A century-old wealthy family that rose from Shanghai

The immense profits made by Worldwide Shipping were well-known in Hong Kong's business community, inevitably arousing envy among many. Everyone understood that this success had elevated the Chan family to a global level, with small Hong Kong merely serving as their foundation.

HSBC was also very envious. On this day, Sir Morse, the HSBC taipan, brought the project manager, Sanders, to the Global Group Centre on Des Voeux Road Central.

The brothers Chen Guangliang and Chen Guangcong received the two men in their office.

HSBC and Ping An Bank are competitors in Hong Kong, but they don't use any overt tactics.

For example, seeing Ping An Bank's strong support for Hong Kong factory owners, HSBC, under the leadership of Sanders, also lowered its stance and began to strongly support Hong Kong factory owners.

"Mr. Chen, we have heard that Worldwide Shipping is making great strides in the global shipping industry. HSBC is also interested in doing business in this sector, so we have come to seek your advice!"

Chen Guangliang chuckled and said, "As far as I know, HSBC has an unwritten rule, which its peers and employees call the 'black book,' which states: 'Please do not invest in the shipping, aviation, and film industries.' This 'rule' is not unique to HSBC; other banks also have it. The reason for this is probably that the risks are too great."

Then, Sanders said, "Mr. Chen, your success proves that shipping is no longer a 'black mark' on banks. Moreover, we also hope to cooperate with Worldwide Shipping."

I'm so envious!
HSBC learned from various sources that Chen Guangliang's Global Shipping will make a profit of more than US$5000 million this time.

If Chen Guangliang continues to develop this business, it will be difficult for HSBC to get involved in this industry in the future!

So they shamelessly sought cooperation.

Chen Guangliang nodded and said, "I believe HSBC has given this matter considerable thought, and in my view, there are indeed many advantages to doing shipping in Hong Kong. Countries like Britain, the United States, and Japan have many enemies internationally, and having too many enemies in shipping would restrict their operations. Hong Kong is a free port; ships of any nationality can enter. Similarly, we can own ships of any nationality and fly any country's flag, as long as it is beneficial to us."

Moses and Sanders suddenly realized that they had only thought shipping was a viable business, but they hadn't expected there to be so much more to it.

They were suddenly delighted. Did Chen Guangliang's words mean that this cooperation was feasible?

Sanders immediately said, "I wonder if Mr. Chen would be willing to form a shipping company with HSBC?"

“Of course. The ocean is vast, and the world economy is constantly growing, so it is destined to need more ships,” Chen Guangliang said readily.

Without much pretense, the two companies quickly agreed on a cooperation method, with each contributing half of the funds to establish a shipping company.

But what Chen Guangliang said next surprised Moss and Sandas.

"Gentlemen, the company we're partnering with can actually invest not only in shipping but also in the aviation industry. As far as I know, British Overseas Airlines' operation of 'Hong Kong Airlines' isn't going well. As two local conglomerates, we might consider buying their shares and operating this business long-term!"

Do you really think he wants to do shipping with HSBC?
At the very least, it's certainly not that they won't be so proactive; moreover, Chen Guangliang also understands one thing: HSBC may be going to lend money to Hong Kong shipping companies to expand its investment in the industry.

Therefore, he is not inclined to cooperate without a specific purpose.

Upon hearing this, Sanders immediately said, "Hong Kong Airlines, isn't that a good investment?"

Hong Kong Airlines (referred to as "HK Airlines") was originally an airline established in the 1940s and based in Hong Kong. It was the second airline in Hong Kong to provide civil aviation services.

Investor background: The main shareholders of Hong Kong Airlines are British Overseas Airways Corporation (BOAC, the predecessor of British Airways) and Jardine Matheson. During its operation, the shareholding ratio of the two companies changed significantly, so both companies once dominated the operation of Hong Kong Airlines.

Operating aircraft types: Douglas DC-3 and Vickers Viscount

Opening of routes: Before 1950, China implemented an open skies policy, allowing two airlines from both sides to fly routes between mainland China and Hong Kong. As a result, British Overseas Airways operated routes to and from mainland China through Hong Kong Airlines.

