The Rivals...

Mention of the Hong Kong and Shanghai Bank (in Hong Kong, just "the Bank") suggests to me that I should touch on this great rivalry, which really dates from the 1860s.

Shanghai (上 - shang - up ) (海 - hai - sea - (the first part of the character is the water radical) - amazing how unromantic Chinese place names often turn out to be, isn't it!) had been one of the original Treaty Ports dating from the First Opium War and was particularly important, early on, in the tea trade, but Shanghai had suffered during the Taiping rebellion and it only really "took off" after the British and the Americans merged their concessions to form the International Settlement in 1863.

From that date until the 1940s, Shanghai overtook Hong Kong as the most important commercial city in China, a situation that was abruptly and completely reversed in 1949 when pretty much the entire upper class of Shanghai decamped to Hong Kong, one jump ahead of the Communists. But we'll be coming to that.

For the rest of the 19th century, Hong Kong became a relative backwater, sustained by its naval base, dockyards, sugar refinery and so on.

What happened to the opium trade?

Well, it seems that it gradually faded away and lost importance; probably because there were now other ways to make money in China, but it is interesting to note that amongst the firms that signed up to Tom Sutherland's Prospectus and founded HSBC several were opium traders.

Indeed, it is usually assumed that the reason that Jardine Matheson did not sign up (they even organised opposition to the Bank in Legco) was partly that they wanted their own bank (in my time, they bought Bear Stearns, but they sold it again) but also because Dents, their rival British opium dealers, Heards (American opium dealers) and Sassoon and Co (Indian Jewish opium dealers) all did sign up. This explains why Russell and Co, the other main American opium dealers, did not sign up either - because Heards did.

Most of the firms that started the Bank went bust within a few years - including Dents and Heards - which suggests that trading conditions were changing and new ways to make money were needed.

New firms were starting - if you had the right sort of ideas, drive and luck you could do well in 1860s Hong Kong. Douglas Lapraik, one of the other founders, who did not go bust, was a watch maker who founded a shipping line.

Sassoon and Co took Jardines out of the opium trade in 1872 by some form of commercial coup which I have been unable to discover; this dynasty went on into the 1930s (they built what is now the Peace Hotel in Shanghai) troubled by the Usual Problem of Jewish business dynasties - not everyone who is a good Jew is a good businessmen and rather often good businessmen are simply appalling Jews...Siegfried Sassoon the war poet was the offspring of one Sassoon who was disinherited for marrying out.

Compared to British India, Hong Kong was not aristocratic; the westerners who settled there were generally working class or middle class; there is an almost complete absence of peers, baronets and such. This did not stop the British talent for snobbery, of course. It probably made it worse, because everyone jumped up a rank or two and put on grander airs than they did at home.

Incidentally, if you wonder where a lot of the "old money" in New England and indeed Wall Steet was made, Google the lists of directors of Heards and Russells...

However, we can see a pretty rapid loss of interest in Hong Kong by the American business community in China once Shanghai gets going - no doubt because Hong Kong was British controlled but the International Settlement was fifty per cent American run.