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International Trade in Asia

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Hong Kong, the pearl of Asia has been the center of trade and

finance in Asia since the early 20th century. In a short

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history of about 150 years, Hong Kong has become the source of

growth for many nearby economies. In a certain sense, it can be

even said that it is a merchant city founded and managed by

Traditional “hongs” or trade houses of Hong Kong were the

pillar of the economy. Jardine Matheson and Hutchison were

major hongs that led the economy and the Hong Kong & Shanghi

Bank were the financier of these hongs and has today grown to

become one of the largest bank in the world.

These firms were

the critical factors of the growth for Hong Kong’s economy.

Their role however has changed overtime. They are no longer the

de facto leaders of Hong Kong as they were in the mid 1800’s.

Their role has diminished as Hong Kong grew to become more

international, and the 1997 handover to the People’s Republic of

China has further altered their position.

Some hongs that

adapted well to the changing times prospered while others either

The territory of Hong Kong is located at the mouth of the Pearl

River, a little southwest of the Guangdong Province of the PRC.

Hong Kong was ceded to the British after the Opium War in 1842.

Many believe that the British hongs were behind lobbying the

British government into fighting the Chinese Government and the

settlement of the island. Kowloon was annexed in 1860, and the

New territories were leased for 99 years in 1898.

In 1984, the British and the PRC government agreed that Hong

Kong as a whole would return to Chinese soverienty in 1997.

However, a system of one country two systems were also agreed

upon where Hong Kong would retain its status as a free port,

with it’s laws remaining unchanged for 50 years. It’s main

emphasis is to preserve Hong Kong’s laws and economic freedom,

thus to enhance the position of Hong Kong as a economic center.

The Large British owned hongs were originally trade and

warehouse companies established by the British in the early days

of Hong Kong colonialism, they have since grown in to major

commerical conglomerates. They hold interest in cargo handling,

manufacturing, real estate, and even retailing. They are the

engine of the Hong Kong economy. Since Britain took over the

port city in 1842 to use as a gateway to the Chinese markets,

the business of Hong Kong had been business, and the power was

held by the hongs. The first traditional hong was the Jardine

Matheson. It was once seen to be more influential than the

colonial government but nowadays it has become a minor player

compared to Li Ka Shing’s Hutchision Whampoa. Li Ka Shing, the

Chairman or “Taipan” of Hutchision Whampoa, became the first

Chinese to own a traditional hong. Li’s drive and business

ability helped foster Hutchision into a global conglomerate.

Hong Kong Bank grew from a small trader’s bank into one of the

Jardine, Matheson & Co. was founded by 2 Scottish merchants,

William Jardine and James Matheson in Guangdong in 1832. It was

an opium trader that were the pioneers into the China trade.

Eventually James Matheson takes control from 1836. It played a

key role in the founding of Hong Kong and became the first to

purchase land from the colonial government in 1842. Jardine

expanded into other trade products in other Asian countries like

Japan and South East Asian countries and also enters the

ship/cargo handling industry and the real estate business.

After World War II, Jardine moved their head office from

Shanghi back to Hong Kong and it offically goes public in the

Hong Kong Stock Exchange in 1961. The 1970’s saw Jardine

forming many ventures and aquisitions such as the joint venture

with the Robert Fleming of UK to create the Jardine Fleming &

Co., a holding company the aquires many foreign and local firms

and diversifies Jardine’s business.

The mid- 1980’s saw some mismanagments and misguided

aquisition especially after the 1984 Sino-British announcement

on the return of Hong Kong. Jardine wanted to diversify more

abroad in fear of the Chinese takeover because their relations

with the PRC was not good. It aquired the British construction

giant Trafalgar House and ther various retail chains in Europe

so that Jardine could emphasize more in Europe, but these

investments would turnout to be disappointing in the future.

The current taipan, or CEO is Alasdair Morrison. He has tried

to undo many past mistakes and to rejuvenate the 160 year old

hong. Morrison has sold off many losing companies and has a

greater emphasis on profitability. The management has been

changed to more aggresive and experienced managers such as

Ronald J. Floto who previously worked as Kmart Corp. and is

known for his turn-around ability. But most importantly,

Morrsion has been trying to improve ties with Beijing. He

realises that the China market as an indespenable location and

has tried repeatly to mend the differences made by the previous

Today, the Jardine Matheson group is a multinational

enterprise that operates in over 30 countries and employs some

160,000 people. It is divided into eight core companies :

Jardine Pacific(general trading), Jardine International

Motors(Car dealership), Jardine Fleming, Jardine Lloyd

Thompsion(Insurance), Jardine Strategic, Dairy Farm(supermarket

and convenience stores), Hong Kong Land(Commerical property),

and the Mandarin Oriental(luxury hotel chain) .

