Ch'en Kuang-fu 陳光甫 K. P. Chen Ch'en Kuang-fu (1880-), known as K. P. Ch'en, banker, founded and developed the Shanghai Commercial and Savings Bank, using modern Western methods. He played an important Tole as representative of the National Government in negotiations with the United States regarding silver purchases (1936) and economic aid to China. He was a member of the wartime Currency Stabilization Board (1941-43). Although born into a business family in the Chinkiang district of Kiangsu province, K. P. Ch'en did not have a formal education. Financial reverses forced his father to leave Chinkiang for Hankow, where he found employment in a customs brokerage firm. The young K. P. Ch'en, apprenticed in the same firm at the age of twelve sui, spent the next seven years working in the company, where he obtained his initial experience in Chinese business and trading procedures. In the evening, he studied the English language in a private school. By the time he was 19 sui, he had become reasonably fluent in English. He then passed the examinations for the Chinese postal service and worked for a year and a half as a postal clerk. He resigned that position to become an interpreter at the Hanyang Arsenal.

K. P. Ch'en made his first trip to the United States in 1904, when he served as an attache with the Hupeh provincial delegation to the International Exposition held at St. Louis. Instead of returning to China with the delegation, he chose to remain in the United States to study. From 1904 until 1906 he attended Simpson College at Indianola, Iowa, and Ohio Wesleyan University at Delaware, Ohio. In 1906 he went to Philadelphia, where he entered the Wharton School of Finance and Commerce at the University of Pennsylvania. After being graduated with a business degree in 1910, he returned to China. At that time, the Nanyang Industrial Exposition was being held under the sponsorship of the governor general for the Liang-kiang provinces, and Ch'en worked at the exhibition for a time. He was then employed in the office of the governor general as foreign affairs secretary.

In December 1911 K. P. Ch'en was appointed general manager of the Kiangsu Bank, and was charged with the task of rehabilitating that bank—which had been mismanaged for some time. He held the position for about two years, applying the modern banking theories which he had learned at Wharton. He introduced several innovations in the operation of the Kiangsu Bank. It had been customary for the provincial bank to be located at the seat of the provincial government, but K. P. Ch'en moved the bank's head office to Shanghai, China's financial and trading center. Instead of emphasizing note issue as a principal source of the bank's profit and working capital, he concentrated on attracting deposits. Moreover, he stipulated that the bank should cease to be the instrument of the provincial government, which had been able to make excessive demand on its resources, and that loans should be granted only in accordance with sound credit procedures and policies. The first bank in China to extend commercial credit on commodities and to establish its own warehouse facilities for such lending operations, the Kiangsu Bank also pioneered in inviting Western accountants to audit its books regularly. Nonetheless, the position of the Kiangsu Bank as a provincial institution rendered it vulnerable to the pressure of politics, and when the new governor of Kiangsu gave evidence of obstructing his banking policies, K. P. Ch'en resigned his position in March 1914.

That experience convinced Ch'en of the difficulty of maintaining either stability or integrity in a financial enterprise with government connections in China. He therefore resolved to start a private bank and, with the support of a few friends, founded the Shanghai Commercial and Savings Bank (Shanghai shang-yeh ch'u-hsu yin-hang). Among these supporters were fellow students in the United States and some senior members of the staffs of the customs, postal, and salt gabelle services in China, men who shared K. P. Ch'en's vision and were prepared to sacrifice their well paid and secure jobs in these foreign-controlled services to work for the development of the new enterprise.

