Ethnic Chinese Business In Asia: History, Culture And Business Enterprise 9789814317535, 9789814317528

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Ethnic Chinese Business in Asia History, Culture and Business Enterprise

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Ethnic Chinese Business in Asia History, Culture and Business Enterprise

Ching-hwang Yen The University of Adelaide, Australia

World Scientific NEW JERSEY

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LONDON

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SINGAPORE

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BEIJING

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SHANGHAI

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HONG KONG

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TA I P E I

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CHENNAI

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Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE

Library of Congress Cataloging-in-Publication Data Yan, Qinghuang, author. Ethnic Chinese business in Asia : history, culture and business enterprise / Yen Ching-hwang, University of Adelaide, Australia. pages cm Includes bibliographical references and index. ISBN 978-9814317528 (alk. paper) 1. Corporations, Chinese--Asia. 2. Chinese--Asia--Economic conditions. 3. Business networks--China. 4. Business networks--Asia. 5. International business enterprises--China. 6. International business enterprises--Asia. 7. Entrepreneurship--China. 8. Entrepreneurship-Asia. I. Title. HD2891.85.Y36 2013 338.7089'95105--dc23 2013028180

British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library.

Copyright © 2014 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher.

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Preface This book represents a major shift of my research interest from political history, such as Yen Ching-Hwang, The Overseas Chinese and the 1911 Revolution (Kuala Lumpur, Oxford University Press , 1976), to diplomat history, such as Yen Ching-Hwang, Coolies and Mandarins (Singapore, Singapore University Press, 1985) to social history, such as Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800 –1911 (Singapore, Oxford University Press, 1986) and then to business history and management. This shift of interest began in 1989 when I was attached to the History Department of the University of Hong Kong. The early result of that shift was the publication of a long article titled “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907-1949”, first published in Proceedings of Conference on Eighty Year’s History of the Republic of China, 1912-1991 (Taipei, 1991), Vol.IV, English Section, pp.77-117, then was re-published in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp.196-236. This book is partly based on the lectures given at my semester course entitled “Enter the Dragon: Ethnic Chinese Business in Asia” which was taught as a history subject at the University of Adelaide from 1996 to 2001. But the course attracted more students from commerce, economics, law and other disciplines in Arts Faculty as well as international students. The course was the first of its kind taught in Australian universities. The principal aim was to help Australian students to understand Ethnic Chinese Business in Asia. The lectures of this course have been extensively revised and they form about a quarter of this book. The idea of writing a book combining history, culture, economics and management is intended to provide in-depth knowledge of v

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history and culture that have affected the business organisations and behaviour of the Ethnic Chinese. Prevailing works on Chinese business which are mostly written by economists, management experts and sociologists lack of historical and cultural depth that would not have explained Chinese business behaviour and organisations satisfactorily. I would like to take this opportunity to thank my wife, Mrs. Kwee Ying Yen, for her support and encouragement without which this work might not have been sustained to its eventual publication. Yen Ching-hwang (Ching-hwang Yen or Yen Ching Hwang) School of History and Politics The University of Adelaide, Australia 9 July 2013

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Contents

Preface Part I

v History and Culture of Ethnic Chinese Business

Chapter 1

Chapter 2

Chapter 3

Introduction

1 3

The Scope of Study and the Definition of Ethnic Chinese Ethnic Chinese Business and Rapid Economic Development in East and Southeast Asia The Rise of Ethnic Chinese Business in Asia

5 10

The Making of Ethnic Chinese Communities

11

Chinese Emigration Social Structure and Social Mobility in Ethnic Chinese Communities Culture and Tradition in Ethnic Chinese Communities

11

Historical Roots of Ethnic Chinese Business

45

Role and Status of Businessmen in Traditional Chinese Society Traditional Chinese Business Organizations Role and Status of Businessmen in Ethnic Chinese Communities Traditional Ethnic Chinese Business Organizations

3

23 33

45 51 61 66

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Chapter 4

The Rise of Modern Ethnic Chinese Business Enterprise The Rise of Modern Ethnic Chinese Business Enterprise The Development of Modern Ethnic Chinese Business Enterprise The Ideology of Modern Ethnic Chinese Business Enterprise The Structure of Modern Ethnic Chinese Business Enterprise

Part II

Structure and Functions of Ethnic Chinese Business

Chapter 5

Chapter 6

Chapter 7

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85 85 93 97 103

107

Ethnic Chinese Family Business and Business Conglomerates

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Ethnic Chinese Family Business Ethnic Chinese Business Conglomerates

109 122

Xinyong (Trust), Guanxi (Relationship), Business Networks and Ethnic Chinese Business

135

Xinyong and Ethnic Chinese Business Guanxi, Business Networks and Ethnic Chinese Business Importance of Business Networks and Business Groups The Role of Business Networking and the Globalization of Ethnic Chinese Business

135

Ethnic Chinese Businessmen and Entrepreneurs

173

Ethnic Chinese Businessmen Ethnic Chinese Entrepreneurs and Entrepreneurship

173

144 151 160

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Contents ix

Chapter 8

Ethnic Chinese Business Management Confucianism and Traditional Chinese Business Management Modern Ethnic Chinese Business Management Contemporary Ethnic Chinese Business Management

205 205 209 218

Part III Regional Studies

231

Chapter 9

Chinese Business in Thailand

233

Coastal Trade and Early Chinese Business The Rise of Modern Chinese Business Enterprise (1851–1942) Case Studies: Chen Cihong and Khaw Soo Cheang Families The Rise of Chinese Business Conglomerates Case Study: Bangkok Bank Group

233

252 269 276

Chinese Business in Singapore and Malaysia

285

Chapter 10

Entrepot Trade, Middlemen and Chinese Business Case Studies: Seah Eu Chin and Tan Kim Seng Commercial Agriculture, Tin-Mining and Revenue Farming Case Studies: Tan Hiok Nee and Yap Ah Loy Chinese and the Rise of Rubber The Rise of Modern Ethnic Chinese Banking and Manufacturing Industry Case Studies: Wong Ah Fook and Tan Kah Kee The Development and Growth of Chinese Business in Malaysia Since 1957 The Development and Growth of Chinese Business in Singapore Since 1959

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285 288 294 302 309 311 318 327 334

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Chapter 11

Chapter 12

Chapter 13

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Chinese Business in Indonesia

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Entrepot Trade and Chinese Business The Rise of Modern Chinese Business and Businessmen Case Studies: Oei Tiong Ham and Zhang (Tjong) Brothers Chinese Business in Transition (1907–1965) The Rise of Chinese Business Conglomerates Case Study: Liem Sioe Liong and His Salim Group of Companies

341 346 349 360 366 372

Chinese Business in the Philippines

379

International Trade and Chinese Business Evolution of Modern Chinese Business Economic Change and the Rise of Chinese Business Conglomerates Case Studies: Lucio Tan Group and Yuchengco Group of Companies

379 389

Chinese Business in Hong Kong

423

Trade and the Chinese Business The Rise of Modern Chinese Enterprise in Hong Kong The Rise of the Chinese Textile Industry During the Post-war Era The Transformation of Hong Kong’s Economy and the Chinese Business (1950–1990) Sino-Western Business Relations in Hong Kong Case Studies: Li Ka-shing and Henry Fok Ying Tung

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404 417

428 434 436 441 443

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Contents xi

Chapter 14

Index

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Chinese Business in Taiwan

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Chinese Business in Taiwan Before 1895 Chinese Business under Japanese Rule and the Post World War II Period The Rise of Taiwan as an Economic Power Entrepreneurship, Confucian Values and Taiwan’s Business Case Studies: Wang Yung-ching and Chang Yung-fa

455 466 475 483 490 499

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Part 1 History and Culture of Ethnic Chinese Business

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Chapter 1

Introduction

The Scope of Study and the Definition of Ethnic Chinese This book is not intended to study Chinese business in all parts of Asia. It covers mainly the business of the Chinese in Southeast Asia, Hong Kong and Taiwan. In short, it deals with the Chinese business in Asian region outside Mainland China. The justification for leaving the mainland out is because a great deal of business in China are still conducted not by private enterprise, but by state-owned or joint government-private enterprise. However, the rapid growth of private business in China requires a separate study. For the convenience of this study, a general term, ‘Ethnic Chinese’ is adopted to include the Chinese in Southeast Asia, Hong Kong and Taiwan. This term is stretched to its maximum limits. It does not have any intention to deny China’s claim on the sovereignty of Taiwan, nor would it deny the fact that now Hong Kong is an integral part of China since July 1, 1997. ‘Ethnic Chinese’ is an ambiguous term which can mean different things to different people. Literally, the term means that ethnic Chinese who live overseas. It does not convey whether they are Chinese nationals or not. They could be the citizens of many of the Southeast Asian countries, or citizens of Australia, New Zealand, United States, Canada or other European countries. What this general term, ‘Ethnic Chinese’, has implied is the ethnicity of the person, he or she must be of Chinese descent which is distinguishable from other ethnic groups, possessing some Chinese cultural traits and customs. The Chinese term, ‘Huaren’, is the closest in meaning to the English term of ‘Ethnic Chinese’.

3

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While the term ‘Overseas Chinese’ (Huaqiao) has a historical root back to 1890s and became more commonly accepted after the Revolution of 1911.1 The word ‘Hua’ is the abbreviation of ‘Zhong Hua’ and indirectly refers to ‘Zhonghua minzu’ (commonly known as Chinese race); while the word ‘Qiao’ means ‘temporary residence’ which refers to the sojourner who resides temporarily overseas or places outside China.2 It also implies that the person has an intention of returning to China. This Chinese term was loosely used to include all Ethnic Chinese outside China in the period between 1912 and 1949, and the Chinese government viewed and treated them as its subjects with moral and legal implications. However, the victory of Chinese Communism in 1949 and the emergence of independent states in Southeast Asia created a crisis of identity for the Chinese in Southeast Asia, and the majority of them opted for local citizenship in preference to Chinese citizenship.3 This had greatly changed the meaning and connotations of the term ‘Hua-ch’iao’. For those who held local citizenship and still identified themselves as ‘Huaqiao’ (Overseas Chinese) were suspected as disloyal to the new sovereign Southeast Asian states. Political sensitivity saw the term ‘Huaqiao’ gradually dropped from the usage in the Chinese communities in Southeast Asia except for those who were the citizens of the People’s Republic of China in mainland or the Republic of China in Taiwan. The English term, ‘Ethnic Chinese’, has less political ramifications. It has been loosely used by journalists, politicians, scholars and 1 See Wang Gungwu, “The Origins of Hua-Ch’iao”, in Wang Gungwu, Community and Nation: China, Southeast Asia and Australia (St. Leonards, NSW., Australia, Allen & Unwin, 1992, New Edition), p. 1. 2 Ibid., pp. 2–3. 3 For discussion of changing identities of Southeast Asian Chinese, see Wang Gungwu, “The Study of Chinese Identities in Southeast Asia”, and Charles Hirschman, “Chinese Identities in Southeast Asia: Alternative Perspectives”, in Jennifer Cushman & Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese since World War II (Hong Kong, Hong Kong University Press, 1988), pp. 1–21, 23–31. For the majority of the Chinese in Southeast Asia who would identify themselves as Southeast Asians, see Leo Suryadinata (ed.), Ethnic Chinese as Southeast Asians (Singapore, Institute of Southeast Asian Studies, 1997).

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Introduction 5

businessmen in the West. It is a neutral term referring to a large group of ethnic Chinese of common Chinese ancestry, of sharing some common cultural roots, values and habits. Many of them may not even identify themselves as ‘Ethnic Chinese’, but for the convenience of examination of their business behavior and practices, this broad term is adopted.

Ethnic Chinese Business and Rapid Economic Development in East and Southeast Asia The explanation of fast economic growth in East and Southeast Asia would never be complete if the role of Ethnic Chinese business is not examined. The mainstream scholars or Neo-Classical economists who were associated with the World Bank and Asian Development Bank explained the rise of economic power of the Four Little Dragons (Taiwan, South Korea, Hong Kong and Singapore) in terms of rapid economic development of world economy. They took a broad global view and postulated that regional economic development was part and parcel of the global whole, and the success of the Four Little Dragons was the natural result of the development of the world economy. Using the hypotheses of ‘Comparative Advantage’ and ‘Technological Ladder’, the Neo-Classical economists interpreted the economic miracle of the Four Little Dragons in terms of universalistic and institutional factors. They focused on the correct economic policies that were adopted by the governments of these countries that included market-oriented policies, export-driven strategy, wise use of foreign investment, and macroeconomic stability policies.4 These Neo-Classical economists tended to ignore and deny non-economic factors such as cultural, religious and social factors. They would have been least to accept that Confucianism had anything to do with the fast economic growth of the Four Little Dragons, but they could not deny the fact that three out of the Four Asian Little Dragons, Taiwan, Hong Kong and Singapore had predominant Ethnic Chinese 4

See for instance, Gerald Tan, The Newly Industrializing Countries in Asia (Singpore, Times Academic Press, 1992), pp. 60–67.

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communities. Taiwan and Hong Kong had 99% of ethnic Chinese in their population, while Ethnic Chinese constituted 80% of the Singapore population. These vast Ethnic Chinese population shared a common cultural root — Confucianism. Principal Confucian values such as group orientation, respect for authority, reciprocity and sense of obligation, and loyalty to the institutions, permeated the Ethnic Chinese communities in these countries.5 These cultural ingredients bonded the Ethnic Chinese societies together and give them strength like cement and mortar to a brick house. They also provided the countries in East Asia in their economic performance with a ‘competitive edge’, the term that was appropriately coined by Professors Roy Hofheinz, Jr., and Kent E. Calder in their influential book, The Eastasia Edge.6 The fallacy of the interpretation of the miracle of the Four Little Dragons by the Neo-Classical economists lies in their mechanical view of human societies and economic modernization. They tend to compartmentalize human society into many different segments mechanically linked together, and each segment acts quite independently with little to do with other segments. This is why they view economic success purely as the result of effective economic policies and strategies, and ignore socio-cultural and religious factors. Conversely, a more acceptable interpretation of the East Asian miracle should take a broader overview of the society which is an integrated organic whole. This interpretation should take into account of the economic and political factors as well as the cultural, religious and social factors. As what professor Ezra F. Vogel has pointed out in his book, The Four Little Dragons, that “industrialization requires high levels of co-ordination, precise timing, and predictability. To break into industrial competition in the middle of the twentieth century 5

For discussion of this topic, see S. Gordon Redding, The Spirit of Chinese Capitalism (Berlin & New York, Walter de Gruyter, 1990), pp. 41–78; Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Chinghwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 237–254. 6 See Roy Hofheinz Jr. & Kent E. Calder, The Eastasia Edge (New York, Basic Books Inc. Publishers, 1982).

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Introduction 7

required even higher levels of co-ordination and teamwork, deeper understanding of science, technology, and management skills, and far greater knowledge of world markets than in the earlier eras”.7 Max Weber’s famous work, The Protestant Ethic and the Spirit of Capitalism, has cast so much influence in the West on the interpretation of the rise of modern Western Capitalism. Whether one agrees with Weber’s interpretation or not is beside the point, what is important is that he has drawn our attention to the intangible factors which have profound impact on economic process. Many Western scholars including a number of economists who are disagreed with the NeoClassical economists’ views would support Weber’s view that culture and values have an important role to play in the process of industrialization. Similarly, Confucianism which served as common cultural roots of East Asian and some Southeast Asian countries would also have a role to play in the rapid economic development of that region. What precise aspects of Confucianism contributed to the rapid economic growth are still under intensive study by scholars, and there is no need for us to go deeper into the issue now. But what is relevant to this study is about the relationship between Ethnic Chinese communities and Confucianism. The Ethnic Chinese communities, particularly in the societies in Taiwan and Hong Kong, have deposited a great deal of Confucian values, and they are detectable in social practices. For instance, when I was attached to the University of Hong Kong in late 1980s, I was struck by a practice of ‘Xie Shi Yan’ (Dinner for Thanking Teachers) which was commonly found in Hong Kong and Taiwan. But it was seldom or not found in the Ethnic Chinese communities in Singapore and Malaysia. Under this practice, students towards the end of their study or graduation would host a dinner to thank teachers for their efforts, a token of appreciation and respect. This practice was obviously consistent with Confucian values of respect for teachers and the concept of reciprocity. In traditional China, teacher-student relationship was a key social relationship outside the Confucian five cardinal 7

See Ezra F. Vogel, The Four Little Dragons: The Spread of Industrialization in East Asia (Cambridge, Massachusetts, Harvard University Press, 1991).

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relationships (between emperor and ministers, between father and son, between husband and wife, between brothers, and between friends).8 Teacher-student relationship was based not just on monetary relationship: students paying fees while teacher making a living out of it, but there was also a moral dimension in it. The teacher not only took teaching as a job departing knowledge to students, but was also to guide and discipline the students to make them useful citizens of the society. He was morally obligated to set good examples for students to follow. On the other hands, students received knowledge as well as moral guidance from the teacher, and were grateful for what they had been taught. They were taught to be obedient and respectful and be appreciative of what they had learned from the teacher. A sense of mutual responsibility prevailed. Apart from the fact that Ethnic Chinese communities deposited a great deal of Confucian values and practices, Ethnic Chinese are distinctively different from the indigenous communities in Southeast Asia and from the European communities in the West and Australia. Ethnic Chinese are generally the descendants of the Chinese immigrants from China. Immigrant mentality and harsh overseas environment drove many of them to be involved in business, and it was the business that offered them quick progress in upward social mobility.9 The possession of wealth gave them a golden pass to prestige, social status and position of power. At the same time, the European colonial administrations in Southeast Asia and Hong Kong did not provide opportunities for their descendants to climb the social ladder through bureaucracy. These two factors combined to account for the predominant position of Ethnic Chinese in business in Southeast Asia and Hong Kong. The predominance of Ethnic Chinese in business by 8

For a discussion of the relationships outside family system in traditional China, see Kenneth E. Folsom, Friends, Guests, and Colleagues: The Mu-fu System in the Late Ch’ing Period (Berkeley & Los Angeles, University of California Press, 1968), pp. 18–32. 9 For discussion of social mobility in the Ethnic Chinese communities in Singapore and Malaysia before 1911, see Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986), pp. 154–162.

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Introduction 9

itself has not explained adequately the important role of Ethnic Chinese in the economic development of East and Southeast Asia. We have to delve into the dynamism of the Ethnic Chinese business to explain their importance. Ethnic Chinese traders in the 19th and early 20th centuries began to construct business system covering vast areas of coastal China, Hong Kong and major ports in the Southeast Asian region. With their distinctive Confucian values and clannish organizations, they were able to establish useful business networks in the region. They were able to adapt to the changing political and economic environments in the region as the result of European advancement in Asia. The first generation of Ethnic Chinese businessmen had successfully constructed their business system, including business networks, business behavior and ethics and business institutions. But this system was subjected constantly to the test because of keen competitions from European merchants who were advantaged by political patronage, modern economic institutions and unlimited capital. To survive the competition, Ethnic Chinese business in Southeast Asia and Hong Kong had to modernize and adopt Western institutions and practice. The key to this continuing process of reform and modernization of Ethnic Chinese business lay in the ability of Ethnic Chinese businessmen to bring up a new generation who were bilingual and were familiar with Confucian and Western cultures. Many of them had received both Chinese and Western educations, and had been constantly trying to mould the values and systems into a hybrid but a superior one. The results were similar to the Japanese and Korean business systems.10 A study in 1992 claimed that 50 million Ethnic Chinese in Southeast Asia, Hong Kong, Macau and Taiwan had generated an estimated GDP of approximately U.S. 450 billion, a figure almost on par with China’s GDP of approximately U.S. 500 billion of the same year which was generated by 1.1 billion people, more than twenty times of

10

See Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai”, and “Modern Overseas Chinese Business Enterprise: a Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 224–227, 247–249.

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the Ethnic Chinese population.11 This estimated figure might not reflect the whole truth, but it nevertheless demonstrated the important role played by the Ethnic Chinese in the countries mentioned.

The Rise of Ethnic Chinese Business in Asia The rise of Ethnic Chinese business in Asia has aroused considerable interest among scholars, researchers, observers, journalists and politicians, and a range of explanations have been advanced to interpret its rise. They range from global, geo-political, structural, socio-economic, to historical, cultural and institutional interpretations. Although this book takes a multi-factorial and multi-disciplinary approach, its emphasis is on historical and cultural aspects which are reflected in the sub-title of the book. The author believes that Ethnic Chinese business cannot be studied in isolation. Apart from global, political and socio-economic factors which have direct bearing on the operation and growth of Ethnic Chinese business, the understanding of its characteristics and distinctiveness has to be set against the Chinese cultural and historical context. The integration of history, culture with economics and management is the attempt to produce a broad comprehensive book on Ethnic Chinese business. The book is divided into three major parts looking at Ethnic Chinese business in three different dimensions: vertical and evolutionary, horizontal and structural, and regional. In the vertical and evolutional dimension, it begins with the formation of Ethnic Chinese communities, historical roots of Ethnic Chinese business, and the rise of modern Ethnic Chinese business enterprise. In the horizontal and structural dimension, it examines Ethnic Chinese family business and business conglomerates, the concepts of ‘xinyong’ and ‘guanxi’ and business networks, Ethnic Chinese businessmen and entrepreneurs, and Ethnic Chinese business management. In the regional dimension, it examines Ethnic Chinese business in Thailand, Singapore and Malaysia, Indonesia, the Philippines, Hong Kong and Taiwan. 11

See East Asia Analytical Unit, Overseas Chinese Business Networks in Asia (Canberra, Department of Foreign Affairs and Trade, 1995), p. 1, quoting The Economist article entitled “The Overseas Chinese: A Driving Force” dated July 18th, 1992.

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Chapter 2

The Making of Ethnic Chinese Communities

Chinese Emigration Early Chinese contacts with Southeast Asia Chinese had been trading substantially with Southeast Asia since the founding of the Tang Dynasty in early 7th century.1 Chinese traders came to Southeast Asia, bringing along Chinese products such as silk and porcelain for the exchange of local produce and made enormous profits. They established trading outposts in the region, and mixed with the indigenous people, and called themselves as the ‘People of the Tang’ (Tangren).2 This term, ‘People of Tang’ is still popularly used by the Chinese in Southeast Asia and other parts of the world. The place that Chinese congregated and do business has been popularly known in the West as ‘China Town’, and the Chinese equivalent of the term is ‘Tangren Jie’ which is literally meant ‘The Street of People of Tang’.3 The popular adoption of the ‘Tangren’ by the Ethnic 1

See Wang Gungwu, “The Nanhai Trade”, as an independent issue of the Journal of the Malayan Branch of Royal Asiatic Society, Vol. 31, Pt. 2 (June 1958), pp. 71–112; Fang Hao, Zhongxi jiaotong shi (A History of Sino-Western Contacts) (Changsha, Yuelu shushe, 1987), Vol. 1, pp. 242–260. 2 This term can be Romanized in Cantonese as T’ong Yan, or in Hokkien and Teochew as T’ng Lang, and in Hakka as Tong gin. 3 For the origins and history of the China Towns, especially in Southeast Asia, see Zhou Nanjing, “Luelun Tangrenjie de lishi yanbian” (On the Historical Changes of China Town), in Qiaoshi xuebao (Journal of Overseas Chinese History. Guangzhou, Guangdong Society of Overseas Chinese History), 1987, No. 4, pp. 2–16; see also Zhou Nanjing, Fengyu tongzhou: Dongnanya yu huaren wenti (In the Same Boat 11

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Chinese suggests a historical continuity of Ethnic Chinese in Southeast Asia and other parts of the world, and the persistence of Chinese culture among them. The rapid growth of trade between China and Southeast Asia throughout the Song, Yuan and Ming dynasties (from 960 A.D. to 1644 A.D.) as result of advancement in maritime technology and the introduction of sea-fearing goddess of Tianhou, induced more Chinese traders to come to the region.4 Yet the permanent settlements of Chinese in Southeast Asia only existed in a few strategic locations such as Champa (part of modern Vietnam), Malacca, Java, Palembang and Manila.5 This was mainly due to China’s restrictions on free trade with foreign countries and the social constraints on the Chinese traders.6 When the Manchus conquered China and through the Storm: Southeast Asia and Ethnic Chinese) (Beijing, Zhongguo huaqiao chubanshe, 1995), pp. 383–406. 4 For the growth of China’s overseas trade during Song and Yuan dynasties, see Chen Gaohua and Wu Tai, Song Yuan shiqi de haiwai maoyi (China’s Overseas Trade during the Song and Yuan Periods) (Tianjin, 1981), Chen Xiyu, Zhongguo huanchuan yu haiwai maoyi (China’s Junks and Overseas Trade) (Xiamen, Xiamen University Press, 1991), pp. 35–57. For the growth of foreign trade during the Ming dynasty, see Li Jinming, Mingdai haiwai maoyi shi (A History of Overseas Trade of Ming Dynasty) (Beijing, Zhongguo shehui kexue chubanshe, 1990). 5 See Chen Zhutong, “Yuandai Zhonghua minzu haiwai fazhan kao” (Notes on Overseas Expansion of the Chinese during the Yuan Dynasty), pt. 2, in Jinan Xuebao (Journal of the Jinan University) (Shanghai, 1937), Vol. 2, No. 2, pp. 123–124; Paul Wheatley, “A City That Was Made for Merchandise: The Geography of Malacca during the Fifteenth Century”, in Paul Wheatley, The Golden Khersonese: Studies in the Historical Geography of the Malay Peninsula before A.D. 1500 (Kuala Lumpur, University of Malaya Press, 1961), pp. 306–320; Ma Huan, annotated by Feng Chengjun, Yingya shenglan jiaozhu (Beijing, Zhonghua shuju, 1955), pp. 8–9, 16–17; James Chin Kong, “Merchants and Other Sojourners: The Hokkiens Overseas, 1570–1760” (unpublished Ph.D. thesis, Department of History, University of Hong Kong, 1998), Chapter 3, pp. 24–69. 6 See Yen Ching-hwang, “Ch’ing Changing Image of the Overseas Chinese (1644–1911)”, in Modern Asian Studies (Cambridge, Cambridge University Press, 1981), Vol. 15, No. 2, pp. 261–285; also in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 3–30, especially pp. 6–8.

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established the Qing dynasty in 1644, their policy in dealing with trade and emigration was similar to the previous dynasties. In fact, in the first few decades of the Manchu rule, the government enforced even more stringent ban on trade and human movement with Southeast Asian region.7 It was not until the suppression of Koxinga’s resistance forces in Taiwan in 1683 that the prohibition of trade was lifted. The relaxation of the ban revived the trade and strengthened the existing Chinese settlements in the region. But these early Chinese settlements in East and Southeast Asia were small and insignificant in terms of economic and political power. They were generally ignored by the home government in China.8 The European economic penetration and expansion into Asia since the beginning of the 16th century altered the economic and political landscapes of the region. Economic development attracted large number of Chinese immigrants to the region despite the existence of the restrictive immigration policy adopted by the Qing government.9 As a result of this development, more and more Chinese 7.

For a study of Qing restrictive policy on immigration and trade, see Yen Chinghwang, Coolies and Mandarins: China’s Protection of Overseas Chinese during the Late Ch’ing Period(1851-1911) (Singapore, Singapore University Press, 1985), pp. 19–31. Zhuang Guotu, Zhongguo fengjian zhengfu de huaqiao zhengce (China’s Overseas Chinese Policy during the Feudal Period) (Xiamen, Xiamen University Press, 1989). For a recent work of Chinese emigration with a broad global perspective, See Philip A. Kuhn, Chinese Among Others: Emigration in Modern Times (Singapore, NUS Press, National University of Singapore, 2008, paperback). For various issues on Chinese emigration, see Wang Gungwu, Don’t Leave Home: Migration and the Chinese (Singapore, Eastern Universities Press, 2003). 8 For an insightful study on two early Chinese merchants communities in Manila and Nagasake, See Wang Gungwu, “Merchants Without Empire: The Hokkien Sojouring Communities”, in Wang Gungwu, China and the Chinese Overseas (Singapore, Times Academic Press, 1991), pp. 79–101. 9 For the development of tin and cash crop industries and their demand for Chinese laborers in Malaya, see Wong Lin Ken, The Malayan Tin Industry to 1914 (Tucson, The University of Arizona Press, 1965); J.C. Jackson, Planters and Speculators: Chinese and European Agricultural Enterprise in Malaya, 1786–1912 (Kuala Lumpur, University of Malaya Press, 1968). For the development of tin and cash crop industries in Dutch East Indies and their recruitment of Chinese laborers,

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settlements appeared on the scene. New ports in the East and Southeast Asia such as Penang, Singapore, Hong Kong, Batavia, Semarang and Manila were crowded with Chinese traders, coolies and artisans. Springing from these settlements, tens of thousands of Chinese immigrants further penetrated into hinterland of British Malaya, Dutch East Indies and the Philippines. These new Chinese settlements were larger in size compared with the early Chinese settlements, and were playing increasingly important role in the Eastern and Western trade, and became a driving force in the economic growth in the region.

Causes of Chinese emigration Chinese were not known as migratory people. The spread of Chinese from North China to the South took many centuries to complete. Chinese had known of Southeast Asia and the lands beyond long before the coming the Europeans. It was not until the 19th century that Chinese emigration to Southeast Asia of any significance took place. What inhibited Chinese emigration overseas was the Confucian concept of filial piety. It was one of the key tenets of Confucianism, and was well observed in traditional China. Right from childhood, Chinese children were indoctrinated to regard ‘filial piety’ as most important virtue in life. Stories of filial sons from The Twenty Four Examples of Filial Piety (Ershisi xiao) were repeatedly told in family gatherings and leisure-hour conversations.10 It was reinforced by the clan and society through clan’s rules and law.11 Any un-filial acts were punishable by law. The essence of ‘filial piety’ was devotion to see Mary F. Somers Heidhues, Bangka Tin and Mentok Pepper: Chinese Settlement on an Indonesian Island (Singapore, Institute of Southeast Asian Studies, 1992), p. 54; Jan Breman, Taming the Coolie Beast: Plantation Society and the Colonial Order in Southeast Asia (Delhi, Oxford University Press, 1990, second impression), pp. 50–64. 10 See Olga Lang, Chinese Family and Society (New Haven, Yale University Press, 1946), p. 25. 11 See Hui-chen Wang Liu, The Traditional Chinese Clan Rules (Locust Valley, New York, J.J. Augustin Incorporated Publisher, 1959), pp. 48–52.