Last year’s sales were US$11.2 billion and a operating profit

of US$190 million was made. The profits fell 34% from last

year, and share prices have fallen almost 60% since it moved its

primary listing from Hong Kong to Singapore.

The main problem with Jardine is that it needs to use its large

cash resources to boost market shares in existing profitable

businesses and make aquistions in core business while assests in

Asia are still cheap from the Asian crisis. It also needs to

refocus on Asia, because it is where it’s main expertise and

connections are, but the controlling family, the Keswicks with

only a 4.9% share are reluctant to invest heavily back to Asia

and especially China. The Keswicks have held control through

cross ownership to build a financial defense against hostile

takeovers. Li Ka Shing has tried but failed to take over

Jardines in 1988 but many still believe that Li has not given up

but is rather waiting for an opportunity.

Although the current taipan, Morrison is trying to shape up

Jardine again, many are doubtful as long as the Keswicks still

retain the controlling shares. Jardine Matheson has had a

astonishing past, but many fear that the golden days of the past

John D. Hutchison Company was founded in 1828. Being one of

the first major traditional hongs in Hong Kong, it had made vast

investments in port facilities and other infrastructure

projects in the colony. In the 1960’s, in an effort to

revitalize the hong, John Douglas Clague, the last British CEO

of Hutchision made huge investments in not only in Hong Kong but

It reoragnized itself to the Hutchision International and up

til the early 1970’s, many believed that Hutchision would indeed

make a comeback as a dominant firm in the colony. However,

losses started to occur from 1973, and being overstretched and

short in liquidity it lost the favors from its investors and

creditors(most importantly the Hong Kong Shanghi Bank).

Eventually the Hong Kong Bank would step in to take up 33% of

Hutchision International and within 2 years merge with a

subsidary, the Whampoa Dock Company and create the Hutchision

Whampoa. Hong Kong Bank was looking for a suitable investor to

take over the pre-opium war hong and eventually they chose a

rising real estate tycoon, Li Ka Shing.

There are many reasons that Hong Kong Bank chose Li Ka Shing,

but two reasons stand out the most, His reputation as a honest

and able businessman and his contacts with the government in

Today, Hutchison Whampoa has grown into one of Hong Kong’s

largest blue chip companies with over 70,000 employees

worldwide. The Group operates five core businesses : Property

Development and Investment, Ports and related services,

Retailing and manufacturing, Telecomminications and Media, and

Property Development and Investment

Hutchison Whampoa Property develops residential and commerical

properties for sale and lease. Its portfolio includes some of

Hong Kong’s largest private housing projects and several

landmark developments in the Mainland.

The group’s expertise in port investment and management stems

form its pioneering operations in Hong Kong. Its port operations

arm, Hutchison International Port Holdings, is now exporting its

professional experience and expertise to ports in different

Watsons operates three of Asia’s most innovative retail

chains:Park’N Shop supermarkets, Watson’s personal care stores,

and Fortress, selling domestic electrical appliances. The

manufacturing division produces and distributes a wide range of

food and beverages throughput Hong Kong, the mainland and other

Hutchison Telecom operates a wide range of intregrated

telecommunications services worldwide and is one of the world’s

major providers of mobile communications

The Group has major shareholding in Cheung Kong Infrastructure,

which holds interests in infrastructure and related businesses,

and power plant projects such as the Hong Kong Electric. It is

the sole supplier of electricity to Hong Kong Island. Husky Oil,

is one of Canada’s largest privately owned oil and gas

For the fiscal year ending in December 31 1998, The Hutchison

Whampoa Group had a net profit after tax of HK$8.7 billion. It

was lower than HK$12.2 billion from 1997. The Asian crisis which

brought on pressures on the entire Asian region. It experienced

a period of unprecedented asset and price deflation coupled with

severe recessionary conditions. These conditions had the

hardest impact on the Property/Development and

Retail/manufacturing operations of the group in 1998.

