Jardine Matheson

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Group.png Jardine Matheson  
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Jardine Matheson Holdings logo.png
Formation1832
Founder• William Jardine
• James Matheson
HeadquartersBermuda, Hong Kong
InterestsOpium, Opium Wars, Hong Kong
Conglomeration based on "the world's most valuable single commodity trade of the nineteenth century", opium.

Jardine Matheson Holdings Limited (also known as Jardines) is a Hong Kong-based Bermuda-domiciled British multinational conglomerate. The company operated in opium, "the world's most valuable single commodity trade of the nineteenth century"[1][2], and had a major influence in the First and Second Opium Wars.

The company officially stopped this trading themselves in 1870 to pursue a broad range of other trading interests including shipping, railways, textiles and property development. The company is controlled by the Keswick family, who are descendants of co-founder William Jardine's older sister.

Early Years

William Jardine was born in 1784 in the Scottish lowlands and graduated from Edinburgh University with a degree in medicine. In 1803, at the age of 19, he became a surgeon on the ships of the British East India Company working the trading routes between London, China and India; a position he held for the next 14 years. As a senior ship's officer, Jardine was allocated an amount of cargo space equal to two chests which he could use to conduct his own business. Using this space, the doctor soon discovered that trading opium was more profitable than practicing medicine.

James Matheson was born in 1796 in the Scottish highlands and also attended Edinburgh University. He began work in 1815 as a free merchant in Calcutta at his uncle's Agency House, Mackintosh & Co., trading goods and services between different markets and communities. Matheson had the advantage of coming from a family with social and economic means, while Jardine came from a much more humble background.

In the early years of the 19th century both Jardine and Matheson went into partnership with Charles Magniac, who subsequently retired to England in 1828. In 1832, two years before the East India Company lost its monopoly over British trade with China, the partnership was restructured as Jardine Matheson and Company[3] with William Jardine, James Matheson, Alexander Matheson, Jardine's nephew Andrew Jardine, Matheson's nephew Hugh Matheson, John Abel Smith, Henry Wright and Hollingworth Magniac as its first partners.

During the mid–1830s, the China trade became more difficult due to increased controls by the Chinese government to halt the worsening outflow of silver. This trade imbalance arose because Chinese imports of opium exceeded exports of tea and silk.[4] A rush to participate in the fast developing China trade, which was initially centred on tea, had begun when the East India Company monopoly ended in 1834. From the middle of the seventeenth century this drink had been growing in popularity in Britain and the British colonies, but the trade in teas was far from simple. The British crown charged duty of five shillings per pound (0.45 kg) regardless of the quality, which meant that even the cheapest variety available cost seven shillings per pound – almost a whole week's wages for a labourer.[5] This punitive level of taxation meant that huge profits were available, which gave rise to widespread smuggling to avoid the payment of duty. To profit in the China trade participants had to be ahead of all competition, both legitimate and otherwise. Each year, fast ships from Britain, Europe, and America lay ready at the Chinese ports to load the first of the new season's teas. The ships raced home with their precious cargoes, each attempting to be the first to reach the consumer markets, thereby obtaining the premium prices offered for the early deliveries.

Nevertheless, William Jardine wanted to expand the opium trade in China and in 1834, in conjunction with Lord Napier, Chief Superintendent of Trade representing the British Empire, tried unsuccessfully to negotiate with the Chinese officials in Canton. The Chinese Viceroy ordered the Canton offices where Napier was staying to be blockaded and the inhabitants including Napier to be held hostages. Lord Napier, a broken and humiliated man, was allowed to return to Macao by land and not by ship as requested. Struck down by a fever, he died a few days later.[6]

Lobbying for Opium War

Following this debacle, William Jardine saw an opportunity to convince the British government to use force to further open trade. In early 1835 he ordered James Matheson to leave for Britain to persuade the Government to take strong action in pursuit of this end. Matheson accompanied Napier's widow to England using an eye-infection as an excuse to return home. On arrival, he travelled extensively and held meetings both for government and trade purposes to gather support for a war with China. In some ways unsuccessful in his mission, on being brushed aside by the "Iron Duke" (Duke of Wellington), the then British Foreign Secretary, he reported bitterly to Jardine of being insulted by an arrogant and stupid man, but nevertheless his activities and widespread lobbying in several forums including Parliament bore the seeds that would eventually lead to war. Matheson returned to China in 1836 to prepare to take over the firm as William Jardine got ready to begin his temporarily delayed retirement. Jardine left Canton on 26 January 1839 for Britain, ostensibly to retire but in actuality to continue Matheson's lobbying work.

