Uneasy Partners: The Conflict Between Public Interest and Private Profit in Hong Kong

VIII. The Triumph of Chinese Capitalism

VIII The Triumph of Chinese Capitalism In the middle of the twentieth century, Hong Kong's largest business enterprises were still well-known companies whose ownership seemed securely British: Jardine Matheson, Butterfield and Swire, Hutchison Whampoa, Wheelock Marden, China Light and Power, and the Hongkong and Shanghai Banking Corporation (the Hongkong Bank). Here, it seemed, was the reality of British colonialism in Hong Kong: control of the commanding heights of the economy. Around 1973, "about half' the total value of Hong Kong's publicly listed companies was accounted for by the Jardine and Swire Groups, together with Hutchison Whampoa and Wheelock Marden, and these firms also seemed to dominate the political landscape. "Their chiefs or delegates sit on all the key bodies in the Colony," a British critic claimed, "They wield enormous power ... a tiny group that manipulates the money supply, the stock exchange and the government".! At this date, they could still operate like a private club and divide up new business opportunities among themselves, especially when the colonial administration was involved. But their days were numbered. During the 1970s, the importance of British-controlled firms went into a rapid decline, and Hong Kong's own tycoons began to eclipse them.2 Commercial blunders had left even the bestknown British names vulnerable to takeover bids from local capitalists. Sir Douglas Clague lost control of Hutchison Whampoa in 1975 through disastrous speculation on foreign currency and stock markets. The Jardine Group failed to foresee a crippling downturn in property values in 1982 and was to spend two decades scheming to keep Chinese predators at bay. John Marden misread world shipping trends and by 1985, had to surrender control of Wheelock Marden.3 Chinese tycoons had come to dominate the business scene. The British who survived still commanded considerable power, nevertheless. The Hongkong Bank transformed itself into HSBC and became a world-class global bank with its headquarters in London. Another three 160 Uneasy Partners British-controlled family groups, the Jardine and the Swire Groups, together with the Kadoories, accounted for 23 percent of the value of Hong Kong's publicly listed companies when British rule was coming to an end.4 But their undisputed pre-eminence was gone. They had been overtaken by Chinese tycoons: Li Ka-shing, Lee Shau-kee, Walter, Thomas, and Raymond Kwok, and an array of Chinese business dynasties. This chapter examines the changing status of the leading British firms and why the competition from the Chinese elite proved so potent. Historical Legacies The culture of the major British firms had been shaped, like their fortunes, by developments on the Mainland rather than in Hong Kong. They had been founded to take advantage of the China market, and they had prospered behind the shelter of extra-territorial privileges in the treaty ports and concessions that Western nations had extracted from the Manchu Empire in the nineteenth century. As the "Introduction" narrated, the United Kingdom was unable to protect its "informal empire" in China during the 1920s and began to abandon its extra-territorial rights. British firms viewed the prospect of withdrawing from the Mainland with dismay. Soon, however, they had to accept the involuntary transfer of their headquarters from Shanghai to Hong Kong: first during the Japanese War and, for a second time, after the Chinese Communist Party came to power in 1949. British firms only started to focus on Hong Kong reluctantly and after being forced out of the Mainland. Throughout this process, they tended to see Hong Kong as little different from the old treaty ports, despite its status as a crown colony, expecting it to provide similar levels of preferential treatment for British firms and citizens both in terms of business priorities and of personal privileges. These historical experiences of British firms on the Mainland shaped the dominant features of the treaty port culture. These included:5 • a considerable fear of the Chinese coupled with a blinkered assumption of the right of foreign firms to the perpetuation of their dominant position in local economic affairs; • a reluctance to have direct dealings with Chinese and a reliance on intermediaries; and • a preference for using financial leverage and corporate relationships, rather than direct investment, to maximize profit opportunities. The Distant Chinese British businessmen in Hong Kong displayed much the same social and commercial behaviour as foreigners throughout the rest of China before World The Triumph of Chinese Capitalism 161 War 11.6 From...