China: The Two-Headed Bank

Few institutions in the Orient appear more mysterious—or more Eastern—to Westerners than the Bank of China. Like a statue of a Bodhisattva, it seems to have many faces and arms. In Saigon, Tokyo, Sydney or New York, the local branches of the bank are controlled by the Chinese Nationalists and report to Taiwan. In Hong Kong, Singapore and London, the bank appears to be the same, but the branches are controlled by the Chinese Communists and answer to Peking. Remembering which is which can become confusing.

Off to New York. The unnatural split began in 1949, when the Chinese Communists drove the Nationalists off the mainland and onto Formosa. The Communists took over the bank’s 245 mainland branches, closed most of them down. Gradually, where governments recognized Peking, the Communists also took over 17 bank branches overseas. The Communist bank has since closed all but its three largest overseas offices. The Nationalists, before leaving the mainland, copied all the bank’s records and shipped them to Hong Kong, also transferred bank funds to safekeeping in New York. They have managed to maintain eight branches abroad.

The Communist bank is directed by Chairman Nan Han-chen, 73, a deceptively benign looking finance specialist who took part in the abortive 1936 kidnaping of Chiang Kai-shek by Shensi-province Reds. Taiwan’s bank is headed by ascetic Yu Kuo-hwa, 51, a veteran follower of Chiang who studied at Harvard and the London School of Economics. Taiwan’s branches abroad are becoming the bank’s vital arm. Last year the Nationalist bank reported earnings of $3,200,000, its biggest profit—and $2,300,000 of that came from overseas operations.

Wide Gap. Controlling the two prestigious branches of Hong Kong and Singapore, the Communists have used their footholds to good advantage. Through these banks they funnel funds to such Communist organizations as the New China News Agency, bring back to Red China an estimated $132 million each year in hard currency remitted by overseas Chinese to mainland relatives. The bank’s London office is now handling transactions amounting to $52 million in pounds sterling, which Japan is paying for recent purchases of Chinese corn, rice and soybeans. Communist branches also give generous loans to importers who handle Chinese goods.

Neither bank officially recognizes the other’s existence, and there are no dealings between them. Despite the wide gap that separates them, however, both serve the same basic purpose for their governments: to act as foreign exchange centers and to provide loans and services for overseas Chinese. For the Communists, the bank is widely believed to serve yet another purpose: espionage. Malaysia last year ordered the Chinese Communists to close their Singapore branch because of subversive activities, and the branch was saved only when Singapore withdrew from the Malaysian Federation. Even so, Singapore has so far refused Peking’s request to send in a new bank manager.