New-York tribune., 1918-02-13
for
Bank of China Is
Aim of Officials
Shareholders Given EQUAL
Voice With Government
in Management

ofhclals OF the Bank of China have
recognized one of its chief needs to be
the emancipation of the institution
from government control, subject. to
political influences. Accordingly, they
have amended the bylaws in such a
way as to encourage subscriptions to
the banks stock by giving private
stockholders voice in its manage
ment.
The bank was established in 1912,
alter the Inauguration of the Chinese
Republic, to take the place of the Ia
Ching Bank, which had been organized
by the Manchu government as the Of
iiclal bank of the country. 1t was in
tended to be owned jointly, according
to report from A. M. Ferrin, United
States commercial attache at Pekinc.
by the Chinese government and pri-
vate stockholders, each subscribing
half of the 100000 shares of s1oo (Chi-
nese currency), which were to make
up the authorized capital of s6O,oOo,-
00O; and the private stockholders were
to have equal voice with the govern
ment In its management. 1t was soon
found, however, that the authorized
private capital could not be raised, and
the bank opened on August 1, 1912,
with nominal capital of $1O,OOO,OOO,
of which considerably less than half
was privately subscribed. The rest
was put in by the government, mostly
in the form of bonds. The actual cash
capital was not more than S3,00O,O0O or
$4,ooo,OOO.
Rapid Progress Made
Nevertheless" says Mr. Ferrin in
his report, "the bank made rapid prog
ress, and after reorganization in 1918,
in order to correct some initial errors,
its deposits rose in one year from S17,-
100000 to $57,OOO,Ooo. In 1913 it
earned $28o,00O net, in 1914 sl,AO0o0o,
and in 1915 s2,6oO,OOO. 1t opened
branches throughout the provinces and
did large business in internal ex-
change, becoming a serious competitors
also Of the foreign banks in the treaty
ports in foreign exchange. 1t issued
bank notes, acted as fiscal agent of the
government in the collection of the salt
and other taxes in the interior and
bade fair to become an important and
influential institution.
"Its lack of capital was made up by
the advantages whic. it's official posi-
tion conferred upon it, but it was
weakened seriously by an article of its
constitution which delayed the forma-
tion of a directorate and inspectorate
until private capital should have sub
scribed 10000 shares, thus leaving
control of the bank in the hands of
government appointees. In October,
1915, the Bank of Communications, the
fiscal agent of the Ministry of Commu-
nications (Which controls the rail-
roads, telegraph and postoffice0, was
made a national bank, with power to
issue notes-a privilege which it had
been intended to restrict to the Bank
of China-and the competition cut into
the profits of the latter. 1T was not
this, however, which caused the Bank
of China its most serious difficulties,
but the facility with which the govern
ment was able to obtain from it loans
for purposes that pi wed unproductive.
Consequently, both the Bank of China
and the Bank of Communications have
become congested with government
paper. Through their head offices in
Peking they have some $60,00O,OOO in
notes outstanding, without adequate
reserve.
Government Railroads Accept Notes
"These notes at present are accept
able for passenger and freight pay
ments on government railways and are
redeemable in small amounts in
Peking. They fuctuate between 65 !
and rs cents on the dollar. Their use
for railway payments is not believed
to have had much influence on their
price, though it has seriously affected
the finances Of the railways, which
have to take them at par. The notes
of the branches Of the banks, with
few exceptions, circulate at pan for
the branches are largely indepelA mt /
and maintain separate reserves against
notes which they issue. The branch
note issues, moreover, have been small.
ut has long been recognized by the
officials of the Bank Of China that
their first duty is to reestablsh the
credit of the banks notes, which means
the creation of reserve, and they
have been trying hard to obtain a for
eign loan for this purpose. 1t would
not be difficult, according to foreign
bankers who have studied the problem,
to create without foreign loan a re-
serve out of the governments own
revenues and to operate on a compara-
lively small reserve by making all
internal taxes, except those already
pledged under foreign loans, payable
in Chinese bank notes.
Foreign Loan Possibility
Under the changes which have been
made in the constitution shareholders
may now vote for directors and in
spectors without waiting for the public
to the banks stock to
reach 100000 shares, or even to equal
the shares held by the government
The authorized capital continues at
S6O,O00,O00, but the outstanding capi-
for period has been lin
tied to $10,000,000, of which the gov
ernment may subscribe any amount at
IT, discretion.