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parent’s well-being by providing them with daily material needs and giving them psychological satisfaction.12 The tradition demanded a filial son to provide the best he could afford for his parents. But more important was to meet his parents’ psychological need when they became elderly. He must always try to comfort them and to meet their wishes. He must try to please them whenever and wherever he could, such as giving birth to male children which would please them the most, or bringing them honor by acquiring imperial degrees or official positions. Filial responsibility extended beyond the lifetime of the parents. It demanded the son to mourn the death of his parents. The tradition also demanded the son to observe his filial duty to his deceased parents by visiting their graves and laying sacrifices on customary occasions.13 The idea of emigration ran counter to these practices of filial piety. Emigration meant that the absence of sons who were unable to fulfil their filial responsibilities: they were unable to take care of their parents’ daily needs; they had difficulty in looking after ill parents, and could even miss their parents’ funerals.14 Despite all social odds against emigration, large numbers of Chinese from the Southern part of China, especially from provinces of Guangdong and Fujian emigrated overseas since the second half of the 19th century. They spread widely in Southeast Asia, East Asia, and across the Pacific, to the North and South America. What made them 12

Ibid., p. 51. The Qing Ming festival (known in the West as the feast of the dead), which normally falls on the 5th of April of the solar calendar, is the day that Chinese pay their respect to ancestors by visiting ancestor’s graves, clearing weeds and offering tea and food to the spirits. This observation is still common in the Ethnic Chinese communities in Singapore, Malaysia, Hong Kong as well as Taiwan. For the practice in Singapore and Malaysia, see C.S. Wong, A Cycle of Chinese Festivities (Singapore, 1967), pp. 109–119; Sacrifices were also carried out at family shrines and clan temples in pre 1949 China. See C.K. Yang, Religion in Chinese Society (Berkeley, University of California Press, 1967), pp. 39–43. 14 See Yen Ching-hwang, “Ch’ing Changing Images of the Overseas Chinese (1644 –1911)”, in Modern Asian Studies, Vol. 15, No. 2, p. 267; also in Yen Chinghwang, Studies in Modern Overseas Chinese History, p. 7. 13

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go against their tradition and imperial restrictions was a powerful economic force. Overpopulation constituted a major part of this economic force. A modern study reveals a dramatic growth of China’s population from 150,000,000 around 1700 to about 430,000,000 in 1850.15 Acute shortage of cultivable land and escalating inflation were the twin evils of the overpopulation. More and more people were roaming the countryside seeking for jobs, or were driven out from villages to treaty ports to form the ever-enlarging pool of the urban poor. The problems of overpopulation were aggravated by natural calamities and wars. China was a disaster-ridden country with frequent scourges of droughts and floods. Hubei province in central China, for instance, experienced 440 droughts and 1,036 floods for the entire period of 267 years of the Manchu rule in China. This meant an average of 5.5 natural disasters per year.16 With the declining power of the Qing government, millions of people who were affected by natural disasters were left to die. An estimated 9 to 13 million had been wiped out by starvation, disease and violence during a serious drought that occurred in North China in 1877–78.17 Social upheavals also took their toll among the rural population. The Taiping rebellion between 1853 and 1864, one of the major uprisings in modern China, devastated most parts of central and south China, greatly dislocated agricultural production, and drove millions of people off the land.18 In addition to overpopulation, natural calamities and wars, Chinese peasants also suffered exploitation by landlords, usurers and the state. Natural calamities and the lack of credit facilities in the 15

See Ping-ti Ho, Studies on the Population of China, 1368–1953 (Cambridge, Massachusetts, Harvard University Press, 1959), p. 278. 16 Ibid., Appendix 4, pp. 292–300. 17 Ibid., pp. 231–232.; He Hanwei, Guangxu chunian (1876-1879) Huabei de da hanzai (The Great Famine during the Early Years of the Guangxu Reign, 1876– 1879) ( Hong Kong, Chinese University of Hong Kong Press, no date). 18 For studies of the Taiping movement and its social impact, see Franz Michael, The Taiping Rebellion: History and Documents (Seattle and London, University of Washington Press, 1966), Volume 1; Jen Yu-wen, The Taiping Revolutionary Movement (New Haven, Yale University Press, 1973).

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rural communities destroyed many small independent farming families and reduced them to the status of tenants. At the same time, landlords were able to strengthen their position in rural economy by involving in trade, usurious activities and land speculation. The result of these was the concentration of land in fewer big landlords. The exploitation of tenant peasants by landlords took the form of high rent. The rent was paid in kind, and usually 50% or more was paid to landlord as rent.19 Overpopulation and the shortage of land disarmed tenant peasants any bargaining power and forced them to accept landlord’s exorbitant rent. Usury was another form of rural exploitation. Meagre income made many peasant families vulnerable when encountered with financial difficulties. They fell quickly into debt spiral and paid high interest for the money they borrowed. The lack of credit facilities and the lack of government control over interest rates made usury the most profitable form of investment by the landlords, and it was the most ruthless form of exploitation of peasant masses by the members of the landlord class.20 Along with landlords and usurers came the state taxmen. The main tax collected in rural China during the Qing period was land tax, and in the second half of the 19th century, land tax was combined with head tax to form into land-head tax (Diding). The tax rate varied from province to province. In the collection of taxes, local government officials usually consulted powerful members of the gentry families before working out the rate.21 With this influence over the state, many gentry (landlord) families were able to shift the main burden of the taxes onto the peasants. Since the opening of China after China’s defeat in the Opium War in 1842, the state was greatly indebted because of foreign invasions and internal rebellions. The government had to impose 19

Liu Yujun, et al., Zhuzai huagong fangwen lu (Records of the Interviews with Chinese Coolie Laborers) (Guangzhou, Institute of Southeast Asian History, Zhongshan University, 1979), pp. 84, 151. 20 Ibid. 21 See Yeh-chien Wang, Land Taxation in Imperial China, 1750–1911 (Cambridge, Massachusetts, Harvard University Press, 1973), pp. 31–34.

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more and more taxes onto the people. Rural population had to shoulder the heavier financial burden of the state. The result of these various forms of exploitation reduced a huge number of peasantry into extreme poverty, and created a large pool of unemployed peasants and artisans. Many of them had the desire to go overseas to earn a living. This powerful economic force only constituted the main part of the so-called push factors for Chinese emigration overseas. The other side of the coin was the pull factors. Principal among the pull factors was again economic. The first wave of European colonization in Southeast Asia from early 16th to the middle of the 18th centuries only resulted in limited economic development, and attracted limited number of Chinese traders to the region. Spanish and Dutch hostile policies towards the Ethnic Chinese ruled out any chance for a large-scale of Chinese emigration into Southeast Asia. It was not until the second wave of European colonization in late 18th century that a substantial Chinese emigration was made possible. The British and the French were the main actors in the second wave. British founding of the new ports in Penang (1786), Singapore (1819) and Malacca (1824) provided excellent opportunities for Chinese traders, artisans and laborers.22 The Chinese found British free trade policy attractive, and British rulers benevolent. Many Chinese immigrants were attracted to settle in these British ports. The rapid economic development of mining and cash crops industries in Southeast Asia in the second half of the 19th century provided excellent opportunities for Chinese immigrants. The continuing supply of raw materials (such as sugar from Java, rice from Burma, pepper and gambier and tin from British Malaya) to feed the world Capitalist system required a large-scale import of cheap labor from China and India.23 22 See K.G. Tregonning, The British in Malaya: The First Forty Years, 1786–1826 (Tucson, The University of Arizona Press, 1965), pp. 109–126; C.M. Turnbull, The Straits Settlements, 1826–67: Indian Presidency to Crown Colony (London, The Athlone Press, 1972), pp. 9–37. 23 For discussion of the development of tin and cash crop industries in Malaya and the demand for Chinese labor, see Wong Lin Ken, The Malayan Tin Industry to 1914

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To the potential Chinese immigrants, Southeast Asia was a region long known to Chinese, and many Chinese from Guangdong and Fujian had already established immigration networks in the region, the risk of emigration was less. Since the British had created an useful political and economic system under which they could make rapid economic advancement, they were prepared to come to work for several years, and return to China with wealth.

Process of Chinese emigration Two patterns existed side-by-side in the process of Chinese emigration to Southeast Asia: kinship-based emigration and credit-ticket system. The former was dependent on traditional kinship ties, while the latter operated on a system of credit. Successful Chinese immigrants in the region had a strong desire of establishing a business, but they were faced with many difficulties, one of which was finding honest and trustworthy staff. This difficulty was further compounded by dialect difference. The simplest way was for the immigrant to recruit his relatives or kinsmen from his home village. He paid for their passages and provided them with food and lodgings in the new land; in return, they worked in his shop as apprentices and assistants. After a few years, those who had learned the trade and had accumulated some capital would then start their own business. In turn, they would return to China to recruit relatives and kinsmen to man their shops. Thus, a kinship-based pattern of emigration was firmly established in the region.24 The credit-ticket system was a more complex one. It involved much wider social and economic networks, and was easier to be (Tucson, The University of Arizona Press, 1965); J.C. Jackson, Planters and Speculators: Chinese and European Agricultural Entreprise in Malaya, 1786–1912 (Kuala Lumpur, University of Malaya Press, 1968); P.L. Burns, “Capitalism and the Malay States”, in Hamza Alavi et al., Capitalism and Colonial Production (London, Croom Helm Ltd., 1982), pp. 159–178. 24 See Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986), p. 4.

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abused. Impoverished and destitute, many prospective Chinese immigrants could not afford to pay their passage overseas. Their passage money was advanced by labor brokers (Kheh-taus), or captains of junks or labor agencies. After arriving ports in Southeast Asia, the credit-ticket immigrants were disposed of to employers who needed laborers.25 The employers paid the passage money that the immigrants owed, and had a verbal or written contract with the immigrants for the repayment of their debts in the form of labor. After working for a fixed period of time, the credit- ticket immigrants were freed from their obligations and were able to choose their new employment. This system was widely practised in Southeast Asia in the 19th century, and was responsible for bringing most of the Chinese immigrants to the region.26 Behind the operation of this credit-ticket system was a thriving immigrant trade. Two stages of development in the 19th century can be identified: the stage before the opening of China in 1842, and the stage after the opening of China. Before 1842, those who profited most from the immigrant trade were labor brokers (Kheh-taus) who were the natives of Fujian and Guangdong provinces.27 They helped the impoverished immigrants to earn a living overseas, and helped meet the 25 For the disposal of Chinese Coolies in Singapore and Penang, see “Report of Committee Appointed to Consider and Take Evidence upon the Condition of Chinese Labourers in the Colony (Singapore), 1876”, in Colonial Office Records(CO) 275/19; “Report of the Commissioners Appointed to Enquire into the State of Labor in the Straits Settlements and the Protected Native States, 1891”, in CO 275/41. 26 Ibid. 27 The term ‘Kheh-tau’ was Romanised according to Hokkien (southern Fujianese) dialect, and it is an equivalent to Mandarin ‘Ketou’. ‘Kheh’ means guest, and ‘tau’ means head. In the eyes of Chinese, emigrants were considered as new guests, and the headman who guided the emigrants to the new land was callled ‘Kheh-tau’. Because of its Hokkien origin, the term was probably referred to those headmen who had arranged illigal emigrants to Taiwan from southern Fujian ports. A Qing imperial statute was enacted in 1740 to punish those ‘Kheh-taus’ who smuggled illegal emigrants to Taiwan and Macao. This suggests that the ‘Kheh-tau’ system must have existed in southern part of China at least by the middle of the 18 century. See Chinding da-Qing huidian shili (Collected Statutes of the Great Qing Empire) (Taipei, 1963, reprint), Vol. 19, pp. 14944–14945, or the original text, Vol. 775, pp. 15–17.

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growing demand for labor in Southeast Asia. The shortage of labor forced the employers in Southeast Asia to pay high prices for needed laborers, and the price they paid for each immigrant not just cover the passage money, but also the profit for the broker or captain of the junk. This immigrant trade became firmly established in the early 19th century. Writing in 1805, one observer claimed that the immigrant trade was responsible for moving 10,000 to 12,000 Chinese to the islands of the Archipelago.28 The majority of them were shifted from Canton (Guangzhou) and Amoy (Xiamen), the major ports of Guangdong and Fujian, where immigration networks existed. The opening of China after the Treaty of Nanjing (Nanking) in 1842 marked the beginning of the second stage of the immigrant trade. The opening of China coincided with a great demand for Chinese labor in the new world as a result of the abolition of the notorious ‘Slave Trade’ in 1843. These events greatly changed the character of the immigrant trade. Firstly, the immigrant trade was transformed into the Coolie Trade which was notorious for its disregard for basic human rights of the emigrants; secondly, the operation of the trade became larger in volume and assumed an international character; thirdly, the Coolie barracoons grew in the Treaty Ports of China and the Portuguese colony of Macao, and their inhuman treatment of prospective Coolies; fourthly, European merchants became deeply involved in the trade.29 The transformation of the immigrant trade into Coolie Trade took place in late 1840s. By early 1850s, the Coolie Trade was already firmly established. This can be seen from the fact that most 28

See “Extracts and Substance of a letter from the Agent to the Governor-General with the Malay States, to His Excellency the Most Noble Marquis Wellesley K.P. Governor-General in Council, dated Prince of Wales Island, 27 March, 1805”, in Journal of the Indian Archipelago and Eastern Asia, Vol. 6, 1852, p. 167. 29 For the rise of the Coolie Trade in coastal China and its cruel treatment of the Coolies, see Yen Ching-hwang, Coolies and Mandarins: China’s Protection of Overseas Chinese during the Late Ch’ing Period (1851–1911), pp. 32–71; Sing-wu Wang, The Organization of Chinese Emigration, 1848–1888: With Special Reference to Chinese Emigration to Australia (San Francisco, Chinese Materials Center, INC. 1978), pp. 165–255.

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records about Chinese emigration before 1840s seldom referred to emigrants as ‘Coolies’ (cheap menial laborers), and instead, a general term of ‘immigrant’ was used.30 By 1852, the term ‘Coolie’ was frequently found in both British and Chinese records. This transformation was primarily due to the response of European merchants to a growing international demand for cheap Chinese labor. The Treaty of Ghent signed in December 1841 obliged Britain and the United States to abolish the African slave trade, and the enforcement of this treaty in 1842 compelled European colonists in the new world to look for alternative source of cheap labor. They cast their eyes on the teeming millions in China. The acquisition of Chinese labor was facilitated by the opening of the Treaty ports along the Southeast coast of China. Some Western merchants capitalized on this new situation by setting up agencies in the Treaty ports, and providing needed laborers to the would-be employers or speculators in the new world.31 The agencies charged commissions on the number of Coolies supplied, and established in the ports a number of barracoons which served as clearing houses.32 Ships then arrived at the ports, picked up the Coolies, and set sail for destinations in the new world, principally for Peru, Cuba and West Indies. The rise of the Coolies Trade after 1843 changed the character of Chinese emigration to Southeast Asia. Not only were the Chinese immigrant operators forced to be more efficient to survive the competition, but the Coolies were treated badly. They were disposed of in the major ports in Southeast Asia such as Singapore, Penang or Rangoon in the manner of common merchandise, and those who could not be sold instantly were confined in Coolie Depots (Barracoons, or known in Chinese as Zhu Zai Guan).33 These Coolie 30

The earliest record of the use of the term of ‘Coolie’ was found in the Singapore Chronicle in 1834. It was written as ‘Cooley’ rather than ‘Coolie’. See “Chinese Emigrants”, in Singapore Chronicle, May 8th, 1834. 31 See P.C. Campbell, Chinese Coolie Emigration to Countries within the British Empire (Taipei, Cheng Wen Publishing Company, 1970, reprint), p. 95. 32 See “Dr. Bowring to the Earl Malmesbury dated August 3, 1852”, in British Parliamentary Papers: Command Papers (1852–53), pp. 347–348, No. 5. 33 See “Report of the Committee Appointed to Consider and Take Evidence upon the

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Depots were overcrowded and badly ventilated, their conditions were not better than those Coolie barracoons found in the Treaty ports and Macao. High profits of this trade attracted Chinese secret society members whose involvement aggravated the miseries of the Coolies. Many of the Coolies were bought and sold against their will, and were ill-treated.34 The ill-treatment of a large number of Chinese Coolies who worked in the tobacco plantations in Deli, a Dutch colony in northeast Sumatra, became an international scandal at the end of the 19th century.35

Social Structure and Social Mobility in Ethnic Chinese Communities Social division The mode of Chinese emigration to Southeast Asia to a greater extent determined how Ethnic Chinese were first grouped and organized. The kinship-based arrangement brought new immigrants from same villages, districts or prefectures in China. They tended to congregate together for protection and mutual help. Dialect difference tended to compartmentalize Ethnic Chinese communities into many segments of dialect groups. The credit-ticket system brought new immigrants from different parts of Guangdong and Fujian, and

Conditions of Chinese Labourers in the Straits Settlements, 1876”, in CO 275/19, p. 2. 34 In Singapore, for instance, ill-treatment of Chinese Coolies continued after 1873 when all Coolie depots on the island were registered and under the supervision of government officials. On June 8th, 1876, acting upon the information received by the police, the Colonial Secretary and the Inspector General of Police visited two Coolie depots in Campong Glem, Singapore, and found in them 50 Chinese Coolies. The windows of the depots were barred, the doors were guarded by Samsengs (thugs, secret society members), and the Coolies had been kept locked up in that manner for a week. Ibid. 35 See Singapore Daily Times, December 11th, 1874, p. 2; Lat Pau (a Singapore Chinese Daily), April 2nd, 1889, p. 2, April 5th, 1889, p. 20; Jan Breman, Taming the Coolie Beast: Plantation Society and the Colonial Order in Southeast Asia (Delhi, Oxford University Press, 1990, 2nd impression), pp. 199–200.

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dispersed them more widely to different parts of Southeast Asia. These credit-ticket immigrants were also attracted to different dialect communities with which they found comfort and support.36 Thus, it reinforced the division of the Ethnic Chinese communities. Although Chinese share a common written language, they differ in their spoken languages which are commonly known as Chinese dialects. Five major dialects were commonly found at the time in the Chinese communities in Southeast Asia: Hokkien (or Southern Fujianese), Cantonese, Teochew (Teochiu), Hakka (Keh) and Hainanese (Hailam). Geographical proximity and the pattern of emigration enabled different dialect groups to predominate different parts of East and Southeast Asia. For examples, geographical proximity led many Hokkien emigrants to settle in Taiwan, while Cantonese emigrants constituted the majority of the Chinese in Hong Kong and Macau.37 In Southeast Asia, Hokkien emigrants predominated the Philippines,38 Dutch East Indies (Indonesia), the Straits Settlements and Burma; the Teochews accounted for the majority of the Chinese in Thailand, Cambodia; while the Cantonese predominated some parts of Vietnam and parts of Malaysia. Among these five major dialects, some degree of intelligibility existed, among Hokkiens, Teochews

36

For a study of early Chinese emigrant settlement and its relationship with dialect organizations in Singapore and Malaya, see Yen Ching-hwang, “Early Fukienese Migration and Social Organization”, in Pin-tsun Chang & Shih-chi Liu (eds.), Zhongguo haiyang fazhanshi lunwenji (Essays in Chinese Maritime History), Vol. 5 (Taipei, Sun Yat-sen Institute for Social Sciences and Philosophy, Academia Sinica, 1993), pp. 679–740; see also Yen Ching-hwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), pp. 72–100. 37 For the making of Hong Kong as a Cantonese predominated city, see Jung-Fang Tsai, Hong Kong in Chinese History: Community and Social Unrest in the British Colony, 1842–1913 (New York, Columbia University Press, 1993), pp. 19–22. 38 For the study of early Chinese emigrants to the Philippines and the creation of a Hokkien dominated community, see Edgar Wickberg, The Chinese in Philippine Life, 1850–1898 (New Haven and London, Yale University Press, 1965), pp. 172–175.

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and Hainanese; while the Hokkiens, Hakka and Cantonese were entirely unintelligible to each other. Different dialect groups established their own dialect organizations for social, cultural and religious purposes and for the protection of group interests. Hokkien Associations, Cantonese Associations, Teochew Associations, Hakka Associations and Hainanese Associations were founded in the different parts of Southeast Asia.39 Numerous sub-dialect associations also existed in the region. Among the Hokkiens, there were sub-dialect associations of Zhangzhou, Quanzhou, Yongchun, Tongan and Nanan; while among the Hakkas, there were sub-groups of Huizhou, Jiaying Zhou, Dapu, Fengshun, and Hepo. All these dialect and sub-dialect groups formed the nuclei of social, religious and educational activities.40 They established their own temples worshipping different deities, organized different religious festivities, founded different cemeteries and schools. This entrenched social division tended to generate misunderstanding, suspicion, hostility and conflict. Clashes among different dialect groups broke out occasionally in different parts of Southeast Asia in the 19th century.41

Social structure Dialect association, clan organization and secret society were the three mainstays of the Ethnic Chinese social structure in the 19th century, and they constituted the main fabrics of the Ethnic Chinese communities. The dialect association was organized on the basis of dialect difference as well as geographical background. It resembled the 39

For the existence of these dialect organizations in Singapore and Malaya, see Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, pp. 177–181; for Thailand, see Richard J. Coughlin, Double Identity: The Chinese in Modern Thailand (Hong Kong, Hong Kong University Press, 1960), pp. 40–47, G. William Skinner, Chinese Society in Thailand: An Analytical History (Ithaca, New York, Cornell University Press, 1957), pp. 167–169, 259–260, 272–273; for the Philippines, see Edgar Wickberg, The Chinese in Philippine Life, 1850–1898, pp. 179, 209. 40 Yen Ching-hwang, Ibid., pp. 44–51. 41 Ibid., pp. 196–202.

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huiguan in China, but it was founded on the social and religious needs of the Chinese immigrants.42 In the 19th and early 20th centuries when the communities were not yet integrated, social role of the dialect association was most important. In a new and sometimes hostile environment, dialect association provided useful focus for emigrants of same dialect group to meet and to socialize. They exchanged news about home districts, employment and business opportunities, and shared joys and sorrow together. They worshipped common deities, and celebrated common festivities. At the same time, the association also assumed the welfare role of providing assistance to needy members. This varied from providing occasional lodging, to living allowance and medical care. The range of welfare programs available depended on the financial position of the particular dialect association. It also helped to arbitrate disputes among members and between members and outside people.43 Like the dialect association, the formation of clan organizations in the Ethnic Chinese communities was connected with practical needs of Chinese immigrants. Although most Chinese immigrants had no desire to settle overseas, many of them were forced by circumstances to stay in foreign land for a considerable length of time. To satisfy their cultural and spiritual needs, they observed traditional Chinese customs, such as ancestral worship and celebration of Chinese festivities.44 That called for some kind of organization to look after that need. More importantly, an organization was required to deal with death. The rich who could afford to send their coffins back to China for burial, and needed an organization to help arrange it; while the poor needed help to raise money for a decent burial overseas.45 42

For the examination of social and economic needs which led to the founding of the dialect organizations in Singapore and Malaya in the 19th century, see Ibid., pp. 35–37. 43 Ibid., pp. 44–51. 44 See J.D. Vaughan, The Manners and Customs of the Chinese in the Stratits Settlements (Singapore, The Mission Press, 1879) (Reprint, Taipei, Ch’eng Wen Publishing Company, 1971), pp. 34–35, 42–47. 45 See Yen Ching-hwang, “Early Chinese Clan Organizations in Singapore and Malaya, 1819–1911”, in Journal of Southeast Asian Studies (Singapore, Singapore University Press), Vol. 12, No. 1 (March, 1981), p. 63.

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Furthermore, the wealthy merchants in the Ethnic Chinese communities desired prestige and social status which they had difficulty to obtain from the Colonial governments, they therefore sought leadership status in a social organization which was deemed to be a symbol of status and influence. This prompted some of them to take initiatives to found clan associations in the Ethnic Chinese communities.46 Apart from these practical needs, most Chinese immigrants had lived under the protection wings of clans in China, and they realized that enormous benefits would derive from the existence of similar kinship organizations overseas. In 19th century Southeast Asia, two types of Ethnic Chinese clan organization can be discerned: a localized clan and a nonlocalized clan. The former was based on kinship, locality and dialect ties,47 while the latter was based on broader kinship and geographical ties, and sometimes on a special bond of traditional brotherhood alliance. The localized clan association had its members claiming a common recent ancestry, coming from the same village or district, and speaking a common dialect; while the non-localized clan association derived its membership from a few neighboring districts or prefectures, claimed a relatively remote ancestry, and its members spoke more than one dialect.48 In the early part of the 19th century, it appears that the localized clan associations were predominant. This was partly because kinship-based emigrants outnumbered other types of emigrant. These localized clan associations became wealthy and powerful, and displayed their wealth by building glamorous clan temples. Gorgeous clan temples built by the Five Hokkien clan associations in Penang (Khoo Kongsi, Yeoh 46

Ibid. For a detailed discussion of localized lineage(clan), see Maurice Freedman, Lineage Organization in Southeast China (London, Athlone Press, University of London, 1958), pp. 1–8. 48 For a discussion of localized and non-localized clans in the Chinese communities in the 19th and early 20th century Singapore and Malaya, See Yen Ching-hwang, A Social History, pp. 75–78. 47

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Kongsi, Lim Kongsi, Tan Kongsi and Chieh Kongsi) testified to their desire for prestige.49 Although the clan association was based on the principle of kinship, it could not justify its continuous support from its clansmen without its principal functions of social and welfare. It had to satisfy emigrants’ cultural and social needs in the new land. The desire to resonate traditional festivities saw its celebrations of Chinese New Year in January or February, the Qingming festival in April or May, the Dragon Boat festival in June, and the Moon Festival in September. The celebrations of these festivals were usually accompanied by a big feast which provided opportunities for members to socialize. The welfare role of the clan association was focused on medical care, financial assistance to destitute members, and a decent burial for poor kinsmen who died overseas. In addition, the association provided free education for members’ children in clan schools, and promoted Chinese education. It also helped to mediate disputes among its members and between members and outside people.50 What made the clan association different from dialect association was the worship of ancestors and patron gods. Most of localized clans worshipped a common progenitor who was the founder of the clan in China during the post-Fujian and post-Guangdong period — the worship of Khoo Chian Eng in the Khoo Kongsi in Penang, the worship of Tan Guan Kong of Tan Kongsi in Penang and Tan clan association of Malacca, and the worship of Ng Shiao Shan (Huang Xiaoshan) of Ng (Huang) clan associations in Singapore and Malaysia — testified to the importance of the progenitor in the clan’s ancestral worship.51 The 49

For the history and the clan temples of the five Hokkien clan associations in early Penang, see Xie Liangsheng, “Bincheng wuge lishi zuijiu de xingshi zongci (The Oldest Five Chinese Clans in Penang), in Liu Wenqu, et al. (eds.), Binzhou huaren dahuitang qingzhu chengli yibai zhounian xinsha locheng kaimu jinian tekan (Commemorative Publication of Centenary Celebration and Inauguration of the New Building of Penang Chinese Town Hall (Penang, Penang Chinese Town Hall, 1983), pp. 372–380. 50 Yen Ching-hwang, “Early Chinese Clan Organizations in Singapore and Malaya”, in Journal of Southeast Asian Studies, Vol. 12, No. 1, pp. 79–84. 51 See “Brief Genealogy of ‘Sin Kang’ Seh Khoo’s Ancestors of Various Branches” (manuscript); Chen Qiyu, Yunchuan tang Chenshi zupu (The Genealogical Records

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worship gave a sense of pride, a feeling of a depth in history and continuity of clan pedigree; provided a focus for solidarity among members, and obligated them to fight for the glory and prosperity of the clan. A solemn ceremony was held on the birthday of the progenitor in the clan temple, and all male members of the clan were gathered to kowtow to his portrait. It was followed by a big feast. The worship of a clan god or goddess had its origins in Chinese polytheistic religion. Polytheism allowed the Ethnic Chinese to develop the concept of clan’s patron god or goddess. They were either common deities or personalities who were closely related to the clan’s history. They might not rank high in the Chinese pantheon of gods, nevertheless, they had conferred special grace to the clan. This was why they were exclusively worshiped in the clan temple. However, practical needs of early Chinese emigrants also had a part to play. The emigrants were fearful of their voyages to the destination overseas, and invariably believed a supernatural power in protecting them. Once they were in the new land, they were unsure when they would be returning home, and the continuing protection from the patron god or goddess was deemed necessary. This led them to worship a patron deity in their clan temples. Some clans took the patron gods directly from the clans in China, some took over the common patron goddess of seafarers, Tianhou (meaning Empress of Heaven, also known as Tianfei or Mazu) as their patron goddess.52 Usually, a statue of the patron deity was placed prominently in the clan temple, and it was of the Chen Clan of Yunchuan tang) (Penang, 1967), p. 5; Chen Yungqing (ed.), Maliujia Yunchuan tang Chenshi zongci dasha locheng kaimu dianli ji baizhounian jinian tekan (Malacca Eng Chuan Tong ‘Seh Tan Ancestral Temple’ New Building Official Opening and Centenary Anniversary Celebration) (Malacca, May 1974), p. 12; Binlangyu Jiangxiatang Huangshi zongci (ed.), Huangshi zupu ji bai sishi zhounian jinian tekan (The Genealogical Records of the Huang Clan together with the Celebration of the 140th Anniversary of the Penang Jiangxiatang Huang Clan Temple) (Penang, Penang Jiangxiatang Huang Clan Temple, January 1970), pp. 4–5. 52 For an excellent study of goddess Tianhou, see James L. Watson, “Standardizing the Gods: The Promotion of Tian Hou (Empress of Heaven) Along the South China Coast, 960–1960”, in David Johnson, Andrew J. Nathan & Evelyn S. Rawski (eds.), Popular Culture in Late Imperial China (Berkeley, University of California Press, 1985), pp. 292–324.

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given sacrificial offerings once or twice a year, and the members of the clan were required to attend the ceremonies to pay homage.53 Secret society was an integral part of the Ethnic Chinese communities in 19th century Southeast Asia. Originated in China with an honorable political objective, it gradually degenerated into a gangster organization. However, it was integrated into Ethnic Chinese social structure, and was used by the Colonial governments in Southeast Asia as an effective control mechanism over the immigrant Chinese. Well aware of its coercive power, Chinese Kapitans — the de facto rulers of the Ethnic Chinese communities — used it to prop up their power.54 It was also used invariably by Chinese merchants, miners and planters to enforce their contracts and to protect their economic interests. Powerful social institutions such as dialect associations also developed close relations with it in order to perpetuate their control over certain lines of occupations in the Ethnic Chinese communities.55 Two major Chinese secret societies existed at that time were Ghee Hin (Yixing) and Hai San (Haishan), which were the off-springs of the Triads prevalent in South China. Being an effective mechanism for social control, secret society was used to achieve political and economic objectives of certain social groups. It was thus involved in violence and riots that threatened the law and order of the societies in Southeast Asia. This led eventually to its suppression by the Colonial governments in Southeast Asia at the end of the 19th century.56 53

Yen Ching-hwang, “Early Chinese Clan Organizations in Singapore and Malaya”, in Journal of Southeast Asian Studies, Vol. 12, No. 1, pp. 78–79. 54 See S.M. Middlebrook, “Yap Ah Loy”, in Journal of the Malayan Branch of Royal Asiatic Society, Vol. 24, Pt 2 (Singapore, July 1951), pp. 36–41; Yen Ching-hwang, A Social History, p. 127; C.S. Wong, A Gallery of Chinese Kapitans (Singapore, Dewan Bahasa dan Kebudayaan Kebangsaan, Ministry of Culture, 1963), pp. 70–72. 55 For the relationship between secret societies and social structure in the Chinese communities in Singapore and Malaya in the 19th century, see Yen Ching-hwang, A Social History, pp. 110–140. 56 For major works on the Chinese secret societies in Malaya and Singapore, see W.L. Blythe, The Impact of Chinese Secret Societies in Malaya: A Historical Study (London, Oxford University Press, 1969); Mak Lau Fong, The Sociology of Secret Societies: A Study of Chinese Secret Societies in Singapore and Peninsular Malaysia (Kuala Lumpur, Oxford University Press, 1981); L. Comber, Chinese Secret Societies in Malaya: A

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Class structure and social mobility Ethnic Chinese class structure differed from the traditional class structure in China. A hierarchy of three classes: the merchants (Shang) class occupied the top, and then followed in descending order by the educated elite (Shi), and the urban and rural workers (Gong).57 The Shang class consisted of traders, shopkeepers, exporter and importers, plantation owners, miners, property owners, compradors and financiers. The Shi class consisted of clerks of foreign firms and Chinese firms, junior government officers, interpreters, school teachers and modern professionals. The Gong class consisted of artisans, shop assistants, plantation workers, mining workers and transport workers (rickshaw pullers). The Shang class was further sub-divided into capitalists and general merchants. The former consisted of wealthy exporters and importers, big plantation owners, tin, gold and other mining proprietors, big contractors, property owners and developers, and wealthy compradors and financiers; while the latter consisted of shopkeepers, general traders and small plantation owners. The Shi class was also divided into two sub groups: the upper Shi class consisting of professionals, junior government officials, interpreters, and clerks of foreign firms; while the lower Shi class consisted of Chinese school teachers and clerks of Chinese shops. Two subdivisions could also be identified in the Gong class: artisans and general workers. Artisans consisted of carpenters, blacksmiths, goldsmiths, bricklayers, mechanics, cooks and tailors; while the general workers

Survey of the Triad Society from 1800 to 1900 (Singapore, Donald Moore, 1959). For work on the Chinese secret societies in Hong Kong, see W.P. Morgan, Triad Societies in Hong Kong (Hong Kong, Government Press, 1960). 57 Professor Wang Gungwu holds a slight different view on the Ethnic Chinese class structure in Malaya and Singapore. He divided the Chinese society into two major groups: Shang (merchants) and Kung (Gong, workers). See Wang Gungwu, “Traditional Leadership in a New Nation: The Chinese in Malaya and Singapore”, in G. Wijeyawardene (ed.), Leadership and Authority: A Symposium (Singapore, University of Malaya Press, 1968), p. 210; see also Wang Gungwu, Community and Nation: Essays on Southeast Asia and The Chinese (Singapore, Heinemann Educational Books (Asia) Ltd., 1981), p. 162.

