Jardine Matheson

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Jardine then persuaded the British Foreign Secretary Lord Palmerston to send warships to China to enforce a judgment for reparations and to preserve free trade. The hostilities that ensued became known as the First Opium War.

The Chinese lost and were forced to sign a treaty on August 29, 1842, which awarded the British $6 million in reparations, opened the ports of Canton, Amoy, Foochow, Ningpo, and Shanghai, and ceded the island of Hong Kong to Britain.

Jardine Matheson purchased the first plot of land to be sold in Hong Kong and promptly moved its offices there. The colony's first governor, Sir Henry Pottinger, endorsed the opium trade (in defiance of Queen Victoria) and later won the support of Parliament, which viewed the opium trade as a method to reduce the British trade deficit with China.

When the company's opium boats sailed into Hong Kong they were greeted by a cannon salute. Jardine Matheson profited greatly from its privileged position in Hong Kong, and through the strength of its opium trade, began to develop commercial interests throughout the region.

Jardine Matheson became known among the local Chinese as a hong (the word implies "big company" but has no relation to the name Hong Kong), and its chairman became known as a taipan, literally a "big boss."

During this period Thomas Keswick, also from Dumfriesshire, married Jardine's niece and was subsequently taken into the Jardine family business. Their son William Keswick established a Jardine Matheson office in Yokohama, Japan in 1859 and later became a leading figure in company management. The Keswick family grew in influence within the company, largely displacing the Matheson interests.

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Expanded Beyond Trading in Latter Half of 19th Century

Jardine Matheson established trading offices in major Chinese ports and helped to set up enterprises as diverse as brewing and milling cotton, in addition to trading tea and silk. The company introduced steamboats to China and, in 1876, constructed the first railroad in China, linking Shanghai with Jardine Matheson docks downriver at Woosung.

Continued hostilities between China and Britain resulted in a Second Opium War in 1860 and a war to protect colonial interests in 1898. As victors in both these wars, the British gained trade concessions and colonies throughout China and won virtually unrestricted commercial rights to conduct business in China.

The opium trade, which China had been forced to recognize as legal, had become an extremely sensitive subject. Thousands of addicts (known as "hippies" because they would lie on their hips while smoking opium) had created a serious social problem. Elements in Parliament called for an end to commercial activities that perpetuated the pain and suffering of these addicts.

The issue was seized by nationalists who argued for an end to the domination of colonial powers in China, and it eventually led to uprisings such as the Boxer Rebellion and the Republican Revolution. For its own protection and business interests, Jardine Matheson was forced to curtail trading opium.

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By 1906, the year it incorporated in Hong Kong, Jardine Matheson had expanded into a wider range of operations, but experienced strong competition from another British trading house called Butterfield & Swire, which was also based in Shanghai and Hong Kong.

The competition between Jardine Matheson and the Swires began in earnest in 1884 when Butterfield & Swire set up a rival sugar refinery in Hong Kong, in an attempt to break Jardine Matheson's monopoly. The competition spread into shipping and trading, but remained on the whole civilized and constructive.

Jardine Matheson continued to operate in China relatively unobstructed by the Nationalist government, which had grown increasingly corrupt. The company continued to expand its interests in China and, with other foreign interests such as Swire and Mitsui, became one of the largest companies in the country.

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Suffered Severely During World War II

In the summer of 1937 Japanese forces attacked China in an attempt to expand Japanese commercial and strategic interests on the Asian mainland. Jardine Matheson officials stationed in areas overrun by the Japanese were branded as agents of European imperialism and imprisoned.

The company's compradores (Chinese intermediaries) were scattered, and its factories were looted; approximately 168,000 spindles were stripped from Jardine Matheson textile mills. Japanese military adventurism in China led to the occupation of several more Chinese ports, including Shanghai and Canton, where Jardine Matheson conducted a substantial portion of its business.

Tony Keswick, a grandson of William Keswick, managed the company's affairs in Shanghai until 1941, when he moved to Hong Kong after having been shot by a Japanese. He was replaced by his brother John, who himself was forced to flee when the city came under siege.

Jardine Matheson had been effectively prevented from doing any further business in China, but continued to operate in Hong Kong, which, as British territory, the Japanese were unwilling to invade.

As a member of the anti-Comintern pact, Japan was unofficially allied with Nazi Germany and Fascist Italy in the war in Europe. The increasingly belligerent military leaders in Japan pledged to evict European imperialists from Asia and to establish a trans-Asian "Co-Prosperity Sphere."

On December 1, 1941, Japanese forces invaded British colonies in Asia, including Hong Kong. Jardine Matheson officials in the colony were imprisoned with other Europeans at Stanley Prison. John Keswick, however, managed to escape to Ceylon (Sri Lanka), where he served with Admiral Earl Mountbatten's staff.

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Forced to Abandon China Following Postwar Communist Takeover

When the war ended in 1945, the British resumed control of Hong Kong and John Keswick returned to oversee the rebuilding of Jardine Matheson facilities damaged during the war.

The company owned a small airline, textile mills, real estate, a brewery, wharves, godowns (warehouses), and cold-storage facilities. In 1949, however, after four years of civil war, Communist forces seized control of the Chinese mainland.

In Shanghai, John Keswick attempted to work with the Communists (who had invited capitalists to help rebuild the economy), in the belief that they would be more orderly and less corrupt than the Nationalists.

Keswick argued for British recognition of the new government, and even attempted to run his company's ships past Nationalist blockades. By 1950, however, new government policies were enacted that increased taxes, restricted currency exchanges, and banned layoffs.