The new bank opened in June 1915. With a paid-up capital of only CN$50 thousand, it was then the smallest bank in Shanghai. It faced competition from the large foreign banks in China; from the Bank of China and the Bank of Communications, both of which had government connections and were authorized to issue bank notes; from ten or more private commercial banks; and from scores of native banks. Despite these inauspicious beginnings, K. P. Ch'en's bank soon proved to be a successful enterprise. In the years between 1915 and the outbreak of the Sino-Japanese war in 1937, the bank's capital rose from CNS50 thousand to CN$5 million, and its deposits increased from CNS340 thousand to CN$196 million. By 1937 the Bank employed a staff of some 1,700 people; its branches and sub-offices, totaling more than 80, scattered throughout China, were exceeded in number only by those of the Bank of China and those of the Bank of Communications. By the mid-1930's, the Shanghai Commercial and Savings Bank was known as the most progressive commercial bank in China. K. P. Ch'en served as general manager of the bank for about 30 years, from 1915 until 1944 when he became chairman of its board of directors. During those years, his concern with public service and his progressive policies opened new frontiers for modern banking in China. Because contemporary Chinese banking practices offered little incentive for individual saving, K. P. Ch'en paid special attention to the development of the savings bank phase of the business. He encouraged individual savings deposits through a policy of permitting savings accounts to be opened with as little as CN$1. That measure attracted a large number of small depositors, who initially were interested in the novelty of the system, but who soon developed the habit of regular saving. The success of the measure led other banks, which previously had been reluctant to accept small accounts, to create and develop savings departments. K. P. Ch'en also took the lead in introducing various new types of savings programs. These included deposit by installment and withdrawal in a lump sum, or the reverse, educational savings, and savings for home-building. Mechanization of the accounting and other procedures was effected as far as was practical.

As the bank's resources grew, K. P. Ch'en devoted special attention to developing credit operations, which were generally neglected by Chinese banks of that period. He built special warehouse facilities for the storage of goods held by the bank as security against loans. The Shanghai Commercial and Savings Bank was also the first in China to extend credit for financing inventories of factories, either raw materials or manufactured goods, on the condition that the borrowing company open its books for examination by the bank's representatives. The bank was also a pioneer in extending credit on goods in transit. As early as 1917, the bank opened special offices near the railroad stations at Shanghai and Nanking to handle loans against bills of lading on goods consigned for rail shipment. Later, these operations were extended to other rail centers in China.

Because of unsettled conditions in the rural areas, most Chinese banks of that period concentrated their business in the foreign concessions of a few major cities. K. P. Ch'en not only recognized the desirability of extending operations into the interior, where modern banking facilities were urgently needed, but also took practical steps to meet that need. He began by opening branches in commercial centers in Kiangsu province and gradually extended operations to other provinces, including Chekiang, Anhwei, Kiangsi, Hupeh, Hunan, Honan, Shantung, and Hopei. By 1934 the loans granted through these branches amounted to more than half of the total credit extended by the bank, and these operations did much to reduce interest rates in rural areas. K. P. Ch'en, however, avoided establishing branches in the Northeastern provinces, despite the fact that many prominent figures in that region were personal friends. Even after the nominal extension of Nationalist political control into Manchuria, he anticipated the troubles which lay ahead there and avoided the region. After the outbreak of the Sino-Japanese war, the bank did open new branches in Kwangsi, Szechwan, and Yunnan.

Although it was a commercial bank, the Shanghai Commercial and Savings Bank began in 1931 to operate in the field of agricultural credit. Two years later, its head office at Shanghai established a rural cooperative credit department, renamed the agricultural department in 1934. Working through agricultural cooperatives, the bank extended loans in rural communities for financing the production, marketing, and storage of agricultural produce. By 1934, loans issued by that department totaled CNS4.4 million. Prior to the Sino-Japanese war, the agricultural sections of the bank's branches at Nanking, Chengchow, Changsha, Peng-p'u, Tsinan, Sian, Hankow, and Canton played an active role in assisting rural cooperatives, encouraging improvement in farm production methods, and improving transportation and marketing of agricultural products. The Shanghai Commercial and Savings Bank was one of the first modern private banks in China to engage in foreign exchange operations, which had previously been dominated by the foreign banks. K. P. Ch'en recognized the importance of ending that domination in order to assist the more rational development of China's foreign trade. A foreign exchange department was established in the bank's head office at Shanghai in 1918, and selected personnel were sent to correspondent banks in the United States and England to study foreign exchange practices. When the business expanded, K. P. Ch'en opened a branch in Hong Kong in 1933 to handle foreign exchange, particularly remittances from overseas Chinese to various parts of China, all using Hong Kong as the clearing house.

