Foreign Banks and Global Finance in Modern China A Conversation with Ghassan Moazzin

Ghassan Moazzin’s Foreign Banks and Global Finance in Modern China: Banking on the Chinese Frontier, 1870–1919 (Cambridge University Press, 2022) is a scrupulously researched and riveting story about the Deutsch-Asiatische Bank (DAB), a German bank that was active in China between 1890 and World War I. The DAB rose to become the peer of the Hongkong and Shanghai Banking Corporation (HSBC) and a major underwriter of Chinese Government debt. It also built a successful commercial business, financing international trade between China and the West. The book draws on intensive archival research from Germany, the United Kingdom, China, and Taiwan, leaning especially heavily on the rich collection of archives in the two European countries. It challenges the received notion of foreign banks in China as being mere expressions of foreign imperialism, highlighting instead Chinese agency and the interdependence between foreign bankers and their Chinese customers.

Matthew Lowenstein: The DAB was one of the most important banks in Chinese and, arguably, global financial history. Yet, before you started researching it, almost no-one had heard of it, and even scholars in the subfield—myself included—were mostly ignorant of its significance. Why was this bank ignored for so long? What did the focus on HSBC—almost to the exclusion of all other foreign banks—obscure? How and why was the DAB different from other foreign banks?

Ghassan Moazzin: I think there are broadly two reasons why the DAB has received relatively little attention so far. First, while the DAB and other foreign banks have of course also been covered at times in the previous literature, Frank King’s four-volume commissioned history of the HSBC remains the most widely read work on foreign banks in China, which, in turn, naturally drew much attention to the HSBC. Second, the HSBC simply was the leading foreign bank operating in China at the time. Something we see in the case of the DAB is that it represented a new form of foreign bank when it entered China in 1890, as it united the interests of the German capital market. More broadly, what I think is naturally lost by paying too much attention to the HSBC is the breadth of different foreign banking institutions operating in China in the late nineteenth and early twentieth centuries. While the narrative of Foreign Banks and Global Finance in Modern China centres on the DAB, one of the things I hopefully managed to do in the book is to give an idea of this diversity.

ML: You draw on a wide array of state and bank archives from Germany, the United Kingdom, and China. How did you track down these collections? Did you notice any other interesting materials that you think merit further scrutiny?

GM: As I guess is true for many historians, the archival research was probably the most pleasant part of working on this book, and I was luckily able to draw on many Chinese, English, and German-language archives in the process. In terms of the European archives, tracking them down was relatively easy. Not only are archives in the United Kingdom and Germany comparatively open and convenient to use, but I found that these archives contained a wealth of information on the China-related activities of the DAB and other foreign bankers during the late nineteenth and early twentieth centuries. As for the Chinese side of my story, thanks to the kind help of Professor Mao Haijian, I was able to spend an extended period as a visiting scholar at East China Normal University in Shanghai, which allowed me to visit and use many archives and libraries in mainland China. In addition, a stint at the Academia Sinica in Taipei, where I was kindly hosted by Professor Chen Yung-fa, proved very useful in collecting additional Chinese sources. As for interesting materials that might be useful to other historians, a general piece of advice I have for those working on Chinese business and economic history is to look at the wide range of foreign sources on the Chinese economy that are available, especially as Chinese archives often remain difficult to access. Moreover, I would encourage scholars to not only look at English-language archives, but also explore sources in languages other than English, such as the rich sources available in German and Japanese archives and libraries.

ML: The concept of the treaty ports as a ‘frontier’ is innovative and highly insightful. It allows us to, as you say, ‘highlight both the complex nature of the environment they operated in and the fact that these banks exemplified much of the ambiguity of the frontier on China’s coast’ (p. 10). How is a frontier different from a border? Were treaty ports a European or a Chinese frontier—or perhaps a mix of each in distinct ways?

GM: In the book, I draw on the work of Robert Bickers, Christian Henriot, and others who have discussed frontiers and frontier spaces because both the environment of foreign banks on the China coast and the activities of foreign banks in the period I examine were full of fluidity and contradictions, and thinking of the DAB (and other foreign banks) as a ‘frontier bank’ is a useful heuristic device for overcoming and complicating simplistic analyses of foreign banking in modern China. The China coast was a space marked by Sino-foreign interaction where Chinese and foreign power intersected, so that it cannot easily be branded as ‘Chinese’ or ‘European’.

ML: In World War I, the bank’s delicate position as an honest broker pursuing good business without regard for national prejudice became untenable. The Allies essentially purchased China’s entry into the war and all but forced the Chinese Government to let British officials liquidate the bank at bargain-basement prices. This story is told in riveting detail and high suspense in your final chapter. It also leads to a highly nuanced understanding of political risk. What does this tell us about the nature of political risk more broadly?

GM: This chapter indeed was a lot of fun to write in part because it provides such a sharp contrast to the rest of the book in that it really is World War I when the globalised world of the China coast came up against the hard realities of war and many things that until then had been taken for granted—be that cooperation among foreign banks or transnational friendships—suddenly came to be questioned. Moreover, the war also generated a lot of wonderfully interesting stories related to individual bankers. These range from the generous treatment Heinrich Cordes, one of the most prominent German bankers, was given in Chinese captivity to the adventures of Alfred Eggeling, a colleague of Cordes who fled Beijing and dressed as a monk to escape arrest.

As for political risk, the final chapter shows that when it came to major geopolitical events such as war, there was only so much foreign businesses in China could do to manage political risk. While elsewhere in the book I show how foreign banks were quite adept at managing political risk during and immediately after the 1911 revolution, the DAB’s attempts to use their financial resources to avert a Chinese entry into the war eventually were unsuccessful. Without generalising too much, I think working on the DAB and the book has certainly made me somewhat more sceptical of the ability of multinational companies to manage global geopolitical shifts and the political risk that such shifts engender.

ML: Reading this book, I had a sense of a moral as well as a business narrative. The German bankers really believed that by integrating China into the global financial system, they were serving China as well as Germany. Today we live in an era of increasing isolationism. China, the United States, and to an extent Europe are sceptical of migration, free trade, and the idea of an internationally integrated economy. What does the story of the DAB tell us about the ideal role of banking and trade? Can capital truly be global and is this an ideal to which it is worth aspiring? Or will nation-states always force bankers to pick a side?

GM: As a historian, I am hesitant to generalise too much about issues such as the ‘ideal role of banking and trade’ or global capital flows. However, a lesson I have taken from working on the case of the DAB, writing Foreign Banks and Global Finance in Modern China, and reading other scholarship is that a backlash against globalisation creates problems for globally operating businesses. In recent years, international banks have fallen victim to the increasing political tensions among nation-states and now face new obstacles in their global operations. Here, the HSBC and current calls for breaking up the bank are a good example, of course. Similarly, if tensions between the United States and China further escalate in the coming years, it will be interesting to see how internationally involved Chinese banks will deal with these tensions and possible sanctions or other consequences. The manoeuvring that some Chinese banks did due to Western sanctions on Russia this year might already foreshadow such issues.

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Matthew Lowenstein

Matthew Lowenstein is a Hoover Fellow at the Hoover Institution, Stanford University. He studies the economic history of modern China from the late imperial period to the early People’s Republic.

Ghassan Moazzin

Ghassan Moazzin is an Assistant Professor at the Hong Kong Institute for the Humanities and Social Sciences and the Department of History at the University of Hong Kong. He is the author of Foreign Banks and Global Finance in Modern China: Banking on the Chinese Frontier, 1870–1919 (Cambridge University Press, 2022).

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