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consisted of shop assistants, plantation workers, mining workers and rickshaw pullers.58 In contrast with the class system in China,59 the class system in the Ethnic Chinese communities was open and fluid. There was no legal barrier to upward social mobility, nor was there a highly competitive examination system that people had to go through before higher social status could be acquired. The main determinant of the upward social mobility was wealth. Those who possessed it moved up the social ladder and those who lost it descended, even down to the bottom. The fast expanding economy in Southeast Asia provided excellent opportunities for Ethnic Chinese to acquire wealth and to change their social status, and there were no quotas restricting the number of people moving up the social ladder.60 This explains why movements between classes and between sub-classes were frequent in the Ethnic Chinese communities. The impact of Confucianism on Ethnic Chinese class system was not so much on the formal class structure,61 but rather on the attitude of the Ethnic Chinese towards social groupings which led indirectly to the formation of Overseas classes. The Confucian concept of a hierarchical order that was expressed in class, clan and family structures in China, left an indelible impression in the minds of the immigrants before leaving China. When they were congregated together overseas, they perceived that the new community was also structured hierarchically. They tended to grade other people according to wealth, and to respect those who had possessed more wealth and higher social status. In the process of grading others, one could not help knowing 58

Yen Ching-hwang, A Social History, pp. 141–142. For a discussion of class system in traditional China, see Ping-ti Ho, The Ladder of Success in Imperial China (New York, John Wiley & Sons, Inc., 1964), pp. 1–52. For mobility within Chinese class system, see Robert M. Marsh, The Mandarins: The Circulation of Elites in China, 1600–1900 (Glencoe, The Free Press, 1961). 60 Yen Ching-hwang, A Social History, pp. 154–162. 61 For a discussion of the impact of Confucianism on traditional Chinese class structure, see Tung-tsu Chu, “Chinese Class Structure and Its Ideology”, in J.K. Fairbank (ed.), Chinese Thought and Institution (Chicago and London, The University of Chicago Press, Phoenix Edition, 1967), pp. 235–250. 59

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one’s own status in that social hierarchy. This strong status consciousness provided an incentive for the Ethnic Chinese to acquire wealth and symbols of status.62 It became an important source of inner strength of Ethnic Chinese business.

Culture and Tradition in Ethnic Chinese Communities Customs and traditions What made the Ethnic Chinese essentially different from the indigenous or other ethnic groups were Chinese customs and tradition. Chinese immigrants brought their customs and tradition to the new land, and entered into an unconscious process of perpetuating them. Born and bred in villages in Southeast of China, early Chinese immigrants had a strong desire to keep their customs and tradition, and did not see the need to change them to suit local climate and conditions. They were blindly loyal to their tradition and resisted change. This cultural tenacity was not just confined to the immigrants, but also found among local-born Chinese, such as the Babas and Nyonyas in the British Straits Settlements, the Peranakans in Dutch East Indies and the Mestizos in Spanish Philippines.63 Writing in 1879, a British 62

For a discussion of psychological needs for social status expressed in the acquisition of Qing official titles in Singapore and Malaya, see Yen Ching-hwang, “Ch’ing’s sale of Honours and the Chinese Leadership in Singapore and Malaya 1877–1912”, in journal of the Southeast Asian Studies, Vol. 1, No. 2 (Singapore, McGraw-Hill Far Eastern Publishers (S) Ltd., September, 1970), pp. 20–32. See also the same article published in Yen Ching-hwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), pp. 177–198. 63 See Tan Chee Beng, The Baba of Malacca: Culture and Identity of a Chinese Peranakan Community in Malaysia (Petaling Jaya, Pelanduk Publications, 1988); Edgar Wickberg, “The Chinese Mestizo in Philippine History”, in Journal of Southeast Asian History, 5 (March, 1964), pp. 62–100. For a more recent study on Babas, Peranakans and Mestizos, see G. William Skinner, “Creolized Chinese Societies in Southeast Asia”, in Anthony Reid (ed.), Sojourners and Settlers: Histories of Southeast Asia and the Chinese (St. Leonards, New South Wales, ASAA and Allen & Unwin, 1996), pp. 51–93.

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observer, J.D. Vaughan, commented that “The Chinese are so attached to the habits of their forefathers that notwithstanding an intercourse in the Straits for many generations with the natives of all countries, they have jealously adhered to their ancient manners and customs.”64 Indeed, the early Chinese immigrants intended to keep all Chinese customs and habits. They wore Chinese style clothes, ate Chinese food, consumed imported goods from China, kept Chinese hair-style and built Chinese style of houses and shops. The most distinctive feature of the Chinese in 19th century Southeast Asia was their hair-style, the queue. Originally imposed on the Chinese by the Manchu conquerors after 1644, the queue was taken over by the Chinese as their own hair-style. Like their compatriots in China, the Ethnic Chinese considered their queue as an inseparable part of their body given by parents, and developed a strong emotional attachment to it. It provided a common identity for all Ethnic Chinese regardless of their wealth and social status, and became a conspicuous object which separated them from non-Chinese. Although the queue was regarded by Europeans as a symbol of backwardness and an object for derision,65 and was considered by the anti-Manchu revolutionaries as the badge of Manchu servitude,66 it nevertheless became a symbol of Chinese identity and pride. In the process of retaining their cultural identity, early Ethnic Chinese were consciously trying to keep alive traditional festivities. Most Chinese festivals were observed in their original forms. Despite climatic difference and local conditions, the Ethnic Chinese in 19th century Southeast Asia followed strictly the dates of the festivals in the lunar calendar. These festivals included the Chinese New Year; the

64. J.D. Vaughan, The Manners and Customs of the Chinese in the Stratits Settlements, p. 4. 65 The queue was sometimes called a ‘pigtail’ by foreigners, and became an object of derision. See for instance, in Wu Lien-teh, Plague Fighter: The Autobiography of a Modern Chinese Physician (Cambridge, W. Heffer and Sons Ltd., 1959), p. 229. 66 For Chinese revolutionaries’ attitude towards the queue, see Chong Shing Yit Pao (The Restoration Daily) (Singapore), 14/8/1909, p. 1; 17/11/1909, p. 2

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birth of the Emperor of Heaven on the 9th day of the first moon (especially among the Hokkien Chinese); the Yuanxiao festival on the 15th day of the first moon; the Qingming festival in the third moon; the Dragon Boat festival in the fifth moon; the Zhongyuan festival (or known as the festival of the dead) on the 15th day of seventh moon; and the Moon festival of the eighth moon.67 A leading Chinese sociologist pointed out that the traditional Chinese festivities had an important social role to play. They relieved monotonous routine life, refreshed the people after hard work, and provided practical motivation. At the same time, they reinforced social values of group spirit, optimism, and harmony.68 For the Ethnic Chinese communities at this time, traditional Chinese festivities served even more important communal and cultural roles. They provided a common focus for general participation. All the festivals fell on common days regardless of dialect difference, and the stories behind them were the same.69 In the absence of weekly holidays that existed in the Western society, the festivities were taken by many Ethnic Chinese as days for celebrations and rest, and to help refresh themselves for the hard works ahead.70 Culturally, the celebration of these festivities rekindled Chinese identity and reinforced emotional attachment to the Chinese tradition.

Ethnic Chinese religions Early Chinese immigrants in Southeast Asia were conscious of their religious need in the new land. With unpredictable future and hazardous voyages, religious worship became an important part of their spiritual life. The majority of the early Chinese immigrants were Buddhists 67

For the retention and celebration of these traditional Chinese festivities in Malaysia, see C.S. Wong, A Cycle of Chinese Festivities (Singapore, Malaysia Publishing House Limited, 1967). 68 See C.K. Yang, Religion in Chinese Society (Berkeley, University of California Press, 1967), pp. 94–96. 69 For instances, the stories of the patriotic poet, Chu Yuan for the Dragon Boat festival, and of the fairy, Chang-E for the Moon festival. C.S. Wong, op. cit., pp. 120–127, 144–151. 70 See Yen Ching-hwang, A Social History, pp. 19–20.

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of Mahayana denomination. The Mahayana Buddhism emphasized the power of prayers, and believed salvation of individuals rested on prayers rather than personal sufferings in life. Because of this, they worshipped Buddha and other Buddhist deities in temples by burning joss papers and joss sticks. The import of a large quantity of joss papers and joss sticks into Southeast Asia in the 19th century testified to the importance of Buddhist worship in the Ethnic Chinese communities.71 Many beautiful and majestic Buddhist temples were built over the years and had dotted the landscape of Southeast Asia. A 1988 study of the Chinese community in Medan, North Sumatra, found the existence of 25 Chinese temples or more in that city.72 The finding of another study in 1968 on the Chinese temples in Kuala Lumpur, Malaysia, was even more astounding. There were at least 150 major and small Chinese temples in Kuala Lumpur (including Petaling Jaya).73 One of the earliest Chinese temples in Southeast Asia was the Green Cloud Temple (Cheng Hoon Teng, Qing Yun Ting in Mandarin) in Malacca which was founded in the middle of 17th century by a local Chinese Kapitan, Li Wei-ching (Li Weiying in Pinyin).74 71

For instance, 144 bales of joss-papers and 734 pounds of joss-sticks were imported into Singapore between 1829 and 1830. The estimated value of both items was $11,630. See Singapore Chronicle (Singapore), 7/10/1830. In 1878, $84,863 worth of joss-sticks and $125,017 worth of joss-papers were imported from Hong Kong into the Straits Settlements. This increased to $93,445 and $135,431 respectively in 1879. See “Annual Report of the Maritime Department for the Year 1879 dated 21st April, 1880”, in Straits Settlements Legislative Council Proceedings, 1880, Appendix No. 23. 72 See Wolfgang Franke, “Chinese Religion in Southeast Asia with Particular Consideration of Medan, North Sumatra”, in Journal of South Seas Society (Singapore, the South Seas Society), Vol. 43, 1988, or in his collected essays entitled SinoMalaysiana: Selected Papers on Ming & Qing History and on the Overseas Chinese in Southeast Asia 1942–1988 (Singapore, South Seas Society, 1989), pp. 401–420. 73 See Choo Chin Tow (Zhu Jintao in Pinyin), “Jilongpo huaren simiao zhi yanjiu” (Chinese Temples in Kuala Lumpur), as an independent issue of the Journal of South Seas Society, Vol. 47/48 (Singapore, South Seas Society, 1992–1993), p. 5. 74 See “Stone tablet dedicated to Kapitan Li Wei-ching in the year of 1685”, in Wolfgand Franke and Chen Tieh fan (eds.), Chinese Epigraphic Materials in Malaysia, Vol. 1 (Kuala Lumpur, University of Malaya Press, 1982), pp. 223–225.

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It was dedicated to Goddess Guanyin, the Goddess of Mercy. She was the embodiment of the infinite quality of pity of Shakyamuni Budda and the ideal of feminine grace and virtue. In addition to Goddess Guanyin, Goddess Tianhou, the patron goddess of seafaring, and Guandi, the God of War and the god of tradesmen, were also worshipped in the temple.75 All of these deities were popularly worshipped in the temples of the Chinese communities in Southeast Asia.76 The existence of early Chinese temples were to meet special religious needs of the early immigrants. Chinese immigrants worshipped the deities for safe voyages to and from China, for guidance in marriages and business ventures, and for curing sicknesses. Apart from the religious role, some major Chinese temples in Southeast Asia also assumed welfare and administrative functions. In Malacca, the Green Cloud Temple was the administrative headquarters of several Chinese Kapitans who settled community affairs.77 In Singapore, the earliest Chinese temple, Tian Fu Gong (T’ien Fu Kung), was used as the administrative center of the de facto Chinese Kapitans, and it had an office which was to register local Chinese marriages.78 One characteristic of Ethnic Chinese religious life was polytheism. The so-called Buddhist temples found in Southeast Asia were not just for the worship of Buddhist deities, but also for Taoist and local deities. The polytheistic nature made the Chinese religious life more complex.79 The commercialization of Ethnic Chinese communities since the end of the Second World War did not see the decline of 75

See Tan Cheng Lock, Cheng Hoon Teng Temple (Malacca, 1965, a booklet), pp. 6–14. 76 Guandi, Guanyin and Tianhou were most popularly worshiped by the Chinese in Medan and Tanjung Pinang (Riau) in Indonesia. See Wolfgang Franke, Chinese Epigraphic Materials in Indonesia (Singapore, South Seas Society, 1988), pp. 82–120, 354–364. 77 See Tan Cheng Lock, op. cit., p. 3. 78 See Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967, reprint), p. 93. 79 See Wolfgang Franke, “Chinese Religion in Southeast Asia, with Particular Consideration of Medan, North Sumatra”, in Journal of South Seas Society, Vol. 43 (Singapore, 1988), pp. 24–27.

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Buddhism in the region. Instead, more and more Buddhist temples and temples dedicated to different deities flourished. Numerous popular religious sects arose in the Ethnic Chinese communities. These sects were of syncretistic nature blending Buddhism, Taoism and Confucianism together. One of these sects is so-called ‘Three-inOne Doctrine’ (Sanyi Jiao) founded in the 16th century in Fujian province, and was introduced into Southeast Asia in late 19th century. It spread to Singapore and Malaysia, especially among the Heng Hua (Xing Hua) dialect speakers of the Hokkien Chinese.80 Another sect, the ‘Doctrine of the True Void’ (Zhenkong Jiao) spread to Indonesia and Thailand, and are popular among the Hakka Chinese. Another even more widespread Chinese religious sect is ‘Moral Uplifting Society’ (Dejiao Hui) which not only blended Buddhism, Taoism and Confucianism together, but also incorporated some of the teachings of Islam and Christianity. It was first founded in China in 1930s, but became popular among Hong Kong and Southeast Asian Chinese after the Second World War.81 The polytheistic and syncretistic nature of early Chinese religion perhaps had made Ethnic Chinese more flexible in their economic pursuit. Their ability to pick what they needed from different beliefs reinforced the pragmatic inclination of immigrants. Less hindered by religious consideration, the Ethnic Chinese enjoyed a slight competitive advantage in their business endeavors.

Ethnic Chinese education Illiteracy and sojourning did not give rise to strong desire for early Chinese immigrants in Southeast Asia to receive education. As the Ethnic Chinese communities became more mature, and a younger 80

See Wolfgang Franke, “Some Remarks on the ‘Three-in-One Doctrine’ and Its Manifestations in Singapore and Malaysia”, in Wolfgang Franke, Sino-Malaysiana: Selected Papers on Ming & Qing History and on the Overseas Chinese in Southeast Asia 1942–1988, p. 844. 81 See Tan Chee Beng, The Development and Distribution of Dejiao Association in Malaysia and Singapore (Singapore, Institute of Southeast Asian Studies, 1985).

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generation of Chinese was born in the new land, the need for education for Chinese children was felt. Three types of Chinese schools were established before the introduction of modern Chinese education at the beginning of the 20th century: traditional private school popularly known as Sishu, community school run by dialect or clan association, and missionary school. The Sishu predominated among them. Early Chinese schools existed mostly in ports or cities of Southeast Asia, few were found in rural areas. In 1885, for instance, an estimated 115 Chinese schools existed in the Straits Settlements, 52 in Penang, 51 in Singapore and 12 in Malacca.82 Most of them appeared to be Sishus, and were characterized by small number of students and conservative methods of teaching. The majority of 115 Chinese schools in the Straits Settlements in 1885 had less than 20 students, and some of them had only two students.83 In 1899, there were 217 traditional Chinese schools in Java (and Madura) with 4,452 students, and 152 schools in the Outer Islands (in Dutch East Indies) with 2,170 students, an average of 20 and 14 students per school respectively.84 The teaching methods by teachers were conservative and traditional. It did not teach students to comprehend, but rather to recite and memorize the texts.85 The facilities in the Sishus were generally poor, and the quality of teachers was bad, and the standard was low.86 On the other hand, community schools

82

See “Annual Educational Report for the Straits Settlements for the year 1885”, in Straits Settlements Legislative Council Proceedings, 1886, Appendix No. 17, Table E. 83 80 out of 115 Chinese schools in the Straits Settlements had less than 20 students each, 41 of them in Singapore, 33 in Penang and 6 in Malacca. Ibid. 84 See Leo Suryadinata, “Indonesian Chinese Education: Past and Present”, in Leo Suryadinata, The Chinese Minority in Indonesia: Seven Studies (Singapore, Chopmen Enterprises, 1978), p. 3. 85 See Lucius, “State of Education Among the Chinese Settlers in Malacca”, in IndoChinese Gleaner, Quarterly (Malacca), No. 11, January 1820, pp. 267–269. 86 See Xu Suwu, Xinjiapo huaqiao jiaoyu quanmao (The Overview of the Chinese Education in Singapore) (Singapore, Lianshu Printing Company Ltd., 1949), p. 18; Victor Purcell, The Chinese in Malaya (Kuala Lumpur, Oxford University Press, 1967), p. 228; Tan Liok Ee, The Politics of Chinese Education in Malaya, 1945–1961 (Kuala Lumpur, Oxford University Press, 1997), pp. 11–12.

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run by dialect or clan associations had better facilities, better teachers and better standard. Before the rise of modern Chinese education in Southeast Asia at the turn of the 20th century, the twin aims of traditional Chinese education were to exalt the moral principles of the sage, and to acquire literacy skill. This was clearly reflected in the curriculum of the early schools. The texts used in either the Sishus or community schools were ‘Trimetrical Classics’ (Sanzijing) which was to lay the foundation for future learning, and it was followed by the Four Books (The Great Learning, The Mean, Analects and Mencius), the Commentary on the Four Books by Zhu Xi, the great Song Confucian philosopher, and the Five Classics (Book of Poetry, Book of History, Book of Change, Book of Rites, and Spring and Autumn Annals).87 The Four Books and Five Classics were the basic texts to prepare students for imperial examinations in China. They did not serve the same functions in the Ethnic Chinese communities, but were used to exalt the moral principles of Confucius. The learning of Confucian Classics imbued students with the values of Confucianism which they were supposed to benefit from in their adult lives. The acquisition of literacy skill was considered important in the overseas setting. As the majority of the immigrants were illiterate, the ability to read not only provided a person with competitive advantage, but also opened up a new world where he could acquire new knowledge which would indirectly benefit him in trade and in life. The rise of modern education in China changed the direction of the Ethnic Chinese education in Southeast Asia. After the turn of the 20th century, the Manchu government abolished the imperial examination system and accepted a modern education system as part of political and social reforms. A modern school system based on the Japanese model (indirectly based on the American system) was adopted. As a result, modern Chinese schools were founded in the Chinese communities in Southeast Asia. One of the first modern Chinese schools in Southeast Asia was the Zhong Hua School (Zhonghua Xuetang) in Penang. Founded in March 1904 by a group 87

Lucius, op. cit., pp. 267–269.

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of rich Chinese merchants led by Zhang Bishi (Chang Pi-shih), a renowned Ethnic Chinese entrepreneur and Qing bureaucrat, it set the pace for the development of modern Chinese education in the region.88 In the following years, scores of modern Chinese schools were established in major ports and cities throughout Southeast Asia. In contrast with traditional Chinese schools, modern Chinese schools in the Ethnic Chinese communities were larger in size, stronger in financial position, had better facilities and better teachers and higher standards. Their curricula were more diversed and more geared to equip students with modern knowledge. Students were taught new knowledge of history, geography, foreign languages (in British colonies, English was taught, while in Dutch, French and Spanish colonies, relevant foreign languages were taught accordingly) and mathematics in addition to the study of Confucian Classics.89 The collapse of the Qing dynasty and the founding of the Republic in early 1912 saw modern Chinese education making great strides The new government restructured the schools system, changed the curricula, and re-orientated the objectives of the education. Three important principles adopted were: education for moral values, education for acquiring practical knowledge and education for physical well-being of students.90 The new Republican education had a profound impact on the development of the Ethnic Chinese communities in Southeast Asia. It boosted the spread of modern Chinese education in the region, and effectively incorporated the Ethnic Chinese 88

See Penang Sin Poe (Penang), 1/7/1904, 4/7/1904; Lat Pau (Singapore), 30/12/1904; Lee Ting Hui, Chinese Schools in British Malaya: Policies and Politics (Singapore, South Seas Society, 2006), p. 11. 89 See Tan Yeok Seong (Chen Yusong in Mandarin), “Malaiya huawen jiaoyu fazhangshi” (The Development of the Chinese Education in Malaya), in Gao Xin & Zhang Xizhe (eds.), Huaqiaoshi lunji (Essays on the History of Overseas Chinese) (Taipei, Guofang Yanjiuyuan. 1963), pp. 136–137; Tay Lian Soo (Zheng Liangshu in Mandarin), Malaixiya huawen jiaoyu fazhanshi (A History of the Chinese Education in Malaysia), Vol. 1 (Kuala Lumpur, Federation of Chinese Teachers’ Associations, 1998), pp. 101–102. 90 See Li Gueilin (ed.), Zhongguo jiaoyushi (A History of Chinese Education) (Shanghai, Shanghai jiaoyu chubanshe, 1989), pp. 354–356.

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education into its orbit of influence.91 At the same time, the Chinese government helped to provide qualified teachers, text books and curriculum supervision. The founding of the Nationalist government in Nanjing in 1927 opened a new chapter in the development of Ethnic Chinese education in Southeast Asia. With staunch political support from Ethnic Chinese, the Nationalist government placed a strong emphasis on Ethnic Chinese education. Ethnic Chinese leaders were recruited into committee of Overseas Chinese Bureau (Qiaowu weiyuanhui) which was to advise the government partly on the development of Ethnic Chinese education.92 Chinese government’s special attention saw a big push for modern education in the Ethnic Chinese communities. Not only more and more Chinese schools were set up in the region (including schools in rural areas), but also the quality of the education had been improved.93 It also saw an important development of

91

See Yen Ching-hwang (Yan Qinghuang in Mandarin), “Zhanqian Xin-Ma Minren jiaoyu” (Hokkien Chinese Education before World War II), in Yen Ching-hwang, Haiwai huarenshi yanjiu (Studies in Overseas Chinese History) (Singapore, Singapore Society of Asian Studies, 1992), p. 294; Yen Ching-hwang, “Hokkien Immigrant Society in British Malaya”, in Michael W.Charney, Brenda S.A. Yeoh & Tong Chee Kiong (eds.), Chinese Migrants Abroad: Cultural, Educational and Social Dimensions of Chinese Diaspora (Singapore, Singapore University Press & World Scientific Publishing Co. Pte. Ltd., 2003), pp. 118–122. 92 See for instances, in 1928, 2nd year of the Nanking government, Deng Zeru (Teng Tse-ju) of Malaya and Xiao Fucheng of Thailand were appointed the Committee as well as the Standing Committee members. In 1929, both Deng and Xiao were re-appointed to their previous positions, and Tan Kah Kee (Chen Jiageng), a famous Chinese leader in Singapore, was also added to the Committee. See Chang P’eng-yuan (Zhang Pengyuan in Pinyin) and Shen Huai-yu (eds.), Minguo zhengfu zhiguan nianbiao (1925–1949) (Offices and Personnel of Republican China: The Nationalist Era (1925– 1949), Vol. 1 (Taipei, Institute of Modern History, Academia Sinica, 1987), pp. 282–283. For an excellent study of Overseas Chinese Bureau (Qiaowu weiyuanhui) and Overseas Chinese education, see Lee Ying-hui (Li Yinghui in Pinyin), Huaqiao zhengce yu haiwai minzu zhuyi (1912–1949) (The Origin of Overseas Chinese Nationalism, 1912–1949) (Taipei, Taiwan, Academia Historica, 1997), pp. 473–585. 93 See Li Chuan Shou, “Yindu nixiya huaqiao jaioyushi” (A History of Chinese Eudcation in Indonesia), in Journal of the South Seas Society, Vol. 15, Pt. 1 (Singapore, July 1959), p. 6.

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Chinese secondary education in the region. The first Chinese high school in the region — the Overseas Chinese High School (Huaqiao Zhongxue) — was established in Singapore in 1918,94 but a better crop of Chinese secondary education was reaped in 1920s and 1930s with scores of high schools established.95 All of these Ethnic Chinese schools (primary and secondary) were very much integrated with the education system in China. The Chinese government helped to provide qualified teachers, texts books and curriculum development; it also helped to train teachers with Ethnic Chinese backgrounds, and offered some financial assistance. The close connection between Ethnic Chinese education and the Chinese education in China brought the Ethnic Chinese under the influence of Chinese cultural values, and strengthened their emotional attachment to China. Part of traditional Confucian moral values and Western knowledge filtered through the school system to the Chinese educated Ethnic Chinese in Southeast Asia. The Confucian values together with modern Chinese values helped mould the mental outlook of a large section of Ethnic Chinese population. Without any serious religious constraints, these Chinese-educated Ethnic Chinese had been able to benefit from these values in their commercial pursuits.

94

See Nanyang Huaqiao zhongxue jinxi jinian tekan (Souvenir Magazine of the Golden Jubilee Celebration of the Overseas Chinese High School) (Singapore, Huaqiao zhongxue, 1969), p. 11. 95 Yen Ching-hwang, “Zhanqian Xin-Ma Minren jiaoyu”, in Yen Ching-hwang, Haiwai huarenshi yanjiu, pp. 299–301.

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Chapter 3

Historical Roots of Ethnic Chinese Business

Role and Status of Businessmen in Traditional Chinese Society Traditional role and status In this chapter, a modern term ‘businessmen’ would be used instead of ‘merchants’. This is not just because it assumes a modern meaning, but also it is a more appropriate translation of Chinese term, ‘shangren’. English word ‘merchant’ is derived from the word ‘merchandise’, and it denotes that the person is involved in goods bought and sold. It is narrow and confined to trading only. It excludes persons involved in mining, service and manufacturing industry. While the word ‘businessmen’ is a broader term which include all people who are involved in making a profit in private business of all kinds. The Chinese term ‘shangren’ is also a general term which denotes people involved in private business activities. In the context of Ethnic Chinese business, the term ‘shangren’ is also inclusive of all people involved in private business activities. For example, in the Chinese communities in Singapore and Malaysia, those involved in mining are called ‘kuangshang’ (mining businessmen), those involved in manufacturing are called ‘changshang’ (industrial businessmen), those who are involved in trading and manufacturing rubber products are called ‘shujiao shang’ (rubber businessmen), those who are involved in middlemen service are called ‘zhongjie shang’ (medium businessmen), the whole-sellers are called ‘pifa shang’, and

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import-exporters are called ‘churukou shang’.1 However, some old terms used by Western scholars such as ‘Salt Merchants’, ‘Hong Merchants’ or ‘Co-hong Merchants’ will be retained. Businessmen had low social status in traditional Chinese society. They were ranked lowest among the commoners who constituted the main bulk of the Chinese population. In traditional Chinese class structure, aristocrats and mandarins occupied the top layer of the social pyramid. Under them were the commoners, and the lowest of the hierarchy was occupied by those so-called degraded people. The commoners were sub-divided into Scholars (Shi), Peasants (Nong), Artisans (Gong) and Businessmen (Shang).2 The reasons for businessmen to be allocated lowest status among the commoners was connected with traditional economic philosophy and the Mandarins’ perception of businessmen’s role in an agrarian economy.3 Traditional Chinese economic philosophy was a reflection of the economic reality on which the traditional Chinese society was based. The society was basically an agrarian one in which agriculture was the main trunk of economy producing food to support the members of all classes. With a subsistent nature of producing goods and services to meet the local needs rather than for distant consumption, commerce was marginalized in the economic pursuits in the society. At the same time, 1 See Chen Woon Fook, “Pili Huaren kuangwu gonghui jianshi” (A Short History of the Perak Chinese Mining Association), in Chen Woon Fook (ed.), Pili Huaren kuangwu gonghui saqi zhounian jinian tekan (The Perak Chinese Mininig Association 37th Anniversary Publication) (Ipoh, The Perak Chinese Mining Association, 1972), p. 13; Xuelane Zhonghua zongshanghui huiyuan mingce 1979 (The Selangor Chinese Chamber of Commerce: Members and Trade Directory, 1979) (Kuala Lumpur, The Selangor Chinese Chamber of Commerce, 1979), pp. 59–61. 2 See T’ung-tsu Ch’u, “Chinese Class Structure and Its Ideology”, in John K. Fairbank (ed.), Chinese Thought & Institutions (Chicago and London, The University of Chicago Press, 1967), pp. 235–250; Ping-ti Ho, The Ladder of Success in Imperial China: Aspects of Social Mobility, 1368–1911 (New York, John Wiley & Sons, Inc., 1964), p. 18. 3 For a discussion of the impact of traditional economic pbilosophy on traditional attitude towards businessmen, see Wellington K.K. Chan, Merchants, Mandarins and Modern Enterprise in Late Ch’ing China (Cambridge, Massachusetts, Harvard University Press, 1977), pp. 15–38.

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businessmen were considered non-productive and parasitic, and were perceived not to have produced anything except moving goods around for profits. With the lack of understanding of the importance of commerce and with the traditional bias against it, the Chinese mandarins despised businessmen, and condemned them to a lower social status than peasants and artisans. In addition, businessmen’s determined quest for wealth contravened Confucian values and social practices. Their pursuit for profits forced them to leave home for distant places, and neglected their social obligations to family, clan and state.4 To probe a little deeper, there was another critical reason why businessmen were given low social status. It was their wealth and influence that posed a direct threat to the power structure of the traditional Chinese society. As commerce was not a respectable occupation, members of the business class tended to be drawn from ambitious elements outside the power structure. After having accumulated enormous wealth in their hands, they tended to exercise undue influence on the existing power structure, and harmed its due functions. Further, the nature of the businessmen’s occupation brought them in direct contacts with a wide range of people across class boundaries, and they tended to become carriers for dissemination of heretical and new ideas which may directly undermine the ruling Confucianism in the traditional Chinese society.5 Because of their low social status and their perceived unworthy economic pursuits, the businessmen were discriminated against legally and socially. During the Han Dynasty (206 B.C. to 220 A.D.), the businessmen were severely chastised by law, they were heavily taxed 4

For a discussion of Confucian values and business activities and their impact on the attitude towards foreign trade during the Qing period, see Yen Ching-hwang, “Ch’ing Changing Images of the Overseas Chinese, 1644–1911”, in Modern Asian Studies (Cambridge, Cambridge University Press, 1981), Vol. 15, No. 2, pp. 264– 266; see also Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 6–7. 5 See Joseph Jiang, “Towards a Theory of Pariah Entrepreneurship”, in G. Wejeyewardene (ed.), Leadership and Authority (Singapore, 1968), p. 157.

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and were not allowed to wear silk, a material reserved for ruling elite; and their children were barred from entering officialdom.6 Up to the end of the Song period (12th century A.D.), artisans and businessmen and their families were prohibited to participate in imperial examinations which were the main channel of upward social mobility.7

Businessmen’s changing roles and status in modern China Chinese business class was traditionally divided into two distinctive groups: a small number of big and powerful businessmen who formed the upper layer of the class, and the bulk of lower class businessmen consisting mainly of shop-keepers and small traders. The members of this small business elite were extremely wealthy, and were able to buy political influence and social prestige with their money. They were generally immune from legal and social discriminations, and were able to rub shoulders with powerful Mandarins and to maintain their high social status. Rapid urbanization and development of domestic and foreign trade provided excellent opportunities for them to accumulate wealth, and to rise to the status of a prominent social group in the society. The Salt Merchants of Yangzhou and the Hong Merchants of Guangzhou (Canton) before the opening of China to the West were the two clear examples. The former were richest businessmen of the empire prior to the 19th century, amassing the largest aggregate capital possessed by any single commercial or industrial group. They greatly benefited from urbanization and development of domestic trade.8 While the latter, also amassed considerable personal fortune, benefited primarily from the growth of foreign trade and their

6

Wellington K.K. Chan, op. cit., p. 18. See Ping-ti Ho, op. cit., p. 41. 8 See Ping-ti Ho, “The Salt Merchants of Yang-chou: A Study of Commercial Capitalism in Eighteenth-Century China”, in Harvard Journal of Asiatic Studies, Vol. 17 (1954), pp. 130–168. 7

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intermediary role between the Qing government and foreign businessmen at Guangzhou before the opening of China in 1840s.9 The opening of China after 1842 ushered in a new era of rapid economic and social changes. Being discriminated against by the governments in traditional Chinese society, the businessmen were proven to be flexible and tenacious, and were able to take advantage of the changes to their benefit. The opening saw the decline of power and influence of the Hong Merchants, who had traditionally served as monopolistic but reluctant intermediary in the Sino-Western trade, but failed to cope with the change. In their place rose a new type of businessmen who served effectively as the intermediary between SinoWestern business. They were known in Chinese history as ‘Compradors’. Coming from diverse backgrounds and equipped with linguistic ability, they forged a close link with foreigners. They worked for Western firms or acted as commercial agents, and familiarized themselves with Western practices of doing business. They also developed connections with Western Consuls and missionaries, and translated these connections into influence and power.10 With wealth and influence, they and other Chinese upper class businessmen were able to provide their children with special education to compete in the highly competitive imperial examinations. If it was not successful, they were able to purchase the first degree — jiansheng — for their children who could by-pass the first stage of the examination into the second. All of these improved the chance of their children to get into the coveted bureaucracy.11 The businessmen also enhanced their social status by purchasing official titles and offices. Serious financial straits as a result of foreign wars and the suppression of the Taiping Rebellion in the second half of the 19th century, compelled the Qing government to sell official

9

See Weng Eang Cheong, The Hong Merchants of Canton: Chinese Merchants in SinoWestern Trade (Richmond, Surrey, Curzon Press, 1997). 10 See Yen-ping Hao, The Comprador in Nineteenth Century China: Bridge between East and West (Cambridge, Massachusetts, Harvard University Press, 1970). 11 For the sale of jiansheng degree in Qing dynasty, see Ping-ti Ho, The Ladder of Success in Imperial China, p. 34.

