Historian Ghassan Moazzin on Foreign Banks and Global Finance in Modern China

Cover image of Foreign Banks and Global Finance in Modern China

Solid, stately buildings line Shanghai’s waterfront Bund, their ornate facades standing in stark contrast to the sleek skyscrapers of Pudong across the Yangtze River. Today, Pudong is the city’s financial district, but a century ago the heart of Shanghai’s financial sector beat on the Bund. One by one, foreign banks arrived in the late 19th century to set up operations on the thoroughfare: HSBC, Deutsch-Asiatische Bank, Yokohama Specie Bank, Banque de L’Indochine, Russo-Chinese Bank, and many more that failed to find a foothold in the Chinese market. 

Historian Ghassan Moazzin (University of Hong Kong) examines the history of those enterprises in his 2022 book, Foreign Banks and Global Finance in Modern China: Banking on the Chinese Frontier, 1870-1919 (Cambridge University Press). Concentrating on the rise and fall of the Deutsch-Asiatische Bank (DAB), Moazzin moves beyond an institutional history to consider the role that the DAB and other foreign banks played in integrating China into the global economy as they facilitated trade and underwrote Chinese government debts. Highlighting “processes of conflict, cooperation and competition,” he argues that this story is a far more nuanced one than has been previously told. “China’s integration into the global web of capital flows and the making of the first global economy,” Moazzin writes, “was always a process of negotiation between indigenous and foreign actors, markets and institutions, and not a one-way imposition of Western capitalism.”

After reading Foreign Banks and Global Finance in Modern China, I interviewed Ghassan Moazzin through email about his deeply researched and thoroughly engaging work.

Maura Elizabeth Cunningham: First, I’d like to ask how you got interested in the history of foreign banks in China. What pulled you into this project, and specifically what drew your focus on the Deutsch-Asiatische Bank (DAB) as a case study?

Ghassan Moazzin: As is often the case with historians, I think, my interest in the topic started with primary sources I found. In my case, these were files related to the DAB’s history in the archives of the Historical Institute of the Deutsche Bank in Frankfurt. Before that, I had not been specifically interested in foreign banks in China in general or the DAB in particular. However, when I started reading about the business of the DAB in these files, I got really interested and wanted to learn more. While I had no background in finance or economics before starting graduate school, reading about business, finance, and commercial transactions in modern China fascinated me right away. In a sense, finding these sources not only led me to the DAB and the history of foreign banking in China, but also towards economic and business history more broadly, and this interest in economic and business history has stayed with me even after the completion of the book and research project.

MEC: China, of course, had a banking sector prior to the arrival of foreign banks in the nineteenth century. What were the characteristics of those domestic banks that created a space for the operation of foreign institutions? What were the practices of the DAB and its counterparts that Chinese banks subsequently adopted in their own operations?

GM: In the book, I trace the important role foreign banks came to play during the late 19th and early 20th centuries back to the fact that they filled what scholars of business and business history call an “institutional void.” In the case of late Qing China, I argue that the absence of Chinese banking institutions that could fulfill certain economic functions, like the remittance of money across the globe, the financing of trade with the West, or the cheap provision of big sums of money, provided foreign banks with an important opening. As the conclusion of the book explains, the flipside of this argument is that once this institutional void started to shrink in the 1910s, 1920s, and 1930s due to a mixture of factors, including the rise of modern Chinese banks, that also meant that the importance of foreign banks and the pace of financial internationalization (which had been rapid between the 1890s and World War I) decreased.

MEC: Banking, especially a foreign bank operating in a (semi-)colonial environment, is often regarded as exploitative. I was struck, therefore, by your focus on the interactive nature of the banking relationship, especially the instances in which you note the agency of Chinese actors. Were you surprised to see this exchange emerge in your research? What are one or two examples of times when foreign banks found themselves working a bit harder than anticipated to come out ahead in a transaction?

GM: I still very vividly remember several times when I was sitting in a library or archive and had profound aha moments when reading primary sources that clearly did not fit much of what I had read in the previous literature. One of the most important examples probably was the ability of Chinese officials to shake down their foreign counterparts and win good loan terms during the waning years of the Qing dynasty. Similarly, for the Chinese banking sector, the book also explain how Chinese bankers often had the upper hand in their relationship with foreign banks.

MEC: Reading Foreign Banks and Global Finance in Modern China, I learned so much about state finances in late Qing China. After initially resisting the idea of taking out large foreign loans, some Chinese officials became like teenagers with a credit card once they realized the amount of money available to them overseas—and bankers were only too happy to issue the loans. How do you seek to write this history into discussions about the fall of the Qing?

GM: In Foreign Banks and Global Finance in Modern China, I explain that by the time of the 1911 Revolution, Chinese officials had become reliant on foreign borrowing. At the same time, Chinese public finance was in a critical state when the revolution broke out. The book traces the critical role of foreign bankers throughout the immediate events of the 1911 revolution and thereafter. Both the Qing and their adversaries sought financial support from foreign financiers. The book highlights that the decision by foreign bankers to initially withhold such financial support from both sides helped shorten the revolutionary conflict. Moreover, their subsequent support for Yuan Shikai after his ascendancy to the presidency cemented his grip on power. The eventual floating of the large Reorganization Loan in 1913 with the help of the bankers allowed Yuan to solidify his position and deal swiftly with the upheaval against him in the same year. Another facet of the bankers’ involvement in the 1911 revolution that the book stresses is their role in maintaining the credit of the Chinese state on Western markets through a variety of measures they took after the outbreak of revolution. It was the success of foreign banks in safeguarding China’s credit that enabled the new republican government to continue to tap foreign capital markets and finance itself.

MEC: How did the DAB in China link up or interact with foreign banks elsewhere in Asia? What sort of regional flows of banking knowledge and practices do you see circulating prior to World War I? Is there other scholarship on this topic that you’d recommend to those interested in looking at banking beyond China?

GM: While most of its branches were located in China and the focus of my book is very much on China, the DAB did not just operate in the Chinese market but also had branches in other economic hubs in Asia, such as Singapore or Yokohama. There is quite a lot of good research on internationally operating banks in Asia. Most importantly, I would highlight the work of a group of Japanese historians led by Nishimura Shizuya and Suzuki Toshio, who have produced important work that focuses on the technicalities of the workings and practices of such banks in Asia. I should also mention Michael Schiltz’s excellent recent book Accounting for the Fall of Silver, which deals with trade finance between the West and East Asia.

MEC: And to finish, what’s occupying your time and attention now, in life and/or work?

GM: In my new research project, I move away from finance somewhat but stay very much within the history of business in modern China. Specifically, I plan to write a history of the Chinese electrical and electronics industries since the late 19th century. While I am still very much at the beginning of this project, the idea is to historicize China’s rise as a major manufacturer and exporter of electrical and electronics products in recent decades. Besides this research project, together with my HKU colleague John D. Wong, I am also building a larger research group on Chinese business history at HKU. Having already worked on this through a range of activities and events over the past two and a half years, we hope to gradually build a platform that brings together business historians working on China.