International Business : Jardine Pulls Flagship Affiliates From Hong Kong Stock Market : Trading: Firm’s largely symbolic retreat, begun a decade ago, nears completion as reversion to Chinese rule looms.
Jardine Matheson, the powerful trading house that helped transform this colony into a jewel of the British Empire, moved closer Wednesday to completing a symbolic retreat begun a decade ago when Britain agreed to return Hong Kong to China.
Jardine, which inspired James Clavell’s novel “Noble House,” removed two of its flagship affiliates--Jardine Matheson Holdings and Jardine Strategic Holdings--from the stock market here.
The companies will be traded on the Singapore stock market next year. Jardine also plans to list in Singapore three other affiliate companies currently traded in Hong Kong.
Jardine began pulling out in 1984, in part, it said, to protect itself from a hostile Beijing government. The moves are largely symbolic, however, because Jardine’s headquarters will remain in Hong Kong and it has substantial operations in both Hong Kong and China.
“We have 60 joint ventures on the mainland and almost 80,000 employees there. About 60% of our profits come from Hong Kong and China,” said Neil McNamara, a Jardine spokesman.
Jardine’s first move in 1984 was to change its legal domicile to Bermuda. In 1992, it removed its main listing from the Hong Kong market, which prompted other companies to follow suit. By next March, almost the entire Jardine Matheson group will be safely ensconced in Singapore and Bermuda. “All Jardine is doing is maintaining the status quo,” McNamara said. “We are a British company operating in Hong Kong, and that will remain the same.”
As the July 1, 1997, reversion to Chinese rule nears, Jardine fears it may become a target of Chinese-backed hostile takeovers, or worse.
The fears are not unfounded.
Whenever Beijing wants to make Jardine uncomfortable, it brings up the company’s “perfidious” origins. As the oldest British trading company, or hong , Jardine made its fortune trading opium for tea and silk in China, and it was influential in getting Britain to fight the Opium War, the 1840-41 clash in which the British took the island of Hong Kong.
In 1937, China achieved some revenge by nationalizing Jardine’s headquarters in Shanghai and its Chinese holdings. Recently, the basis of China’s displeasure with Jardine has been the company’s support of something China fears could be as addictive as opium: democracy.
Jardine was the only hong to condemn the Chinese government for its massacre of student demonstrators in Tian An Men Square in 1989. The company’s executives have also backed Hong Kong Gov. Chris Patten’s recent democratic reforms, which have riled Beijing.
The company protests that it has been made a scapegoat.
“We’re not involved in politics between Britain and China,” McNamara said. “We’re just in business.”
But recent run-ins between Jardine and Beijing seem to show that in Hong Kong, politics and business aren’t easily separated. Beijing has refused to approve a $1.6-billion container terminal project, complaining that Jardine received the contract as a reward for political support. Soon after, a Jardine-owned construction company came under fire after it was chosen to build China’s naval base in Hong Kong.
Jardine may have anticipated such attacks when it took its main listing off the Hang Seng index in 1992--an action Beijing called irresponsible. Or, as some analysts suggest, the firm may have sealed its fate.
“We’ve been caught up somewhat in a struggle in which we had no control,” McNamara said. “We won’t be released from that until the conflict is resolved.”
Hong Kong’s other hongs seem to be taking a different tack, convinced that change is the key to success in China’s burgeoning market. The contrast is especially apparent with Swire Pacific, Jardine’s sometime partner and longtime rival.
“Swire has changed their tune,” said Gordon Crosbie-Walsh, a financial analyst at Nomura Research Institute. “They made a significant effort to improve their relationship with China, and it’s paying off.”
The company has traded its British image for a more Asian one, replacing the Union Jacks on the tails of its Cathay Pacific airplanes with a bird-like brush stroke of Chinese calligraphy. It formed partnerships with the mainland company Citic Pacific, whose head, Rong Yiren, is now vice president of China, and won the Coca-Cola bottling franchise for China’s large and thirsty market.
“Swire will be the winner in China, but not overall,” Crosbie-Walsh said. “Jardine is capturing growth all over the world. Swire will have the growth from China, but also the risk.”
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