Dynasty fell, republic born and New China emerges

As the nation's only century-old bank, Bank of China's history has been closely linked with the country's fate and a mirror reflection of its governance and finance during the 20th century.

In the late Qing Dynasty (1644-1911), China's financial industry was controlled by foreign banks that provided currency exchange settlement for international trade, provided loans and even issued bank notes.

Some industrialists, as well as government officials, proposed establishment of China's own bank as a part of reform efforts that were taking root as the dynasty tottered on the brink of collapse.

In August 1905, the Finance Ministry of the Qing Dynasty, or Hubu, founded China's first domestic bank - Hubu Bank.

It was also the country's central bank responsible for establishing a nationwide monetary system, unifying currencies and issuing bank notes and government bonds.

In February 1908, the Hubu Bank was renamed the Ta-Ching Government Bank. It became the largest bank in China in 1911 with 56 branches and subsidiaries nationwide.

But soon after, the 1911 Revolution overthrew China's imperial system and led to the founding of the Republic of China.

Ta-Ching shareholders then proposed changing the name of the bank to Bank of China (BOC), the central bank for the new government.

The proposal was endorsed by Dr Sun Yat-sen, and Bank of China was officially established in Shanghai on Feb 5, 1912, just one month after the founding of the republic.

BOC, totally funded and owned by Chinese, emphasized modernizing the national economy and helping consolidate the government of the new republic.

Its contributions at that time included redemption of military bonds, issuing bank notes, collecting taxes, selling government bonds, accepting deposits, lending and remittance for enterprises and individuals.

In 1912, the republic's government with its temporary seat in Nanjing issued a number of military bonds for tackling financial difficulties. BOC was responsible for the redemption of the bonds, playing an important role in stabilizing the government and the republic.

In 1912 and 1913, bank notes issued by the BOC completely replaced Qing dynasty currencies, helping build a stable and unified monetary system for the new government.

Unfortunately, the newborn republic was immediately endangered by dictator Yuan Shikai and successive warlords.

Yuan became the president of the republic in 1913 and two years later even tried to restart the imperial system. One of his notorious decrees stopped the redemption of bank notes - but the move was rejected by the Bank of China.

Yuan was later defeated by the army from the south and died in 1916. But the country was dragged into fighting among the warlords.

To battle northern warlords, Dr Sun Yat-sen organized a revolutionary government in Guangzhou in 1923. BOC once again lent the government money - some 500,000 yuan - to help it build an army.

The Guangzhou government began its Northern Expedition in 1926 in an effort to free the country from northern warlords. BOC lent the army a total of 16 million yuan.

A Japanese newspaper commented that, "the success of Northern Expedition is linked to the support of Jiangsu and Zhejiang tycoons"- a reference to important shareholders and executives of the BOC such as Zhang Jia'ao, Chen Guangfu and Li Ming.

Anti-Japanese War

When the Anti-Japanese War broke out in 1937, BOC management required its staff to "devote all their energy and courage to save the nation".

The bank's efforts mostly focused on supporting construction behind the lines in southwest China and purchasing equipment and other materials for the military.

From 1937 to 1942, the bank opened 106 branches in the southwest, offering loans for industrial development and construction of strategic facilities like railways and roads with links to both domestic regions and foreign countries.

Passageways to Southeast Asia and South Asia were vital for transporting weapons and materials from Western allies, so BOC established branches in Vietnam, Myanmar, India and Pakistan to facilitate purchase of machines, weapons, fuel and medicines.

Another BOC mission was helping the government raise funds overseas.

From 1938 to 1941, the Chinese government asked for a total of seven loan packages from the United States and the United Kingdom, with all debt guaranteed by the Bank of China.

Through its overseas branches, the bank also played an important role in collecting funds and donations from overseas Chinese to support the war against the Japanese.

From 1939 to 1945, the BOC collected $230 million from overseas Chinese - at a time when an aircraft carrier could be built for $5 million - more than 50 percent of government funding for the period.

In addition, BOC's presence in rural areas also made a contribution to the nation's war effort by offering loans to improve basic facilities and help farmers increase production.

New China

In 1949, when the People's Republic of China was founded, all BOC branches on the mainland presented the new government a special gift by keeping the bank's assets intact - precious funds needed for economic recovery.

In early 1950, BOC's Hong Kong branch announced loyalty to the New China, followed by subsidiaries in London, Singapore, Malaysia, Indonesia and India.

At that time, BOC Hong Kong had total deposits of HK$400 million, including HK$60 million in foreign exchange deposits, and BOC London had 12 million pounds in deposits, big reserves desperately needed as the country tried to recover from decades of war.

Another problem the country needed to tackle was embargos by Western countries. BOC played an important role during the difficulties by facilitating settlement of foreign trade and funding the country's oceangoing transport fleets.

Since the late 1970s, Bank of China has pioneered the nation's opening-up strategy through offering foreign exchange settlement for foreign trade and investment and helping domestic enterprise go global.

From: China Daily Zhao Xie 2012-02-07