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titles in exchange for monetary donations.12 This opened a new avenue for businessmen to purchase Qing offices and titles. Many wealthy businessmen possessed titles which allowed them to wear Mandarin ropes and enhanced their status in the eyes of the government and the general public. The second half of the 19th century also saw the efforts of limited modernization undertaken by the Qing government in its attempt to revitalize the crumbling empire. The partial modernization known as the Self-Strengthening Movement involved setting up arsenals and shipyards, opening mines and establishing factories, improving infrastructure and telecommunication. New commercial ventures on the formula of state-private joint enterprise (known as guandu shangban) were attempted.13 All of these new enterprises required capital as well as expertise. The businessmen who had possessed both wealth and knowledge of running modern enterprises fitted into this new role of manager and commercial administrator. Some of the well-known Comprador-businessmen were recruited into the Qing bureaucracy without going through the imperial examinations. Prominent businessmen such as Tong King-sing (Tang Jingxing, or known as Tang Tingshu), Zheng Guanying (Cheng Kuan-ying) and Zhang Bishi (Chang Pi-shih or known as Thio Tiauw Siat) were the best examples.14 Both Tong and Zheng were the natives of Xiangshan district, Guangdong province. Tong received missionary education in Macao 12

For the sale of official tiltes and offices during the Qing period, see P.C. Hsieh, The Government of China, 1644–1911 (New York, 1966), pp. 105–109. 13 See Albert Feuerwerker, China’s Early Industrialization: Sheng Hsuan-huai (1844–1916) and Mandarin Enterprise (Cambridge, Massachusetts, Harvard University Press, 1958), pp. 110–111, 116. 14 For the recruitment of Tong King-seng and Zheng Guanying into Qing bureaucracy in China’s efforts of early industrialisation, see ibid.; Chi-kong Lai (Li Zhigang), “Lunquan zhaoshangju jingying guanli wenti, 1872–1901” (Some Issues on the Management of the China Merchants’ Steam Navigation Company), in Zhangyang yanjiuyuan jindaishi yanjiusuo jikan (Bulletin of The Institute of Modern History, Academia Sinica), Vol. 19 (Taipei, Institute of Modern History, 1990), p. 71. For recruitment of Zhang Bishi into Qing bureaucracy, see Michael R. Godley, The Mandarin-capitalists from Nanyang: Overseas Chinese Enterprise in the Modernization of China (Cambridge, Cambridge University Press, 1981), pp. 79–93.

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and Hong Kong,15 while Zheng learned his English from missionary in Shanghai. Tong worked as the Comprador with Jardines, Matheson and Co., the British commercial giant in the East. He was later recruited into the Qing bureaucracy by Li Hongzhang to run the famous China Merchants’ Steam Navigation Company in 1873.16 Zheng Guanying worked as a Comprador with other big British companies, such as Dent & Co., Butterfield & Swire, and was later recruited into the bureaucracy as well.17 Zhang Bishi was different from Tong and Zheng. A Dapu Hakka of Guangdong province, he migrated to Southeast Asia when he was young. He made his millions in Dutch East Indies and British Malaya. Never worked as a Comprador for any foreign companies, he learned the Western way of doing business through his contacts with foreigners. He emerged as one of the wealthiest and most powerful Chinese businessmen of his time,18 and was later recruited into the Qing bureaucracy as China’s Trade Commissioner to Southeast Asia. Although the businessmen had enhanced their social status and prestige with their wealth, their role was still restricted to economic matters. The Mandarins and Scholar-gentry, though their prestige and status declined over the years, were still regarded as community leaders.

Traditional Chinese Business Organizations Small business organizations Traditional Chinese business was dominated by small business. It consisted mainly of shops and small trading firms. Shops selling a 15

For a study of Tong King-seng’s missionary connections in Macao and Hong Kong, see Carl T. Smith, Chinese Christians: Elites, Middlemen, and the Church in Hong Kong (Hong Kong, Oxford University Press, 1985), pp. 34–51. 16 See Albert Feuerwerker, op. cit., pp. 19, 110–111; Chi-kong Lai, “Lunchuan zhaoshangju jingying guanli wenti, 1872–1901” (The Management Issues of the China Merchants’ Steam Navigation Company, 1872–1901), in Zhongyang yanjiuyuan jindaishi yanjiusuo jikan (Bulletin of the Institute of Modern History, Academia Sinica), Vol. 19 (1990), pp. 67–108. 17 See Yen-ping Hao, op. cit., 196–197. 18 Michael R. Godley, op. cit., p. 4.

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large variety of goods existed in towns, cities and ports. In country towns, local agricultural produce and products of artisans predominated the scene; while in major cities and ports, inter-regional goods and imported goods were found; and they were generally more expensive, and were to satisfy a more affluent urban population. The ownership of a small business was in the hands of either a sole proprietor or a small group of partners. In a sole proprietor shop, the owner started his business with his own capital, or capital borrowed from relatives or kinsmen. He was most likely to run the business himself with the help of his wife or other close relatives. If the business was larger than he could handle, he would hire an experienced manager to run the show, and he was in a supervisory position. The manager was again likely to be his relative or kinsman or friend who would be paid a salary plus a fixed percentage of net profit. The employment of a manager could be in written contract or sometimes just on verbal promise. In the case of partnership, the shop or trading firm was owned by a group of partners. The number of partners and the sum of capital contribution varied according to the nature and the size of the business. If the venture required larger sum of capital, more partners were needed. The partners were usually relatives, kinsmen, people coming from same districts or friends. Kinship, common geographical ties and friendship served as bonds for the business partnership. The partnership was based on the ownership of shares of capital, each partner purchased certain number of shares, and the profits of the business were distributed in accordance with the shares owned. Usually, the major partner or an experienced partner would be elected to the position of manager, and other minor partners also had the right to participate in the management. If no competent manager could be found among the partners, a manger would be hired to take charge of the operation of the business. In either case, the partner-manager or hiredmanager would receive a salary and a fixed percentage of net profit. The manager, commonly known as Zhanggui (literally meant the holder of the counter) was empowered to hire his staff, including shop assistants and apprentices. He selected and supervised his staff with absolute authority. Minor partners could recommend

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relatives, kinsmen or friends for employment in the business, but subject to his approval. The only constraint on the manager’s power was that he was not allowed to do similar business of his own, and he was liable for losses if he was found guilty of negligence or dishonesty.19 A characteristic of the small business was limited capital. The meagre capital tended to restrict the expansion of the business. The majority of the small business stagnated. The owners, particularly of those sole-proprietor shops, treated their involvement in the shop as a way of life. The expansion of business depended very much on the profits they had made and the reinvestment of that profits. Largescale operation of business was beyond their horizon. Only a very small number of sole-proprietors and partnership owners possessed the ambition and courage to expand their business. They were prepared to take risks and put in extra efforts to make the business a success. Two ways of expanding the business were: to enlarge the number of partners, or to borrow money from traditional Chinese bank known as Qianzhuang (money house).20 The increase of number of partners would entail complexity and heighten tension or friction among the partners. Loans from Qianzhuang were difficult to get and had to pay high interest, but those who managed to expand their business usually reaped handsome profits. As a result of population growth and increased urbanization, there appeared a number of specialized commodity shops in cities and ports. They specialized in selling commodities from different parts of China or imported goods from overseas. This specialization represented the development of a higher stage of traditional Chinese business. In Shanghai, for instance, different types of specialized shops came into existence in different periods. In 1840s, some specialized shops selling 19

See Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firms and Its Modern Reform”, in Business History Review, Special Issue: East Asian Business History, Vol. LVI, No. 2 (Summer 1982), p. 220. 20 For a study of the origins and functions of Qianzhuang during the Late Qing period, see Zhang Guohui, Wan Qing Qianzhuang he piaohao yanjiu (A Study of the Traditional Chinese Money House and Bank during the Late Qing Period) (Beijing, Xinhua shuju, 1989), pp. 1–80.

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goods from Beijing which were known as ‘Jing Huo Dian’ (literally meant the shop selling goods from the Capital) appeared. After 1850s, as a result of the opening of Shanghai as a major treaty port, shops specializing in selling goods from Guangzhou (known as Guang Huo Dian) and the imported goods known as ‘Yang Huo Dian’ (Shops selling commodities from Overseas) came into existence.21 They represented different periods of modern Chinese history and catered for the needs of the population in different times. In the cities and ports, shops opened 14 hours or longer a day, usually from 7 in the morning till 9 at night. Western weekly holiday was unknown, and Chinese holidays were connected with traditional Chinese festivals on the basis of lunar calendar: first few days of the Chinese New Year, plus several days off duty during major Chinese festivals such as Qingming (feast of the dead) festival, Dragon Boat festival and the Moon festival. Since there was no work shift system, all shop assistants and apprentices had to work long hours. Two or more shop assistants or apprentices were required to board in the shop, mainly for its security. Sometimes, a roster was drawn among the staff to take turn to look after the shop. In the 19th century, the salary for shop assistants was generally very low: a base pay of 2 or 3 taels of silver each month in the larger establishments. But they were provided with free meals and lodging, sometimes with other fringe benefits such as medical bills paid, free work clothes and haircut. If the business made a good profit, a bonus would be paid to the staff at the end of the lunar year for encouragement of hard work.22 The backbone of the labor recruitment system in the traditional Chinese business was the apprentice system. There was no formal job 21

See Shanghai jindai baihuo shangyeshi (A History of Modern Chinese Retail Business in Shanghai) (Shanghai, Shanghai shehui kexueyuan chubanshe, 1988), pp. 8–23. For a study of the development of a modern Chinese department store in Hong Kong and Shanghai, see Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907– 1949”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 210–219. 22 See Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firms and Its Modern Reform”, op. cit., pp. 220–221.

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training program for the apprentice. He learned the trade by observation. The working conditions of the apprentice were generally harsh. He was to start learning the trade by menial labor such as sweeping floor, cleaning spittoons and toilets or learning to cook. These works were not directly related to the learning of how to do business. But the rationale behind was that he had to learn to be patient and to put up with any possible humiliation he might have suffered. This, according to traditional explanation, was to mould the character of the trainee to be a good businessman. Whether this was true or as an excuse for giving the new comer dirty jobs that nobody wanted to do, the apprentice had to go through that process before he would be given chance to learn about business etiquette, differentiation of merchandise, the skills of sales, and then correspondence and bookkeeping. The length of apprenticeship was traditionally fixed for three years,23 and the discipline he received was strict. In the first year of his training, he received no salary except some pocket money, no home leaves and no sitting down while on duty.24 Despite this harsh training, the apprenticeship was coveted by the children, relatives and kinsmen of the business partners. In the absence of modern trade and technical schools, the apprenticeship offered the only path for those aspiring businessmen. After completing the apprenticeship, he could continue working as a shop assistant in the same establishment. Only after several years of work and having accumulated enough experience and capital, he then would start a shop or partner with relatives or friends for a new business venture.

Large business organizations Traditional Chinese business was capable of developing into large business establishments. This was reflected in the existence of large 23

See Peter J. Golas, “Early Ch’ing Guilds”, in G. William Skinner (ed.), The City in Late Imperial China (Stanford, Stanford University Press, 1977; reprint, Taipei, Rainbow-Bridge Book Co. Ltd., 1983), p. 566. 24 Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firms and Its Modern Reform”, op. cit., p. 221.

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business establishments and commercial groups. They monopolized certain commodities and developed strong regional-based commercial networks. In domestic trade, prominent among them were the Salt Merchants of Yangzhou, the Shanxi Business group (Jin Shang), the Huizhou Business group (Hui Shang), and the Jiangsu Business group (Su Shang);25 in foreign trade, the Hong Merchants and later the famous ‘Compradors’.26 There also arose powerful business groups involved in both foreign and domestic trade, the Guangdong Business group (Guangdong shangbang) was a good representative. The Guangdong Business group was a collective term which consisted mainly of the Guangzhou Business group (Guangzhou shangbang) and the Chaozhou Business group (Chaozhou shangbang). The former embraced the businessmen from the city of Guangzhou (Canton) and those from the Pearl River delta, principally the districts of Shunde, Panyu, Nanhai and Xinhui, and they spoke a Cantonese or sub-Cantonese dialect; while the latter consisted principally of businessmen from Chaozhou prefecture in the eastern part of the province, and they spoke a distinctively different Teochew (Chaozhou) dialect. Historically, the Chaozhou Business group was formed in the middle of the 16th century as a result of reacting to the growing maritime trade opportunities and the Ming government’s prohibition of private foreign trade.27 The presence of European traders in East 25

For Salt Merchants of Yangzhou, See Ping-ti Ho, “The Salt Merchants of Yangchou: A Study of Commercial Capitalism in Eighteenth-Century China”, op. cit.; for the business activities of the Shanxi Business group, see Shi Jun, Huitong tianxia de Jin Shang (Shanxi Businessmen: Spreading Business Activities throughout China) (Hangzhou, Zhejiang renmin chubanshe, 1997); for the historical origins and cultural background of the Huizhou Business group, see Gao Shouxian, “Zongfa shehui zhong de Huizhou shangren” (The Huizhou Businessmen in Traditional Chinese Society), in Gao Shouxian, Huizhou wenhua (The Culture of Hui Prefecture) (Shenyang, Liaoning jiaoyu chubanshe, 1995), pp. 70–119; for Jiangsu Business group, see Shi Jun & Jin Guozheng, Zongheng Yinei de Su Shang (Jiangsu Businessmen: Their Domestic and Foreign Business Activities) (Hangzhou, Zhejiang renmin chubanshe, 1997). 26 For Hong Merchants and their evolution, See Weng Eang Cheong, op. cit; for the rise of Chinese Comprador class, see Yen-ping Hao, op. cit. 27 For the origins and formation of the Guangdong Business group, see Huang

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and Southeast Asia since the beginning of the 16th century created huge trading opportunities and enticed many Chinese traders to get involved in illicit foreign trade.28 Many of them were ethnic Teochews. Based on linguistic and geographical solidarity, they formed the Maritime Business group (Haishang shangbang) which was also known as the Chaozhou Business group. Not only it had a lion share of the illicit trade between coastal China and the foreign traders, but also had a direct control over certain trade in East and Southeast Asia. Its two notorious leaders were Lin Daoqian and Lin Feng. Lin Daoqian, a native of Chenghai district of the Chaozhou prefecture, was a Maritime businessman actively involved in the illicit trade of the coastal areas in Eastern Guangdong and Western Fujian around 1561.29 He reaped enormous profit from this trade, and attracted a large number of followers. His Maritime empire extended to Taiwan, Southern part of Vietnam and Borneo. In 1578, he led a contingent of 2,000 followers to occupy the Southern part of Thailand, and developed a port called Pattani as his base of maritime activity. His Thai connections might have some direct impact on Teochew emigration to Thailand in later years.30 While Lin Feng, a native of Yaoping district of Chaozhou prefecture, was a leader of the illicit trade. In Qichen, “Ming Qing Guangdong shangbang de xingcheng ji qi jingying fangshi” (The Formation and the Operation of the Guangdong Business group during the Ming and Qing Periods), in Ming Qing Guangdongsheng shehui jingji yanjiuhui (ed.), Shisi shiji yilai Guangdong shehui jingji de fazhan (Socio-Economic Development of Guangdong Province Since Fourteenth Century) (Guangzhou, Guangdong gaodeng jiaoyu chubanshe, 1992), pp. 122–123. 28 See Li Jinming, Mingdai haiwai maoyi shi (A History of Overseas Trade of Ming Dynasty) (Beijing, Zhongguo shehui kexue chubanshe, 1990), pp. 86–88. 29 See Huang Qichen, op. cit., p. 126; Ye Xianen, “Ming Qing Guangdong shuiyun yingyun zuzhi yu diyan guanxi” (The Relationship between Sea Transport Organization and Geographical ties in Guangdong Province during the Ming and Qing Periods), in Ming Qing Guangdongsheng shehui jingji yanjiuhui (ed.), Shisi shiji yilai Guangdong shehui jingji de fazhan (Socio-Economic Development of Guangdong Province Since Fourteenth Century), p. 108. 30 For Lin Daoqian’s activity in Southern Thailand, see Hsu Yun-tsiao (Xu Yunqiao), Beidanian shi (A History of Pattani) (Singapore, Nanyang bianyisuo, 1946), pp. 111–121.

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October 1574, he moved from P’enghu islands to Taiwan, and at the end of the month, he led a fleet of 62 ships to enter the Manila Bay (North of Luzon, the Philippines) to trade. Obstructed by the Spanish, he moved to Pangasinan of north Manila, and established his base there.31 To control vast networks of maritime trade in East and Southeast Asia, both Lins must have elaborate business organizations and control mechanisms. The Guangzhou Business group, in contrast, was more involved in inland trade. The lifting of the ban on foreign trade in late Ming period (late 16th and early 17th centuries) saw the rise of Guangzhou as an international port. The concentration of foreign trade in Guangzhou in the middle of the 18th century consolidated its position as the only international port. Foreign goods were purchased and exchanged at Guangzhou and distributed to other parts of China. Conversely, Chinese goods such as tea, silk and porcelain were moved from inland to Guangzhou for export.32 Taking advantage of its unique position, the Guangzhou Business group benefited greatly from this inland trade. At the same time, it was also involved in the legitimate foreign trade. Trading firms which received special permits to act as the middlemen between foreign traders and Chinese government in early and mid Ming period (late 14th to mid 16th centuries) were named Yashang (Commission businessmen) who charged commission for their business, and there were at least 36 of these firms during the Ming period. Their number was reduced in early Qing period because of the ban on foreign trade again. Since 1757 under the Canton Trade system, the Qing government authorized 13 Commission firms which acted as the intermediaries between the government and the foreign traders; they were also entrusted by the government to regulate the behavior of the foreigners in the port.33 31

Huang Qichen, op. cit., p. 126. For instance, tea produce from northern part of Fujian province were moved overland to Guangzhou for export. See Chen Ciyu, Jindai Zhongguo chaye de fazhan yu shijie shichang (The Development of Modern Chinese Tea Industry and World Markets) (Taipei, Zhongyang yanjiuyuan jingji yanjiusuo, 1982), p. 38. 33 Huang Qichen, op. cit., p. 131.; Liang Jiabin, Guangdong shisanhang kao (Study on the Thirteen Commission Houses in Guangdong). 32

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They were later known as the Hong Merchants. The Guangzhou businessmen who were either involved in inland or legitimate foreign trade, had large commercial establishments in Guangzhou and other inland cities. They also established elaborate business networks and control mechanisms which enabled them to grow and prosper.34 The ability of traditional Chinese business to grow and expand is best illustrated by the case of Ruifuxiang Company of Beijing (Peking). Originated from a small township — Zhou Cun (Zhou Village) — in Shandong, an eastern province of China before 1800, Ruifuxiang was a family business owned by the Meng family. It was involved in cloth wholesale and retail, and traditional finance business (Qianzhuang).35 Nothing was special with the company in its early history, having gone through vicissitudes like many other traditional Chinese family business, but it survived for about two hundred years and was revived in 1870s by Meng Lochuan. He possessed the quality of a modern entrepreneur: business acumen and foresight, innovative, risk-taking and the pursuit of profit. Having perceived rapid economic change and enormous business opportunities arising from the opening of China after the Opium War, he, with the advice of his manager, Meng Jinhou, expanded his business to include the sale of imported fabrics and other foreign luxurious goods. He set up branches in Beijing, Qingdao, Chefoo and Shanghai, and further diversified his business into pawnshops, Chinese pharmacies and handicraft products. At the height of his business activities in 1925, his company owned 26 shops selling a variety of goods, and employing about 1,000 people with a gross annual income of 600,000 taels. It became the leader of the eight largest piece goods establishments in Beijing.36

34

Huang Qichen, ibid., pp. 134–135. See Zhongguo kexueyuan jingji yanjiusuo, Zhongyang gongshang xingzheng guanliju & Ziben zhuyi jingji gaizhao yanjiushe (eds.), Beijing Ruifuxiang (The Ruifuxiang Company of Beijing) (Beijing, Sanlian shudian, 1959), p. 2. 36 See Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firms and Its Modern Reform”, op. cit., p. 223; Beijing Ruifuxiang (The Ruifuxiang Company of Beijing), Ibid., p. 11. 35

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The Ruifuxiang company had the hallmarks of a large traditional Chinese family business: centralization of decision-making and a highly personalized management system. Centralization of decisionmaking was made possible by the strong personality of Meng Lochuan who read every details of the activities of the company, and made major decisions with the help of his right-hand man, Meng Jinhou. It was claimed that Lochuan had neither vices nor hobbies, and his passtime was to read and re-read his company’s account books and records that filled the shelves of his bedroom and study room.37 His devotion to his business and his single-mindedness made the concentration of decision-making effective. However, this centralization of power at the top did not lead the company to adopt a pyramid structure. Instead, branches were given much autonomy. Each branch was treated as a separate unit with its own account of profit and loss. Each branch was headed by a manager who was assisted by 4 assistant managers, while Meng Lochuan maintained a centralized control over these branches through a personalized network of trusted subordinates and a formal structure of meetings and written reports. He selected managers and assistant managers himself. Two criteria he adopted in selecting managers were talent and personal loyalty.38 He required the managers to communicate with him regularly in the form of reports. He also held two meetings every year attended by all the managers and his chief assistant, Meng Jinhou. These meetings were to scrutinize the activities of the branches, and reflect their views on the future of the business.39 Of course, the final decisions still rested with himself. In addition to centralization of decision-making and personalized management system, Meng Lochuan was also innovative. His innovation was not in the area of production or manufacturing process, rather in the area of management. The traditional jenli share system, a reward system tied to net profit, did not give sufficient incentive for hired managers to work harder or to improve their performance. He reformed this system by changing it into a 37

See Beijing Ruifuxiang, ibid., p. 4. Ibid. 39 See Wellington K.K. Chan, op. cit., p. 224. 38

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bonus share system which rewarded good performers with both money and shares in the company. It provided greater incentive for his mangers to perform well. He also streamlined the management by dividing functions and responsibilities among managers: some in charge of day-to-day running, while others planned, co-ordinated and evaluated staff performance.40 This suggested the introduction of the concept of division of labor, a principle of modern management. The Ruifuxiang company was a success story of traditional large Chinese business. Its success depended on a strong leadership, an elaborate and efficient management system, and innovation. Business acumen of the leaders made the company adaptable to changing political and economic environments, and enabled them to seize the opportunities to branch out into new line of business. However, the inherent weakness of the traditional Chinese business — highly personalized management — led to the decline of the company after it had lost the able leadership at the top. Both Mengs died one after another in 1936 (Meng Jinhou) and 1939 (Meng Lochuan), and their deaths led the company into oblivion.

Role and Status of Businessmen in Ethnic Chinese Communities Role and status before World War II In contrast with their counterparts in traditional China, businessmen had high social status in the Ethnic Chinese communities. This was mainly due to the absence of aristocrats, Mandarins and Scholargentry in the communities. Ethnic Chinese class hierarchy was constructed from bits and pieces of the old society in China. Those who emigrated from China to the new land were mostly poverty-stricken peasants or artisans, and hardly any members of the Chinese Mandarin and Scholar-gentry classes had ever emigrated. The absence of the traditional Chinese political and social elites made Ethnic Chinese

40

Ibid., p. 225.

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class system open and fluid.41 It provided equal opportunities for the immigrants to make money, and those who became rich moved to the top of the social hierarchy. The businessmen, particularly the upper layer of the business class, occupied the top of the hierarchy, and enjoyed tremendous influence and social prestige. Ethnic Chinese communities were basically urban. They consisted of businessmen, workers, and artisans. Unlike China’s agrarian society where the bulk of wealth was produced by the peasants, the wealth of the urban Ethnic Chinese communities was created mostly by businessmen. This was why businessmen as a class was given an important role in the society.42 Their perceived important role enabled them to claim community leadership. Furthermore, many Ethnic Chinese social organizations (such as dialect and clan associations, cultural and social clubs) required money to establish themselves, while wealthy businessmen had the financial capacity to meet this social need, and they were thus accepted as leaders of these organizations.43 The lack of an agrarian class system led the businessmen to play multiple roles in the Ethnic Chinese communities. In addition to economic role, they assumed social and cultural roles of Chinese Mandarins and Scholar-gentry. They initiated social ceremonies, arbitrated disputes and patronized cultural activities, as well as acting as 41

For a discussion of formation of the Ethnic Chinese class system in 19th century Singapore and Malaya, see Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986), pp. 141–143. For a discussion of the difference between Ethnic Chinese class system and traditional Chinese class system, see Wang Gungwu, “Traditional Leadership in a New Nation: The Chinese in Malaya and Singapore”, in G. Wijeyawardene (ed.), Leadership and Authority: A Symposium (Singapore, University of Malaya Press, 1968), p. 210; see also Wang Gungwu, Community and Nation: Essays on Southeast Asia and The Chinese (Singapore, Heinemann Educational Books (Asia) Ltd., and North Sydney, New South Wales, George Allen & Unwin Australia, 1981), p. 162. 42 For a discussion of the relationship between wealth and leadership in a major Ethnic Chinese community in Southeast Asia, see Yong Ching Fatt, “Chinese Leadership in Nineteenth Century Singapore”, in Journal of Island Society, Vol. 1 (Singapore, 1967), pp. 4–7; see also the same article in C.F. Yong, Chinese Leadership and Power in Colonial Singapore (Singapore, Times Academic Press, 1992), pp. 4–8. 43 Yong Ching Fatt, ibid., pp. 10–12; also in C.F. Yong, ibid., pp. 11–13.

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guardians of Chinese tradition.44 The social and cultural roles reinforced the businessmen’s power and authority which could be used for their economic advantage. The lack of a strong separate Scholar-gentry class in the Ethnic Chinese communities meant businessmen’s status was not challenged. In China, businessmen felt inferior to Mandarins and Scholar-gentry, and desired to be accepted into the ruling classes at the cost of their own identity, but the Ethnic Chinese businessmen could build their status and power without rivalry groups. In a rather open and fluid societies as the Ethnic Chinese communities in Southeast Asia, wealth, though was most valued, did not guarantee social prestige. Businessmen must either display their wealth or use it to acquire some tangible symbols such as Qing official titles. In the 19th and early 20th centuries, wealthy Chinese businessmen in Southeast Asia tended to display the wealth they had possessed. They wore expensive silk clothes, travelled in beautiful and rich-decorated carriages, built grandiose mansions, villas and gardens.45 Many of these luxuries were obviously meant for public display as well as for personal indulgence. Hoo Ah Kay (Hu Yaji, nickname Whampoa), for example, was a well-known wealthy Chinese businessman in Singapore in the second half of the 19th century. His famous ‘Nam Sang Garden’ (Nan Sheng Yuan) was richly decorated. It was designed and constructed by horticulturists from Guangzhou, and was famous for its miniature rockeries, artificial ponds, aquariums and curious dwarf bamboo and plants 44

See Yen Ching-hwang, “Overseas Chinese Nationalism in Singapore and Malaya, 1877–1912”, in Modern Asian Studies, Vol. 16, No. 3 (Cambridge, Cambridge University Press, 1982), pp. 399–409; Yen Ching-hwang, “The Confucian Revival Movement in Singapore and Malaya, 1899–1911”, in Journal of Southeast Asian Studies, Vol. 7, No. 1 (Singapore, FEP International Ltd., 1976), pp. 38–50. 45 See Yen Ching-hwang, “Ch’ing’s Sale of Honours and the Chinese Leadership in Singapore and Malaya, 1877–1912”, in Journal of Southeast Asian Studies (Singapore), Vol. 1, No. 2 (September, 1970), p. 28.; see also same article in Yen Ching-hwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), p. 184; Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911, p. 146.

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trimmed to resemble animals. It was so well-known that it became a resort for all Chinese in Singapore for more than a quarter of century, and it was also a public show-piece for visiting Western and Chinese dignitaries from overseas at that time.46 Social prestige could be more effectively displayed by acquiring more tangible token like Qing titles. As a result of the Qing government’s sale of honors in the second half of the 19th century, Ethnic Chinese businessmen at the end of the 19th century were also allowed to purchase those titles to enhance their social prestige. The sale of Qing titles was widespread in the Ethnic Chinese communities in Southeast Asia. Any Ethnic Chinese businessmen of some substance purchased a title or more titles for themselves, and titles could also be purchased for children and ancestors.47 Titles not only impressed other title-holders, they were well-respected by the entire Ethnic Chinese communities in the region. Local Chinese newspapers listed titled businessmen in a formal order of ranks, and gave them special publicity and respect. To satisfy the ego of the title-holders, Qing Consuls in Southeast Asia and those visiting Chinese dignitaries from China, tended to mix with and respect those Ethnic Chinese businessmen with Qing titles.48

Changing roles after World War II Post World War II Ethnic Chinese communities in East and Southeast Asia entered into a new era of rapid political, economic and social changes. Many former Western colonies became independent states, and the local Ethnic Chinese communities were incorporated into the structure of the new states. With changing identity and national status, many Ethnic Chinese businessmen played an increasing role as 46

See Song Ong Siang, One Hundred Year’s History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967, reprinted edition), pp. 52–53. 47 For a discussion of the purchase of Qing official titles among Ethnic Chinese in Singapore and Malaya in late 19th and early 20th centuries, see Yen Ching-hwang, “Ch’ing’s Sale of Honours and the Chinese Leadership in Singapore and Malaya, 1877–1912”, in Journal of Southeast Asian Studies, Vol. 1, No. 2, pp. 24–31. 48 See Lat Pau, 5/6/1888, p. 1.

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entrepreneurs and industrialists of the new nations.49 They were actively involved in the rapid economic development, and reaped the benefits from it. Some of the wealthy Ethnic Chinese businessmen were transformed into international tycoons and their enterprises became multi-national conglomerates.50 In this sense, Ethnic Chinese businessmen assumed a new economic role in the new states in the region, and played an important role in helping to lift these states to the status of industrialized nations. Apart from this new economic role, the Ethnic Chinese businessmen had not abandoned their traditional role as the leaders of their communities. Many of them still held positions in dialect and clan associations or social clubs, and they still acquired honors and titles from the local governments instead of titles from China.51 Perhaps they still valued the prestige and respect from their own communities. At the same time, they were actively involved in politics to help safeguard their economic interests, or as a means of achieving upward social mobility. Generally speaking, Ethnic Chinese businessmen after

49

For a discussion of ethnic identities and changing economic roles among the Chinese in Indonesia and Thailand, see J.A.C. Mackie, “Changing Economic Roles and Ethnic Identities of the Southeast Asian Chinese : A Comparison of Indonesia and Thailand”, in Jennifer Cushman & Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II (Hong Kong, Hong Kong University Press, 1988), pp. 217–260. 50 For instances, the CP Group of companies in Thailand and the Salim Group of companies in Indonesia. For C.P. Group, see Akira Suehiro, “Modern Family Business and Corporation Capability in Thailand: A Case Study of the CP Group” (a paper presented at the Workshop on Asian Business Networks, 31 March 1998 to 2 April 1998, Singapore), pp. 18–27; for Salim Group, see Yuri Sato, “The Salim Group in Indonesia: The Development and Behaviour of the Largest Conglomerate in Southeast Asia”, in R. Ampalavanar Brown (ed.), Chinese Business Enterprise, Vol. 1: Critical Perspective on Business and Management (London, Routledge, 1996), pp. 265–279. 51 For instance, rich Ethnic Chinese businessmen have acquired Malaysian titles such as ‘Tan Sri’ and ‘Datuk’, the former is conferred by the King of Malaysia, while the latter is conferred by state Sultans. See Heng Pek Koon, “Chinese Business Elite of Malaysia”, in Ruth McVey (ed.), Southeast Asian Capitalists (Ithaca, New York, South East Asian Program, Cornell University, 1992), p. 128.