Li Ka Shing’s another main weapon in Asian business is his

strong ties to the Chinese Government. He has been favored

since being the first Chinese to take over a western hong in the

late 1970’s. He also played a large role in the transition

period for the `97 handover of Hong Kong. Currently he has a

strong influence in the policies that effect Hong Kong both

through his contacts with Beijing and the Chief executive, Tung

Headquartered in London, HSBC holdings is one of the world’s

largest banking and financial services organizations. The HSBC

Group’s international network comprises more than 5,000 offices

The HSBC Group is named after its founding member, The Hong

Kong and Shanghi Banking Coporation limited. Hong Kong Bank, as

it is known for short, was established in 1865 to finance the

growing trade between China and Europe.

The inspiration behind the founding of the bank was Thomas

Sutherland, a Scot who was then working as the Hong Kong

Superintendent of the Peninsular and Oriental Steam Navigation

Company. He realised that there was considerable demand for

local banking facilities in Hong Kong and the China coast and he

helped to establish the bank in March 1865. Then, as now, the

bank’s headquarters were at 1 Queen’s Road in Hong Kong and a

branch was opened in April 1865 in Shanghai.

Throughout the late nineteenth century and the early twentieth

century, the bank established a network of agencies and branches

based mainly in China and South East Asia but also with

representation in the Indian sub-continent, Japan, Europe and

North America. In many of its branches the bank was the pioneer

of modern banking practice. From the outset, trade finance was a

strong feature of the bank’s business with bullion, exchange and

merchant banking also playing an important part. Additionally,

the bank also issued notes in many locations throughout the Far

During the Second World War the bank was forced to close many

of its branches and the head office was temporarily moved to

London. However, after the war the bank played a key role in the

reconstruction of the Hong Kong economy and set about further

diversifying the geographical spread of the bank.

The post-war political and economic changes in the world

forced HongkongBank to analyse its strategy for continued growth

in the 1950s. The bank diversified both its business and its

geographical spread through acquisitions and alliances.

However, the bank remained committed to its historical markets

and played an important part in the reconstruction of Hong Kong

where its branch network continued to expand.

In 1965 the bank purchased a controlling interest in Hang Seng

Bank, which had been established in Hong Kong in 1933. By the

1970s the policy of expansion by acquisition of subsidiaries

with their own identities and specialisations was firmly in

During the 1980s the bank concentrated on moving into those

markets where it was not yet fully represented. Hongkong Bank of

Canada was established in 1981 and HongkongBank of Australia

Limited in 1986. In 1987 Marine Midland Bank, based in New York

State, became a wholly owned member of the Group and its

principal subsidiary in the United States. HSBC Holdings plc,

the parent company of the HSBC Group, was established in 1991

with its shares quoted on both the London and Hong Kong stock

Already almost two years have passed since the handover Hong

Kong to the PRC. It is hard to judge the impact of the handover

to the Hong Kong economy, due to the Asian Financial Crisis in

1997. What is definite however is that Hong Kong has suffered a

difficult 1998 and is still in the process of recovering. The

good news is that the fallen prices of 1997 got rid of a lot of

the bubbles that was being accumulated in the territory. Large

landowners like Li may have had some losses but 1999 saw the

economic prices and activities picking up again. Many say that

the worst is over and that recover is in process. Already land

prices have recovered a lot of its losses during the 1997-8

The problem in the territory is more a political one. Many

incidents have brought attention to the problem of implementing

the “one country, two system” policy, which is fundamental in

the Hong Kong Basic Law and which will guarntee the independent

governing of Hong Kong. The main attraction that has made Hong

Kong what it is today is it’s efficiency and lassie faire

approach of the government. If the mainland interferes too much

in Hong Kong, it status will decline as the international free

port city that has made it so prosperous.

Biblography

Chan, Anthong B., Li Ka Shing, Hong Kong’s Elusive Billionaire,
Oxford University Press, 1996.

Clifford, Mark L, The Taipan’s Last Chance, Businessweek, April
26, 1999.

Kraar, Louis, Inside Li Ka Shing’s Empire, Fortune, March 29,
1999.

King, Frank H H, The History of the HongKong Shanghi Banking
Coporation, 4 volumes (Cambridge University Press, 1987-91)

Cite this International Trade in Asia

International Trade in Asia. (2018, Jun 13). Retrieved from https://graduateway.com/international-trade-in-asia/

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