History of Banking in China - Entry of Foreign Banks

Entry of Foreign Banks

British and other European banks entered China around the middle of the nineteenth century to service the growing number of Western trade firms. The Chinese coined the term yinhang (銀行), meaning "silver institution", for the English word "bank". The first foreign bank in China was the Bombay-based British Oriental Bank (東藩匯理銀行), which opened branches in Hong Kong, Guangzhou and Shanghai in the 1840s. Other British banks followed suit and set up their branches in China one after another. The British enjoyed a virtual monopoly on modern banking for forty years. The Hong Kong and Shanghai Banking Corporation (香港上海匯丰銀行), now HSBC, established in 1865 in Hong Kong, later became the largest foreign bank in China.

In the early 1890s, Germany's Deutsch-Asiatische Bank (德華銀行), Japan's Yokohama Specie Bank (橫濱正金銀行), France's Banque de l'Indo-Chine (东方匯理银行), and Russia's Russo-Asiatic Bank (華俄道勝銀行) opened branches in China and challenged British ascendancy in China's financial market. By the end of the nineteenth century there were nine foreign banks with forty-five branches in China's treaty ports.

Foreign banks enjoyed extraterritorial rights. They also enjoyed complete control over China's international remittance and foreign trade financing. Being unregulated by the Chinese government, they were free to issue banknotes for circulation, accept deposits from Chinese citizens, and make loans to the qianzhuang.