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the Second World War were better educated than their predecessors before the war and were more cosmopolitan in their outlook. This was why they were prepared to extend their business activities outside the states they resided, and many of them aimed at building global business empires. Many sent their children overseas to receive foreign education, principally in the United Kingdom, the United States, Canada, Europe and Australasia for further education. The advanced Western knowledge in economics and business management are valuable for the running and maintaining of their global business enterprises.

Traditional Ethnic Chinese Business Organizations Traditional Ethnic Chinese craft guilds Traditional Ethnic Chinese business organizations carried the hallmark of their counterparts in China — strong regional and kinship affiliations — with nomenclature of ‘hang’, ‘gongsuo’, ‘gonghui’ ‘huiguan’ ‘ju’ and ‘tang’.52 Whatever name they assumed, they were better known as guilds. They existed in the major ports and cities in East and Southeast Asia. The force of overseas environment appeared to be paramount in their birth. They were mainly responding to both religious and economic needs in the new land they sojourned to. Two types of early Ethnic Chinese guilds can be discerned: craft guild and business guild. The former was the business organization for craftsmen: carpenters, tailors, blacksmith, goldsmith, and building tradesmen. The latter was the business organization for a variety of business: import-export trade, grocery, cloth trade, tea trade, restaurant business and others.

52

See Wu Hua, “List of Chinese Guilds in Singapore”, in Wu Hua, Xinjiapo huazu huiguan zhi (Chinese Associations in Singapore), Volume 3 (Singapore, South Seas Society, 1977), front page; Sei’ichi Imahori, translated by Liu Guoyin, Malaiya huaqiao shehui (Overseas Chinese Society in Malaya) (Penang, Jiaying Association of Penang, 1972), p. 3; Kwang-ching Liu, op. cit., p. 213.

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The existence of early Ethnic Chinese craft guilds in East and Southeast Asia are beyond doubt. In Penang, the Hujing tajin hang (The Hujing Goldsmith Guild) came into being in 1832.53 It was followed by Beicheng hang (North City Guild) for carpenters in 1856, and Lucheng hang (The Lu City Guild) for concrete and brick layers in 1858, and Lubei hang (The Northern Lu Guild) for employee carpenters in 1886.54 In Singapore, the carpenters’ guild, Beicheng hang, also led the way by founding the guild in 1868. It was followed by the tailors’ guild, Xian Yan guan (The Hean Yuen Guild) in 1880, and the employee carpenters’ guild, Lubei hang in 1890.55 Among the craftsmen, the carpenters were most active in founding their guilds for the protection of common interests. They founded four of the earliest Chinese craft guilds in Singapore and Malayan region as listed above. The Beicheng hang of Penang which came into being in 1856,56 deserves special attention. Beicheng, literally meant northern city, was the posthumous name of Lu Ban, the legendary craftsman in Chinese history who was worshipped as the patron deity of carpenters.57 It was the worship of this patron deity that brought the Ethnic Chinese carpenters together to found this guild. Scanty records do not allow us to reconstruct actual circumstances under which the guild was established. Nevertheless, the worship of legendary craftsman, Lu Ban, appeared to be the motivating force behind this move.58

53

Sei’ichi, ibid., pp. 119–120. Ibid., pp. 99, 107 & 116. 55 See Wu Hua, op. cit., pp. 1, 8 & 12. 56 Sei’ichi Imahori, op. cit., p. 99. 57 Lu Ban, his surname was Gongshu while his name was Ban, was born in the Lu state during the Spring and Autumn period of Chinese history. He was the expert craftsman setting standards for construction and building of boats and carts. He was deified after his death, and was worshipped as the patron deity of all carpenters. Because he was born in the state of Lu, this was why he was popularly known as Lu Ban rather than Gongshu Ban. During the Ming Dynasty, he was conferred posthumously the title of ‘Beicheng hou’ (Lord of Northern City) by an imperial decree. 58 Sei’ichi Imahori, op. cit., p. 99. 54

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Like their counterparts in China,59 religion played a significant role in the life of the Ethnic Chinese craft guilds. It served as the rallying point for members of the Beicheng hang who were required to participate in the ceremonies in honor of the patron deity — Lu Ban — on the 13 day of 6th moon every year.60 Perceived to have possessed enormous power, the patron deity was not only to protect the guild members against any imminent dangers and for job security, he was also to serve as the symbol of unity and solidarity among members, and to harmonize their potential conflicts. As the followers of the legendary craft master, Lu Ban, the members regarded each other as brothers, and took the guild as the extended family. With the blessing of the patron deity and the protection of the guild, the members were able to co-operate and unite for a common goal of protection of jobs and business, and to defuse any possible conflicts arising from the practice of the same trade. Economic role was the most significant aspect of the Ethnic Chinese craft guilds. To preserve a monopoly and prevent competition among members were two obvious economic functions. Ideally, to preserve a monopoly of a trade was to prevent the participation of outsiders in the business. But in reality it was not possible. Thus, the craft guilds tried to exclude the outsiders from joining their ranks. In early Penang, the majority of the carpenters were from the district of Taishan, Guangdong province, their distinctive sub-Cantonese dialect naturally barred carpenters of other dialect speakers from joining the Beicheng hang Guild. But the dialect barrier did not ensure the monopoly of the trade by the Taishanese. There was a need to exclude carpenters or concrete workers of other dialect groups from joining the guild. This was clearly stipulated in the “Rules and

59

See Peter J. Golas, “Eearly Ch’ing Guilds”, in G. William Skinner (ed.), The City in Late Imperial China (Stanford, Stanford University Press, 1977, reprint, Taipei, Rainbow Bridge Book Co. Ltd., 1983), p. 577. 60 See “Bi-neng Lu Ban hang zhangcheng” (The Rules and Regulations of the Penang Lu Ban hang Guild, revised and reprinted in November 1966). I have this document in my possession since 1971. See also Sei’ichi Imahori, op. cit., p. 105.

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Regulations of the Penang Lu Ban hang Guild (the successor of the Beicheng hang Guild)” revised in 1966.61 To prevent competition among members for jobs or business was another useful function of the craft guilds. The prevention did not take the form of prohibition, but in the promotion of co-operation and help. Neither the 1880s nor the 1966 revised Rules and Regulations of the Beicheng hang (Lu Ban hang) Guild prohibited poaching jobs, business or apprentices, obviously this kind of act was not expected to have happened among members. Instead, positive acts of promoting co-operation and help were stipulated in the rules and regulations. Members were required to donate money for funerals and weddings, and they were also required to help each other to find jobs.62 From a broader historical perspective, Ethnic Chinese guilds, both craft and business guilds, served as an institution which helped to perpetuate the monopolization of occupations by different dialect groups. I have argued elsewhere that the dominance of certain branches of jobs and business in the Ethnic Chinese communities was mainly the result of the functions of dialect and clan organizations.63 Like the secret societies, guilds were instrumental in the control of certain lines of jobs and business.64 In this sense, the guild and secret society were the two sides of a coin that served the interests of Ethnic Chinese dialect groups in the monopolization of occupations. The difference was that the former was an open and legal institution, while the latter was an informal and illegal one.

61

See “Bi-neng Lu Ban hang zhangcheng” Item 4 “The Qualifications of the Membership”. 62 See Sei’ichi Imahori, op. cit., pp. 105–06; “Bi-neng Lu Ban hang zhangcheng”, Item 15. 63 See Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911, pp. 116–117. 64 For the role of secret societies in the monopolization of occupations in early Singapore and Malaysia, see Mak Lau Fong, The Sociology of Secret Societies: A Study of Chinese Secret Societies in Singapore and Peninsular Malaysia (Kuala Lumpur, Oxford University Press, 1981), pp. 45–46.

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Underpinning these monopolistic craft guilds was a restrictive labor recruitment system — the apprentice. Like their counterparts in Qing and early Republican China, an arbitrary 3 years period was adopted.65 This arbitrary period was not so much as the training required for a particular trade, but as what Peter J. Golas has pointed out, it was primarily a custom-sanctioned initiation before one could enter a trade.66 In the case of carpenter’s training, the apprentice was required to reside in the shop learning the skill as well as manning the shop, cleaning and running errands. He received no salary, but was provided with food, clothing and pocket money.67 Given the fact that many of the Chinese craftsmen were trained in China before coming overseas, they had invariably transmitted their experience to the overseas guilds. They expected the apprentices to go through a training process similar to the one they had gone through. The relationship between master and apprentices was complex and contradictory. On the one hand, the master was morally obligated to treat the apprentices as his sons and to teach them the required skill. In return, the apprentices were required to give total submission to the master and respect him like their father, and this master-apprentices relationship, like father-son relationship was to be harmonious. The old records of the Beicheng hang Guild of Penang of Xianfeng reign (1851–1861) emphasized the so-called “the law of nature” of human society that required father to be benevolent and son to be filial. This law was to be applied to the teacher-student (master-apprentice) relationship which required the apprentices to be grateful and obedient.68 This fictitious family relationship obliged the apprentices to respect their master as sons would towards their father. On the other hand, the 65

See Peter J. Golas, “Early Ch’ing Guilds”, op. cit., p. 566; Sei’ichi Imahori, Overseas Chinese Society in Malaya, p. 102. 66 Peter J. Golas, ibid. 67 See Lin Yuqi, “Malaiya jianzhu ye de poushi” (The Analysis of the Construction Business in Malaya), in Malaiya huaqiao jianzao hang lianhe zonghui kaimu tekan (Souvenir Magazine of the Federation of the Malayan Chinese Building Guilds), cited in Sei’ichi Imahori, Overseas Chinese Society in Malaya, p. 102. 68 See the Beicheng hang Guild old records, cited in Sei’ichi Imahori, ibid., p. 114, note 18.

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master was mindful that his apprentices could be his future competitors for jobs and business. He could have kept some secrets of the trade from them, and exploited them for his own benefits.69

Traditional Ethnic Chinese business guilds Like the craft guilds, the business guilds operated on the same principles of monopoly and self-protection. The nature of urban life and the predominant small business in the Ethnic Chinese communities meant that a wide variety of business existed in the port cities of Southeast and East Asia. Trading was the focus of Ethnic Chinese business life, and business guilds were born out of the need of the trade and the special overseas environment. Among these early Ethnic Chinese businessmen, it appeared that those who were involved in grocery business, cloth trade, restaurant business and Chinese medicine were active in organizing their guilds for the promotion of common interests. In Singapore, the ‘Gushu shenjing tang’ (Restaurateurs’ Guild, founded 1876), the ‘Buhang shangwu ju’ (Singapore Piece Goods Traders Guild, founded 1908) and the ‘Xingzhou zahuo hang’ (The Grocers’ Guild of Singapore) were among the earliest business guilds on the island.70 In Kuala Lumpur, the ‘Xue Shenzhong tang’ (The Restaurateurs’ Guild of Selangor, founded 1892), the ‘Xuelane Jianzhao hang’ (or known as Selangor Kin Cho Hong, the Builders’ Guild of Selangor, founded 1917), the ‘Xuelane Jiushang gonghui’ (The Selangor Wine and Spirit Dealers’ Association, founded 1917) 69

See Yen Ching-hwang, “Traditional Ethnic Chinese Business Organisations in Singapore and Malaysia”, in Leo Suryadinata (ed.), Ethnic Chinese in Singapore and Malaysia: A Dialogue between Tradition and Modernity (Singapore, Times Academic Press, 2002), p. 202; see also Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), p. 60. 70 See Wu Hua, Xinjiapo huazu huiguan zhi (Chinese Associations in Singapore), Vol. 3, pp. 6, 18–19; Liu Zhanliang, “Ben hang shilue” (A Short History of the Grocers’ Guild of Singapore”, in Xingzhou zahuo hang wushi zhounian jinxi jinian tekan (Souvenir Magazine of the Golden Jubilee Celebration of the Grocers’ Guild of Singapore) (Singapore, Xingzhou zahuo hang, 1957), p. 8.

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and the ‘Xuelane Zahuo hang’ (The Selangor Grocers’ Guild, founded 1924) were among the earliest Chinese business guilds in Malaysia.71 Like the early craft guilds, the early business guilds were characterized by strong dialect affiliation: founded mostly by businessmen of same dialect origins, and the membership was dominated by a single dialect group. For instance, the Singapore Piece Goods Traders’ Guild was founded on February 25, 1908 by a small group of Teochew cloth businessmen headed by Chen Delun (Tan Teck Lun) and Wang Bangjie (Heng Pang Kiat), two known leaders of Teochew community in Singapore.72 The Guild, located at 75-B, Circular Road, Singapore in the early 1970s, had 23 founding members, all of them were Teochews who dealt in cloth and piece goods primarily from Europe and America.73 This trend appeared to have continued in the post-war period.74 71

See Li Jingpo, “Xue Shenzhong tang shilue” (A Short History of the Restaurateurs’ Guild of Selangor), in Xing Ma Gushu lianhe zonghui tekan (Souvenir Magazine of the Federation of Chinese Restaurateurs of Singapore and Malaya) (Singapore, 1958), p. 162; Zhu Wen-shui, “Xuelane Jianzhao hang jianshi”(A Short History of the Builders’ Guild of Selangor) and Zhou Jisun, “Xuelane Zahuo hang shilue”(A Short History of the Selangor Grocers’ Guild), in Xuelane hangtuan zonghui tekan (Souvenir Magazine of the Federation of Chinese Guilds of Selangor) (Kuala Lumpur, Xuehua hangtuan zonghui, 1962), no page number; Xuelane Jiushang gonghui jinxi jinian tekan (Goldern Jubilee Publication of the Selangor Wine and Spirit Dealers’ Association) (Kuala Lumpur, Xuelane Jiushang gonghui, 1967), p. 33. 72 See Wu Hua, Xinjiapo huazu huiguan zhi, vol. 3, p. 18; Pan Xingnong, Malaiya Chaoqiao tongjian (The Teochews in Malaya) (Singapore, Nandao chubanshe, 1950), pp. 72 & 137. 73 See “Xinjiapo Huaren bupiye” (A Report on the Singapore Chinese Piece Goods Business), conducted by the students of the History Department of Nanyang University, Singapore, 1971, p. 5. 74 In 1950, the membership of the Singapore Grocers’ Guild consisted of 106 shop members and 242 individual members. Only 10 shop members (mostly represented by the sole owner or the main partner) were non Cantonese speakers (6 Hokkiens, 3 Hakkas and 1 Teochew), while the remaining 96 were Cantonese or sub-Cantonese speakers from Xinhui, Nanhai and Shunde. Among the individual members, only 6 out of 242 members were Hokkien (4) and Hakka and Teochew (1 each), and the rest 236 were Cantonese and sub-Cantonese speakers from Xinhui, Heshan, Shunde and Taishan. This statistical evidence confirm beyond doubt that there was a strong link

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Economic interests and mutual-aid were the principal functions of the Ethnic Chinese business guilds. They were usually stated in the aims or rules and regulations of the guilds. The desire to minimize competition and maximize profit brought together a group of farsighted individuals for the founding of the guild; and then this desire was incorporated into its rules and regulations.75 Unlike their counterparts in China which enjoyed considerable judicial authority,76 the Ethnic Chinese business guilds neither wielded any legal power nor obtained any government support, they had to negotiate with members for the implementation of the rules. Sometimes, a deterring clause was incorporated into the rules and regulations as part of member’s obligation to obey the rules and the decisions made by the guild.77 The lack of judicial power undermined the authority of the guilds and reduced their ability to enforce rules. Sometimes, this could result in the dysfunction of the guilds.78 Whatever rivalry and competition they might have, business guild members shared some common needs such as mutual-aid (including welfare). This was particularly felt in a foreign environment like

between the business guilds and dialect groups. See “Hanghao tongxinlu” (Addresses of the Shop Membership of the Guild) and “Hangyan tongxinlu”(Addresses of the Individual Membership of the Guild), in Xinjiapo Zahuo hang sishisan zhounian jinian tekan (Souvenir Magazine of the Celebration of the 43rd Anniversary of the Singapore Grocers’ Guild) (Singapore, Xinjiapo Zahuo hang, 1950), pp. 105–121. 75 See “Bincheng Lianshang gonghui zhangcheng” (The Rules and Regulations of the Penang General Merchants Association), in Bincheng Lianshang gonghui kaimu jinian ji zhounian huiqing hebian tekan (Penang Lean Seong Kong Hoay (General Merchants Association) Inaugural Ceremony and First Anniversary Combined Souvenir) (Penang, 1960), p. 103. 76 See Joseph Fewsmith, “From Guild to Interest Group: The Transformation of Public and Private in Late Qing China”, in R. Ampalavanar Brown (ed.), Chinese Business Enterprise, Volume 2 (London, Routledge, 1996), p. 231. 77 See Rule Number 11 of the “Rules and Regulations of the Penang General Merchants Association”, op. cit., p. 103. 78 See Yen Ching-hwang, “Traditional Ethnic Chinese Business Organisations in Singapore and Malaysia”, in Leo Suryadinata (ed.), Ethnic Chinese in Singapore and Malaysia, op. cit., p. 206; Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia, op. cit., p. 64.

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Southeast Asia where Western Colonial or indigenous rulers were speaking different languages. Linguistic barrier was not the only problem, there were problems in relation to laws and external competitions (foreign and indigenous) which would have direct bearing on everyone in the business. With the spirit of mutual-aid, the guild was able to mobilize talents within the trade and deal with the common problems. The collective power of the guild could change the legislation or external environment in favor of the trade.79 The Ethnic Chinese business guilds also settled internal disputes among members, established contacts with foreign import-exporters,80 assisted and promoted business, and strengthened the co-operation between employers and employees.81 Sometimes, large business guild was also involved in running Chinese schools and other community charity functions in an attempt to improve the image of the guild in the wider Chinese community.82 79

In 1954, when the Colonial government of the Federation of Malaya imposed a 25% tax on all imported Chinese medicine, the Selangor Chinese Medicinal Merchants Guild (Xuelane Huaqiao yaoye gonghui) which was founded before the World War I, took the lead in organising petition against the new import duty. The petition gained strong support from other Chinese medicinal guilds in other states in Malaya and Singapore. The result of this concerted effort was the lifting of the tax on imported raw Chinese medicine. See Lo Bojin, “Xuelane Huaqiao yaoye gonghui shilue” (A Short History of the Selangor Chinese Medicinal Merchants’ Guild), in Xuelane hangtuan zonghui tekan (Souvenir Magazine of the Federation of Chinese Guilds of Selangor), no page number. 80 See Hong Majin, “Luetan benhui zhuzhi zhi dongji” (The Motives for the Founding of the Penang General Merchants Association), in Bincheng lianshang gonghui kaimu jinian ji zhounian huiqing hebian tekan (Penang Lean Seong Kong Hoay (General Merchants Association) Inaugural Ceremony and First Anniversary Combined Souvenir), p. 93. 81 See Liu Zhanliang, “Ben Hang shilue” (A Short History of the Singapore Grocers’ Guild), in Xingzhou zahuo hang wushi zhounian jinxi jinian tekan (Souvenir Magazine of the Golden Jubilee Celebration of the Singapore Grocers’ Guild), p. 10. 82 The Federation of the Selangor Chinese Guilds (Xuelane Hangtuan zonghui), founded in 1955 in Kuala Lumpur with 41 guilds in the state of Selangor, ran a Chinese primary school (the Huaqiao School), acted as a pressure group to press the government for the use of Chinese language in public places, and on educational matters such as education policy and the support given to the founding of Nanyang

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The foundation of the business guild was also the apprentice system. Like the craftsmen trade, the commercial line recruited its labor force through connections based on kinship, marriage and dialect affinity.83 This kin and dialect ties became especially important in the immigrant societies because recruitment of the labor started more frequently in China rather than overseas. Many stories of successful Chinese entrepreneurs in Southeast Asia started with apprenticeship in a relative’s or kinsman’s business, and from there they learned the business fundamentals, and later succeeded to shine in their business. The life stories of Zhang Bishi (Chang Pi-shih or known as Thio Thiau Siat), a most prominent businessman in Southeast Asia in late 19th and early 20th centuries, Yap Ah Loy (Ye Yalai or Ye Delai), the founder of Kuala Lumpur and a prominent tin miner, Wang Bangjie (Heng Pang Kiat), a prominent Teochew merchant in Singapore, and Foo Chee Choon (Hu Zichun), an eminent tin mining tycoon in Perak, testified to this process.84 The relationship between apprentice University (a Chinese language University) in Singapore. See Selection of newspaper reports on the activities of the Federation of Selangor Chinese Guilds, in Xuelane Hangtuan zonghui tekan, op. cit., no page number. 83 See “Xinjiapo Huaren zhongyao hangye shi” (A History of the Singapore Chinese Medicinal Trade), a Report on a Survey of Singapore Chinese Medicinal Trade conducted by the students of History Department, Nanyang University, Singapore, 1971, p. 24; “Xinjiapo Huaren bupiye” (Singapore Chinese Piece Goods Business), a Report on a Survey of Singapore Chinese Piece Goods Business conducted by the students of History Department, Nanyang University, Singapore, p. 7. 84 Zhang Bishi arrived in Batavia from China at the age of 18, and he first worked as an apprentice in a rice shop. Yap Ah Loy worked as an apprentice in a shop of a kinsman, Yap Ng (Ye Wu) in Kesang, Malacca. Wang Bangjie worked as an apprentice in a cloth shop in Singapore after he arrived from China. Foo Chee Choon worked as an apprentice in a shop before he learned mining business from his uncle. See Kuang Guoxiang, “Zhang Bishi qiren” (The Story of Zhang Bishi), and “Xikuang dawang Hu Zichun” (Tin-mining King — Foo Chee Choon), in Kuang Guoxiang, Bincheng sanji (Anecdotal History of Penang) (Singapore, Shijie shuju, 1958), pp. 99 & 114; Wang Zhiyuan, Ye Delai zhuan (A Biography of Yap Ah Loy) (Kuala Lumpur, Yihua Publishing Company, 1958), pp. 19–20; S.M. Middlebrook, “Yap Ah Loy”, an independent issue of Journal of the Malayan Branch of Royal Asiatic Society (Singapore, Malaya Publishing House Ltd., 1951), p. 13; “Wang Bangjie xiansheng” (Mr. Heng Pang Kiat), in Pan Xingnong (ed.), Malaiya Chaoqiao tongjian (The Teochews in Malaya), p. 72.

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and employer (shop owner or business partner, or owner-manager) was similar to the apprentice-master craftsman — paternalistic and sometimes oppressive. The apprentice was to be obedient, respectful and faithful towards the employer, while the employer was paternalistic and supposed to be caring. This relationship was perceived to be like a father-son relationship.85 The apprentice was to start learning from cleaning, moving and packaging goods, cooking and running errands, the so-called mundane duties in the shops — either in a Chinese medicinal shop, grocery shop or trading company.86 He usually worked long hours with little or token salary. There was no fixed period of apprenticeship, and it varied from business to business. In comparison with the craft apprentice who had to learn a special skill in order to qualify as a craftsman, the apprentice in a business could pick up the essential knowledge of doing the business through personal experience or by observation, and the length of time needed varied according to individuals. His promotion to a proper paid job (a formal employee status) in the shop depended very much on his relationship with the employer (such as how close his relationship with the employer in terms of kinship or dialect ties) and his performance. The former seemed to have played a bigger role in determining his promotion.87 After he had learned the knowledge of running the business and had accumulated some savings, he could come out or partner with others to start a similar line of business. When his business expanded and needed more helping hands, he would have done the same thing by taking apprentices among children of relatives, kinsmen and friends either local or from China, and this process repeated itself continuously. Whether this low-paid, long hour and paternalistic apprentice system should be regarded as a hidden means of employer’s 85

See Xinjiapo Huaren bupiye (Singapore Chinese Piece Goods Business), op. cit., p. 6. Ibid.; Xinjiapo Huaren zhongyao hangye shi (A History of the Singapore Chinese Medicinal Trade), op. cit., p. 28; Tan Jingsheng, “Zahuo shengyai ershi nian” (Twenty Years of My Life in a Grocery Shop), in Xingzhou Zahuo hang wushi zhounian jinxi jinian tekan (Souvenir Magazine of the Golden Jubilee Celebration of the Singapore Grocers’ Guild) (Singapore, Singapore Grocers’ Guild, 1957), p. 15. 87 See Xinjiapo Huaren zhongyao hangye shi, p. 29. 86

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exploitation of cheap labor, or as a necessary training process to shape the prospective businessmen’s character is a matter for debate. In the light of the absence of modern trade schools or business colleges, the apprentice system was the only means for training a future businessman. Long hours and low pay in doing petty and mundane works of apprenticeship are sometimes claimed to be the Chinese way of character building — hard working, thrifty and able to endure hardship. The acquisition of these qualities perhaps contribute to the success of a businessman. Of course, the system also worked to the advantage of the employer who benefited from low labor cost and indirectly increased his profit margin. This mutual obligations and mutual benefits between apprentice and employer was in line with Confucian concept of mutual responsibility. Despite the stringent apprentice system, the apprenticeship was still coveted by many Ethnic Chinese immigrants and local-born alike. From a broader perspective, the Chinese apprentice system has contributed to the growth of the numbers of Chinese businessmen, and helped perpetuate the dominant position of the Ethnic Chinese in business in Southeast Asia. It would be a mistake to assume that traditional Ethnic Chinese business organizations are incapable of changing with time, and they would disappear into oblivion or be replaced by new organizations. The traditional Ethnic Chinese business organizations, like their counterparts in China were capable of coping with change, and making themselves relevant in the modern world. Of course, the ability to cope with change varied according to individual organizations, some were more capable than others. On the whole, traditional Ethnic Chinese business organizations contained seeds for change. The idea of progress was not completely lost in the organizations. Perhaps this concept of change with time came primarily from the geographical position. Since most of the Ethnic Chinese were urban folks residing in the major ports of the Southeast and East Asia, they were exposed more readily to outside influence, both Western and Chinese, through media or business contacts. Many of the Ethnic Chinese businessmen who had to keep in touch with foreign businessmen were at the forefront of change, because they were more aware of what was going on outside Ethnic Chinese communities. There were also businessmen

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who were influenced by newspaper reports or socio-political change occurred in China. These outside influence would have impact on their thinking and their attitude towards reforming the business organizations. At the same time, the internal problems of the Ethnic Chinese communities such as dialect difference and the lack of unity were issues that propelled guilds to change. This awareness was sometimes reflected in their writings for souvenir magazines published by the guilds. For instance, the souvenir magazine for the celebration of anniversary of the Singapore Grocers’ Guild published in October 1950, contains many articles with progressive themes. They ranged from topics on ‘Chinese business to survive in the international business competition’, ‘backwardness of Ethnic Chinese business and industry’, ‘the future of Ethnic Chinese business’, ‘economic status of the Ethnic Chinese in Southeast Asia’, to ‘employer-employee cooperation’ and ‘unity and solidarity’.88 Although some of these contributors were not members of the Singapore Grocers’ Guild, they were prominent Ethnic Chinese businessmen affiliated with the guild,89 and their progressive ideas and insights would have impact on the members of the guild. In Penang, the awareness of the relatively backwardness of Ethnic Chinese and their traditional practices in early 88

See Liang Bin, “Lun zhengqu qiaohui zhi guoji shichang” (On the Chinese Remittance and International Market), Huang Shufen, “Huaqiao shangye hougu yu qianzhan” (Retrospect and Prospect of the Ethnic Chinese Business), Feng Fuqi, “Lueshu laozi hezuo yu wo huaqiao shangye zhi guanxi” (On the EmployerEmployee Cooperation and the Ethnic Chinese Business), Qiu Zhanghe, “Huaqiao shangye de tuanjie jingzhen he baozhang” (The Spirit of Unity and Its Guarantee of the Ethnic Chinese Business), Liang Junan, “Jiaqiang tongye de tuanjie” (Strengthen the Cooperation among the Grocers), Feng Jiaju, “Huaqiao shangye yu qiantu” (Ethnic Chinese Business and Its Future), Ke Tian, “Nanyang huaqiao yuanyu de jiangji diqei” (The Economic Status of the Ethnic Chinese in Southeast Asia), in Xinjiapo Zahuo hang sishisan zhounian jinian tekan (Souvenir Magazine of the Celebration of 43rd Anniversary of the Singapore Grocers’ Guild) (Singapore, Xingzhou Zahuo hang, 1950), pp. 21–25, 64–73. 89 Liang Bin was a leader of the Hong Kong Guang Yi Shanghui (Hong Kong Grocers’ Guild), while Huang Shufen was a prominent Cantonese businessman and a leader of Singapore and Johore Cantonese communities.

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1960 prompted some of the members of the Penang General Merchants Association to suggest ‘Ethnic Chinese business and industry have to catch up with time’ and ‘to reform obsolete practices’.90 Among the proposed reform of obsolete practices included ‘protracted bargaining’(taojia huanjia) and ‘long opening hours’. The ‘protracted bargaining’ was considered to be a waste of time and add burden to the management, while the shortening of trading hours would help conserve energy.91

Informal Ethnic Chinese business organizations Informal Ethnic Chinese business organizations consisted mainly of two types: mutual-aid society and businessmen’s club. They invariably played a supporting role for Ethnic Chinese businessmen in their business activities. The mutual-aid societies in the Ethnic Chinese communities grew out of the desire for mutual assistance in times of crisis. The uncertainty of business and the nature of early Chinese immigrant society provided no guarantee on the perpetuation of wealth. The fluctuation of fortunes in the business world and the lack of institutional and legal protection on wealth evoked the fear of misery after the collapse of business. Wealth was not ever-lasting and dependable, it could dissipate overnight leaving the families devastated. The formation of these mutual-aid societies were to meet this need. They began to appear in the major port cities of the Southeast and East Asia. In Singapore, the Kheng Teck Whay (Qing De Hui in Mandarin, The Kheng Teck Society) came into existence in 1831,92 while in Malacca, 90

See Chen Xiting, “Gongshangye ying yingtou gangshang shidai” (Ethnic Chinese Business and Industry Must Catch Up with Time), and Qian Chenxiang, “Xiang benhui tongye jin yiyan” (A Proposal to the Members of Penang General Merchants Association), in Bincheng Lianshang gonghui kaimu jinian ji zhounian huiqing hebian tekan, 1959– 1960 (Penang Lean Seong Kong Hoay (General Merchants Association) Inaugural Ceremony and First Anniversary Combined Sovenir, 1959–1960), pp. 91–92, 94. 91 Qian Chenxiang, ibid., p. 94. 92 See David K.Y. Chng & Lim How Seng, “Xinjiapo Qing De Hui yanjiu” (The 153Year Old Kheng Teck Association of Singapore), in Asian Culture, No. 5 (Singapore, Singapore Society of Asian Studies, April 1984), p. 54.

