COLUMN ONE : Hong Kong’s New Business Dynasties : The great British trading houses rush to hire more Chinese executives, shed their colonial veneer before Beijing takes over in ’97.

The ceremonial changing of the guard took place high above Hong Kong Harbor, in one of the glass-enclosed aeries reserved for the colony’s business elite.

Simon Murray, a feisty Scotsman in the long tradition of British colonial traders here, reluctantly handed over his job last fall as managing director of Hutchison Whampoa Ltd., the venerable British merchant trading house, to Canning Fok, a low-profile Chinese accountant from Hong Kong.

The switch on the 22nd floor of Hutchison House ended a boardroom debate about the company’s direction and signaled a scramble among Hutchison and powerful companies like it to shed their British veneer before China takes over in three years.

Since 1979, Hutchison, founded by a colonial class that once banned Chinese from its country clubs, had been controlled by Hong Kong billionaire Li Ka-shing. Li, known for his solid business ties with the Communist leadership in Beijing, wanted Hutchison to concentrate on its trade with mainland China. Murray, although bullish on China, pushed to maintain the company’s business connections with the West through investments in Britain and Canada.

Murray also presented another problem: He supported the democratic reforms proposed for Hong Kong by British colonial Gov. Chris Patten, the bane of the Beijing regime.

When the dust settled, Murray was out. For the first time in its history, Hutchison was to be managed by a Chinese executive. Unequivocally, the main business of Hutchison would be China. There would be no more question of supporting Patten’s reforms.

In terms of Hong Kong history, it was a moment almost as significant as the day more than 150 years earlier when Capt. Charles Elliot of the Royal Navy convinced the British Empire that the rocky island might be a good place to set up business.

As the Hong Kong newspapers noted with varying degrees of celebration and alarm, usually depending on the language in which the article was written, Simon Murray was one of the last British “taipans.”

For more than a century, the Hong Kong financial world has been dominated by a handful of British trading houses. These are the “hongs” made famous in recent years through the best-selling James Clavell novels “Taipan” and “Noble House.”

But with Hong Kong set to revert to mainland China in 1997, the days of the British taipan and the colonial-style hong are coming to an end.

At one time the business of the hongs--the name comes from yang hong, meaning “foreign company”--was tea and opium. Today it is telecommunications and fleets of jetliners. One of the hongs manages the Coca-Cola franchises on the mainland. Another is planning a huge new container port on China’s Yangtze River that it claims will create a Chicago-style hub on the Communist mainland. Another operates a chain of luxury hotels.

Together, the four largest hongs--Jardine Matheson, the Swire Group, Hutchison Whampoa and Wheelock-Marden--have assets of more than $17.5 billion. All are busy buying and selling real estate on both sides of the Bamboo Curtain.

Historically, the boardrooms and executive offices of the biggest hongs were the exclusive domain of the British taipans who commanded enormous power and staggering wealth.

The world of the taipan was one of turbaned Sikh doormen, chauffeur-driven Bentleys and luxurious, mahogany-paneled cabins on company-owned cargo ships plying the South China Sea. As an unquestioned right befitting his position, the taipan enjoyed the best boxes at the Happy Valley racecourse and the best tables at the once whites-only Hong Kong Club, described by a government officer in the mid-19th Century as “the paradise of the select and temple of colonial gentility.”

Making the hongs, the very symbol of Victorian colonial expansionism, acceptable to the Communist landlords of this jewel in the South China Sea is one of the most compelling business stories of this decade.

“If you have someone who is your boss today and someone who is going to be your boss tomorrow and they tell you to do two different things, which one do you obey?” Clive Weedon, head of research at the Nomura Research Institute of Hong Kong, asked rhetorically in a recent interview.

This is the question that looms over all of Hong Kong, from the political corridors of the Legislative Council to the locker rooms of the Hong Kong Police Department, as the 1997 deadline approaches. The name of the game is positioning, with companies and institutions scrambling for strategic redoubts to prepare for the changeover.

About the same time that the Murray-Fok switch was taking place at Hutchison, for example, the Swire Group announced the promotion of two Hong Kong Chinese executives to top positions at its Cathay Pacific Airways and Dragonair subsidiaries, replacing two British executives.

One of the new management’s first acts was ordering British flags removed from the tails of Cathay Pacific airliners.

Other hongs, such as the die-hard Jardine Matheson, are busy severing their ties with the colony. Jardine, once the most powerful of the “princely hongs” and widely considered to have been the model for Clavell’s “Noble House,” took another important step in its decade-long retreat from Hong Kong last month when it withdrew its stock from trading on the Hong Kong Stock Exchange.

Jardine had moved its corporate registration from Hong Kong to Bermuda in 1984, after the British government and Chinese Communists agreed on the 1997 takeover. After the Bermuda switch, the company then began shifting many of its investments to Singapore and Europe.

Today, Jardine’s upper management remains resolutely and unapologetically British.

