JI Zhaojin

The Southern Three and Northern Four Banks were the two leading private commercial banking groups during the 1920s and 1930s, the golden age of modern Chinese banking. Both groups adopted a Western banking-management style and helped support China’s modern industrial development until their decline at the outbreak of war with Japan in 1937.

The rise of the Southern Three and Northern Four Banks reflected the change of Chinese banking style from traditional qianzhuang (native bank) and piaohao (native draft bank) to modern corporate governance. The loose political environment after the collapse of the Qing dynasty in 1912 created a situation prime for the development of private banking. A group of foreign-educated professionals combined the knowledge of Western management styles with the realities of the Chinese financial system to establish these seven banks, whose support contributed to China’s modern industrial development.

Southern Three

The Southern Three Banks ??? were the National Commercial Bank, the Zhejiang Industrial Bank, and the Shanghai Commercial and Savings Bank. The term Southern Three refers to the origins of the capital of these banks, which came from the southern Yangzi (Chang) River regions such as Zhejiang and Jiangsu provinces.

The Zhejiang Provincial Railway Company founded the National Commercial Bank ?????? in May 1907 with the intent to develop industry in Hangzhou. Initially it was a joint state and private shareholding bank. After the Zhejiang railway was nationalized, however, the bank sold all of the Zhejiang railway shares to the mercantile community and individuals; therefore, it became a completely private banking company with limited liability. Ye Kuichu (1874–1949), a president of the National Commercial Bank, moved the headquarters to Shanghai in 1915. The bank became a fully functional commercial bank with the ability to grant loans for industrial development, accept savings and industrial deposits, and conduct trust business. The National Commercial Bank was ranked first in ability to attract deposits among Chinese commercial banks by Banker’s Weekly from 1918 to 1926. Its business gradually declined after the Guomindang (Chinese Nationalist Party) government took power in 1927.

The Zhejiang Industrial Bank ?????? was founded in 1909 by the Zhejiang provincial government and local merchants. The bank was privatized after the Chinese Republican Revolution of 1911–1912. Li Ming (1887–1966), a native of Shaoxing in Zhejiang Province who graduated from Yamaguchi College of Business in Japan, favored liberal enterprise and developed this bank into an efficient operation with relatively small facilities. Li built diverse business connections with foreign companies and provided opportunities for the bank to operate in foreign exchange. Subsequently the bank was listed as the second-largest private bank specializing in foreign exchange in the 1930s.

The Shanghai Commercial and Savings Bank ???????? was founded by a group of Shanghai bankers under the leadership of Chen Guangfu (1880–1976) in June 1915. Chen Guangfu, a native of Dantu in Jiangsu Province who graduated from the Wharton School of Finance at the University of Pennsylvania, adopted U.S. banking practices and emphasized efficiency and innovation. Chen believed that if a bank lacked pioneering spirit, it would not be able to compete in China’s modern society. Consequently he tended to deviate from conventional wisdom in Shanghai banking. Whereas others often sought short-term returns, he emphasized long-term returns; whereas others were often unable to deal with small accounts, he made them some of the bank’s major depositors. Chen created the one-dollar savings plan, travel agent offices, warehouse mortgages, railway transportation remittance, and foreign exchange business. Chen was the key figure in Shanghai bank growth. Compared with that of other private banks, the initial capital of the Shanghai Commercial and Savings Bank was miniscule, earning it the nickname “the little Shanghai bank.” Nevertheless, it operated with a distinctive style by offering the one-dollar savings plan, which encouraged people to open a savings account in the bank with a one-dollar deposit. Through the accumulation of various savings resources, the bank developed into the number one private bank in China.

Northern Four

The Northern Four Banks ??? were the Yien Yieh Commercial Bank, the Kincheng Banking Corporation, the Continental Bank, and the China & South Sea Bank. These banks were founded mostly north of the Yangzi River, in contrast to the Southern Three Banks.

The Yien Yieh Commercial Bank ???? was founded in March 1915 to assist the Chinese Salt Administration in tax collection. The bank was originally designated to specialize in the salt industry with official funding under government supervision. But because of a shortage of government funds, the Yien Yieh Commercial Bank was transformed into a private bank. Wu Dingchang (1884–1950), a native of Wuxing in Zhejiang Province and former superintendent of the Bank of China, was elected general manager. Because the majority of the bank shareholders were warlords, Wu’s administration was limited in selling and buying government and foreign bonds. Despite Wu’s limitations, he organized the first Chinese banking syndicate and founded the joint business office of the Northern Four Banks in 1922.

The Kincheng Banking Corporation ???? was founded in May 1917 with a distinguished Chinese business name meaning the “golden city.” Zhou Zuomin (1884–1955), a native of Huaian in Jiangsu Province, was founder of the bank. Initially the Kincheng bank set up a savings department to absorb floating capital from various channels and granted loans to Chinese industrial projects, such as cotton and flour mills, match manufacturers, coal mines, and chemical industries. Zhou tried to pattern the Kincheng bank on a Japanese model by joining banking capital with industrial syndicates. The bank also handled remittances from transportation, especially railways. In an effort to expand its business domain, the bank established the Pacific Insurance Company to handle shipping, automobiles, and fire insurance.