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Kheng Leong Huay (Qing Liang Hui in Mandarin, The Kheng Leong Society) was founded in 1891,93 and it was followed by Ghee Kiat Huay (Yi Jie Hui in Mandarin, The Ghee Kiat Society) in later years.94 It appeared that members of these societies in their early stages were mostly confined to businessmen. But as time changed, the societies were opened up and had broadened their social base to include most of the adult Chinese.95 Among these societies, the Kheng Teck Society was probably the earliest and the most important one. The Society was established by 36 Ethnic Chinese businessmen in 1831 in Singapore, and all of the founders were of Southern Fujianese (Hokkien) origins; some of them were leaders of the Hokkien Bang in Singapore and had strong connection with Malacca. It was primarily a mutual-aid and welfare organization for Hokkien businessmen, and the members of the Society, though English-educated, was imbued with strong Confucian values and loyalty to the Qing government.96 With the foresight of the founders who contributed $100 (Spanish dollars) each, the Society had a flying start with its main objective of mutual-aid.97 The impressive $3,600 fund was invested in 93

The Society claimed it was registered on August 19th, 1891. See Rules, Bye-laws and General Objects of Kheng Leong Huay and Kheng Leong Huay Mutual Aid Section, Malacca, cover page revised in September 1957. I have this document in my possession. 94 The Rules of Ghee Kiat Huay, Malacca does not indicate when the Society was founded. When I acquired the pamphlet in 1970s, I was informed the Rules were probably amended in 1939. I suspect the Society could have been founded before the World War I. 95 In the revised Rules of the Kheng Leong Huay, membership is open for persons of Chinese race of either sex; but the revised Rules of Ghee Kiat Huay confines membership to all Chinese of male sex over 20 years of age. See above documents. 96 See Lim How Seng, “Qing De Hui: Xinjiapo huashang huzhuhui de zuzhi yu yunzuo” (The Kheng Teck Association: The Dynamics of a Chinese Merchants’ Mutual-Aid Organization in Singapore), in Asian Culture, No. 17 (Singapore, Singapore Society of Asian Studies, June 1993), pp. 154–167; David K.Y. Chng & Lim How Seng, op. cit., pp. 58–65. 97 The $100 contribution was a large sum of money at the time. In the middle of the 19th century, an average agricultural worker in Singapore earned $3 to $4 a month, and his annual income did not exceed $50. This contribution represented two years’

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property which gained a stable and steady return. By 1908–1914, the Society had 7 shops of which the rental accounted for most of the income of $33,136.98 Strong financial position of the Society enabled it to fulfil its main objective of helping members and their families in times of crisis. Members or non-members (presumably member’s relatives or friends) could obtain loans from the Society with mortgage of land titles or jewellery when they were in financial straits. When members’ livelihood was threatened by sickness, the Society would render support with a sickness allowance. More importantly, the Society would take care of a member’s family if he died in poverty; his widow and children would receive monthly allowance until they could stand on their own feet; and children of the deceased members could apply scholarship or loans.99 In the period between 1907 and 1928, the Society had spent averagely over 30% of its annual income on welfare, and the bulk of it went to members’ benefits.100 Two important implications are to be noted in relation to the Ethnic Chinese business activities. Firstly, this informal business organization acted as a modern insurance company providing unemployment and sickness benefits as well as widow pension. This insurance policy would free the fear of Ethnic Chinese businessmen of destitution in times of crisis, and reduce their level of worry and stress. This would improve their focus on doing business, and to provide them with spirit of risk-taking which was necessary if their business were to succeed. Secondly, this informal organization provided them with a useful contact point where they could meet to exchange business ideas, market information, and labor recruitment etc. Traditional Ethnic Chinese businessmen’s clubs assumed the form of a social club providing a meeting place and facilities for income of an average worker. See Yen Ching-hwang, A Social History of the Chinese in Malaya and Singapore, p. 144. 98 See Lim How Seng, “Qing De Hui: Huashang huzhuhui de zuzhi yu yunzuo”, op. cit., pp. 160–162; see also the same article in Lim How Seng, Xinjiapo huashe yu huashang (Singapore Chinese Community and Entrepreneurs) (Singapore, Singapore Society of Asian Studies, 1995), pp. 114–117. 99 Ibid., p. 161; pp. 116–117. 100 Ibid., pp. 161–162; pp. 117–118.

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businessmen to meet after hours. But they had important business implications. Traditional Ethnic Chinese businessmen gained a reputation of doing business in an informal way: no formal negotiation sessions, valuing verbal promises and no formal contract signed. This informal approach displays a sharp contrast with the way business is done in the West, and sometimes, it has been dubbed as ‘Chinese way of doing business’. This informal way was the product of Chinese perception of business relationship. In their view, business relationship was an integral part of a total relationship. They would not do business with adversaries but with friends, relatives, and people of same district or province whom they could trust. A successful business relationship was a long-term and a lasting one. This traditional attitude of doing business made these clubs important in the building of business relationship. These clubs assumed names such as ‘ting’ (pavilion), ‘yuan’ (garden) and ‘xuan’ (a porch or a side room), or a more modern term of ‘jilobu’ (club). Song Ong Siang’s One Hundred Years’ History of the Chinese in Singapore has listed at least four of such clubs in 19th century Singapore, including Ban Chye Ho Club, Cheng Kee Hean Club, Choon Guan Hock Club, and Kim Ban Choon Club.101 Available Chinese sources add another four businessmen’s clubs in that period. They were the Chui Huai Lim Club, the Shulin Yuan Club, the Xiao Tao Yuan (Hsiao T’ao Yuan) Club and the Ee Hoe Hean Club in Singapore.102 These clubs appeared to 101

See Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967), pp. 98, 259, 291, 476 & 552. 102 Song Ong Siang in his book lists a Chinese club in Kampong Java without a name, now I have identified it to be the Shulin Yuan Club that in 1890 members of the Club hosted a dinner in honour of Qing visiting dignitary, Admiral Ting Juchang who led a Chinese fleet to visit Singapore in April 1890. See Lat Pau, April 15th, 1890, p. 5; for the Chui Huai Lim Club, see “Juihua lin jilobu” (The Chui Huai Lim Club), in Pan Xingnong (ed.), Malaya Chaoqiao tongjian (The Teochews in Malaya), pp. 343–344. For the existence of Xiao Tao Yuan Club, see Yen Ching-hwang, The Overseas Chinese in the 1911 Revolution: With Special Reference to Singapore and Malaya (Kuala Lumpur, Oxford University Press, 1976), p. 55; for Ee Hoe Hean Club, see C.F. Yong (Yong Ching Fatt), Zhanqian Xinghua shehui jiegou yu lingdou

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be founded by wealthy businessmen with strong dialect and regional affiliation.103 The best known businessmen club was the Ee Hoe Hean (Yi He Xuan in Mandarin) Club founded in Singapore in 1895. The founders of the club were a group of rich Hokkien businessmen such as Lim Ho Puah (Lin Heban, father of famous entrepreneur Lim Peng Siang), Tan Cheng Siong (Chen Jenxiang, father of famous banker Tan Chin Tuan), Lee Cheng Yan (Li Qingyan), Tan Jiak Kim (Chen Ruojin) and Gan Eng Seng (Yan Yongcheng).104 It was aimed at bringing both Chinese and English educated Hokkien businessmen together for recreational and social purposes.105 The club only admitted Hokkien businessmen in its early stage from 1895 to 1922. When Tan Kah Kee (Chen Jiageng), the renowned Ethnic Chinese entrepreneur and community leader, took over the position of zongli (chairman or director) of the club, it was opened to Chinese businessmen of other dialect groups,106 and the reform was carried out with a new community spirit. He banned opium smoking on the premises, encouraged punctuality and hygiene in social gatherings, and set up a small library.107 When Tan Kah Kee was actively involved in China politics in 1920s and 1930s, Ee Hoe Hean Club was turned into the headquarters for the mobilization of the Chinese in Southeast Asia in resisting Japanese invasion of China in both the Jinan Incident (1928) and the Overseas Chinese National Salvation Movement (1937–1941).108 chen chutan (Chinese Community Structure and Leadership in Pre-War Singapore) (Singapore, South Seas Society, 1977), p. 31. 103 See Pan Xingnong, ibid., p. 343. 104 See C.F. Yong, op. cit., p. 31. 105 Ibid., pp. 31–32; Lim How Seng, “Yi He Xuan Jilobu shilue” (A Short History of the Ee Hoe Hean Club), in Huang Yihua et al. (eds.), Yi He Xuan jiushi zhounian jinian tekan (Souvenir Magazine of the Celebration of 90th Anniversary of the Ee Hoe Hean Club, Singapore) (Singapore, Ee Hoe Hean Club, 1985), p. 37. 106 C.F. Yong, op. cit., p. 33; Lim How Seng, ibid., p. 38. 107 Lim How Seng, ibid. 108 C.F. Yong, op. cit., pp. 34–36; Lim How Seng, ibid., pp. 38–40; Yen Chinghwang, “The Response of the Chinese in Singapore and Malaya to the Tsinan(Jinan) Incident, 1928”, in Journal of the South Seas Society, Vol. 43 (Singapore, South Seas Society, 1988), pp. 1–22; C.F. Yong, Tan Kah-Kee: The Making of an Overseas Chinese Legend (Singapore, Oxford University Press, 1987), pp. 160–167.

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The high political profile of the Club after 1923 did not conceal its original function of providing recreational and social facilities for businessmen. These activities included opium-smoking (before 1923), playing mah jong,109 drinking and feasting etc. More importantly, the club, like many other Ethnic Chinese businessmen clubs, provided a relaxed environment for businessmen, both Chinese and English educated, to mix. They chatted and exchanged useful business information, and negotiated business deals. A great deal of business were done through these informal contacts. Traditional business organizations have several important implications for the Ethnic Chinese business. First, they were important institutional back-up for Ethnic Chinese business by monopolizing certain lines of trade and as training ground for prospective entrepreneurs. Second, they acted as an effective mechanism through which Bang (dialect and geographical entity) perpetuated its control over business lines. The Bang monopoly, to a certain extent, disadvantaged the consumers, but guaranteed profit margin and generated competition in business activity. Third, they were a factor accounting for the dynamics of the Ethnic Chinese business and partly responsible for the dominance of the Ethnic Chinese in business, especially in Southeast Asia. Fourth, they contained seeds of progress which enabled them to cope with changing circumstances. These progressive elements help transform and make them relevant to modern world by changing of adding to their traditional functions. Just like many other Ethnic Chinese clan and dialect organizations, they are capable of modernizing themselves. Fifth, the formal and informal business organizations (guilds, mutual-aid societies and businessmen clubs) were complementing each other, and helped mould the special character of the Ethnic Chinese business.110

109

A very popular form of Chinese gaming, and it is still popular nowadays when I visited the Club in November 1996. 110 See Yen Ching-hwang, “Traditional Ethnic Chinese Business Organisations in Singapore and Malaysia”, op. cit., p. 23.

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Chapter 4

The Rise of Modern Ethnic Chinese Business Enterprise

The Rise of Modern Ethnic Chinese Business Enterprise No single factor was responsible for the rise of modern Ethnic Chinese enterprise. A series of complex factors, ranging from economic, political to social and cultural can be identified. Rapid economic change took place on coastal China and in Southeast Asia as a result of opening of China in the 1840s following the defeat of China by Britain in the infamous Opium War. Whether the Opium War can be regarded as the classic example of British imperialist aggression of China or not is not relevant here, what can be ascertained is that the war had profound economic impact on China and Southeast Asia. The ceding of Hong Kong to Britain as a colony provided British businessmen with a permanent base from which they spearheaded into the vast market of China. The opening of the five treaty ports (Canton, Amoy, Foochow, Ningpo and Shanghai) on east and Southeast coast of China further facilitated the activities of British and other Western businessmen in China.1 The opening of China also stimulated the business activities with Southeast Asian region, and attracted a large number of Chinese immigrants to trade and settle. Further opening of China in the 1860s (into central, Northeast China and Taiwan), the introduction 1

For a study of the opening of Treaty Ports and Western business activities in the mid 19th century, see John K. Fairbank, Trade and Diplomacy on the China Coast: The Opening of the Treaty Ports, 1842–1854 (Cambridge, Massachusetts, Harvard University Press, 1964); W.C. Costin, Great Britain and China, 1833–1860 (Oxford, The Clarendon Press, 1968). 85

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of modern transport system such as shipping lines,2 the adoption of Western business institutions and the birth of the comprador system,3 helped to integrate China with the Ethnic Chinese communities in Hong Kong, Macao and Southeast Asia into an emerging capitalist system in East and Southeast Asia.4 The second wave of European penetration into Southeast Asia in late 18th and the first half of 19th centuries saw increasing competition and rivalry among the European Powers.5 Economic consideration for their colonies led to competition for Chinese immigrants as a major source of cheap labor. The competition forced the European Powers to adopt liberal policies to encourage Chinese immigration.6 British adoption of free trade policy in Penang and Singapore attracted a number of Chinese traders to the ports. In the second half of the 19th century, the development of mining and cash crop industries in the Malay Peninsula and Dutch East Indies induced large number of Chinese menial workers to come.7 The result of which was the rise of Ethnic Chinese communities in the region. 2

For introduction of Western steamship in China’s water and their rivalry for business in the region, see Kwang-ching Liu, Anglo-American Steamship Rivalry in China, 1862–1874 (Cambridge, Massachusetts, Harvard University Press, 1962). 3 For the birth of the Comprador system and its impact on 19th century China, see Yen-ping Hao, The Comprador in Nineteenth Century China: Bridge between East and West (Cambridge, Massachusetts, Harvard University Press, 1970). 4 For the integration of Hong Kong into the emerging world capitalist system after the opening of China, see Jung-Fang Tsai, Hong Kong in Chinese History: Community and Social Unrest in the British Colony, 1842–1913 (New York, Columbia University Press, 1993), pp. 21–31. 5 For competition and rivalry between Britain and the Netherlands in Southeast Asia, see Nicholas Tarling, Anglo-Dutch Rivalry in the Malay World, 1780–1824 (St. Lucia, Queensland University Press, 1962). 6 For instance, Chinese immigrants to Singapore increased markedly from 2,069 in 1838–1839 (before China’s opening) to 10,928 in 1849–1850 (after China’ opening). See Joyce Ee, “Chinese Migration to Singapore, 1896–1941”, in Journal of Southeast Asian History, Vol. 2, No. 1 (March 1961), p. 33. 7 For the development of tin mining and cash crop industries in the Malay Peninsula, see Wong Lin Ken, The Malayan Tin Industry to 1914 (Tucson, The University of Arizona Press, 1965) and James C. Jackson, Planters and Speculators: Chinese and European Agricultural Enterprise in Malaya, 1786–1921 (Kuala Lumpur, University

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The political situation in East and Southeast Asia in the second half of the 19th century was also conducive to the rise of modern Ethnic Chinese business. The second wave of European penetration was both broader in scope and deeper in intensity. The first wave of European colonizers, represented by Portuguese, Spaniards and the Dutch, were more interested in acquiring strategic locations to safeguard their valuable spice and silver trade; while the second wave of European colonizers, represented by the British and the French, were preoccupied with religious and territorial expansion. The rise of the world imperialism in the 1870s accelerated their process of territorial conquest in East and Southeast Asia.8 As Western Colonial empires stretched across East and Southeast Asia, state boundary was relatively blurred under European Colonial administrations. Physical movement and movement of goods from one colony to another under the same empire was relatively easy and smooth. This had facilitated the rise of modern Ethnic Chinese business enterprises in the region. The rise of Ethnic Chinese communities in Hong Kong and Southeast Asian ports in the second half of the 19th century provided excellent opportunities for Chinese businessmen to interact with Western counterparts. Those Chinese who were linguistically competent became compradors working for Western companies, and those who served as intermediaries between Western and native economies also developed a close relationship with foreigners.9 The interaction of Malaya Press, 1968); for the Dutch plantation industry and its cruel treatment of Chinese coolies in Dutch East Indies, see Jan Breman, Taming the Coolie Beast: Plantation Society and the Colonial Order in Southeast Asia (Delhi, Oxford University Press, 1989). 8 For the origins of Western imperialism and its economic impact, see J.A. Hobson, Imperialism: A Study (London, George Allen & Unwin Ltd., 1961, sixth impression); for a Marxist interpretation of the rise of world imperialism and its impact, see V.I. Lein, Imperialism: the Higher Stage of Capitalism (Beijing, Foreign Languages Press, 1969); for a general reader in economic imperialism, see K.E. Boulding & T. Mukerjee (eds.), Economic Imperialism: A Book of Readings (Ann Arbor, The University of Michigan Press, 1972). 9 One of the best examples was Sir Robert Ho Tung (1862–1956). After serving several years at the Jardine, Matheson and Company’s branch in Hong Kong, he was promoted to the position of Comprador (1883–1900). He then made his two

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enabled Chinese businessmen to learn and emulate useful Western business practices. The internal factors within the Ethnic Chinese communities also had an important role to play in the rise of modern Ethnic Chinese business enterprise. The increasing number of Chinese immigrants arriving in Southeast Asia made the local Chinese communities viable as economic entities.10 Although the communities were still rigidly divided into different dialect groups with clannish loyalties, nevertheless, the needs for goods and services were increased. The desire to consume Chinese foodstuff and household goods opened up the import markets.11 At the same time, the collection of local native produce for export to China and Europe built up the export trade.12 When the Ethnic Chinese communities became larger and more sophisticated, the opportunities for doing business grew. brothers, Ho Fu and Ho Kan-t’ang as assistant Compradors. Ho Tung used his position to enrich himself, and his family emerged as one of the richest families in the history of Hong Kong. See Yen-ping Hao, The Comprador in Nineteenth Century China: Bridge between East and West, p. 173. For the family history of Ho Tung, see He Wenxiang, Xianggang jiazushi (A History of Prominent Families in Hong Kong) (Hong Kong, Shi Hua Tang yinshua youxian gongsi, 1989), pp. 9–57. 10 For instance, Chinese immigrants arrived in Peninsular Malaysia increased from 89,801 in 1881 to 269,854 in 1911. See Saw Swee-Hock, The Population of Peninsular Malaysia (Singapore, Singapore University Press, 1988), p. 19. 11 For instance, consumption of joss-sticks and joss papers for religious worship of early Chinese in the Straits Settlements swelled the import of Chinese goods. The value of $84,863 joss-sticks and $125,017 worth of joss papers were imported into the Straits Settlements from Hong Kong in 1878. This increased to $93,445 worth of joss-sticks and $135,431 worth of joss papers in 1879. See “Annual Report of the Maritime Department for the year 1879”, in Straits Settlements Legislative Council Proceedings, 1880 (Singapore), Appendix No. 23. 12 For the growth of trade between Singapore and China in the period between 1819 and 1869, see Wong Lin Ken, “The Trade of Singapore, 1819–1869”, an independent issue of the Journal of Malayan Branch of Royal Asiatic Society, Vol. 33, Pt. 4 (December 1960), pp. 106–133. For the trade between the Straits Settlements and East Asia in the period between 1870 and 1915, see Chiang Hai Ding, A History of Straits Settlements Foreign Trade, 1870–1915 (Singapore, National Museum, 1978), pp. 102–103.

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The rapid economic change on coastal China and Southeast Asia opened up a new world, and provided excellent business opportunities for those Chinese who had possessed foresight, business acumen, courage and determination. Ironically, it was neither the educated elite — the Scholar-gentry, nor the Hong merchants — traditionally served as intermediary between Sino-Western trade, who made the best out of these new opportunities. Rather, it was the Ethnic Chinese who grasped the opportune time and benefited greatly from that change. This was because the Ethnic Chinese were marginal men who had little or no chance to climb up social ladder in the traditional Chinese social system. They were highly motivated for rapid economic advancement. In their views, it was the possession of wealth that would enhance their prestige, social status and power in the society.13 Further, they were in a better position than their compatriots in China to observe how Western business was organized and operated, and they also had the advantage of having direct experience in living under Western colonial rule. The founders of the modern Ethnic Chinese enterprises came mostly from a poor family background with semi-literacy; but they possessed business acumen and foresight with strong personality and adaptability. Of course, people with these qualities would also have done well in the Western business world. Using a modern term, they had possessed the essential ingredients of modern entrepreneurship. Being poor immigrants, they started from scratch in getting a lowly paid job in business, but developed a strong sense of self-reliance and independence. With traditional Chinese virtues of thrift and diligence, they were able to save initial capital and learned the trade. They started their small business in a very difficult condition, but managed to survive and grow. With business acumen and foresight, they were able to absorb Western 13

For a study of the links between wealth and acquisition of social status and prestige among the Chinese in 19th century Singapore and Malaya, see Yen Ching-hwang, “Ch’ing’s Sale of Honours and the Chinese Leadership in Singapore and Malaya, 1877–1912”, in Journal of Southeast Asian Studies, Vol. 1, No. 2 (Singapore, September, 1970), pp.27–29; see also Yen Ching-hwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), pp. 183–185.

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ideas and new business practices quickly, and attempted to integrate Chinese values with Western practices. Since their customers were predominantly Chinese, they constructed unique Ethnic Chinese business networks and systems to suit their business operation. With determination and perseverance, planning and luck, they succeeded to build their business empires on coastal China and in Southeast Asia. The Kao and Chen families in Hong Kong and Thailand, Oei Tjie Sien of Java, and Zhang Bishi of Dutch East Indies and British Malaya exemplified the process of the rise of early modern Ethnic Chinese business enterprises. The founder of the Gao family business empire was Gao Manhua (or known as Gao Chuxiang or Gao Tingkai) who was a native of Cheng Hai district, Guangdong province. He was born into a poor Teochew peasant family, and had learned how to read in a village temple. Dissatisfied with rural poverty and having perceived immense economic opportunity arising from the opening of China in early 1840s, he left China for Thailand where he worked as a rice cargo coolie in his relative’s rice mill. Having accumulated a small capital, he bought a rice mill and was involved in rice export business.14 The modernization of his traditional Chinese rice mill found him a small fortune, and he developed his rice trade with Singapore, Hong Kong and Swatow. In 1853, he founded a famous trading company, Yuan Fa Hang (or known in Hong Kong as Yuen Fat Hong firm), one of the earliest Nan Bei Hang (Nam Pak Hong) firms in Hong Kong. These Nan Bei Hang firms, literally meant the Southern and Northern business lines, were those trading firms involved in entrepot trade between China, Hong Kong and Southeast Asia.15 They specialized in 14

See Zhang Yingqiu, “Taiguo zhi Chenghai yimin: Gao Huishi yu Chen Hongli jiazu de yeji” (The Immigrants of Cheng Hai in Thailand: The Records of Family Enterprises of Gao Huishi and Chen Hongli), in Lin Tien-Wai (Lin Tianwei) (ed.), Ya-Tai difang wenxian yanjiu lunwenji (Collected Essays on Local History of The Asian-Pacific Region: Contribution of Overseas Chinese) (Hong Kong, Centre of Asian Studies, University of Hong Kong, 1991), p. 241. 15 From Hong Kong northwards to the treaty ports of China was called northern trading line; while trade from Hong Kong to ports in Southeast Asia was termed southern line. See Chen Chinhuai, “Shilun Xianggang Chaoshang jingji fazhan de

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trading agricultural products — rice, sugar, beans, vegetable oil and copra — as well as traditional Chinese export commodities — tea, silk and porcelain. Gao’s Yuan Fa Hang became a leader of these Nan Bei Hang firms.16 It successfully established a trading network linking business in Singapore, Thailand, Hong Kong, and Swatow, and monopolized some of the valuable commodities such as rice.17 The story of the Chen business empire of Hong Kong and Thailand was not very different from Gao’s. Chen Huanrong (or known as Chen Xuanyi), the founder, was also born in Cheng Hai district, Guangdong. Inspired by the change and opportunity in the region after the Opium War, he left home and worked as a boat hand in a junk plying between Swatow and Hong Kong. His diligence and thrift enabled him to save enough capital to buy his own junk and engaged in entrepot business between Hong Kong, Swatow and other Chinese treaty ports in the north. The expansion of his business led him to found the Qian Tai Long trading firm in 1851, the earliest Nan Bei Hang firm in Hong Kong. He then extended his trading network to include Southeast Asian ports like Bangkok and Singapore. He thus laid a solid foundation for the building of a business empire which was completed by his son.18 Two other Ethnic Chinese businessmen who succeeded to build extensive business empires in Southeast Asia and coastal China were Oei Tjie Sien (or romanized in Mandarin as Huang Zhixin) and Zhang Bishi (or romanized as Chang Pi-shih, or known in the West as Thio Tiauw Siat). Unlike Gao Manhua and Huang Huanyong who were Teochew speakers, Oei Tjie Sien was a southern Fujianese lishi guocheng” (A Preliminary Study on the Historical Development of Teochew Business in Hong Kong), in Tay Lian Soo & Chang Chak Yan (eds.), Chaozhouxue guoji yantaohui lunwenji (Collected Essays from the First International Symposium on Teochew Studies) (Guangzhou, Jinan daxue chubanshe, 1994), vol. 2, pp. 608–609. 16 See Jung-fang Tsai, Hong Kong in Chinese History: Community and Social Unrest in the British Colony, 1842–1913 (New York, Columbia University Press, 1993), p. 29. 17 Ibid., Zhang Yingqiu, op. cit., p. 241. 18 Zhang Yingqiu, ibid., p. 242.

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(Hokkien), while Zhang Bishi was a Hakka. Oei was born in 1835 in the district of Tong An of Fujian province. His involvement in the Taiping revolutionary movement resulted in his fleeing to Java in 1858. Taking refuge in Semarang, a thriving port of Eastern Java with a large Chinese community, he started working as a shop assistant — a lowly paid job; but his diligence and intelligence won the trust of the shop proprietor who married him with his daughter. With his fatherin-law’s influence and financial support, Oei Tjie Sien managed to have a smooth ride in business. He founded a small trading company dealing in Chinese commodities from China and exporting local agricultural produce such as sugar and tobacco. He then took in business partners and expanded the company into the famous Kian Gwan Trading Concern (The Source of Wealth). Benefiting from the Dutch Colonial government’s new policy of relaxing control over production of agricultural produce, the Kian Gwan grew into a great trading empire in Southeast Asia with many branches throughout the region and southern China.19 The success story of Zhang Bishi was equally amazing. Zhang, a Hakka, was born in Da Pu district of Guangdong province in 1840. Zhang’s father was a first degree-holder (Xiucai), and he had a chance to receive some traditional Chinese education at home. Inspired by new economic opportunities arising in Southeast Asia, Zhang, at the age of 17, followed his relatives to Dutch East Indies to seek his

19

For a short biography of Oei Tjie Sien, see Zheng Guojin, “Huang Zhonghan ji qi jiazu de xingcui” (The Rise and Fall of the Oei Tiong Ham Family Enterprise), in Zheng Min & Liang Cuming (eds.), Huaqiao Huaren shi yanjiuji (Collection of Essays on the Study of Overseas Chinese and Ethnic Chinese Histories) (Beijing, Haiyang chubanshe, 1989), Vol. 1, pp. 433–435.; History of Oei Tjie Sien was also told by his grand daughter, Oei Hui Lan in her “Reminiscences”, reprinted in Yoshihara Kunio (ed.), Oei Tiong Ham Concern: The First Business Empire of Southeast Asia (Kyoto, The Center for Southeast Asian Studies, Kyoto University, 1989), pp. 22–32. For a study of Kian Gwan, see J. Panglaykim & I. Palmer, “Study on Entrepreneurship in Developing Countries: The Development of One Chinese Concern in Indonesia”, in Journal of Southeast Asian Studies, Vol. 1, No. 1 (Singapore, March 1970), pp. 85–95; Yoshihara Kunio, “Introduction”, in Yoshihara Kunio (ed.), op. cit., pp. 1–21.

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fortune. He started as an apprentice in his maternal uncle’s shop. His intelligence and diligence earned the heart of the daughter of the proprietor of a neighboring rice shop, which resulted in their marriage. With the financial backing of his father-in-law, he founded a company named Yu He (Prosperity and Harmony) in 1865, engaging in the development of coconut and rice plantations. Having established a good relationship with the Dutch Colonial government in Java, he acquired the lucrative opium and liquor farms. Within a few years, he emerged as a prominent businessman in Java. In 1877, he extended his business activities to North Sumatra where he owned large plantation estates of coconut, rubber, pepper, coffee and tea, and founded a bank and a shipping line. In 1880s, Zhang further extended his business operation to the British Malaya. Using Penang as his base, he was also actively involved in tin mining in the Malay Peninsula. By the end of the 19th century, Zhang Bishi emerged as one of the wealthiest Ethnic Chinese in the region. His business empire covered many Southeast Asian ports and coastal China. He later entered into Qing bureaucracy, and was appointed as the Imperial Commissioner for the Inspection of Commerce in Southeast Asia.20

The Development of Modern Ethnic Chinese Business Enterprise One common feature of the modern Ethnic Chinese business enterprise was trading. Trade was a main source of wealth. The second half of the 19th century witnessed rapid economic development in Southeast and 20

For short biography of Zhang Bishi, see Kuang Guoxiang, “Zhang Bishi Qiren” (Mr. Zhang Bishi), in Kuang Guoxiang, Bingcheng sanji (Anecdotal History of Penang) (Hong Kong, Shijie Book Store, 1958), pp. 97–107; Zheng Guanying, “Zhang Bishi jun shengping shilue” (A Brief Biography of Mr. Zhang Bishi), in Jindai Zhongguo shiliao congkan (Collections of Historical Materials of Modern History of China), Series 75 (Taipei, no date). For an excellent study of Zhang Bishi and his contribution to China’s economic modernization during the Late Qing period, see Michael Godley, The Mandarin-capitalist from Nanyang: Overseas Chinese Enterprise in the Modernization of China 1893–1911 (Cambridge, Cambridge University Press, 1981).

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East Asia. As a result of opening of China and the deepening of Western penetration into Southeast Asia, East-West trade and inter-regional trade between East and Southeast Asia prospered. Although these trades were primarily in the hands of British, Dutch and other European companies, nevertheless, they still provided opportunities for the Ethnic Chinese who could find a suitable role in an European dominated trading system. The Ethnic Chinese served the role of intermediary between the East-West trade, between the advanced capitalist economy and the agriculture-based agrarian economies of Southeast Asia. With the knowledge of markets in the region, a sophisticated business network, the supply of cheap labor, and the willingness to learn and adapt to the changing economic conditions, Ethnic Chinese businessmen were able to exploit these advantages to their benefits and successfully founded some large modern business enterprises. However, the changing economic environment after the turn of the 20th century called for changes in techniques, knowledge, organization and direction of these enterprises. It was in the second generation of Ethnic Chinese entrepreneurs that saw the transformation of their business enterprises into modern conglomerates.21 The foundation laid by their fathers was most valuable to them that gave them comparative advantage over their competitors. The business experience learnt from their fathers and new exposure they received further equipped them to expand their business globally. They delved into new lines of business, and diversified their business operations. The rise of manufacturing industry and new financial institutions after the turn of the 20th century inspired them to change and to adapt to the new global economic environment. They established manufacturing plants, founded modern banking companies and shipping lines, and were involved in lucrative property speculation. The son of Oei

21

For instances, Gao Huishi and Chen Cihong, the second generation of Gao and Chen families of Hong Kong and Thailand, built up the business empires in Southeast Asia and Hong Kong in the second half of the 19th and early 20th centuries. While Oei Tiong Ham also built up his business empire in Southeast Asia in late 19th and early 20th centuries on the foundation that his father Oei Tjie Sien had laid. See Zhang Yingqiu, op. cit., pp. 242–243; J. Panglaykim & I. Palmer, op. cit., pp. 87–90.

