The Princely House

From all over free Asia last week, capital flooded into Hong Kong. In the island colony itself, bank withdrawals ran more than ten times normal rates--but not out of panic. Among Asian investors, the rush was on to buy the first public stock offering of the most powerful British trading company east of Suez: 129-year-old Jardine, Matheson & Co. By week's end the 900,000-share secondary issue had been oversubscribed 56 times, and Jardines' stock, which had been distributed at $2.78, was changing hands in private deals at $5.22.

Jardines' shares were no run-of-the-mill investment. Playing its cards close to the vest, the company admits only to assets of $20 million and 1960 profits of $1.5 million. But as Hong Kong agents for 77 major companies, Jardines sluices Western products ranging from machine tools to fine Scotch throughout Asia. In addition, the company owns much of the richest land in booming Hong Kong, controls two of the island's three profitable English newspapers, and has substantial interests in banking, shipping, insurance, utilities, streetcars and airlines. So powerful are Jardines' executives, who traditionally sit on Hong Kong's governing bodies and the boards of its richest banks, that local Chinese call the company "the princely business house.''

Old Habits. "The story of Hong Kong's development." says Historian Harold Ingrams. "is to a large extent the story of Jardines.'' Both stories began early in the 19th century when a pair of thrusting Scots--James Matheson and Dr. William Jardine--cracked the British East India Co.'s trading monopoly with China and, with the aid of a heavily armed clipper fleet, won for themselves 25% of the illegal but vastly profitable opium trade. In 1839, when the Manchu Emperor seized 20,000 chests of smuggled British opium, it was William Jardine who convinced British Foreign Minister Lord Palmerston that this was an indignity to which Britain could not submit. The result was the three-year Opium War, which ended in 1842 with permanent Chinese cession of Hong Kong to Britain.

From its Hong Kong base, Jardines reached deeply into China, laid some of the country's first major rail, lines and brought in Western products in exchange for Chinese silks, spices, teas and minerals. Traders to the core, Jardines' high-living taipans made a practice of getting along with whoever was in power in China --or any part of China. During World War II. British-owned Jardines continued to make beer at its Happy Harmony Brewery in Japanese-occupied Shanghai. When the Communists came, Jardines hoped to do business with them, played an influential part in persuading London to recognize Mao Tse-tung. But by 1954 all of Jardines' mainland assets had been taken over by the Reds--a loss so heavy that the company has never been willing to put a figure on it.

Undeterred. Jardines continued to do as much business as possible with the Communists from its Hong Kong headquarters, swapping Western chemicals and machinery for Chinese commodities. But the company also embarked on a major program of expansion into other areas. It bought up an importing and engineering company with outlets in Singapore, Malaya, Borneo and Sarawak. It stepped up tea marketing in the U.S. through Jardine. Balfour Inc.. branched into manufacturing with a $1,000,000 textile plant in Hong Kong.

New Markets. Much of the profit from these operations funnels back to the descendants of Founder William Jardine, who now live in Britain. The working head of the Jardine empire is Managing Director Hugh D. M. Barton, 50. Tall (6 ft. 3 in.), suave and social, Cambridge-educated Hugh Barton joined Jardines in 1933 as a tea taster, scrupulously lives up to the company's cherished traditions, including the raising of ponies that race under the Jardines' silks.

Barton freely concedes that Jardines' trade with Red China, which has sagged steadily from the last published figure of $35 million in 1959, is likely to sag even more. Says he: "The immediate outlook for trade with China is discouraging because of natural calamities. This has resulted in China having to spend a great deal on the import of foodstuffs." But he is confident that great new markets still await Jardines in the emergent nations of Southeast Asia. And most old Asia hands, convinced that a prime motive for last week's stock sale was to raise expansion capital, back Barton's judgment of Jardines' future. Says one: "Jardines always was, and still is, a Scottish house that kept the Sabbath and everything else it could lay hands on."

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