Thomas Tooke

Posts Tagged ‘Foreign banks’

The Foreign banks in China in the 1930s, the money bags of China.

In Currency reforms on April 28, 2013 at 4:33 pm

Frank Tamagna discusses the situation of foreign banks in China before and after the currency reform of 1935.

“Silver stocks. Before the monetary reform of 1935, foreign banks used to keep their reserves in silver bars and coins; they were the money bags of the country, through which all international movements of white metal were passing. In 1921 nearly 70 per cent of the silver stocks of Shanghai was held by the foreign banks, but in the following years their importance as money-keepers was somewhat lessened, and in 1931 they held only 33% of the Shanghai Silver stock. During the two years following, as a result of spectacular inflow of silver into the vaults of Shanghai, holdings of the foreign banks rose to over 50% of the total. A reversal in trend followed very rapidly in 1934, however, when silver was exported by the foreign banks at unprecedented speed. Stocks in Shanghai were depleted until April 1935, when a “gentlemenĀ“s agreement” between foreign banks and Chinese authorities was reached through the good offices of Dr T.V. Soong, newly appointed to the chairmanship of the Bank of China, in order to restrain the banks from making further shipments of Silver abroad. It is impossible to state how effective the agreement was, since despite the fact that little silver was left in Shanghai, the decline in stock of the foreign banks continued.l It feel from CN$ 55 million at the end of April to CN$ 36.7 million in September 1936. This decline, however may have been caused by buying operations of the Government banks, in order to cover their expanding note issue and for shipments to the interior, where the stocks had been depleted by exports and hoarding.”