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Tjie Sien, Oei Tiong Ham (Huang Zhonghan), is one of the best examples. Born in 1866, Oei Tiong Ham helped his father build the business empire. With new insights into the operation of international business, he restructured the company inherited from his father with a new direction and a new management in order to compete successfully in a global context. The rise of Kian Gwan’s business empire invited jealousy and rivalry from European business establishments in the region. Having consolidated his company’s trading position, he delved into manufacturing industry. With his expert knowledge in processing sugar and rice, he founded a string of sugar mills and topioca factories in Java as well as modern rice mills, and founded a bank named after himself and a steamship company. He recruited a number of promising young Chinese with kinship and dialect connections, and sent them to Europe for training; and they were placed in managerial positions in the new industries after their return. He also built up a pool of advisers and experts, studied the operation of Western cartels, and borrowed Western management techniques of vertical integration.22 He was strong, insightful and innovative. At the height of this empire, he was widely known throughout Southeast Asia and China, and his powerful business complex comprised of enterprises in the fields of manufacturing, transport, import and export, banking, shipping and insurance. He employed tens of thousands of employees. The development of modern Ethnic Chinese enterprise can further be illustrated by the success story of another Ethnic Chinese entrepreneur, Tan Kah Kee (Chen Jiageng). Tan’s case does not strictly fit into the pattern of the second generation of Ethnic Chinese entrepreneur. Although his father was a first generation Chinese immigrant, he did not benefit greatly from the financial status of his father, instead he inherited a debt to repay. Nevertheless, his father, Tan Kee Peck, was one of the leaders of the Hokkien community in Singapore with extensive business connections, and Tan Kah Kee indirectly benefited from his father’s business experience and contacts. Born in Tong An district of Fujian province in 1874, he 22

J. Panglaykim & I Palmer, ibid. p. 88.

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started off as an apprentice in Singapore in his father’s trading company which imported rice from Indo-China and distributed it locally. The collapse of his father’s company in 1904 forced him to find his way in a challenging business world.23 He founded a rice trading company at North Boat Quay, named Khiam Aik (Qianyi in Mandarin, Modesty and Profitability) in the same year. He then ventured into cash crop plantation and manufacturing. He set up several pineapple canning factories and rubber processing plants.24 The First World War (1914–1918) provided Tan Kah Kee with a golden opportunity for expansion and diversification of his business. The demand for war materials saw the rising prices of rubber which brought him enormous profit. He also diversified into other lines of business. At the end of the War, his extensive business empire included rice mills, pineapple manufacturing, rubber processing, sawmills and commission agencies, shipping line, pineapple and rubber plantation estates.25 In 1919, he reorganized his business and founded the Tan Kah-kee and Company specializing in manufacturing of rubber products, including tyres, rubber raincoats, rubber sheets, rubber umbrellas, rubber shoes, boots, rubber sleepers and various kinds of rubber toys. His company was also involved in making biscuits and producing a variety of medical products. At the height of his financial success in 1925, he made a net profit of 7.8 millions in that year.26 He was a multi-millionaire and a well-known 23

For an excellent biography of Tan Kah Kee in English, see C.F. Yong, Tan Kah-kee: The Making of an Overseas Chinese Legend (Singapore, Oxford University Press, 1987); for works on Tan Kah Kee in Chinese language, see Chen Bisheng & Chen Yiming (eds), Chen Jiageng nianpu (A Chronology of Tan Kah Kee ) (Foochow, Fujian renmin chubanshe, 1986); Wang Zengping & Yu Gang, Chen Jiageng xingxueji (Records of Tan Kah Kee’s Educational Enterprise) (Foochow, Fujian jiaoyu chubanshe, 1981). Tan Kah Kee’s own autobiography in Chinese entitled Nanqiao huiyilu (Reminiscence of My Life and Activities in the Chinese Communities in Southeast Asia), 2 volumes (River Edge, Global Publishing Co. Inc., 1993 reprint) is also an important reference. 24 C.F. Yong, op. cit., p. 49. 25 Ibid., pp. 50–52. 26 Ibid., p. 55; Tan Kah Kee, Nanqiao huiyilu, Vol. 2, p. 505; “William Tai Yuen, The Historical Experience of the Rise and Fall of Tan Kah Kee’s Enterprise” - Dr. William

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industrialist throughout East and Southeast Asia. Undoubtedly, Tan Kah Kee was an outstanding modern Ethnic Chinese entrepreneur, his business operation helped lift the Ethnic Chinese modern enterprise to a new level.27

The Ideology of Modern Ethnic Chinese Business Enterprise The ideological foundation of modern Ethnic Chinese business enterprise was a hybrid of traditional Chinese and modern Western cultures. Confucian ideas and parts of Chinese tradition constituted the main body of traditional Chinese culture; while modern Western culture consisted mainly of modern economic ideas and principles, and knowledge of science and technology. Confucianism, used as a collective term, includes basic teachings of Confucius and the ideas expounded by his disciples over the centuries. Having been elevated to the position of state ideology during the Han Dynasty in 136 B.C., Confucianism ruled supreme in Chinese intellectual life for more than two thousand years. It strongly influenced the attitude and behavior of Chinese mandarin-entrepreneurs in the second half of the 19th and early part of the 20th century China.28 Confucian values were transmitted to the Ethnic Chinese communities primarily through education. The China-born Ethnic Chinese invariably picked up some Confucian values either through family or village schools or in the communities in South China;29 Tai Yuen’s Speech at the Third Tan Lark Sye Memorial Forum (English Section) (Kuala Lumpur, Nantah Education and Research Foundation, 2012), p. 9. 27 See Yen Ching-hwang, “Tan Kah Kee and the Overseas Chinese Entrepreneurship”, in Asian Culture, Vol. 22 (Singapore, Singapore Society of Asian Studies, June 1998), p. 3. 28 For the influence of Confucianism on Chinese Mandarin-entrepreneurs, see Albert Feuerwerker, China’s Early Industrialization: Sheng Hsuan-huai (1844–1916) and Mandarin Enterprise (Cambridge, Massachusetts, Harvard University Press, 1958); Wellington K.K. Chan, Merchants, Mandarins and Modern Enterprise in Late Ch’ing China (Cambridge, Massachusetts, Harvard University Press, 1977). 29 For a study of the spread of Confucian values through family system in imperial

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while the local-born Ethnic Chinese were exposed to the influence of Confucianism through the private schools (Sishu) or community schools run by dialect or clan association.30 The traditional Chinese education system was not intended to produce businessmen or industrialists. This was also the case with the traditional schools in the Ethnic Chinese communities. Nevertheless, the Confucian-based education provided students with some fundamental moral values which might be useful in future life. These values set mental frameworks for governing human relationships, and provided the students with guidance in their behavior. Thus, Confucian values laid the foundation of business ideology in the Ethnic Chinese communities. The Confucian values were further strengthened in the Ethnic Chinese communities through a series of Confucian Revival movements which took place in the first decade of the 20th century, especially in British Malaya (including Singapore) and Dutch East Indies and Burma. These movements attempted to re-conquer the minds of Ethnic Chinese by converting Confucianism into a modern religion which could compete with other major religions such as Islam and Christianity in Southeast Asia. By lifting Confucius’ status from a sage China, see Patricia Ebrey, “The Chinese Family and the Spread of Confucian Values”, in Gilbert Rozman, East Asian Region: Confucian Heritage and Its Modern Adaptation (Princeton, New Jersey, Princeton University Press, 1991), pp. 45–83. 30 For instance, prominent Ethnic Chinese clan organizations in Penang founded several clan schools at the turn of the 20th century to educate their young. The Khoo Clan (Khoo Kongsi) founded the Khoo Clan School (Qiushi jiazu xuetang) in 1907, while Kew Leong Tong Lim Clan (Lim Kongsi) founded a clan school in 1908, the Yeoh Clan (Yeoh Kongsi) founded a school in 1909, and another clan school was founded by the Eng Chuan Tong Tan Clan (Tan Kongsi) in 1911. Invariably, these clan schools taught Confucian Classics as main contents of their curriculum. See “Report of the Chinese Consul-General of the Straits Settlements, Sun Shiding, to the Ministry of Education relating to the founding of Chinese schools by Chinese merchants in Southeast Asia, 1907”, in Zhengzhi guanbao (Qing Government Gazette), twenty-eighth day of ninth moon of thirty-two year of Guangxu (3rd November, 1907); this important report was also contained in a memorial by the Ministry of Education to the Court. See Xuebu guanbao (Ministry of Education Gazette), Vol. 52, p. 72.; Chung Shing Yit Pao (The Chung Shing Daily, Singapore), 16/10/1909, p. 1; Penang Sin Poe (The Penang Daily, Penang), 18/2/1911, p. 4.

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to a prophet and by worshipping him in Confucian temples, the movements aimed at Confucianizing the entire Ethnic Chinese population.31 Although the movements had not achieved their aims, they had nevertheless made the Confucian values more pervasive among all classes in the Ethnic Chinese communities. These values perpetuated in the minds of many Ethnic Chinese and became a source of strength for doing business. Many years ago, a whole generation of Western-trained China specialists was influenced by Max Weber into a belief that Confucianism and its embodied institutions were the major obstacle in the path of China’s modernization. This belief was vigorously expounded by the ‘Traditional Society’ theorists. They believed that Confucian concepts of harmony and stability led to a trend of ever reinforcement of traditional institutions which resisted change.32 The crux of the problem of this 31

For a study of Confucian Revival movement in Singapore and Malaya, see Yen Ching-hwang, “The Confucian Revival Movement in Singapore and Malaya, 1899– 1911”, in Journal of Southeast Asian Studies, Vol. 7, No. 1 (March, 1976), pp. 33–57; for a study of Dr. Lim Boon Keng’s role in the Confucian Revival movement in Southeast Asia, see Yen Ching-hwang (Yan Qing Huang), “Lin Wenqing yu Dongnanya zaoqi de Kongjiao fuxing yundong, 1899–1911” (Dr. Lim Boon Keng and the Confucian Revival Movement in Early Southeast Asia), in Yen Chinghwang(Yan Qinghuang), Haiwai huaren de chuantong yu xiandaihua (Tradition and Modernity in the Ethnic Chinese Communities) (Singapore, Nanyang Technological University and Global Publishing, 2010), pp. 129–162; for a study of the spread of Confucianism in Dutch East Indies, See Leo Suryadinata, “Confucianism in Indonesia: Past and Present”, in Leo Suryadinata, The Chinese Minority in Indonesia: Seven Papers (Singapore, Chapman Enterprise, 1978), pp. 33–62; Charles A. Coppel, “ The Origins of Confucianism as an Organized Religion in Java, 1900–1923”, in C.F. Yong (ed), Ethnic Chinese in Southeast Asia: A Special Issue of Journal of Southeast Asian Studies, Vol. 12, No. 1 (March, 1981), pp. 179–196. 32 For the exposition of this view, see Joseph R. Levenson’s famous trilogy on Confucianism titled Confucian China and Its Modern Fate, Vol. 1 to Vol. 3 (Berkeley, University of California Press, 1958 to 1965), and his Liang Ch’i-ch’ao and the Mind of Modern China (Berkeley and Los Angeles, University of California Press, 1967, paperback); J.K. Fairbank, Edwin O. Reischauer and Albert M. Craig, East Asia: Tradition and Transformation (Boston, Houghton Mifflin Company, 1973); and J. K. Fairbank, China: A New History (Cambridge, Massachusetts, The Belknap Press of Harvard University Press, 1994); Mary C. Wright, The Last Stand of Chinese

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view is one-sidedness of traditional Chinese society expounded by Max Weber. Max Weber, a great German sociologist and the father of modern Western sociology, had a rather unscientific approach to the study of traditional Chinese society. Not only had he not exhausted all available information about traditional Chinese society, he also had a wrong starting point. He was motivated by proving the validity of his famous theory of ‘Protestant ethic’ and the ‘spirit of capitalism’. To prove the linkage between Protestant ethic and the rise of Western capitalism, Weber went to the extent to write two books on China and India to prove negatively that the lack of similar Protestant ethic in the East had not led the Chinese and the Indians to embrace capitalism.33 Because of this negative perspective on traditional Chinese society, he tended to select the negative aspects of Confucianism, and viewed it in a negative light. This resulted in his conclusion that Confucian values and institutions contravened the concept of progress. However, Weberian view of Chinese society and Confucianism has been appraised, and some positive aspects of Confucianism have been given recognition.34 Several important concepts in modern Ethnic Chinese business ideology are ‘harmony’, ‘reciprocity’, ‘hierarchy and paternalism’, Conservatism: The T’ung-Chih Restoration, 1862–1874 (Stanford, Stanford University Press, 1957); Immanuel C.Y. Hsu, The Rise of Modern China (New York, Oxford University Press, 1970) and Albert Feuerwerker, China’s Early Industrialization: Sheng Hsuan-huai (1844–1916) and Mandarin Enterprise (Cambridge, Massachusetts, Harvard University Press, 1958). For a critical evaluation of ‘Tradition and Modernity’ paradigm in the writing of modern Chinese history by American scholars, see Paul A. Cohen, Discovering History in China: American Historical Writing on the Recent Chinese Past (New York, Columbia University Press, 1984), Chapter 2 “Moving Beyond ‘Tradition and Modernity’, pp. 57–96. 33 For Max Weber’s interpretation of traditional Chinese society and its hindrance to progress, see Max Weber (translated by Hans H. Gerth), The Religion of China: Confucianism and Taoism (New York, The Macmillan Company, 1951). 34 For a critique of Max Weber’s view on traditional Chinese society and Confucianism, see Paul A. Cohen, op. cit., pp. 88–89; for an appraisal of the Weberian view in Chinese, see Du Xuncheng, Zhongguo chuantong lunli yu jindai ziben zhuyi, jianping Weibo de Zhongguo zongjiao (China’s Traditional Morality and the Modern Capitalism, with Comments on Max Weber’s ‘The Religion of China’) (Shanghai, Shanghai shehui kexueyuan chubanshe, 1992).

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‘innovation’ and ‘progress’. The concept of ‘harmony’ (he) is perhaps most important, and it is derived from Confucian concepts of benevolence (ren) and propriety (li). Most modern Ethnic Chinese entrepreneurs regarded their enterprises as an extended family, and the employees and employers only assumed different positions and roles within that large family. It was on the basis of this harmony that members of the company co-operated and the company prospered. But to achieve a greater success for the company, members of this large family should understand their positions and roles in the enterprise, and developed their own potentials within the organization. The Ethnic Chinese entrepreneurs were not unaware of the potential conflict of interests between employers and employees. The gains for the employees could mean the loss to the employers. Unlike the Marxists who see industrial relations in a strict class terms and tend to regard the class relationship as antagonistic and irreconciliable, the Ethnic Chinese entrepreneurs perceived the employer-employee relationship as senior-junior partnership in a common endeavor, and their relationship was harmonious, cooperative and complementary.35 Another major concept in the business ideology of Ethnic Chinese is reciprocity. Again, this concept seems to have been grown out of Confucian concepts of benevolence and loyalty (zhong) which governed the bonds between superior and subordinate. Benevolence is not just the right attitude for superior to treat his subordinate, but also his moral duty to do so. On the other hand, the subordinate has to reciprocate with loyalty. From the perspective of the subordinate, he has the right to be treated benevolently by his superior, but also has the moral duty to pay his superior absolute loyalty. Similar perspective is taken by the superior who is morally obliged to give 35

See Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: a Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 241–242. Lim How Seng (Lin Xiaosheng), “Chen Jiageng de jingying linian yu qiye guanli” (Business Philosophy and Corporate Management of Tan Kah Kee), in Lim How Seng, Xinjiapo Huashe yu Huashang (Singapore Chinese Community and Entrepreneurs) (Singapore, Singapore Society of Asian Studies, 1995), pp. 162–165.

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benevolence and to demand absolute loyalty. Chinese tradition seems to have imposed the duty on the superior to initiate such a reciprocal relationship. In applying this concept of reciprocity to the business enterprise, modern Ethnic Chinese entrepreneurs aptly used this concept to cultivate good relationship with their employees, and appeared to have sealed a strong bond with them.36 This helped to smooth the industrial relations in modern Ethnic Chinese enterprise. Concepts of hierarchy and paternalism formed other important elements of modern Ethnic Chinese business ideology. Confucian society was structured hierarchically on class and status, and was further organized into hierarchies of age, gender and generation within family and clan.37. The Confucian concept of social hierarchy, in contrast with the Western concept of equality, was based on the assumption that individuals were inherently unequal in ability and morality, and they should be given different status and roles in the society. Inequality was therefore considered to be natural and justified. Brought up in a traditional Chinese family and community which were 36

For instance, the Kwok brothers, Kwok Lock and Kwok Chin, felt obligated to look after the interests of their employees in Wing On Company in Hong Kong. They improved employee’s intellectual capacity, looked after their health and offered them lifetime employment. In return, they expected employees to be absolutely loyal to the Company. See Kwok Chin, Yongan jingshen zhi fazhan ji qi zhangcheng shilue (The Origins of the Wing On Spirit and a Brief History of its Growth ) (Hong Kong, 1961), pp. 27–28; Liu Tianren, “Pen gongsi- ershiwu zhounian zhi jingguo” (Twenty Five Year’s History of the Wing On Company), in Xianggang Yongan youxian gongsi nianwu zhounian jinianlu (Souvenir Magazine of the Silver Jubilee Celebration of the Wing On Company of Hong Kong) (Hong Kong, Tian Xing Press, 1932), Shilue column (Historical Records), pp. 5–8.; Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Proceedings of Conference on Eighty Years History of the Republic of China, 1912–1991 (Taipei, Jindai Zhongguo chubanshe, 1991 ), Vol. 4 (English Section), pp. 91–92; see also the same article in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 196–236, especially pp. 209–210. 37 For the structure of the clan or lineage, see Hugh D.R.Baker, Chinese Family and Kinship (London, The MacMillan Press Ltd., 1979), pp. 49–70.; Hsien Chin Hu, The Common Descent Group in China and Its Functions (New York, Johnson Reprint Corporation, 1968), pp. 18–20.

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hierarchically stratified, modern Ethnic Chinese businessmen tended to perceive others from that hierarchical perspective. They tended to see business world in two separate hierarchies: external and internal. In the external hierarchy, business enterprises large and small were competing among themselves, and they were far from equal. Those large and financially powerful enterprises were at the top, followed by the medium-sized enterprises, and the small and financially weak ones were at the bottom of the hierarchy. The competition in the business world was fierce, those successful enterprises expanded and moved up to the top, while less successful ones moved downwards and even disappeared all together. In the internal hierarchy, all members of the enterprise were also structured hierarchically according to positions and roles, and to contribute their utmost to the enterprise. Within this internal structure, those who occupied leadership positions were expected to lead and to show good examples for their subordinates to follow. At the same time, they had to treat their subordinates with benevolence. This internal hierarchy and its relations gave rise to the concept of paternalism.38 The leaders felt morally obligated to lead and to discipline the subordinates for the common good of the enterprise.39 Undoubtedly, the concepts of hierarchy and paternalism generated a strong sense of competitiveness and self-motivation which helped to motivate and discipline the work force, and served as a driving force behind modern Ethnic Chinese business enterprise.

The Structure of Modern Ethnic Chinese Business Enterprise Modern Ethnic Chinese enterprise was characterized by family-based ownership, large size in scale of operation, and a management based on a mixture of kinship and professionalism. It usually started with a 38

For a discussion of the origins of Chinese paternalism and its relations with Ethnic Chinese entrepreneurs, See G. Gordon Redding, The Spirit of Chinese Capitalism (Berlin & New York, Walter de Gruyter, 1990), pp. 127–135. 39 See Yen Ching-hwang, “The Wing On Company of Hong Kong and Shanghai”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, p. 210.

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family ownership or partnership, but grew in size and had been gradually transformed into a Western type of public liability company or group of companies under the control of one or several related families. To go public was certainly an effective way to solve the problems of capital supply and expansion. In a highly competitive business world, to grow big and powerful was certainly the best way to survive and prosper. But to grow big by continuous expansion or to perish by gradual contraction did not seem to be a difficult choice to make, and many of the modern Ethnic Chinese enterprises had chosen the former. However, the option of continuous expansion was also highly risky. It was not just involved in the continuous supply of needed capital, but also involved in the adoption and application of new Western ideas and methods. Further, it was also involved in overcoming old sentimental values and habits, as well as continuous efforts in integrating Chinese and Western ideas and practices. Any major wrong steps in this innovation could result in the collapse of the business. Like modern Western business, a modern Ethnic Chinese business enterprise had a three-tier structure: a board of directors, the management and the general staff. The directors were elected among partners or shareholders. Since most Ethnic Chinese enterprises were controlled by one or several related families, those who were elected to the board represented the interests and strength of ownership. Like Western companies, the board of directors was the policy-making body. Major decisions were made by the board. Under the board of directors was the management which was responsible for implementing the policies taken by the board. The management was usually headed by a general manager or a managing director (known traditionally as Sili, or modern term as Zong Jingli), and he was assisted by a deputy general manager, and sometimes with several assistant general managers. Under them, a group of departmental heads (equivalent to sectional managers in Western companies) (Zhuren) were responsible to run different departments.40 40

Ibid., pp. 87–90; for the structure of another modern Overseas Chinese enterprise, the Sincere Company of Hong Kong and Shanghai, see Xianshi gongsi ershiwu

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Essentially, modern Ethnic Chinese enterprises were private corporations dominated by a single family or some related families. The internal organization of the corporation can be described as belonging to so-called ‘line organization’. Line refers to the chain of authority or command from top management (general manager) down through various jobs to the lowest level of authority or responsibility. Of course, this form of internal organization was oldest type in use, and was found quite universally among many cultures. It was simplest but efficient. The chain of command or authority was clear but rigid. Subordinate did not act without a direct delegation of authority from their immediate superior, and each subordinate was answerable only to one superior. Since most modern Ethnic Chinese enterprises were trading companies, they usually consisted of departments of sales, finance, purchasing and general affairs (like personnel department). The department heads were given the authority and responsibility in their jurisdiction, and they were of equal status in the hierarchy. They were supreme in their respective departments and independent of each other. They were only answerable to the general manager, and their subordinates in their departments also answered to no one except them. Authority flowed vertically with each person responsible to only one boss.41 In the case of the Wing On company of Hong Kong, the internal structure of the company was essentially a ‘line organization’ type with more elaborate division of labor. The management of the head office of Hong Kong was controlled by a general manager and a deputy general manager with Chinese titles of Sili and Fu Sili. Under them were General Affairs Department (Zongwu bu), Cashiers Department (Zong Shouzhi Bu), Purchasing Department (Banhuo Bu), Trading Department, Shares Department (Guwu Bu) and Estate Department (Zu-wu Bu). As the company was a department store

zhounian jiniance (The Sincere Company Limited: Twenty Fifth Anniversary, 1900– 1924 (Hong Kong, Shang Wu Publishing Company, 1924), ‘Jizai’ (Records) column, pp. 8–9. 41 See Bayard O. Wheeler, Business: An Introductory Analysis (New York, Harper & Row, A Harper international student reprint, Tokyo, 1964).

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selling a variety of goods, the Trading Department was further divided into many sub-departments specializing in selling different types of commodity. They ranged from furniture, Chinaware, electrical supply, goldsmith, hardware, grocery, men’s wear and ladies’ wear to money exchange, medicine, music, optical goods, perfumery and photo supply.42 Although this ‘line organization’ was simple and efficient, and allowed quick and orderly decisions made at different levels of management, it limited the incentive and initiative from below, either from departmental heads or rank-and-file workers; it also limited cooperation among various departments, and the spirit of team work was lacking. More importantly, the structure overburdened the executives at the top (the general manager and his deputy). Since all action of importance had to be approved by them, they had to be familiar with a great deal of administrative details. They had to work very hard in order to manage the company properly. This type of organization seemed to suit Ethnic Chinese entrepreneurs because of Confucian elitist approach in doing things. The leaders, as what the Ethnic Chinese entrepreneurs saw themselves, had to lead by examples. Confucian paternalism led them to view their employees as the members of their extended family, and they had to behave like the ‘head of a family’ (Jiazhang).43

42

See Yen Ching-hwang, Studies in Modern Overseas Chinese History, p. 208. For instance, in managing his business empire in Singapore and Malaya, Tan Kah Kee adopted traditional but integrated management style with strong showing of personal leadership. See Lim How Seng (Lin Xiaosheng), “Chen Jiageng de jingying linian yu qiye guanli” (Tan Kah Kee’s Management Ideas and Business Management), in Lim How Seng, op. cit., pp. 157–166; Yen Ching-hwang, “Tan Kah Kee and the Overseas Chinese Entrepreneurship”, in Asian Culture, No. 22 (Singapore, Singapore Society of Asian Studies, June 1998), p. 5. 43

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Chapter 5

Ethnic Chinese Family Business and Business Conglomerates

Ethnic Chinese Family Business Characteristics A definition of an Ethnic Chinese family business is similar to the definition of a general term of ‘family firm’. Many scholars seem to have defined a ‘family firm’ on the basis of three concepts: family, ownership and control. One scholar considers the greatest resource of family business is the owner’s family. “Its members provides the company with employees, ideas, new blood; they also give the owner good reasons to work hard and achieve success”.1 Another scholar suggests that family firms are “firms in which the majority of capital is held by a single family or a few families, but which managed by non-family members”.2 Similar to these definitions, an Ethnic Chinese family business is family centered, family owned and family controlled enterprise. The Ethnic Chinese business is predominantly family business, and the majority of them are small in size and in operation. For instance, a study of Chinese business in Hong Kong by Siu-lun Wong found that over 90% of 38,000 Chinese manufacturing enterprises at the end of the 1970s were small family concerns employing less than 50 workers.3 1

See John Ward, Keeping the Family Business Healthy: How to Plan for Continuing Growth, Profitability and Family Leadership (San Francisco & London, Jossey-Bass Publishers, 1987), p. 54. 2 See Miyamoto, Mates, Family Business in the Era of Industrial Growth (Tokyo, University of Tokyo Press, 1984), p. 306. 3 See Siu-lun Wong,“The Chinese Family Firm: A Model”, in The British Journal of Sociology, Vol. 36, No. 1 (March 1985), p. 60. 109

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Similar situation exists in the Ethnic Chinese communities in Southeast Asia and Taiwan. The foundation of the Ethnic Chinese family business is familism. Familism, as what Donald Willmott pointed out in 1960 in his study of the Chinese in Semarang, Indonesia, that “the most striking feature of Chinese business organization in Semarang is the familism which, in the great majority of cases, forms its core”.4 As family is the fundamental unit of traditional Chinese and Ethnic Chinese social structures, it is not surprising to find that family should become the core of the Ethnic Chinese business enterprise. In this sense, Ethnic Chinese family business is family centered. This begins with the founding of the business, to the control and running of it. To start from the beginning, the business is founded on the basis of the savings of the family, and it is owned by the family for the family, and is run by family members. This is clearly reflected in a number of small Ethnic Chinese family business. Usually the head of the family becomes the founder of the business, he would get his wife, children to work in the business as workers. They do not draw wages like working for outside company or factory, but draw a small sum of pocket money. They contribute their utmost time to the business, and bear the losses if the business declines. In this sense, the family and the business are intertwined and well-integrated.5 If they rent or own a shop, they would live on the first floor of the shop, sleep in the shop, have meals in the shop and bring up children in the shop and work seven days a week.6 4

See W.E. Willmott, The Chinese of Semarang: A Changing Minority Community in Indonesia (Ithaca, Cornell University Press, 1960), p. 47. 5 This practice is still common among Chinese family business in Southeast Asia. In early 20th century Penang, a Chinese observer, Khaw Joo Tok, Director of the Eastern Shipping Company at Penang, noted that all Chinese merchants kept their offices open on Sunday, and they did not have a day of rest. See “Evidence given by Khaw Joo Tok on 28th February 1908”, “Proceedings of the Select Committee of the Legislative Council on the Sunday Labour Ordinance VI of 1892”, in Straits Settlements Legislative Council Proceedings, 1908, Appendix No. 14. 6 For a discussion of this issue, see Wong Siu-Lun, Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong (Hong Kong, Oxford University Press, 1988), pp. 136–146.

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Unlike small business in the West where business activity and family life are mostly separated (like living in houses in suburbs), many small Ethnic Chinese family business are run in the manner of an integrated family and business lives. The advantages of this integration are saving of time and money. By integrating residence and business together, they do not need to pay rent or to buy a residential house. The money saved could be used for expansion of the business. The integration also saves time in travelling which could be used for managing the shop or for extending trading hours. The easy access to the business also ensures the security of the shop. In this integrated manner, business activity is the extension of family life, while family life is an integral part of business activity, and this integration has generated a strong sense of belonging. They all feel that they have a share in the business, and are motivated to contribute as much as they could to its success. In a larger family business such as a company or a factory where the majority of the work force are not family members but salary workers, the principle of familism is still applied in different ways. The recruitment of workers is measured by the relations and distance with the family, those who are closely related to the family by kinship or marriage would be given preference. Brothers, sisters, sons, daughters, son- and daughter-in-laws, cousins, nephews and nieces are placed in key positions in the company. This is because they are perceived to be more trustworthy than outsiders and are unlikely to betray the interests of the family.7 It would be an exaggeration to suggest that the employment of workers is entirely depended on the kinship and marriage ties, talented outsiders are sometimes employed, especially in the professional capacity. The promotion system is also operated on the basis of familism. Those workers who possess some relations with the family would get preference if all other qualifications are equal. Structurally, Ethnic Chinese family business, especially small and medium-sized, is organizationally weak but is strong in networking. 7

See S. Gordon Redding, The Spirit of Chinese Capitalism (Berlin & New York, Walter de Gruyter, 1990), p. 156.

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This characteristic is termed by Gordon Redding as “weak organization and strong linkages”.8 Based on the samples collected in Hong Kong and Taiwan, Redding concludes that (Ethnic) Chinese owned and managed companies responding to growth opportunities by concentrating their efforts in one main field, and then grow through replicating the same formula or through horizontally spreading into connected fields.9 Redding has vaguely explained why Ethnic Chinese business is organizationally weak. He implies that the cultural factor and managerial ideology are partly responsible for this.10 It seems to me that the main reason for the weak organization of Ethnic Chinese business is the man-centered philosophy in Confucianism. This creates a mindset of emphasizing the role of man and placing organization in the secondary importance. Whether this man-centered philosophy projects a correct relationship between man and organization or not is a matter for debate. But it is clear this philosophy has influenced many Ethnic Chinese businessmen, and affects their views towards management of their enterprises. Wang Yung-ching (Wang Yongqing in Pinyin), one of the top Ethnic Chinese tycoons from Taiwan, places much emphasis on human factors in the management of business enterprise. He spells out three prime conditions for good management: the spirit of hard-work, knowledge and experience, and among the three, the spirit of hard-work takes precedence.11 Further, Confucian concept of ‘duty’ leads Ethnic Chinese leaders to take more responsibilities than they can do, and neglects to delegate works to their subordinates. This man-centered philosophy and the concept of ‘duty’ 8

See S. Gordon Redding, “Weak Organization and Strong Linkages: Managerial Ideology and Chinese Family Business”, in Gary Hamilton (ed.), Asian Business Networks (Berlin, Walter de Gruyter, 1996), p. 27. 9 Ibid., p. 36. 10 Ibid., pp. 27–33. 11 See Wang Yongqing (Wang Yung-ching), Wang Yongqngi tan Zhongguo shi jingying guanli (Wang Yung-ching on Chinese Style of Management) (Nan Chang, Jiangxi renmin chubanshe, 1998), p. 93; Wang Yung-ching, Wang Yung-ching tan Zhongguo shi guanli (Wang Yung-ching on Chinese Style of Management) (Taipei, Yan Liu chuban shiye gufen youxian gongsi, 2008, 27th edition), pp. 109–111.

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contribute significantly to the weak organization of Ethnic Chinese business. At the same time, Ethnic Chinese strength in business networking is mainly the result of interaction of historical, political and circumstantial factors which will be discussed in greater details in next chapter. Another characteristic of Ethnic Chinese family business is the lack of contractual obligations. This is especially true in the small and medium-sized business. In Western business, employer-employee relationship is bound by a contract which is legally binding. Any infringement of the contract would result in compensation claim on the other party. This is derived from the concept of the rule of law, and both parties are obligated to each other, and to honor the written contract. On the contrary, the employer-employee relationship in the Ethnic Chinese family business is not that well set, and are bound by kinship, marriage ties and other relations, and both parties are bound more by moral duties rather than legal obligations. Since many of the employees of the Chinese family business are related to the owner in one way or another, they enter into a strong unseen relationship based on a Confucian concept of reciprocity. The employer is obliged to look after the interests of the employees, and reverse is also true that the employees are obligated to work to the utmost of their ability for the employer.12 Because of this mutual moral obligations, there is no need for any written contract similar to Western practice.

Stages of growth There are hundreds of thousands of Ethnic Chinese family business in the world. Not all of them are successful, and some collapse after few years of existence. But the majority of them invariably experience some kind of growth. The growth is measured not so much in terms of 12

See Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Yen Chinghwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), p. 209.

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volume of turn-over, but more by structural change. David Wu, a Chinese anthropologist divides the growth cycle of the Chinese family business in Papua New Guinea into four stages: founding of a store or workshop combining retailing business with services; from retailing to wholesaling in import and export; diversifying into investment and management services in addition to wholesaling business; more diversification into other businesses and enlargement of the scale of operation.13 The initial stage, Wu elaborates, family business usually consisted of a workshop or a store. It began in the low cost service and retail area such as a barber shop, tailor shop, a laundry shop, a bakery, a butchery, a tea house, a restaurant or a mechanical repairs shop. After the business had been running successful for a period, the owner changed his business orientation to something more profitable. These changes represented the second step in the development of family business. It was shifted from retail and basic services to wholesale and import and export. After having more wealth as a result of business success, the owner then began to use his profits to invest in real estate and or management of rural plantations. This movement into investment and management signalled the arrival of the third stage. The final stage came as a result of increased wealth. The family business can now afford to diversify and venture into more lines of business. This also meant the increase in scale of the existing business.14 Wu’s paradigm, though appears to be simplistic, has effectively summarized the similar growth cycles experienced by the majority of the Ethnic Chinese family business in Southeast and East Asia. The speed of growth is determined by the socio-economic and political environments of the country that particular family business resided and the ability of the founders in taking advantage of that environments. This is because favorable environments would provide more and better opportunities for business, and the entrepreneurial ability of the founders would enhance the chance of growth. Wu’s paradigm, from an anthropological perspective, describes the horizontal growth 13

See David Y.H. Wu, The Chinese in Papua New Guinea: 1880–1980 (Hong Kong, The Chinese University Press, 1982), pp. 89–90. 14 Ibid.

