The dawn of the Golden Age (mainly about money...)

Submitted by Andrew Craig-Bennett on Wed, 08/25/2010 - 09:40

The HK$ had evolved from the Trade Dollar, but was linked to Sterling until the 1960s, when the devaluation of Sterling caused Hong Kong to move out of the Sterling Area. The HK$ then led a life of its own until the disastrous and spectacular Hong Kong property crash of 1983 (we'll get back to that) which caused a "run" on the currency.

The hero of this part of the tale is Sir John Bremridge, who having retired as Taipan of the Great and Ancient Hong was asked by Sir Murray MacLehose if he would care to join the Government as Financial Secretary, in 1981. This was the first time that anyone from business was asked to join the Government at Policy Secretary level; it has happened once since then (Elsie Leung, post 1997). Sir John Brembridge is, after Sir John Cowperthaite, the second of Hong Kong's three famous Financial Secretaries; there will be one more whom we need to mention.

As to why the currency board was needed, we have to go back a bit, which we will, but meanwhile we might note what was probably the high point of popularity of British rule in Hong Kong:

In early 1982 Sir Murray Maclehose retired, to become, in effect, Hong Kong's man in the House of Lords, and was suceeded by another very popular and esteemed Governor, Sir Edward Youde, the only Welshman to run Hong Kong, a career diplomat with long experience of China, a learned Chinese scholar with the gift of the common touch, who was probably Hong Kong's most loved Governor:

A remarkably modest photograph, but very typical of the man.

(Sir Edward and Sir John, by the way, got on like a house on fire.)

A cleaned-up Government, rapidly improving public services, and Hong Kong was in the middle of a property boom.

At this time, the late, and by many much lamented, Far East Economic Review* conducted an opinion poll in Hong Kong, asking what its citizens wanted for the future of their territory.

66% of respondents hoped that Hong Kong would carry on just as it was.

2% voted for Hong Kong to return to Chinese control.

(This survey is in danger of going the way of the '67 riots. Did it really happen? Fortunately. paper lasts longer than computer memory.)

* I cannot put my views better than this:

Now, as can be seen, during the seventies, Hong Kong was moving from a low cost manufacturing economy which had kept people fed during the days of the mass refugee influx and the Embargo, towards a more mixed economy with higher value manufacturing and a resumption of trading. There was a growth in financial services as soon as people had money to save.

The last big wave of refugees arrived with the Cultural Revolution in 68; I have a good friend whose parents, both doctors, arrived in Hong Kong from Shanghai in that year - the Mainland took a relaxed view of the border at times when there were food shortages - but there was a constant trickle of refugees until the ending of the Touch Base Policy in 1981. Thereafter, immigration from China was illegal (immigrants were called "Eyeyes" - "IIs") but it did not actually stop.

During the years 1960 - 1990 Hong Kong's GDP per head went from one quarter that of the UK to one and one third that of the UK.

The Hong Kong Stock market became a significant one.
We may spend a little time considering the development of the Hong Kong stock market and its major components - the "hongs"
Hong Kong had had a stock market since its very early days; it was a rather stuffy and clubbable institution which dealt in a handful of companies; brokers rather expected to see cash before executing a trade and a board lot was HK$100K or so.

Rival stock markets were set up in the sixties and seventies - at one time there were, I think, four of them - the newcomers were aiming at a very different clientele and had limits of around HK$2K with margin trading allowed. This was aimed at people who had small earnings but who fancied a flutter - it was an alternative to Happy Valley and very much seen as such.

An expression typical of the times was that "Once your taxi driver and your amah started tipping a stock it was time to be out of it".

Hong Kong's first corporate raider was Colonel Sir Douglas Clague. Colonel Clague had, as a lieutenant in the Royal Artillery, been one of the defenders of Hong Kong; had been taken prisoner, escaped, joined and served in the BAAG and had taken the surrender of the Japanese in Bankok by sheer force of personality - he drove into the city centre in a car flying the Regent's flag, which naturally caused the Japanese to salute, marched into the Japanese headquarters with six men and told the Japanese to surrender and start co-operating, as they were surrounded by guerillas. ( This was another British "beat the Americans to it" operation - MacArthur had announced that no Allied forces were to enter Japanese occupied territory before the official Japanese surrender on the 2nd September. This caused outrage amongst the British forces, since there were large Japanese POW camps in Thailand (see the Burma railway, etc) and amongst American OSS units since both feared a massacre of prisoners by diehard Japanese units. So "operation Swansong" was authorised by Mountbatten in disregard of MacArthur and was carried out by British M19 units and American OSS units which had been assisting the Thai underground - 30,000 POWs were freed.)