The Continental Bank ???? was established in April 1919 with private funding by Tan Lisun (1880–1933), a native of Wuxi in Jiangsu Province who graduated from Tokyo Commercial College. The Continental Bank specialized in savings, warehouses, trusts, and real estate business. The bank set up savings services stations in universities, hospitals, and commercial areas. It built many warehouses and railways and engaged in foreign trade and trust businesses by opening the Continental Trade Company. The Continental Bank financed China’s northwest wool industry and northeast oil manufactures. Although initially its involvement in real estate had generated tremendous profits, the outbreak of the War of Resistance against Japan in the 1937 destroyed the bank’s real estate development plans and created a significant amount of bad loans. This experience taught all private banks a huge lesson in the risks of engaging in real estate development.

The China & South Sea Bank ???? was an overseas bank founded in 1921 by Huang Yizhu (1868–1945), a wealthy worldwide importer and exporter of sugar, and Hu Bijiang (1881–1938), a former branch manager of the Bank of Communications. The bank specialized in overseas Chinese business and foreign currency exchange and remittances. Because the bank was an overseas Chinese investment bank, the Chinese Beiyang government granted the bank special rights to issue banknotes abroad. In 1922 the China & South Sea Bank joined other thre
e northern banks to form the Joint Four Bank Business Office. The other three banks transferred interbanking funds to support the China & South Sea Bank in issuing banknotes and instituted the Four Banks Reserve Fund, with 60 percent cash reserve and 40 percent reserve in securities or bonds. Although the Four Banks Reserve Fund guaranteed all notes issued, each bank had its own logo on the notes, acknowledging its own responsibility. The joint efforts to issue banknotes were unique in the banking history of China.

In 1923 the Four Northern Banks organized the Joint Savings Society of the Four Banks in Shanghai to absorb floating capital in the market. This society shared profits with its customers by distributing annual dividends to them. To promote its image, the society built the twenty-four-story Shanghai Park Hotel in 1934. The hotel was the first skyscraper in Asia and became a landmark in Shanghai in the following half century.

Compared with the Southern Three Banks, the Northern Four Banks had stronger capital components, with financial resources derived from former Qing dynasty (1644–1912) officials, warlords, and overseas Chinese. Similar to the Southern Three Banks, the Northern Four Banks also had an excellent team of managers. These bankers were all friends who met weekly to discuss political and economic issues. They organized the Chinese Bankers Association and published Banking Weekly magazine.

The rise of the Southern Three and Northern Four Banks reflected the change of Chinese banking style from traditional qianzhuang (native bank) and piaohao (native draft bank) to modern corporate governance. The collapse of the Qing dynasty created a loose political environment for private banking development. A group of foreign-educated professionals applied its Western management knowledge to the system of the Chinese banking already in operation to create these seven banks. These private banks supported China’s modern industrial development.

The golden age of the Southern Three and Northern Four Banks was short-lived—from 1907 to 1937. China’s modern banking development was interrupted by the outbreak of the War of Resistance against Japan. With the government wartime banking and financial control, which continued during the civil war period, little room was left for private banks’ development.

The Southern Three and Northern Four Banks became part of history after the political and financial system changes that came with establishment of the People’s Republic of China in 1949. In 1951 all private banks were progressively reorganized into a few groups with joint state-private ownership, a principal form of state capitalism adopted during the socialist transformation. The Northern Four Banks became a joint state-private ownership banking group on 1 September 1951. The Shanghai Commercial and Savings Bank, however, moved its capital to its Hong Kong branch, then to Taiwan. The other two southern banks also joined the state-private ownership enterprises in China. At the end of 1952 all private banks in China were nationalized.

Further Reading

Cheng, Linsun. (2003). Banking in modern China: Entrepreneurs, professional managers, and the development of Chinese banks, 1897–1937. Cambridge, UK: Cambridge University Press.

Du Xuncheng. (2002). Zhongguo Jinrong Tongshi: Vol. 3 [A general history of Chinese finance: Northern government period]. Beijing: Zhongguo Jinrong Chubanshe.

Hong Jiaguan., Ye Shichang, Zhang Guohui, Kong Xiangyi, Xu Huijun, Yuan Yuanfu, Yu Tao, & Hong Qinguan. (1993). Zhaogguo Jinrongshi [A history of Chinese finance]. Chengdu, China: Xinan Caijing Daxue Chubanshe.

Ji, Z. (2003). A history of modern Shanghai banking: The rise and decline of China’s finance capitalism. New York: M. E. Sharpe.

Xu, M., Gu Guanlin, & Jiang Tianying. (1997). Zhongguo Shino da Yinhangjia [Chinese ten bankers]. Shanghai: Renmin Chubanshe.

Ye Shichang, & Pan Liangui. (2001). Zhongguo Gujindai Jinrongshi [Chinese ancient and modern financial history]. Shanghai: Fudan University Press.

Zhongguo Remin Yinhang Shanghai Jinrong Yanjiusuo. (Ed.). (1990). Shanghai Shangye Chuxu Yinhang Shiliao [The historical materials of Shanghai Commercial and Saving Bank]. Shanghai: Renmin Chubanshe.

Source: Ji, Zhaojin. (2009). Southern Three and Northern Four Banks. In Linsun Cheng, et al. (Eds.), Berkshire Encyclopedia of China, pp. 2063–2065. Great Barrington, MA: Berkshire Publishing.

Southern Three and Northern Four Banks (Náns?nháng hé B?isìháng ???????)|Náns?nháng hé B?isìháng ??????? (Southern Three and Northern Four Banks)

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