BNP Paribas in China: towards a forced withdrawal (4/5)

BIC, a French-Chinese bank founded in 1913 with the support of the Ministry of Foreign Affairs with offices in Shanghai and Paris, consisted of one third Chinese capital, and the rest of it French capital including from Banque de Paris et des Pays Bas (Paribas).

Following a very promising start due to the prosperity of the Chinese economy, the bank suffered from popular uprisings in the 1910s and political events that shook the country from 1919, preventing it from curbing the decline in commodity prices and obtaining the reimbursement of loans granted to the Chinese government. Being the direct competitor of another French bank – Banque de l’Indochine – it was unable to find support within the French government in terms of aid and recapitalisation.

Wars and country political situation  drive the Group to withdraw

However from 1931 to 1937 the country was involved in the Second Sino-Japanese War, marked by the Imperial Japanese Army’s incursion into the rest of Chinese territory on 13 August 1937, and the invasion of Shanghai. As from 1941, this incursion would form part of the Asian chapter of World War II (the Japanese invasion of South East Asia and the Pacific War). It should be noted that France’s position with regard to the Japanese in Shanghai was more than accommodating.

This prevented the Shanghai office in 1940-1941 from being affected by the difficult situation caused by the Second Sino-Japanese War: until December 1941, the city remained outside the conflict. Protected by international and French concessions, port activities kept up their pace.

But in the aftermath of the Pearl Harbor attack, the Japanese became the absolute masters of international concessions in Shanghai and of all economic sectors in the city. Although protected by its neutral status and the existence of a French concession, the Shanghai office was reduced to waiting: from 1942 to 1945, it merely tried to cover its overhead expenses.

Then on 17 December 1950, in retaliation to Peking’s engagement in the war alongside North Korea, the United States blocked all Chinese funds on its territory. Without Dollars, Chinese trade with Western countries became paralysed. The country fell back on trading with the USSR and practised an increasingly strict implementation of the reforms planned by the Mao regime, starting in 1949. The Peking, Hankou and Canton offices closed in the same year.

The country’s political situation and its highly strained relations with Western countries during the Cold War forced the Group to leave the country and to revise its investment strategy in this part of the world. As a British colony, Hong Kong was spared from Maoist expansion and became the new home port for the Group.