Operational Status: The late 4s were the heyday of Hong Kong Airlines. At that time, a large influx of wealthy refugees from the mainland fled to Hong Kong to escape the war (civil war), making Hong Kong Airlines' many routes to and from the mainland extremely busy—at that time, there were more than four flights a day on the Guangdong province alone. However, after the founding of the People's Republic of China, flights to and from Hong Kong were suspended, causing Hong Kong Airlines to lose many major routes. Subsequently, due to the Korean War, routes to the Korean Peninsula were also suspended for security reasons (routes to South Korea were restored after the Korean War), making operations even more difficult. Later, Hong Kong Airlines was left with only routes to Japan and Taiwan. As its operations deteriorated, British Overseas Airways sold a majority stake to Jardine Matheson.

In 1954, British Overseas Airways (BOA) took over Hong Kong Airlines again and acquired two brand-new Vickers Viscount aircraft, aiming for significant reform. Hong Kong Airlines added routes to Seoul and Tokyo and reopened the Manila route, but still failed to escape losses.

Chen Guangliang said, "We are a local conglomerate, and the effects of our long-term investments are visible!"

Morse then said, “Sir Chan, although you are a Hong Konger, the Hong Kong government stipulates that non-British citizens cannot operate Hong Kong airlines.”

Chen Guangliang smiled and said, "My younger brother has already become a British citizen."

After some thought, Morse said, "If you can convince BAIC, HSBC can consider supporting a joint venture to operate Hong Kong Airlines. But there is a condition: Mr. Chan needs to guarantee that the shipping will be profitable to subsidize Hong Kong Airlines."

"Of course, it's very difficult for me to lose money in shipping!"

To acquire Hong Kong Airlines, political factors must be taken into account.

In Britain, Chen Guangliang had extensive connections; even Churchill was a guest of honor. Moreover, the British government also hoped to win over this global shipping magnate.

However, Hong Kong Airlines is also related to the Hong Kong government's interests, and Chan Kwong-leung hopes to bring HSBC into the picture to do this together.

At that time, the major shareholder of Hong Kong Airlines was British Overseas Airways, but Jardine Matheson also held a stake.

Chen Guangliang's idea was simple: to dilute Jardine Matheson's equity through later investments.

"Brother, are we really going to invest in Hong Kong Airlines?"

"What, you think this is a losing proposition?"

Chen Guangcong shook his head and said, "I don't think so! It's just that the aviation industry is different from the shipping industry. I'm afraid Jardine Matheson will object, after all, Jardine Matheson doesn't get along with us!"

Chen Guangliang said, “Their opposition is useless! Everyone knows that the aviation industry is not profitable. As long as our price impresses the British overseas companies and we lobby the governments in London and Hong Kong, there won't be much of a problem. The aviation industry has a bright future, especially once the mainland opens up, it will be a huge market. This is a long-term event that others may not realize. In addition, I don't want Swire Pacific to monopolize Hong Kong's aviation industry, so this time we are determined to succeed. To ensure HSBC's complete loyalty, we will provide existing ships and contracts and inject them into the new joint venture.”

"Okay, I'll get ready right away!" Chen Guangcong didn't say anything more. Once his older brother made a decision, he would discuss it at the beginning and then resolutely carry it out.

Soon, Chen Guangliang's activities in London were very successful. He successfully persuaded some government officials to support Chen Guangcong and HSBC's joint venture shipping company to buy Hong Kong Airlines' shares from British Overseas Airways.

Of course, in order to make British Overseas Airlines willing to sell its shares, Chen Guangliang purchased them at a 30% premium, allowing British Overseas Airlines to make a profit and exit the business.

HSBC also benefited, as the joint venture between the two parties involved in the project directly injected two existing new 10,000-ton cargo ships with transportation capabilities.

In this way, although the joint venture purchased Hong Kong Airlines at a premium, it did not suffer any losses.

For a while.

Hong Kong Airlines is about to fall into the hands of the Chan family.

Upon learning of this, Jardine Matheson first protested to British Overseas Airways. John Keswick declared that although Chan Kwong-chung was a British citizen, he had acquired the citizenship for business convenience and was not a true British citizen. He argued that Hong Kong's air rights should rightfully be in British hands, as this was a guarantee of safety.

However, British Overseas Aviation immediately offered the following opinion: "Mr. Chen Guangcong is a British citizen, so he is British; moreover, the joint venture includes HSBC, and both parties hold 50% of the shares, which is more in line with the relevant regulations. But for the sake of fairness, Jardine Matheson can offer a higher price to buy it."

Upon hearing this news, Jardine Matheson immediately deflated. They were not optimistic about Hong Kong's aviation industry and naturally would not fill this hole. Even without a 30% premium, they were unwilling to buy the shares of British Overseas Airways.

Jardine Matheson's interference was simply due to its animosity towards the Chen family's businesses.

