercial community but also to the fame of the country."

III. Establishment of Singapore Branch. British Malaya was inhabited by more than one million overseas Chinese which made up one third of its total population. Singapore was an important communication hub in the Southeast Asia and thus became a commercial and financial center of the region. Every year, large amounts of overseas remittance were sent from Singapore to Guangdong, Fujian and other regions of China through foreign-funded banks and post offices. In 1935 when both Chinese and Singaporean economy saw upturns, Bank of China head office planned to set up a branch in Singapore to mainly handle overseas remittance to China.

On June 15, 1936, Bank of China Singapore Branch opened, with over 1,000 people from various sectors present at the opening ceremony. The ceremony was particularly highlighted by nine planes dispatched by UK Air Force in Singapore flying three circles over the building of the branch.


A report on Nanyang Siang Pau on June 16, 1936 about the opening of Bank of China Singapore Branch

IV. Establishment of New York Agency. Zhang Jia'ao, after his visiting tour abroad, had a plan to set up a branch in New York. At that time, Bank of China lacked US dollar reserve, and the laws of the New York State didn't allow foreign-funded banks to receive local deposits. Furthermore, the State would make a decision according to the performance of Bank of China London Agency and Bank of China Osaka Branch. As China's economy and finance experienced difficulties from 1932 to 1934, Bank of China didn't make the final decision to establish the New York Agency until 1935. With an vision to facilitate trade and foreign exchange business between China and the U.S., the New York Agency was officially opened on July 1, 1936. Wang Zhengxu, former manager of Foreign Exchange Department of OCBC Bank, was appointed as the manager of the Agency.


Staff of Bank of China New York Agency, April 1937

Bank of China's overseas agency branches also achieved great progress. By the end of 1930, Bank of China had 62 overseas foreign exchange branches and 96 special agency banks across 43 countries, with its foreign exchange business developing smoothly.

With an increasing number of Bank of China's overseas branches and agency banks, its foreign exchange business was accelerated based on an enhanced foundation of the global network.

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