The Qing Daoguang Emperor, pleased to hear of Jardine's departure, then proceeded to appoint a special Commissioner, Lin Zexu, to stop the opium trade altogether,[7] at that time centred on Canton. Lin commented, "The Iron-headed Old Rat, the sly and cunning ring-leader of the opium smugglers has left for The Land of Mist, of fear from the Middle Kingdom's wrath." The commissioner then ordered the surrender of all opium and the arrest of opium trader Lancelot Dent,[8] the head of Jardine Matheson rival Dent & Co., which triggered a series of events leading to Lin destroying more than 20,000 chests of opium – a large part of which belonged to Jardines.[9]

Once in London, Jardine's first order of business was to meet with the new Foreign Secretary Lord Palmerston who had replaced Wellington. He carried with him a letter of introduction written by Chief Superintendent of trade in Canton Charles Elliot that relayed a few of his credentials to Palmerston. Jardine persuaded Palmerston to wage war on China[10] and provided a comprehensive plan along with detailed maps and strategies, the indemnifications and political demands from China and even the number of troops and warships needed in what was known as the Jardine Paper. War followed and in 1842, the Treaty of Nanking was signed by official representatives of both Britain and China. It allowed the opening of major five major Chinese ports, provided indemnification for the opium destroyed and completed the formal acquisition of the island of Hong Kong, which had been officially taken over as a trading and military base on 26 January 1841, though it had already been used for years as a transhipment point. Trade with China, especially in illegal opium, grew, and so did the firm of Jardine, Matheson and Co, by that time already known as the "Princely Hong"[11] for its status as the largest British trading firm in East Asia.

Jardines had 19 inter-continental clippers by 1841, complemented by hundreds of smaller lorchas and other craft used for coastal and upriver smuggling. As well as smuggling opium into China, Jardines traded sugar and spices from the Philippines, exported Chinese tea and silk to England, acted as cargo factors and insurance agents, rented out dockyard facilities and warehouse space as well as financed trade.[4]

Creating a base in Hong Kong

Hong Kong is an island at the mouth of the Pearl River, about 90 miles (140 km) from Canton separated from the mainland of Kowloon by a strip of water which at the narrowest point is only 440 yards (400 m) wide. As late as 1840, the island seemed to have no potential development value. Lying just below the Tropic of Cancer, its climate was considered hot, humid, and unhealthy. In area the island is less than 30 square miles (78 km2), and rises steeply from the water. Before westerners arrived, the total land and water population of around 5,000 fisherfolk and quarrymen[12] lived along the eastern and southern shores. It was also suspected that pirates used the island as a hiding place. Prima facie, the only thing to recommend the island was its natural deep-water harbour. "Hong Kong" came from the Cantonese Heung Gawng (香港) meaning "fragrant harbour" and possibly originated from the scent emanating from the sandalwood incense factories across the water in what is now Shenzhen.[13]

James Matheson had long believed in the future of Hong Kong. In his own words:

...the advantage of Hongkong would be that the more the Chinese obstructed trade in Canton, the more they would drive trade to the new English settlement. Moreover, Hongkong was admittedly one of the finest harbours in the world.[14] His enthusiasm was not shared by many of his fellow merchants. Understandably, they preferred not to abandon their comfortable residences on Macau's Praya Grande for the bleak slopes of Hong Kong Island. Bad luck made matters worse for the early Victorian builders. In quick succession, two typhoons and two fires flattened the new settlement while a virulent malaria epidemic almost succeeded in wiping out the island's population. For years, the Canton Press in Macau never lost an opportunity to ridicule and slander the venture. Even Queen Victoria was unimpressed with her new acquisition. Once she wrote a sarcastic note to the King of the Belgians:"--Albert is so much amused at my having got the island of Hongkong, and we think Victoria ought to be called Princess of Hongkong as well as Princess Royal." Despite the setbacks and ridicule, the colony's founders refused to be discouraged.