K. P. Ch'en's attention was directed to other fields closely related to commercial banking. In 1931 his bank opened a trust department, began the renting of safety deposit boxes, and later extended activities to include insurance, real estate operations, and the purchase and sale of securities for customers, but not underwriting. Loans were given to students to pay their tuition and to teachers in need of financial help, and sub-offices were maintained at some leading universities and schools to handle these operations. In the field of insurance, the bank operated three subsidiaries: the China First Fidelity Insurance Company, which specialized in insurance for commercial credit; the Ta-hua Insurance Company, which handled fire and marine insurance; and the China Assurance (Pao-feng) Company, operated in cooperation with the British firm of Butterfield and Swire. One of the best-known subsidiaries of the Shanghai Commercial and Savings Bank was its very successful travel department, patterned after such organizations as Thomas Cook and Sons, the American Express Company, and the Japan Tourist Bureau. Established in 1923, the travel department acted as agent for the purchase of railroad and steamship tickets, sold domestic travelers checks, and handled travelers checks issued by foreign banks. In 1927 the department became a subsidiary of the bank and was renamed the China Travel Service (Chung-kuo lü-hsing she). The China Travel Service sponsored organized tours, provided travel assistance to students going abroad and to overseas Chinese returning to China, and published a travel magazine, the Lü-hsing tsa-chih [traveler's magazine]. In 1935 it opened two hotels, the Metropolitan Hotel at Nanking and the Siking Hotel at Sian. Hotels on a more modest scale were later opened at Tsingtao, Hsuchow, Chengchow, Kiukiang, and other centers where branches of the service were located. During the Sino-Japanese war, the service established and operated a series of hostels in southwest China to provide accommodations for wartime refugees. An outstandingly efficient and reliable organization in a period when facilities for travel in China were crowded at best and chaotic at worst, the China Travel Service established an outstanding international reputation. In addition to these contributions to the modernization of Chinese banking, K. P. Ch'en played an important role as a representative of his country in international financial negotiations both before and during the Sino-Japanese war. His first significant work in this field was in connection with the Chinese currency reform of November 1935, when the National Government abandoned the silver standard in favor of a managed paper currency. That reform required the nationalization of silver, the withdrawal of silver dollars from circulation, and the creation of a foreign exchange reserve for the Chinese currency. The success of the reform depended largely upon the ability of China to convert its silver stocks into foreign exchange, and the only potential purchaser of Chinese silver was the United States. In March 1936, K. P. Ch'en went to Washington as head of the Chinese Silver Mission. After several weeks of negotiation, an agreement was signed on 14 May 1936 under which the United States agreed to purchase from China 75,000,000 ounces of silver. That agreement substantially strengthened the currency reserve of the Chinese government and the confidence of the Chinese public in the new currency. The accumulation in foreign exchange also facilitated the Chinese purchase of arms in the face of the general Japanese aggression beginning in the summer of 1937.

During the first year of the Sino-Japanese war, the United States government took no positive steps to extend economic aid to China. Not until the Japanese invasion engulfed Hankow and Canton in December 1938 and forced the National Government to withdraw to Chungking was Washington shocked into a sense of moderate crisis and impelled to go beyond the simple purchase of Chinese silver. In December 1938, following detailed negotiations conducted by K. P. Ch'en in Washington, the United States government agreed to grant a loan of US$25 million, to be extended by the Export- Import Bank and secured by tung oil shipments from China. The agreement between the Export-Import Bank and the Universal Trading Corporation, a company established in New York by the Chinese government to facilitate the procurement of materials from the United States, was signed on 8 February 1939. The success of the tung oil loan opened the way for K. P. Ch'en to proceed with negotiations to obtain badly needed credits for China. A second agreement was signed on 20 April 1940, providing for an additional credit of US$20 million to China to be repaid by tin exports from Yunnan province. These two loans spearheaded American wartime assistance to China, and later credits were patterned on these initial agreements negotiated by K. P. Ch'en. Ch'en returned to Chungking in June 1940 and turned his attention to wartime economic and financial problems in China. From 1938 until 1941 he served as chairman of the newly created foreign trade commission of the ministry of finance, then headed by H. H. K'ung (q.v.). An important organ, the foreign trade commission had primary responsibility at Chungking for supervising the export of tung oil and tin in repayment of the United States loans, as well as for the export of bristles, tea, and other Chinese products. In connection with these duties, K. P. Ch'en served concurrently as chairman of two government trading companies, Foo Hsing (Fu-hsing) and Foo Hua (Fu-hua), and supervised the collection and shipment of these basic export commodities.