Ewo Breweries, a Jardine Matheson subsidiary in Shanghai, was ordered to reduce its prices by 17 percent, despite heavy increases in the cost of raw materials. The government forced Ewo to remain open, despite a $4 million annual loss.

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Companies based in Hong Kong were bound to observe a British trade embargo placed against China as a result of the Korean War. Conditions had deteriorated to a point where it was impossible to continue operating in China (on one occasion Keswick was arrested as he attempted to leave Shanghai).

Compelled to close its operations in China, Jardine Matheson entered into negotiations with the government and, in 1954, settled the nationalization of its assets in China by writing off $20 million in losses.

Jardine Matheson continued to trade with the seven official Chinese state trading corporations and attended the biannual Canton Trade Fair, where Chinese companies negotiated approximately half their nation's foreign trade.

Many of Jardine Matheson's management traditions changed after the war. Although managers continued to be recruited primarily from Oxford and Cambridge, the company started placing younger men in higher positions.

John Keswick, whose nephews Henry and Simon were too young to run the company, returned to Britain in 1956 to direct the family estate and appointed Michael Young-Herries to manage the operations in Hong Kong.

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Became Public Company in 1961

In the late 1950s John and Tony Keswick enlisted support from three banks in London and purchased the last Jardine family interests in the company. Jardine Matheson became a publicly traded company in 1961 and, with additional capital provided by shareholders, acquired controlling interests in the Indo-China Steam Navigation Company and Henry Waugh Ltd. and established the Australian-based Dominion Far East Line shipping company.

In 1966 China embarked on its second campaign to form a nation of communes. During this campaign, called the "Cultural Revolution," China ceased virtually all trade with Hong Kong. Although Jardine Matheson lost a significant amount of trade with the Chinese, its association of textile companies in Hong Kong continued to generate large profits from exports to the United States.

The company's greatest achievement during this period was the sale of six Vickers Viscount aircraft to the Chinese. By 1969 the Cultural Revolution had lost its momentum and Jardine Matheson was once again doing business with the Chinese.

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In 1972 the Keswick family attempted to install Henry as the new taipan, but met considerable resistance from supporters of managing director David Newbigging, the son of a former director of Jardine Matheson.

The Keswicks prevailed after winning the support of institutional shareholders in London, and Henry Keswick was named senior managing director, while his father John resumed the chairmanship to ensure that the Keswicks did not lose control of the company.

Three years later Henry stepped down and returned to London and was replaced by David Newbigging. Henry, remarked Fortune, lacked the "panache" of the elder Keswicks and made "more than a few enemies" through his bold financial maneuvers.

Henry did, however, complete a buyout in 1973 of Reunion Properties, a large real estate firm based in London. Keswick financed the takeover by creating an additional seven percent of Jardine Matheson equity, but through the acquisition nearly doubled the company's assets.

Henry Keswick also oversaw the acquisition of Theo H. Davies & Company that same year. Davies, a large trading company active in the Philippines and Hawaii, controlled 36,000 acres of sugar plantations. A few months after it was purchased by Jardine Matheson, world sugar prices rose dramatically.

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Profits Suffered in the 1970s

At the time David Newbigging assumed the senior directorship of Jardine Matheson, a disturbing trend began to arise in Hong Kong. Throughout its history, Jardine Matheson had operated as a trading agent, or "middleman," arranging sales between producers in one location and consumers in another.

Manufacturers in Hong Kong, however, discovered ways to sell their products directly to customers, bypassing agents such as Jardine Matheson. Even Hawker-Siddeley, a British company, managed to arrange the sale of six Trident jetliners to the Chinese without the negotiating expertise of Jardine Matheson.

Between 1975 and 1979, Jardine Matheson's profits grew at an annual rate of only ten percent (a poor record for Hong Kong). David Newbigging responded by disposing of underperforming Jardine Matheson subsidiaries outside Hong Kong. He redoubled efforts to increase trade with China (which had only invited the company back into China in 1979) and resumed investments in Hong Kong-based enterprises. Jardine Matheson, however, had little expertise in these enterprises and lost money in almost every venture.

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During the 1970s British companies in Hong Kong such as Jardine Matheson, Swire, Hutchison, and Wheelock Marden, were consistently outperformed by local, ethnically Chinese hongs. Most of these hongs became public companies in the early 1970s and invested heavily in Hong Kong industries, which experienced strong growth during a decade-long bull market. These companies became serious competitors of the British establishment by the end of the decade.

Cheung Kong Holdings, a local hong run by an influential figure named Li Ka Shing, achieved a dominant position in the Hong Kong property market by 1980, threatening the business of Hongkong Land, a development company established in 1889 by William Keswick's brother James Johnstone Keswick which remained closely associated with Jardine Matheson.

In addition, when the shipping magnate Sir Yue-Kong Pao decided to diversify from ships into property a year earlier, his first move was to outbid Jardine Matheson for the Hongkong & Kowloon Wharf & Godown Company, over which the two groups had previously shared control.

When it was discovered that a secret partner had begun acquiring shares of Jardine Matheson stock in late 1980, many observers suspected that either Li or Pao (or worse, both) were attempting to purchase a large enough share in Jardine Matheson to win control over Hongkong Land.

Newbigging announced in early November that Jardine Matheson and Hongkong Land had agreed to increase their interests in each other, so as to make it impossible for any party to gain control of either company. The cross-ownership scheme, however, placed both companies deeply into debt.