Hong Kong provided a unique opportunity for Jardine's expansion. On 14 June 1841, the first lots were sold in Hong Kong. Godowns, wharves, offices and houses were also built on the island and facilities established to maintain Jardine's fleet of ships and their crews. At the same time, the company played an active role in the development of the new colony's infrastructure while also providing commercial leadership, credit and services of all kinds to the growing community. In the early years, this included Hong Kong's first ice-making factory, which was later amalgamated with the Dairy Farm Company,[15] the first spinning and weaving factory and the establishment of Hong Kong Tramways. David Jardine, a nephew of William Jardine, was one of the first two unofficial members of the Legislative Council appointed by the Governor in 1850.

The Hong Kong General Chamber of Commerce was founded in 1861 with Jardine's 7th Taipan Alexander Perceval, a relative of James Matheson's wife, as its first chairman.[16] In 1878 the firm pioneered sugar refining in Hong Kong with the formation of the China Sugar Refinery Co.[17]

Making the Money Respectable

Meanwhile, in Shanghai, Jardine, Matheson & Co. were the first to register a building lot on the Bund in 1843 where their first premises at No. 27 were completed in 1851.[18] In the second edition of his Shanghai handbook published in 1920, the Rev. C. B. Darwent estimated that by 1900, the firm's initial investment of £500 in the land was by then worth £1,000,000.[19]

New offices were also opened in the trading centres of Fuzhou and Tianjin and, during the latter half of the nineteenth century, the firm underwent a dramatic transformation from an agency house acting for principals to a more diversified business. It traded in a wide variety of imports and exports, promoted railways and other much needed infrastructure projects in China, and founded banks and insurance companies as the country strove towards modernisation.

Profits accruing to the firm in the early years were enormous. According to one source, over a ten-year period the amount divided amongst the partners amounted to $15,000,000 – approximately £129,480,000 at 2011 values,[20] "the greater part of which had been accumulated in the opium traffic."[21] Nevertheless, in the face of increasing domestic Chinese competition[22] and a growing anti-opium movement back home in England,[23] in 1872 Jardines formulated an explicit policy ending significant involvement in the opium trade. This move freed up huge amounts of capital, which were then available for investment in new market sectors.[24]

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References

  1. Wakeman Jnr., Frederic (1992)page 192
  2. The Canton Trade and the Opium War in John K. Fairbank, The Cambridge History of China, vol. 10, part 1. London page 192
  3. ://web.archive.org/web/20110929001710/http://archiveshub.ac.uk/features/03021205.html |archive-date = 29 September 2011
  4. a b https://web.archive.org/web/20091228091713/http://www.economicexpert.com/a/William:Jardine.htm
  5. http://www.teamuse.com/article_030601.html
  6. https://web.archive.org/web/20110519173923/http://www.koreanhistoryproject.org/Ket/C17/E1702.htm%7Carchive-date=19 May 2011
  7. https://web.archive.org/web/20141006202706/http://www.eastasianstudies.com/eastasian/5921_01.htm
  8. Chang, Hsin-Pao (1964). Commissioner Lin and the Opium War. Massachusetts: Harvard University Press. ISBN 978-0-393-00521-9. p. 190
  9. Ward Fay 1976, p. 160.
  10. Funding Universe: Jardine Matheson History
  11. Tsang 2007, p. 56.
  12. Ngo 2002, p. 18.
  13. https://web.archive.org/web/20080630064228/http://www.sldinter.com/hong-kong-history.html
  14. Greenberg 2000, p. 214.
  15. https://web.archive.org/web/20110626110209/http://www.jardines.com/the-group/history/1870-1899.html |
  16. Ngo 2002, p. 128.
  17. https://web.archive.org/web/20110929001710/http://archiveshub.ac.uk/features/03021205.html
  18. Lampton & Ji 2002, p. 40.
  19. https://web.archive.org/web/20110703213716/http://english.eastday.com/e/shmb/u1a4021436.html
  20. Calculated using the UK National Archives currency converter based on exchange rate of £1=$5 at 1860 values.
  21. http://www.the2520.com/PDFs/Signs-1863.pdf
  22. https://web.archive.org/web/20110519064046/http://www.2020site.org/opium/china.html
  23. https://web.archive.org/web/20110419202049/http://www.drugtext.org/library/books/opiumpeople/britopharaom.html
  24. Meyer 2000, p. 104.