Two years after the war ended Clague  joined a small Hong called John D. Hutchison and Co, where he soon rose to become Taipan and a feared corporate raider, building the company which he re-named Hutchison International. He became a member of Legco, he was knighted and he was behind the development of the Jockey Club's new course at Sha Tin. But in the early seventies he grew the business, now Hutchison Whampoa after acquiring the Hong Kong and Whampoa Dockyard, too fast; he was wrongfooted by a stock market collapse in 1973, and in 1975 he was forced to ask the Bank, of which he was a Director, for support - they required thirty per cent of Hutchison's issued share capital and their nominee as his replacement. The Bank's replacement was William Wyllie, an Australian former racing driver known as a cost cutter, but in 1979 the Bank shocked Hong Kong by selling their stake to Li Ka-Shing's Cheung Kong ("Great River" - the Cantonese name for the Yangtse River - its Chang Jiang in Mandarin) Real Estate Company. Li Ka Shing put in Simon Murray, a former member of the French Foreign Legion, to manage Hutchisons. Mr Murray is still very much with us and recently became the oldest man to walk to the South Pole.

This was the first take over of a "British" Hong by Chinese interests.

Today, of course, Li Ka-Shing is one of the world's richest men and his empire is truly vast.

The term "hong" comes up in any discussion of Hong Kong. Originally,a hong was a trading house; over time, the term became limited to large, well established, enterprises and from there it was applied not just to trading houses but to other substantial businesses. A Hong is headed by a Chairman or Chief Executive who is referred to as a Taipan (= "very big boss") if he is thought by others to deserve that title. A man who never took a decision or a risk would never be considered a Taipan - a Taipan has to be a Leader of Men.
In the Seventies the "Hongs" were generally thought to include the following - I have listed them with the name of the family most closely associated with each (it would be wrong to use the word "controlling" but you get my drift...):

  • Jardine Matheson / Hong Kong Land / Dairy Farm (Keswick)
  • China Light and Power / Hong Kong and Shanghai Hotels (Kadoorie)
  • The Hong Kong and Shanghai Banking Corporation (no overall control)
  • Swire Pacific (Swire)
  • Cathay Pacific Airways (70% Swire, 30% Bank)***
  • The Bank of East Asia (Li - not Li KaShing this is a much older HK dynasty)
  • Wheelock Marden (Marden)*
  • The Hong Kong Wharf and Godown Company*
  • Hutchison International**
  • The Hong Kong and Whampoa Dock Company**

By 1990 those shown thus * had passed to the Pao family and those marked ** had passed to Li KaShing. Cathay Pacific *** was floated and formally has no overall control but is still within the Swire camp.

Today we could assemble a list of Hongs by listing the components of the Hang Seng Index and picking them out:

If we list the members of the Hang Seng Index who merit their own Wikipedia entry then delete the "Red Chips", we come up with a plausible list of the Hongs of today.


Trading and Industrial:
What such a comparison will show is that the original Hongs were either traders, bankers or service businesses (including utilities) in Hong Kong, and with the exception of those connected with the Kadoorie family, who are Jewish (Sir Elly Kadoorie had begun as a manager in David Sassoon and Sons - see above) and the Li family, they were controlled by familes who came originally from Britain.
Today the hongs are often global businesses:
It is interesting to look at the evolution of one of the hongs that I have listed above - Li and Fung - to see how this very well run business adapted to the changes in the Hong Kong economy whilst remaining, essentially, a trading house:

Hong Kong manufacturing was starting to "hollow out" in the 80's as people experimented with production in the Mainland; there was no language barrier in Guangdong Province, but this was still quite a tentative process and it received a few set backs; notably the Fourth of June Events (Tian an Men Square) . Only after Deng's Southern Tour in 1992 did things really get going.

But lets get back to 1983.