Hu Yün (1881-24 August 1938)

Hu Yün (1881-24 August 1938), banker. After serving as general manager of the Bank of Communications from 1915 to 1920, he organized and directed the operations of the China and South Seas Bank. When the National Government centralized the management and control of Chinese banking in the 1930's, he became chairman of the board of the Bank of Communications.

Chinkiang, Kiangsu, was the birthplace of Hu Yün. Because he was a sickly child, he received no schooling until he was 8 years old. Three years later, in 1892, his family engaged a tutor to help him prepare for the imperial examinations. In 1896 he abandoned this avenue of advancement and became an apprentice in a native bank. He undertook increasingly important tasks at the bank and soon mastered the intricacies of the traditional banking system. When the bank failed in 1907, Hu decided to go to Peking.

In 1908, at the age of 27, Hu became assistant manager of the Kung-i Bank (Kung-i yin-hang), where he learned Western banking procedures. Two years later, his reputation as a talented banker won him the post of chief auditor at the Bank of Communications (Chiao-t'ung yinhang). In 1911 he was promoted to assistant manager of the bank's head office, and in 1915 he was appointed general manager.

After the death of Yuan Shih-k'ai in 1916, political turmoil engulfed north China, and the practice of banking became increasingly precarious. Accordingly, Hu Yün resigned from the Bank of Communications in 1920 and moved to Shanghai. He soon was offered the opportunity to create a modern banking corporation in Peking and Shanghai by Y. S. Oei (Hung I-chu), who had become wealthy in the sugar business in Java and who owned most of the public utilities at Amoy. Hu accepted Oei's offer, and they went to Peking to confer with Tuan Ch'i-jui (q.v.), then the premier. Tuan authorized the chartering of the China and South Seas Bank (Chung-nan yin-hang), and the Peking government took the unusual action of granting the power of note issue to the new bank. Hu and Oei then returned to Shanghai to establish the head office, which opened for business in July 1920.

The bank was an immediate success, and it helped to set new standards of efficiency and integrity in Chinese banking. By law, a bank with the power of issue had to have a reserve equivalent to the banknotes issued. In practice, banknotes had sometimes been issued without adequate reserves, causing the worth of the banknotes and the confidence of the public to decline. Hu backed the China and South Seas Bank currency in strict accordance with the law. The bank soon established offices in Peking, Tientsin, Hankow, and Wusih. The addresses of the bank's offices were printed on each banknote, and people soon learned that they could confidently expect to redeem any note for silver at any of the bank's offices.

In the early 1920's Chinese banks seldom dealt in foreign exchange transactions. Under Hu's direction, the China and South Seas Bank established foreign remittance operations and began dealing with Europe, the United States, and Southeast Asia.

Hu soon joined with Chou Tso-min (q.v.) and other bankers in establishing a reserve system which emulated the Federal Reserve System of the United States. Banknotes would be backed by a reserve which would be 60 percent cash bullion and 40 percent government bonds and negotiable securities. In 1923 the China and South Seas Bank, the Kincheng Banking Corporation (Chin-ch'eng yin-hang), the Continental Bank (Ta-lu yin-hang), and the Yien-yieh Comihercial Bank (Yen-yeh yin-hang) pooled their resources to establish the Joint Treasury and the Joint Savings Society. The Joint Treasury issued banknotes and assumed responsibility for the maintenance of the required reserves. The Joint Savings Society encouraged people to save, and it became a highly profitable operation. Through the society, the participating banks made substantial investments in Shanghai real estate and in domestic and foreign bonds. The four participating banks became known collectively as the four northern banks.

In 1932 Hu became interested in reviving the moribund Chinese silk and tung oil industries. As a result of his efforts, two schools with laboratory facilities were established in his native district of Chinkiang. The school of sericulture developed new techniques of larva incubation, reeling, and mulberry cultivation which came to be used throughout China. The other school helped to stimulate the production of tung oil.

In 1934 the China and South Seas Bank established new branches in Hong Kong and Canton. Its foreign remittance business with the Philippines, Singapore, Malaya, and the Netherlands East Indies increased greatly. The bank provided its overseas clientele with market and commodity information as well as regular services. Domestic business increased when the Nanking branch initiated an installment plan for government employees who wished to build homes. This plan caused a real estate boom in the Nanking area.

In the meantime, the National Government had begun to take steps to strengthen the financial structure of China and to initiate currency reform. One of the measures called for the revoking of the power of issue of non-government banks. The Central Bank of China (Chungyang yin-hang) was to be the only bank empowered to issue the newly introduced fapi. In the final auditing of banknotes issued, it was confirmed that the China and South Seas Bank had used its power of issue in strict conformity with government reserve regulations.

It was also in 1934 that the China and South Seas Bank, under Hu Yun's direction, entered the cotton business in direct competition with Japanese interests. Japanese entrepreneurs had long since established cotton mills in Shanghai, Tientsin, and Tsingtao. In 1929 and 1930 these operations were expanded and modernized. By 1933 most of the Chinese cotton mills, burdened with obsolete machinery and an ill-trained labor force, had been forced to the edge of bankruptcy. The large unsecured loans made to mills by Shanghai, Wusih, and Nanking banks seemed to be uncollectable. The China and South Seas Bank was virtually supporting the large Pu Yih and Min Sen mills in Shanghai. By 1934 Hu Vim had realized that the situation demanded action. Rejoined with other bankers to assume charge of the ailing mills. Hu then undertook detailed studies of Japanese-run mills to determine the nature of their competitive advantage.

He soon discovered that unit costs in Chinese mills were much higher because of technological and operational backwardness. Hu employed highly trained textile experts to solve the technical problems and reorganized the financial operations of the mills. By 1935 the Chinese mills had begun to show a profit, the first in many years, and by 1938, with an assist from war production demands, they had retired their bank loans.

In the meantime, the National Government had continued to centralize the management and control of banks in preparation for war with Japan. Private banks were absorbed into the centrally managed system. Hu Yün assumed the post of chairman of the board of the newly centralized Bank of Communications and became a key figure in the handling of China's defense finances and war economy. He set up branch offices of the Bank of Communications in other cities so that liquid assets would not be concentrated in Shanghai alone. When the Japanese invaded Shanghai in 1937, Hu supervised the transfer of funds and operations of his and other banks to Hong Kong and later to Chungking and Kunming.

In the summer of 1938 Hu, then in Hong Kong, was summoned by the National Government to an urgent financial conference in Chungking. On the morning of 24 August he boarded a Chinese National Aviation Corporation plane, the Kweilin, to fly to Chungking. The plane was intercepted and forced down in the sea near Tang Kai bay. Hu Yün and 18 of the 21 other passengers, including the banker Hsü Hsin-liu (q.v.), perished. He was officially mourned by the National Government, which issued an order commending him and awarding him its highest civilian honors.