In April 1940 the United States Treasury and the British government granted credit to the Central Bank of China amounting to US$50 million and £5 million, respectively. These credits, together with a loan of US$20 million to other Chinese government banks, amounted to approximately US$90 million, which was to be administered by a specially organized Currency Stab
lization Board. The purpose of the fund was to purchase excess Chinese notes from the market and to finance imports to foreign concessions in Shanghai and Tientsin, with a view to slowing down the depreciation of the fapi (legal currency) notes in the market. The membership of the board consisted of three Chinese, one American, and one Englishman. K. P. Ch'en, who was strongly supported by the American Secretary of the Treasury, Henry Morgenthau, Jr., was chosen as chairman, with Chi Ch'ao-ting (q.v.) as his alternate. Tsuyee Pei (Pei Tsu-yi, q.v.) of the Bank of China and Hsi Te-mou of the Central Bank were the other two Chinese members. After the Japanese defeat in 1945, K. P. Ch'en returned to Shanghai. He was called upon to head the foreign exchange stabilization fund committee in 1947 and 1948, was made a member of the State Council in 1947, attended the National Assembly at Nanking which adopted the new constitution of the Republic of China, and was elected a member of the Legislative Yuan. Always an active supporter of modern education for China, he was elected chairman of the board of Nanking University. His major enterprise after his return to Shanghai, however, was the rehabilitation of the Shanghai Commercial and Savings Bank.

The rapid deterioration in the economic situation in China forced Ch'en to concentrate on salvage rather than on development. When the Communist forces occupied north China at the beginning of 1949, Ch'en withdrew with his key staff members and the central records of the bank to Hong Kong. There he began preparations to reorganize the Hong Kong branch of his bank. When Great Britain extended diplomatic recognition to the People's Republic of China in January 1950, all Chinese banks in Hong Kong which had head offices on the mainland, led by the Bank of China, went over to Peking. The sole exception was the Shanghai Commercial and Savings Bank. K. P. Ch'en announced that the Hong Kong office of his bank had severed connections with Shanghai. He then reorganized it as a new entity, the Shanghai Commercial Bank, incorporated in Hong Kong under the laws of that British colony. In October 1954, with the special permission of the National Government, the administrative head office of the Shanghai Commercial and Savings Bank, that is, the bank which had had its headquarters at Shanghai, was moved to Taiwan.

The bank in Hong Kong, the Shanghai Commercial Bank, was technically a new and separate bank. It was operated principally by Ch'en's old associates who accompanied him from Shanghai to Hong Kong in 1949. K. P. Ch'en himself, who reached the age of 80 in 1960, remained active and regularly visited his office at the bank. He served as chairman of the board of both the bank in Hong Kong and that in Taiwan.

Generally regarded as republican China's leading representative of the American type of commercial banking, K. P. Ch'en was unquestionably influenced by his training at Wharton and by his later contacts with American banks and bankers. Yet, his devotion to the American spirit of enterprise was tempered by a realistic recognition of the necessity of molding Western theories to conform with indigenous business traditions and practices. That realism may be partly attributed to his native background, since his home district of Chinkiang has long been one of the centers of native banking in Kiangsu. His youthful experience in customs brokerage in Hankow was later supplemented by broad practical experience in assessing the banking needs of republican China and in dealing with Chinese commercial and fiscal problems.