A Study on the Transfer Process of the Western Banking System to Korea vis Japan: Hansung Bank and Daiichi Bank

Myungsoo Kim

The aim of this paper is to scrutinize how western technology was transferred into East Asia from the late 19th century to the early 20th century by a case study on the introduction of the banking system into Korea via Japan. In this regard, it is important to focus on the relation between Hansung Bank of Korea and Daiichi Bank of Japan.

From the mid-nineteenth century, the Chinese world system in East Asia began to be disturbed in the face of the eastern penetration by the Western powers. Korea, China, and Japan, which often are called “East Asia three countries”, gradually began to be incorporated into the World Capitalist Economy in response to external shocks by the Western powers. When the Treaty of Nanjing was signed on August 29, 1942, after the Opium War between Britain and China, Japan changed its seclusive attitude entirely towards the western powers into an appeasement policy. Korea, which was called Chosun in those days, reinforced its seclusion policy after the French campaign against Korea (1866) and the United States expedition to Korea (1871). The elite bureaucrats and scholars of East Asia three countries felt that the change was irreversible and insisted that they should accept western culture and technology. However, conservative people strenuously resisted change.

After the compulsory opening of Japanese ports to foreign trade by U.S. Commodore Perry in 1853, Japan tried to establish a modern state during the reign of Emperor Meiji. Japan strongly propelled the Meiji Restoration under the slogan of “encouragement of new industry (殖産興業)” and “national prosperity and military power (富國强兵)”. The Iwakura Mission was dispatched to Europe and America in 1871 for further understanding of western culture, economy, and politics. The Unyo Incident (1875) by the Japanese Army and the Treaty of Ganghwa (1876) were expressions of self-confidence. Victories in the Sino-Japanese War of 1894-1895 and the Russo-Japanese War of 1904-1905 enabled Japan to upgrade its position and range with the Western powers in East Asia. Now Japan had achieved enough economic and military success to fight for the rights and interests with the Western powers in Korea and China. Japan depended on its military power to secure the rights and interests in Korea and to expand trade areas in Korea. Financial supports functioned as a precondition to the above activities. The final result was the colonialization of Korea after the Russo-Japanese War of 1905.

From the late 19th century to the early 20th century, before Korea became a Japanese colony in 1910, a variety of industrial technologies from the U.S., Britain, China, and Japan were introduced into Korea, such as the railroad, tramcar, electricity, telegraphy, weapon, medical treatment, etc. Also, the introduction of the western banking system was closely related to the colonialization process in Korea. Financial penetration by Japan was expanded into the Korean inland since the Pusan branch of Daiichi Bank had been established in 1878, which stimulated the Korean government and elite people had no choice but to establish banks independently to protect the Korean financial system. There was nothing more that Korean people could do against Japan’s expansion of trade and business area with prompt remittance and low-interest loans from Japanese banks like Daiichi Bank. Korean people began to think that traditional finance and usury in Korea should be improved, and the scarcity of financial institutions made them establish actively western style of banks  like Daiichi Bank. The enforcement of tax payments in cash through the Gabo Reform (甲午改革) of 1894 promoted a commodity money economy which had been expanded since the late Chosun dynasty. Both external shocks and internal necessity made Korean people show an aggressive attitude toward the establishment of banks and modernization in finance. 

However, it was so difficult for Korean people to establish monetary and financial systems independently because of Japan’s colonialization of Korea; therefore, Hansung Bank started out again as a by-product of the colonialization process of Korea. Since then, Hansung Bank came to experience dependent development under Daiichi Bank’s supervision and guidance, and the process of dependent development itself was the introduction process and the settlement process of western banking system in Korea. Details of these situations will be examined thoroughly in this paper.