The Rivals...

Submitted by Andrew Craig-Bennett on Sat, 05/01/2010 - 21:21

Mention of the Hong Kong and Shanghai Bank (in Hong Kong, just "the Bank") suggests to me that I should touch on this great rivalry, which really dates from the 1860s.

Shanghai ( - shang - up ) ( - hai - sea - (the first part of the character is the water radical) - amazing how unromantic Chinese place names often turn out to be, isn't it!) had been one of the original Treaty Ports dating from the First Opium War and was particularly important, early on, in the tea trade, but Shanghai had suffered during the Taiping rebellion and it only really "took off" after the British and the Americans merged their concessions to form the International Settlement in 1863.

From that date until the 1940s, Shanghai overtook Hong Kong as the most important commercial city in China, a situation that was abruptly and completely reversed in 1949 when pretty much the entire upper class of Shanghai decamped to Hong Kong, one jump ahead of the Communists. But we'll be coming to that.

For the rest of the 19th century, Hong Kong became a relative backwater, sustained by its naval base, dockyards, sugar refinery and so on.

What happened to the opium trade?

Well, it seems that it gradually faded away and lost importance; probably because there were now other ways to make money in China, but it is interesting to note that amongst the firms that signed up to Tom Sutherland's Prospectus and founded HSBC several were opium traders.

Indeed, it is usually assumed that the reason that Jardine Matheson did not sign up (they even organised opposition to the Bank in Legco) was partly that they wanted their own bank (in my time, they bought Bear Stearns, but they sold it again) but also because Dents, their rival British opium dealers, Heards (American opium dealers) and Sassoon and Co (Indian Jewish opium dealers) all did sign up. This explains why Russell and Co, the other main American opium dealers, did not sign up either - because Heards did.

Most of the firms that started the Bank went bust within a few years - including Dents and Heards - which suggests that trading conditions were changing and new ways to make money were needed.

New firms were starting - if you had the right sort of ideas, drive and luck you could do well in 1860s Hong Kong. Douglas Lapraik, one of the other founders, who did not go bust, was a watch maker who founded a shipping line.

Sassoon and Co took Jardines out of the opium trade in 1872 by some form of commercial coup which I have been unable to discover; this dynasty went on into the 1930s (they built what is now the Peace Hotel in Shanghai) troubled by the Usual Problem of Jewish business dynasties - not everyone who is a good Jew is a good businessmen and rather often good businessmen are simply appalling Jews...Siegfried Sassoon the war poet was the offspring of one Sassoon who was disinherited for marrying out.

Compared to British India, Hong Kong was not aristocratic; the westerners who settled there were generally working class or middle class; there is an almost complete absence of peers, baronets and such. This did not stop the British talent for snobbery, of course. It probably made it worse, because everyone jumped up a rank or two and put on grander airs than they did at home.

Incidentally, if you wonder where a lot of the "old money" in New England and indeed Wall Steet was made, Google the lists of directors of Heards and Russells...

However, we can see a pretty rapid loss of interest in Hong Kong by the American business community in China once Shanghai gets going - no doubt because Hong Kong was British controlled but the International Settlement was fifty per cent American run.


Submitted by
Anonymous (not verified)
Tue, 05/11/2010 - 16:13

Would it be possible to provide more info on that yourself, rather than suggesting a Google ?   If there is anything out on the web, it's not obvious.

Thanks !

Thank you for pointing that out. I will prepare something and post it.

We should keep in mind that the period between the end of the War of 1812 and the start of the Civil War was the era when the US merchant marine was the dominant merchant shipping fleet in the world's commerce - as one example of this, America Square, in the City of London, adjacent to Tower Hill is so named because the wives of the American clipper ship captains running to China from London in the 1840s and '50s lived there.

These ships were mainly owned by the established merchant families of New England.

There is a Wikipedia article on Samuel Russell, here:

His cousin founded the Skull and Bones Society at Yale, of which George W Bush, amongst others, was a member.

Briefly, amongst prominent partners in Russell and Co were the Delanos, including Franklin Delano Roosevelt's grandfather, the Forbeses, including John Kerry's great uncle, the Lows, including Abiel Abbot Low, Augustine Heard (see next paragraph) and Russell Sturgis, later head of Barings.

Augustine Heard left to form his own firm,

which contained amongst others Joseph Coolidge. 

Heards collapsed in the 1870's and I suspect but do not know that this may be associated with any or all of the long recession in the eastern seaboard of the States, or possibly with  the upheaval in the opium trade that seems to have occurred at this time.

It was an article of faith in the Great and Ancient Hong that one element in FDR's hostility to the British was down to their having driven Russell and Co out of their dominant position in the China river steamer trade in the 1870's and 1880's.