Unlike the other hongs, Jardine made little attempt to make peace with the Chinese government. Its British executives, for example, were alone among hong officials in condemning the violent government crackdown on the 1989 democracy movement demonstrators in Tian An Men Square. They strongly support democratic reform proposals pushed by the British government in its waning days as the political sovereign here.

Jardine’s pullout from the stock exchange was a chilling reminder that the old ways of doing business in Hong Kong are over. The announcement drew the instant wrath of the Chinese government. Zheng Guoxiong, deputy director of China’s official New China News Agency in Hong Kong, described the Jardine action as “very irresponsible.”

Without saying so directly, the Chinese official accused Jardine, which amassed a fortune under British rule, of jumping ship as the takeover approached.

“Between now and 1997 and beyond,” Zheng said, “it will take our concerted efforts to maintain Hong Kong’s status as an international financial center. We don’t want to see companies failing to take into account Hong Kong economic development and Hong Kong people’s interests by taking irresponsible action.”

In fact, the South China Morning Post newspaper in Hong Kong reported late last month, Jardine executives were secretly worried that the mainland Chinese antipathy toward their company would result in a stock buyout attempt by Chinese-backed companies on the Hong Kong exchange.

Except for Jardine, the other hongs have all tried to make peace with their new masters by converting their British businesses to Chinese standards. Many argue that this is long overdue. After all, 98% of the population here is ethnic Chinese.

At the same time the hongs were announcing their historic changes, Patten, probably the last colonial governor, named for the first time a Chinese civil servant, Anson Chan, as chief secretary, the highest bureaucratic post in the Hong Kong government.

Simon Murray was philosophical about the changes in an interview with Newsweek just after he was removed from the leadership of Hutchison.

“Hong Kong is moving rapidly toward China,” he said, “and you’ve got to have Chinese guys on the block if you want to play that game.”

John Hung, the portly, chain-smoking executive director of Wheelock, is a child of the old British hongs who is supervising the conversion of one of them into a Chinese institution.

Hung’s great-uncle and his father were both “compradors,” the Portuguese term adapted by the hongs to describe the senior Chinese officials who acted as middlemen between the British colonialists and their Chinese staffs and business contacts. The two essential positions in the hong were the taipan, or boss, and the comprador.

“These compradors--and I know firsthand--were in fact chief procurement officer of personnel,” Hung recalled in an interview at Wheelock House in central Hong Kong. “They paid them direct. They got a big sum of money from the company, and they paid these fellas.

“They were the guarantors of the receivables, they were the underwriters against loss claims--they didn’t have insurance companies. They were the chief interpreters. They were the chief marketing and sales people. They did everything. They were the conduit between East and West. And without them, there would have been no success.”

To Mao Tse-tung and other Communist revolutionaries, the compradors were the personification of imperial evil, fellow Chinese willing to sell out their race to the hated foreign powers.

Even in the hongs, the comprador class began to disappear in the 1970s as the conversion to Chinese ownership began.

Today, surprisingly, Hung and Wheelock Chairman Peter Woo have revived the term to describe their own company--now a “Chinese hong”--and the role it will play when the People’s Republic of China assumes control of Hong Kong.

Hung continued: “We look at ourselves at Wheelock as an entrepreneurial merchant house acting as a comprador with China. There are thousands, hundreds of great Western companies with tremendous products that would die to get into China. But they don’t know how. Even if they did know how, it would take them 10 years. The perfect situation is for them to join hands with a company that understands East and West.”

As Jardine withdraws from its Hong Kong base, Wheelock and Hutchison are considered the two “Chinese hongs.”

As for the taipans, they are seen as useless appendages in an Asia for Asians. “The British families may well want to see China succeed,” said one business analyst here, a former journalist with 25 years’ experience working in Hong Kong, “but they probably don’t have a lot of confidence that China wants to see them succeed. History is not really on their side.”

With Jardine in retreat, the last of the British-owned hongs with a significant stake still in Hong Kong is likely to be the London-based Swire Group.

Unlike Jardine, Swire is naming Chinese executives for many senior positions while entering into ventures with powerful Communist state enterprises on the mainland.

Linus Cheung, 46, a Hong Kong Chinese named to head the commercial division of Swire-owned Cathay Pacific Airways, dismissed in an interview the significance of the rush to appoint Chinese to senior positions.

“But for sure, with 1997 and with the changes that are occurring,” Cheung said, “I think Chinese who have the right experience and competence would have improved career opportunities compared to before. . . . It is this East meeting the West.”

Clive Weedon, the Nomura Research Institute head, agreed.

“There was a time,” he recalled without any nostalgia, “when it was probably very important to have a white face and to speak the Queen’s English to get on in Hong Kong. Those days have now departed, and it has become increasingly important that one is able to speak Cantonese and Mandarin (dialects of Chinese) if one wants to function at a senior level in this town.”

Tempest is a Times staff writer, and Courtney is a special correspondent.