The Other Handover

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During the heyday of colonial rule in Hong Kong, the shorthand of speech was telling: the Club was the Hong Kong Club, and the Bank meant the Hongkong and Shanghai Banking Corp. The people who mattered belonged to the former and banked at the latter. And most of the people who mattered were either British or had very strong ties to the British establishment. Not a single Chinese person occupied a leading post in the government, and business was dominated by the big hongs, or trading houses, controlled by old English and Scottish families.That cozy world tumbled just before midnight Hong Kong time on Sept. 25, 1979, after trading had ceased on the London stock exchange. The Bank had issued a statement saying it was selling, for just HK$639 million (about $82 million at today's exchange rate), its 22% stake in Hutchison Whampoa, one of the hongs. The buyer was Cheung Kong (Holdings), a mass-market property developer owned by Li Ka-shing, a once penniless Chiu Chow immigrant. Hutchison, which rapidly came under Li's control, had a slew of valuable real estate interests—it owned docks and retail ventures. But under the often erratic leadership of Sir Douglas Clague, a charismatic war hero, the company ran into trouble and had to be rescued by the Bank, which then quickly showed him the door. FROM OUR ARCHIVES The Li FamilyAsia's richest man, Li Ka-shing, is preparing to pass on the keys to his empire. Which son will he choose...? Apr. 19, 2004 Archive links are premium content In today's age of high-speed, high-frequency global mergers and takeovers, Li's buyout of Hutch, as the hong was commonly called locally, would be ho-hum. But in those days, the sale was historic, marking the beginning of the end of empire in Hong Kong, 18 years before the territory was formally returned to China. The complexion of Big Business in Hong Kong was changed forever. It wasn't just that Li, though already rich, was still known primarily as a peddler of plastic flowers, his first successful trade. It was the new sense of unease and insecurity felt by Hong Kong's British élite that one of their own—the Bank, no less!—had seen the writing on the wall. The Bank's chiefs had decided it needed to shift from its colonial moorings and find some new berths among the Chinese tycoons who would undoubtedly flourish as British influence dwindled.Li had long been looking to move up the business chain. The money he made from plastic flowers he had put into real estate. But by 1979 he was straining to break out of the confines of being a mere property developer. He quietly invested some money he made from the stock market in Hutch before acquiring the Bank's stake. The Bank was looking for more than just commercial acumen; it wanted connections to the political masters in Beijing who were dismantling the horrors of the Cultural Revolution and pursuing an open-door economic policy that would eventually give foreign companies access to China's vast market. Michael Sandberg, the Bank's then chairman, decided that the best way was to form a close association with someone like Li who could help the Bank get back into China.The Bank's faith in Li's guanxi, or connections, was vindicated with extraordinary speed. A month after selling its stake in Hutch, Li was named one of three Hong Kong directors to China International Trust and Investment Corp., the company that was designated to spearhead China's open-door policy by aggressively creating a capitalist business model for others to follow. Later, Li was appointed to serve on a clutch of Chinese state advisory bodies. And in 1985, the Bank, now part of HSBC Holdings, made him a deputy chairman. (He resigned the position in 1992.)Hutchison Whampoa has grown under Li: today, it is among the world's biggest port operators and mobile-phone companies. Li himself is 22nd on the Forbes billionaires list, and his diversified business empire in Greater China (in a twist of fortune, it's widely known for employing top British managers to run its companies) ranges from real estate to retail to utilities to media. But Hong Kong remains the place where his reach is most dramatic. Buy a flat in the city, or a magazine or a dehumidifier, or shop at a supermarket, or simply turn on the light switch, and chances are you are contributing to Li's coffers. Among ordinary Hong Kong people today, the shorthand for Li Ka-shing is just as telling as the Bank and the Club once were. It's Superman.Stephen Vines is the author of the books Market Panic: Wild Gyrations, Risks and Opportunities in Stock Markets and Hong Kong: China's New Colony