But when John Keswick saw that his first plan had failed, he quickly sought out Schjöck of Swire & Co. for advice.

Schjork also learned of the news. He certainly hoped that Cathay Pacific would acquire Hong Kong Airlines, but he preferred to buy the shares at a low price.

“Chen Guangliang is already a knighted by the British government, and his relationship with London politicians is extraordinary. Even Sir Winston Churchill is a guest of honor on his yacht. Moreover, this time, he has asked his younger brother Chen Guangcong to form a joint venture with HSBC, which shows that he is determined to succeed.”

John Keswick said, "Would you like to see Chinese people in the skies over Hong Kong?"

Schjok said, "The routes to mainland China are closed, the routes to South Korea are in dire straits, the routes to Taiwan and the Philippines are also losing money, and the routes to Japan are facing intense competition. If there were no premium, I might consider it, but now that they are willing to offer a 30% premium, they are clearly determined to win. I can't do anything about it!"

Hong Kong Airlines' routes are south of Hong Kong Island;
Cathay Pacific's routes are north of Hong Kong Island.

Schjok believes that the routes to the south are all to Asian countries and regions, and it is impossible to open routes to the mainland. Based on this, this opportunity is not worth his full effort.

In addition, Cathay Pacific's operations are not ideal. If it spends too much money to acquire Hong Kong Airlines, it could put Swire Pacific in trouble.

British Overseas Airways and Jardine Matheson took turns operating Hong Kong Airlines for ten years, but they saw no hope of success.

"Alright! Since Swire Group isn't interested, I guess I'll just have to stop trying!"

Schjoker's mind raced, and he turned his attention to Jardine Matheson. He said, "Since Jardine Matheson has no interest in operating an airline, why not sell its 30% stake in Hong Kong Airlines to Cathay Pacific?"

It turns out that British Overseas Airways only holds 70% of the shares, while Jardine Matheson holds the other 30%.

Schjok believes that if the joint venture between Chan Kwong-chung and HSBC acquires a 70% stake in British Overseas Airways, then Chan will only hold 35%. One day, Cathay Pacific, in conjunction with HSBC, may well regain control of Hong Kong Airlines.

John Keswick's face stiffened. He was still thinking about holding a 30% stake in Hong Kong Airlines, so that when Cathay Pacific took over, Jardine Matheson's losses would be transferred to Cathay Pacific.

Therefore, selling the shares now would undoubtedly mean completely severing investment in Hong Kong's aviation industry.

"If you also offer a 30% premium, I can consider it!"

"You're joking. I'm not a spendthrift like Chen Guangliang."

“Brother, HSBC may not always be on our side. If we really want to develop Hong Kong Airlines, our equity stake is not a safe bet!” Chen Guangcong said.

In this joint venture with HSBC, the eldest brother placed 50% of the shares in his name, which shows that he trusts him a great deal.

Chen Guangcong never considered that if the family were to split up, he hoped that Chen Wenming would take over the company in the future, with his son Chen Wenbo assisting him.

Moreover, the 50% equity stake in this cooperation with HSBC is actually 85% held by the elder brother and 15% by himself, reflecting a tacit understanding between the brothers.

Chen Guangliang smiled and said, "No rush, let's take it one step at a time. At least we're still cooperating now. As for Hong Kong Airlines, you should hurry up and familiarize yourself with the work. Also, you need to pay attention to the development of Boeing's jet aircraft, especially the Boeing 707, which will be the next new aircraft that Hong Kong Airlines will purchase."

"Jet aircraft? Does this mean that the Americans are ahead of the British in this technological field, and that it can truly become widespread?"

The British are the pioneers of jet aircraft, having developed jet fighters during World War II and the 'Comet' jet airliner in 1949, thus ushering in the jet age in the history of human aviation.

However, the Comet aircraft suffered two accidents, completely ruining the future of British jet airliners. Boeing, on the other hand, has caught up and is expected to develop a successful aircraft next year.

"The United States is stronger, and therefore more trustworthy. If we bet on the Boeing 707 correctly, then we will have a greater competitive advantage on the same routes."

"Okay, I'll keep an eye on that."

Chen Guangcong has witnessed firsthand his elder brother's 'prophetic abilities' and has come to believe in them wholeheartedly.

Jet airliners have now become Hong Kong Airlines' "magic weapon" for future development. Of course, the United States has not yet successfully developed and is operating the Boeing 707, but this is within the next year or two. (End of Chapter)