Pei Tsu-yi (1893-), banker who was known for his pioneering work in developing the foreign-exchange business of the Bank of China and for helping to plan the managed currency system that China adopted in 1935.
Born into a merchant family in Wuhsien, Kiangsu, Pei Tsu-yi received his early education in the Chinese classics at a local school maintained by the Lu family. At the age often sui, he was sent to study at the Ch'en-chung Middle School in Shanghai, where he remained until 1907, when he returned home to attend Soochow University. After being graduated in 1911, he went to north China for a two-year stint at the T'angshan College of Railways. In 1913 he moved south to work in the accounting department at the Shanghai office of the Hanyeh-p'ing Iron and Coal Company. Pei Tsu-yi embarked on his banking career in 1914 when he joined the accounting department at the Bank of China's head office in Peking. He was transferred to the Canton branch in 1915 as acting head of the accounting department. After serving as chief accountant and as head of the business department, he became assistant manager of the Canton branch in 1917. About this time, Sun Yat-sen's newly established military government at Canton began to make incessant and excessive demands on the resources of the Canton branch of the Bank of China. The branch manager proved unable to cope with the situation, and he soon left for Peking to tender his resignation at the head office. Pei Tsu-yi was made acting manager. He soon incurred the wrath of the local military authorities by ignoring their demands for funds. They retaliated by ordering his arrest, and he was forced to flee to Hong Kong.
By this time, the Kwangtung provincial note issues had lost much of their value, and Hong Kong bank notes had found their way into Canton in increasing numbers. Pei Tsu-yi had learned much about foreign exchange because of this situation, for the principal activities of Canton bankers had come to be the handling of remittances between Canton and Hong Kong and the exchange of currency. In 1918 the Bank of China transferred its Canton branch to Hong Kong and appointed Pei to manage it. The Canton establishment was maintained as a sub-office under the control of the Hong Kong branch, which was to direct the bank's activities throughout south China. However, the development of the new branch was hampered by the smallness of capital appropriations from the head office and the slowness of people to place their confidence in a new banking operation. Pei Tsu-yi therefore decided to specialize in arbitrage, exploiting the regional differences in the exchange rates among the major currencies of the world. Because of its complete lack of banking restrictions, Hong Kong was admirably suited to arbitrage activities. Pei's faultless handling of foreign-exchange operations enhanced both his reputation and that of the Bank of China.
In 1927 Pei Tsu-yi became the manager of the Bank of China's Shanghai branch. When the Bank of China was reorganized in 1928 as a specialized bank handling foreign-exchange transactions, Pei was elected a director of the bank (representing private stockholders) and was appointed chief of the business department at the head office, now located at Shanghai. He was elected to the Shanghai Municipal Council in 1929 as a representative of the Chinese Ratepayers Association. In 1930 he was named director of the newly created foreignexchange department at the Bank of China. Before assuming his new duties, he made a tour of England and the United States to study banking practices in those two countries. On returning to China in 1931 he ordered all branches of the Bank of China in treaty or commercial ports to undertake foreign-exchange operations. Credit facilities were extended to Chinese importers and exporters; and guarantees were furnished for National Government agencies and for merchants in the interior who wished to place orders with manufacturers abroad. In branches which handled remittances from overseas Chinese, every effort was made to improve these facilities. Before long, Pei also secured the admittance of Chinese brokers to the previously all-Western Foreign Exchange Brokers Association in Shanghai.
The reserves accumulated by the foreign department enabled the Bank of China to create new branches and agencies abroad. It came to have offices in New York, London, Tokyo, Osaka, Havana, Sydney, Singapore, Penang, Kuala Lumpur, Bombay, Calcutta, Karachi, Chittagong, Jakarta, Saigon, Bangkok, Phnom Penh, and Rangoon. Pei Tsu-yi's role in breaking the foreign monopoly of the business of foreign remittances in China was of great importance. The Bank of China enjoyed an ever-increasing volume of business in the 1930's, and it handled all public and private foreign-exchange transactions during the Sino- Japanese war, for there were no foreign banks in Free China.
In 1934-35 Pei Tsu-yi participated in the planning which resulted in the monetary reform of November 1935 (for details, see H. H. K'ung), when the National Government abandoned the silver standard in favor of a managed paper currency. The new legal tender notes were known as fapi. In the years following, Pei was called upon for aid and advice whenever measures were needed for the maintenance of the fapi system. Thus, when the outbreak of the Sino-Japanese war in July 1937 caused financial panic and strong demands for the redemption of fapi with foreign exchange, Pei Tsu-yi, representing the Bank of China, collaborated with the Central Bank of China in sales of foreign exchange in order to maintain public confidence. When the Central Bank of China suspended the exchange of foreign currency for fapi at fixed rates in 1938, Pei's department collaborated with a British bank, the Hong Kong and Shanghai Banking Corporation, in supplying foreign exchange at current open rates, thus preventing a drastic fall in the value of the fapi. By 1939 inflation in China had become so serious that it no longer was possible to maintain the value of the fapi through ordinary measures. At the urging of the Hong Kong and Shanghai Banking Corporation, the British Government agreed to cooperate with the National Government in establishing the Sino-British Stabilization Board. The Bank of China and the Bank of Communications joined with the Hong Kong and Shanghai Banking Corporation and the Chartered Bank of India, Australia, and China in subscribing a total of £10 million as the stabilization fund for the maintenance of the fapi. Pei Tsu-yi served as the principal Chinese representative on the five-man management committee. With the exhaustion of this fund in 1941, the Sino-British-American Stabilization Board was established with the subscribing of US S50 million by the United States Government, £5 million by the British Government, and US S20 million by the National Government. Pei Tsu-yi was one of the three Chinese representatives to the five-member board, the other two being Hsi Te-mou of the Central Bank of China and the board's chairman, K. P. Ch'en (Ch'en Kuang-fu, q.v.).
Pei became acting general manager of the Bank of China in 1941. In this post, he did much to promote agricultural and industrial production by providing financial assistance and by participating in the operation of various enterprises. In June 1944 he accompanied H. H. K'ung to the United States as a member of the Chinese delegation to the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire. He made a second trip to the United States in 1945, when he held discussions with American officials about the possibility of floating a postwar rehabilitation loan of US $500 million for use in maintaining the value of the fapi. The outbreak of hostilities between the Nationalists and the Chinese Communists put an end to these negotiations. From March 1946 to April 1947 Pei Tsu-yi served as governor of the Central Bank of China. He was handicapped severely in his attempts to stabilize the Chinese economy by the huge and irreducible Nationalist military budget and by galloping inflation. In 1948 he was made head of the Chinese Technical Mission to Washington, which went to the United States in 1949 for discussions on problems connected with proposed American aid to China. In November 1952 he became a director of C. V. Starr and Company in New York as an adviser, a post he held until 1959. He then became a director of K. P. Ch'en's Shanghai Commercial Bank of Hong Kong, and thereafter he divided his time between New York and Hong Kong. One of Pei Tsu-yi's sons, Pei Yi-ming (191 7-), better known as I. M. Pei, went to the United States in 1935 to study architecture. He later became an architect of international renown. P'ei Wen-chung T. Ming-hua I X +