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of an Ethnic Chinese family business. It can be completed within one generation, or stretched to cover two or more generations. This horizontal perspective of growth over-focuses on the change of forms of business and lacks a depth of time scale. It does not provide an overview of the growth, and fails to explain the ebb and flow of the family fortune, and the success or failure of the Ethnic Chinese family business. Siu-lun Wong, in his famous article “The Chinese Family Firm: A Model” offers another perspective which complements the horizontal perspective. Wong, without differentiating between Chinese and Ethnic Chinese businesses, offers a model of evolution of Chinese family business into four phrases: emergent, centralized, segmented and disintegrative.15 The growth period in Wong’s model concentrates on the first two phrases. The locomotive of growth, Wong postulates, rests with father-entrepreneur who single-handedly founded the business and engineered its growth. With total devotion and absolute power over the running of the business, he made the rapid growth of the family business possible.16 The last two phrases of Wong’s model explains the problems and the decline of the family business. Wong’s model provides a vertical perspective of growth and the decline of Chinese family business. It aptly identifies the key factors for the decline and explains why Chinese saying that “wealth of Chinese family would not last for more than three generations” (fu buguo sandai).17 But his explanation for the rapid growth of the family business is inadequate. His key factors of the crucial role of the father-entrepreneur and family solidarity are necessary but not sufficient. His father-entrepreneur concept is based on single founder which could not explain adequately the success of some family 15

See Siu-lun Wong, “The Chinese family firm: a model”, in British Journal of Sociology, 36 (1985), p. 68, table 1. 16 Ibid., pp. 62–64. 17 This saying does not seem to be unique for the Chinese business. John L. Ward in his study of Western family business, claims that only 13% of successful business last through the third generation, and less than two-thirds survive the second generation. See John L. Ward, Keeping the Family Business Healthy: How to Plan for Continuing Growth, Profitability, and Family Leadership, p. 1.

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businesses with more than one founder. The cases of Kwok brothers of the Wing On company of Hong Kong and Shanghai, the Chia brothers of the Charoen Pokphand (CP) group of Thailand, and the Kwek brothers of the Hong Leong groups of Singapore and Malaysia are just few of these multiple-founders of Chinese family businesses.18 Wong’s assumption that rapid growth taking place within the life span of the founder is also partially correct. There are many examples that rapid growth and development are attained in the second generation. The Ooi Tiong Ham concern in Dutch East Indies (Indonesia), Robert Kwok’s business group in Malaysia are few of these examples.19

18

For the founding of Wing On company by the Kwok brothers, see Yen Chinghwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Yen Ching-hwang, Studies in Modern Overseas Chinese, pp. 196–236; for Chia brothers’ founding of the CP group, see Akira Suehiro, “Modern Family Business and Corporation Capability in Thailand: A Case Study of the CP Group” (an unpublished paper presented to the Workshop on Asian Business Networks, 31 March 1998 to 2 April 1998); for Kwek brothers’ founding of the Hong Leong groups of Singapore and Malaysia, see Tong Chee Kiong,“Centripetal Authority, Differentiated Networks: The Social Organization of Chinese Firms in Singapore”, in Gary G. Hamilton (ed.), Asian Business Networks (Berlin, Walter de Gruyter, 1996), pp. 141–147; Kwek Hong Png’s autobiography titled Wo Yu Hong Leong (A Lifetime with Hong Leong) (Singapore, 1987, English Section). 19 For the study of Oei Tiong Ham Concern in the Dutch East Indies, see J. Panglaykim and I. Palmer, “Study on Entrepreneurship in Developing Countries: The Development of One Chinese Concern in Indonesia”, in Journal of Southeast Asian Studies, Vol. 1, No. 1 (March, 1970), pp. 85–95, and Yoshihara Kunio (ed.), Oei Tiong Ham Concern: The First Business Empire in Southeast Asia (Kyoto, the Center for Southeast Asian Studies, Kyoto University, 1989); for the study of Robert Kuok’s business group in Malaysia, see Lin Wuguang,“Guo shi xiongdi qiye jituan” (Kuok Brothers Group), in Wang Muhan (ed.), Tongnanya Huaren qiye jituan yanjiu (Studies of the Ethnic Chinese Business Conglomerates in Southeast Asia) (Xiamen, Xiamen daxue chubanshe, 1995), pp. 110–124; for biographies of Robert Kuok in Chinese, see Zhou Shaolong, Guo Henian zhuan (A Biography of Robert Kuok) (Hong Kong, Ming Chuang chubanshe youxian gongsi, 1996); Wang Yongzhi, Duomian zhi wang — Guo Henian (Robert Kuok — The King with Many Crowns) (Beijing, Guang Ming ribao chubanshe, June, 1997).

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Part of the dynamics of the Chinese family business should be sought in the inter-relationship between the perceived family unit, family members and the family business. A strong perceived family unit, harmonious relations among family members and an idea of everlasting family business created a strong sense of purpose and solidarity in the family which partly account for strong growth and success of the family business. This also explains why growth is faster in the founding generation. Of course, rapid growth can also be achieved in the second generation if the aforesaid factors are maintained. With other new factors, such as better education and more exposure to outside or Western influence, the second generation leaders of the family business could have achieved even faster growth than their fathers or uncles.

Structure and functions Like traditional Chinese family and clan, the Ethnic Chinese family business is hierarchically structured. In the medium-sized Chinese concerns where the majority of the work force are wage employees, the structure is a three-tier pattern: a manager and a deputy manager; several senior staff; and general staff. The founder, or the son or the close relative of the founding family would usually occupy the position of the manager or deputy manager; relatives, kinsmen and friends would occupy the second tier of the management structure. The general staff can be recruited from the outside community. The main characteristic of the Ethnic Chinese family business organization is centripetal authority or known as paternalism. Power and authority tend to concentrate at the top, and the decision making is top down rather than bottom up.20

20

See Tong Chee Kiong, “Centripetal Authority, Differentiated Networks: The Social Organizations of Chinese Firms in Singapore”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia (Hong Kong, Centre of Asian Studies, University of Hong Kong, 1991), pp. 180–182.; Siu-lun Wong, “The Chinese Family Firm: A Model”, in The British Journal of Sociology, Vol. 36, No. 1 (March, 1985), p. 63.

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In relatively young firms, the founder would usually occupy the position of manager. He owns the business and manages it. From his perspective, the success or failure of the company has little to do with other people except himself, and he then has to shoulder all responsibilities. He puts in maximum time and effort, and tries his utmost to see the business grow and prosper. Because of this perception of responsibility, the owner-manager tends to be over-enthusiastic over the running of the business. He considers it his duty to oversee the entire operation, even to the minute details of it. He tends to take too much responsibilities on himself and to make most of the decisions. This behavior forms the basis of Chinese paternalistic management. But what should be pointed out here that the foundation of the Chinese paternalism is not the Western concept of ‘right’, but ‘responsibility’. Throughout the Chinese history, the Confucian state emphasized the concept of ‘duty’ or ‘responsibility’ as individual’s role, while Western emphasis on power seems to have underpinned the concept of ‘right’.21 The owner-manager tends to make too much decisions himself not because he enjoys making them, but rather he feels that he is obligated to run the business properly. At the same time, traditional Chinese practice of setting good example for subordinates to follow also makes him over-enthusiastic to be involved in all aspects of the business operation. Like Western and other types of businesses, Ethnic Chinese family business desires to grow and prosper; but it adopts different ways and means to achieve these goals. Ethnic Chinese businessmen tend to see the business world like human society. Not only it is hierarchically structured, but also predominated by complex interpersonal relationships. To succeed in the business world, you need an extensive and reliable business network that would guarantee the supply of materials and the sale of products. Because of their own experience in the Ethnic Chinese communities where personal connections predominate, they tend to value business networks rather than impersonal operations. They are more prepared to spend money in networking rather than advertisements. They begin to construct these business networks through business contacts, through dialect, clan, social clubs or alumni organizations. 21

See S. Gordon Redding, The Spirit of Chinese Capitalism, pp. 128–129.

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The emphasis on interpersonal networks produces two important concepts in Ethnic Chinese business: xinyong, trust or trustworthiness and ganqing, good personal relationship.22 Verbal promise that constitutes the basis of xinyong, is considered to be as important as a legal contract. The more xinyong accumulated, the better for the business, and there will be an almost guarantee for the success. On the contrary, anyone who has lost the xinyong would find difficulty to do business in the Ethnic Chinese communities.23 His business partners and customers would abandon him, his business networks would disintegrate, and his business would lead to collapse. Ganqing (good personal relationship) is also important because it serves like a lubricant in business. Because Ethnic Chinese society operates on the basis of complex human relationships rather than contractual and legal obligations, Ethnic Chinese businessmen tend to personalize the business relationships.24

Strength and weaknesses In the small and medium-sized Ethnic Chinese businesses, the strength of familism and centripetal authority are evident. Familism provides a strong bond for members of the business. Management and 22

For an excellent sociological analysis of ‘guanxi’ (kuan-hsi) and networking, see Ambrose Yeo-chi King,“Kuan-hsi and Network Building: A Sociological Interpretation”, in To Wei-ming (ed.), The Living Tree: The Changing Meaning of Being Chinese Today (Stanford, Stanford University Press, 1994), pp. 109–126. Chinese version of this article is entitled“Guanxi he wangluo de jiangou: yige shehuixue de chuanxi”, in Jin Yaoji (Ambrose Yeo-chi King), Zhongguo shehui yu wenhua (Chinese Society and Culture) (Hong Kong, Oxford University Press, 1992), pp. 64–85. A full discussion will be dealt with in the next chapter. 23 For an useful discussion of this topic, see Clifton A. Barton, “Trust and Credit: Some Observations Regarding Business Strategies of Ethnic Chinese Traders in South Vietnam”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia: Volume 1, Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983), pp. 50–57. For a fuller discussion on this subject, see Clifton A. Barton,“Credit and Commercial Control: Chinese Business in South Vietnam” (A Ph.D. dissertation, Cornell University, 1977). 24 Tong Chee Kiong, op. cit., p. 182.

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workforce who are directly or indirectly related to the family tend to share a common goal for the business, and are prepared to work hard for the realization of that goal. The blurring of the line between management and workforce as a result of the operation of familism avoids any serious disputes within the business. At the same time, as many of them are connected with the family, they tend to pay their absolute loyalty to the company and are not easily lured by higher offers of other companies. This helps to provide continuity and stability for the operation of the business.25 As solidarity and stability are important ingredients for the success of any business, the possession of these ingredients has made Ethnic Chinese family business competitive. Further, the centripetal authority provides the business with a dedicated leadership. If the leader is able and of strong personality, the centripetal authority he commands would contribute greatly to the success of the business.26 As division of labor is not greatly emphasized in these businesses, the ‘people-oriented management’ has certain advantages. Firstly, it provides flexibilities for decision making, not everything has to be made according to rules and regulations. It would enable the leader to make a firm decision in a competitive situation when a quick decision is required. Secondly, the style of management generates strong bond of human relationships, reinforced by the Confucian value of reciprocity (mutual responsibility).27 Therefore, the spirit of cooperation and solidarity prevails. 25

See Lin Pao-an,“The Social Sources of Capital Investment in Taiwan’s Industrialisation”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 96. 26 Tan Kah Kee is a case in point. Tan was of a strong personality, and the concentration of power in his hands was one of the factors for the success of building his business empire. See Lim How Seng (Lin Xiaosheng),“Chen Jiageng de jingying linian yu qiye guanli” (Tan Kah Kee’s Management Ideas and Management Style), in Lim How Seng (Lin Xiaosheng), Xinjiapo huashe yu huashang (Singapore Chinese Community and Entrepreneurs) (Singapore, Singapore Society of Asian Studies), pp. 157–163. Yen Ching-hwang,“Tan Kah Kee and Overseas Chinese Entrepreneurship”, in Yazhou wenhua (Asian Culture), Vol. 22 (Singapore, Singapore Society of Asian Studies, June 1998), pp. 5–6. 27 For the impact of Confucian concept of reciprocity (mutual responsibility) on the Chinese management exemplified by the Kwok Brothers at the Wing On Company

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However, the small and medium-sized Ethnic Chinese businesses have shown some obvious weaknesses. Nepotism, the lack of delegation of duties and the lack of institutionalization are the few major ones. The emphasis on familism leads to nepotism. The employment of relatives and kinsmen tends to restrict the scope of tapping the talent for the company, and may sacrifice efficiency for loyalty and trust. This would directly affect the performance of the company and its competitiveness.28 The centripetal authority which concentrates too much power and authority on one person, restricts the delegation of responsibility. It may lead to the lack of initiatives from below and inaction of the staff.29 Furthermore, the ‘people-oriented’ management tends to overemphasize human relationships at the expense of rules and regulations.30 The end result of this would be the lack of specialization and standardization. In this people-oriented management, the success or failure of an enterprise hinges upon the ability of the leadership. A good and strong leader at the top would almost guarantee the success of the enterprise, for he possesses business acumen, foresight and organizational ability. He can lead and coordinate well, and is able to unleash maximum human energy within the enterprise and channel it towards a common goal.31 On the contrary, an

in Hong Kong, see Yen Ching-hwang,“The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), pp. 97–98. 28 Poor performance and lack of competitiveness led to dramatic corporate collapse of some Ethnic Chinese companies in Hong Kong, Singapore and Taiwan. See S. Gordon Redding, The Spirit of Chinese Capitalism, p. 158. 29 See Tong Chee Kiong,“Centripetal Authority, Differentiated Networks: The Social Organization of Chinese Firms in Singapore”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 181. 30 For a discussion of this issue, see Tu I-ching,“Family Enterprises in Taiwan”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, pp. 116–122. 31 Lim How Seng,“Chen Jiageng de jingying linian yu qiye guanli”, in Lim How Seng, op. cit., pp. 157–163.; Yen Ching-hwang,“Tan Kah Kee and Overseas Chinese Entrepreneurship”, pp. 8–11.

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incompetent and weak leader would make many wrong decisions, and would almost be sure to lead the enterprise to collapse.

Ethnic Chinese Business Conglomerates The emergence and patterns of the conglomerates Except for a few cases, the rise of Ethnic Chinese business conglomerates is a 1970s phenomenon. The retreat of European capital from Southeast Asia during the post-Colonial period in 1950s and 1960s paved the way for their rise. In Taiwan and Hong Kong, the efforts of industrialization undertaken in the 1960s led to the rise of big Chinese business corporations. The rise of the conglomerates was the result of interplay of political and economic forces that gave rise to rapid changes in East and Southeast Asia, and within the Ethnic Chinese communities in the region. The political situation in the post-Colonial period was conducive to economic development. Shaken away from the yoke of Western Colonial rule, the Southeast Asian political elites lost no time to undertake the gigantic task of nation-building. Being educated in the West and had enormous admiration for Western material achievements, they were preoccupied with the creation of a modern economic system on Western model. However, what they had inherited from the Colonial regimes was a lopsided economic structure with one or two dominant commodities subject to constant fluctuation of prices in the international markets.32 Determined to restructure and to create a healthier economy, most of them adopted an interventionist posture and pursued state-guided policies. At the same time, economic nationalism pursued by the newly independent states in

32

Typical example was the case of Malaya (Malaysia after 1963). Two mainstays of Malayan economy before independence were tin and rubber. For the history and importance of Tin, see Wong Lin Ken, The Malayan Tin Industry to 1914 (Tucson, The University of Arizona Press, 1965); for the history of rubber and its importance, see J.H. Drabble, Rubber in Malaya, 1876–1922 (Kuala Lumpur, Oxford University Press, 1973).

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Southeast Asia frightened the European capital, principally in Indonesia, Malaysia and Singapore.33 The retreat of the European capital provided the golden opportunity for the Ethnic Chinese capital to fill the void, and benefited greatly from the sell-out of European-owned plantation estates and mining companies. One good example is the case of Loy Hean Heong. Loy, the founder of the MBF group of companies in Malaysia, took advantage of the retreat of the British planters from Malaya in early 1960s, and used a technique of ‘plantation fragmentation’ to build up his own business empire.34 Another example is the case of Lee Loy Seng and his family. Lee, a Hakka born in Perak, came from a rich mining family and was educated both in English and Chinese schools. Taking advantage of the retreat of the British planters in Malaysia, he built up his vast rubber plantation empire with his flagship named Kuala Lumpur-Kepong Berhad. In 1992, the company had 87,000 hectares of plantation land engaged in rubber, oil palm and cocoa planting spreading over 7 states in Malaysia.35 The Ethnic Chinese capital could not have benefited from such a retreat of European capital if there had no rapid political and economic changes taking place within the Ethnic Chinese communities. The political struggle between the Nationalist supporters and the Leftists in Southeast Asian Chinese communities ended after the victory of the Chinese Communists on the mainland, and the retreat of Chiang Kai-shek’s Nationalist regime to the island of Taiwan. The rise of indigenous nationalism during the post-war era pressurized 33

See J.J. Puthucheary, Ownership and Control in the Malayan Economy (Singapore, Eastern Universities Press, 1960). 34 See Loy Hean Heong with Andrew Crofts, Against All Odds: The Making of a Billionaire (Singapore, Times Books International, 1997), pp. 86–107. 35 See Edmund Terence Gomez, Chinese Business in Malaysia: Accumulation, Ascendance, Accommodation (Richmond, Surrey, Curzon Press, 1999), pp. 157–158; Lee Kam Hing & Chow Mun Seong, Biographical Dictionary of the Chinese in Malaysia (Petaling Jaya, Selangor, Pelanduk Publications (M) Sdn. Bhd. 1997), pp. 91–92.

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the Ethnic Chinese to focus more and more on their economic and political interests in Southeast Asia rather than China.36 The post-war rehabilitation of Chinese economy also helped the communities to get ready to meet the future challenge. More and more Chinese were prepared to invest and help develop the new nations with which they formed the component part. In Taiwan and Hong Kong, the changing political and economic environments paved the way for the rise of Ethnic Chinese conglomerates. In Taiwan, the Nationalist government undertook ambitious industrialization projects in the 1960s;37 the loss of the seat in the United Nations in 1971 further spurred the Nationalist government towards rapid industrialization. On the other hand, the British Colonial government in Hong Kong undertook steps for rapid economic development in the same decade. The export-driven policy boosted the fast growing light industry such as textile, toys and electronics.38 The policy also unleashed enormous untapped energy of the Hong Kong refugee population that resulted in the rapid economic development. One of the most distinctive patterns of the Ethnic Chinese conglomerates is the overlapping of ownership with management. Unlike their counterparts in the West that are rapidly moving towards separation of management from ownership, the Ethnic Chinese 36

For a study of the change of political identity of the Chinese in Singapore and Malaya during the postwar era, see Chui Kuei Chiang, Xin-Ma huaren guojia rentong de zhuanbian, 1945–1959 (Changes of National Identities of the Chinese in Singapore and Malaya, 1945–1959) (Singapore, South Seas Society, 1990), especially Chapters 6, 10 and 11. 37 For a comprehensive introduction to this change, see Thomas B. Gold, State and Society in the Taiwan Miracle (Armonk, New York, M.E. Shape, Inc., 1986); for the formation and implementation of the policies led to the Taiwan Miracle, Dr. K.T. Li, the architect of the Miracle, has explained in some details in his work The Evolution of Policy Behind Taiwan’s Development Success (New Haven, Yale University Press, 1988, 1st Edition; Singapore, World Scientific, 1995, 2nd Edition), see also Chinese version translated by Zhou Qienzhong entitled Taiwan jingji fazhan beihou de zhengce yanbian (Nanjing, Tongnan daxue chubanshe, 1993). 38 See K.R. Chou, The Hong Kong Economy: A Miracle of Growth (Hong Kong, Academic Publications, 1966), p. 26.

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conglomerates are dominated by some leading families. The OCBCSime Darby group by the Lee Kong Chian and Tan Chin Tuan families in Singapore and Malaysia, the Hong Leong group by the Kwek family in Malaysia and Singapore, the Salim group of companies by the Liem Sioe Liong family in Indonesia, the Cheung-kong and Whampoa group of companies by the Li Ka-shing family in Hong Kong, and the Taiwan Plastics group by the Wang Yung-ching (Wang Yongqing) family in Taiwan, are just few of the examples of the family-dominated large Ethnic Chinese conglomerates.39 What should be noted is that most of these powerful families had made their fortunes after World War II rather than having their wealth accumulated in the pre-war period. One explanation is that some of the pre-war prominent families did not survive the drastic changes 39

For study of OCBC-Sime Darby group, see Lim Mah Hui,“The Ownership and Control of Large Corporations in Malaysia: The Role of Chinese Businessmen”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Volume 1: Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983), pp. 285–289. For study of Hong Leong Group, see Tong Chee Kiong,“Centripetal Authority, Differentiated Networks: The Social Organization of Chinese Firms in Singapore”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, pp. 186–197 and Lin Wuguang,“Fenglong Ma qiye jituan“(The Hong Leong Group of Malaysia”, in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (Study on the Ethnic Chinese Business Conglomerates in Southeast Asia) (Xiamen, Xiamen daxue chubanshe, 1995), pp. 136–149; the autobiography of Kwek Hong Png, the founder of the Hong Leong Group, entitled Wo Yu Hong Leong (A Lifetime with Hong Leong) (Singapore, 1987), provides valuable insight into the founding and growth of the Hong Leong. For study of Salim group, see Cai Renlong,“Sanlin qiye jituan” (Salim Group), in Wang Muhan, Study on the Ethnic Chinese Business Conglomerates in Southeast Asia, pp. 41–60; Cai Renlong, “Lin Shaoliang jiazu yu Sanlin jituan” (Liem Sioe Liong and the Salim Group), in Cai Renlong, Yinni Huaren qiye jituan yanjiu (A Study of the Chinese Business Conglomerates in Indonesia) (Hong Kong, Xianggang shehui kexue chubanshe youxian gongsi, 2004), pp. 1–97. Sung Chek Mei (Song Zemei), Lin Shaoliang zhuan (A Biography of Liem Sioe Liong) (Hong Kong, Dongnanya yanjiusuo, 1988), For study of Li Ka Shing and his enterprises, see Chen Yanzhun, Huaxia jiaozi Li Jiacheng (The Outstanding Chinese — Li Ka-shing) (Hong Kong, Tiandi tushu youxian gongsi, 1993); Xia Ping, Li Jiacheng zhuan (A Biography of Li Ka Shing) (Beijing, Zuojia chubanshe, 1993).

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before and after the war such as the case of powerful Oei Tiong Ham family (Kian Gwan business empire) in the Dutch East Indies.40 At the same time, the rapid changes during the post-Colonial era provided a golden opportunity for those Ethnic Chinese entrepreneurs who had possessed immense foresight, courage and business acumen to take advantage of the situation. Ethnic Chinese conglomerate is also characterized by a high level of diversification. Most of the Ethnic Chinese conglomerates have diversified into many related businesses with numerous subsidiaries. Sometimes the diversification has extended to unrelated fields that appear to be promising. The diversification into related businesses would maximize the profit, consolidate the position of the core business and increase its market share. This is a favored strategy adopted by many Ethnic Chinese conglomerates for their fast growth. On the other hand, the main motive of diversification into unrelated fields is to reduce risk of putting all eggs in one basket. Ethnic Chinese capitalists are keenly aware of the ebbs and flows of fortune in the business world, the loss of one line of business can be cushioned by the gain in another line of business. Further, the diversification also provided flexibility to redistribute capital from one business to another.41 In the case of Genting group of Malaysia, diversification was adopted as a strategy for fast development. The Genting group, famous of its gaming, leisure and tourism industry in Southeast Asia, began to diversify in the late 1970s, and had made significant inroads into plantations, property, paper, power generation, oil and gas exploration and cruise industry.42 In Indonesia, the Salim group 40

For explanation of the collapse of the Kian Gwan empire, see Tjoa Soe Tjong (translated by Onghokham),“One Hundred Years of Oei Tiong Ham Concern”, in Yoshihara Kunio (ed.), Oei Tiong Ham Concern: The First Business Empire of Southeast Asia (Kyoto, The Center for Southeast Asian Studies, 1989), pp. 80–94. 41 See Yen Ching-hwang,“Wing On and the Kwok Brothers: A Case Study of Pre-war Overseas Chinese Entrepreneurs”, in Kerrie L. MacPherson (ed.), Asian Department Stores (Richmond, Surrey, Curzon Press, 1998), p. 64. 42 See Lim Goh Tong (Founder of the Genting Group), My Story (Subang Jaya, Selangor, Pelanduk Publications (M) Sdn. Bhd., 2004), pp. 129–137.

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owned by Liem Sioe Liong started with a trading company, but it achieved fast growth by adopting diversification strategy. It diversified into automobile (distribution and assembly), manufacturing (in textiles, nails, bicycle tyres, food processing, flour milling), property and construction, banking and finance, logging, plywood and tin mining.43 Increased globalization should also be counted as a feature of Ethnic Chinese conglomerates. In line with the trend in the Western corporate world in the last few decades,44 Ethnic Chinese conglomerates also favored this strategy of expansion. Apart from economic consideration of enhancing revenue, political and ethnic factors can not be ruled out. As Ethnic Chinese operated in a relatively unfriendly political environments, their expansion to China or Taiwan could be thwarted by the existing rules and regulations of the home countries. A shrew move was to shift the center of operation to or setting up another holding company in Hong Kong, a relatively free British colony on the fringe of China. In 1970s, Kuok Brothers Group gradually shifted its center of operation from Malaysia-Singapore to Hong Kong, while the Charoen Pokphand (CP) Group of Thailand established Charoen Pokphand Company (Hong Kong) as the flagship of its overseas activities, especially in Mainland China.45 Another feature of Ethnic Chinese conglomerates is their close yet subordinate relations with the governments of the countries they are located. Because of their ethnicity and their minority status, Ethnic Chinese capitalist have to develop close ties with the ruling political and military elites, and sometimes they have to bribe the elites in 43

See Richard Robison, Indonesia: The Rise of Capital (Sydney, Allen & Unwin Pty. Ltd., 1986), pp. 297–300. 44 For the trend of globalization among American conglomerates and its importance, see Carl Kaysen,“Introduction and Overview”, in Carl Kaysen (ed.), The American Corporation Today (New York, Oxford University Press, 1996), p. 9. 45 For details of C.P. group’s business activities in China and Hong Kong, see Lu Ming,“Road to Prosperity: The Role of Ethnic Teochew Chinese in China’s Economic Development, 1978–2003” (an unpublished Ph.D. thesis, Department of History and Centre for Asian Studies, The University of Adelaide, Australia, 2007), Chapter 6 to Chapter 8.

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order to get their ways.46 Unlike the 20th century American experience where entrepreneurial capitalists played the central role in economic development,47 the Ethnic Chinese capitalists were subordinate to the government bureaucrats. They were to help carry out the government’s policies and benefit from the implementation of these policies, while the state played the central role of rapid economic growth.48

Structure of the conglomerates It would be wrong to assume that being evolved from family business, Ethnic Chinese conglomerates are incapable of functioning efficiently as modern Western or Japanese or Korean conglomerates. Like their Western and East Asian counterparts, they possess important features of modern multi-national corporations, and at the same time, have some distinctive Chinese cultural traits. An Ethnic Chinese conglomerate consists of a group of companies diversified into different branches of business activities. The number of companies controlled by the conglomerate vary according to the size of the conglomerate. Like other Western and East Asian multi-nationals, the structure of the Ethnic Chinese conglomerate is 46

For a study of close business relationship between Liem Sioe Liong’s Salim group and President Suharto in Indonesia, see Richard Robison, op. cit., pp. 296–297, 346–347; for study of close relationship between government and business in Asia in general, see Andrew Macintyre (ed.), Business and Government in Industrialising Asia (Sydney, Allen & Unwin Pty. Ltd., 1994). 47 For the central role played by American entrepreneurial capitalists in the economic development, see Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Massachusetts, 1977). 48 For the emphasis on the role of state in the developing countries in East and Southeast Asia, see The World Bank, The East Asian Miracle: Economic Growth and Public Policy (New York, Oxford University Press, 1993), pp. 5–6; Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York, Oxford University Press, 1992); Gerald Tan, The Newly Industrializing Countries of Asia (Singapore, Times Academic Press, 1995), pp. 43–45; Andrew Macintyre (ed.), Business and Government in Industrialising Asia (Sydney, Allen & Unwin Pty. Ltd., 1994).

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basically a pyramid shape. At the top of the pyramid is the board of directors that controls the decision-making and is responsible for mapping the direction of the conglomerate. Major decisions concerning finance, distribution of resources and strategies for growth are made by the board. The directors of the board are usually businessmen with substantial ownership and controlling interests in the conglomerate.49 But increasingly, the so-called functional directors (those who are appointed to the board because of political connections or other functional purpose) are also appointed to the board, and they are very useful in terms of helping to gauge the political climate, to cultivate good relationship with the government, and to help chart the future course of the conglomerate.50 Some managing directors or managers of key subsidiary companies of the conglomerate are appointed to the board, and their views from below is valuable and important for the decision-making at the board. The majority of the Ethnic Chinese conglomerates are in one way or another controlled by a single family or a small group of families. In a single family controlled conglomerates, the founder is commonly at the helm, and if the founder is retired or dead, the chairmanship would usually pass on to one of his brothers or sons. This pattern is illustrated by the history of the Hong Leong group which is a leading Chinese conglomerate in Singapore and Malaysia. It has several groups of companies under its wings. In Malaysia, there are at least 4 major groups of companies under the control of its Malaysian parental company, Hong Leong Company (Malaysia) Berhad. These 4 groups of companies are Hong Leong Credit Berhad, Hong Leong Industries Berhad, Hume Industries Malaysia and Hong Leong Overseas (Hong 49

See Lim Mah Hui,“The Ownership and Control of Large Corporations in Malaysia: The Role of Chinese Businessmen”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Vol.1: Ethnicity and Economic Activity, p. 281. 50 See Harold Crouch, Government & Society in Malaysia (St. Leonards, NSW., Australia, Allen & Unwin Australia Pty Ltd., 1996), p. 209; Lim Mah Hui, Ownership and Control of the One Hundred Largest Corporation in Malaysia (Kuala Lumpur, Oxford University Press, 1981), pp. 68–69; Peter Searle, The Riddle of Malaysian Capitalism: Rent-seekers or Real Capitalists? (St. Leonards NSW. & Honolulu, Allen & Unwin, and University of Hawaii Press, 1999), pp. 86–92.

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Kong). Each of these 4 groups consists of a number of subsidiaries and sub-subsidiaries. The Hong Leong Industries Berhad had 19 subsidiaries and 4 sub-subsidiaries.51 Hong Leong conglomerate achieved rapid growth in the 1970s and the 1980s through takeovers and acquisition of companies, and was involved in a wide range of business, including finance, manufacturing, property development and service industry. It also expanded to Hong Kong, China, Taiwan, the Philippines and the United Kingdom.52 The conglomerate is in the hands of Kwek family members who control the major stocks of the group and its management. The founder, Kwek Hong Png, was a Hokkien immigrant arriving in Singapore in 1928. He worked as an apprentice in his relative’s hardware shop, and later founded the Hong Leong company with his three younger brothers.53 As the company grew and expanded, he was always at the helm and became the chairman of the board of the group until his retirement in 1984. The chairmanship was passed to his son, Kwek Leng Joo who was also made managing directors of many major companies under the control of the group. His other sons and nephews have also been placed into key positions in the subsidiaries.54 51

Tong Chee Kiong, “Centripetal Authority, Differentiated Networks: The Social Organization of Chinese Firms in Singapore”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 192, “Table 2”. 52 Ibid., p. 191. 53 Kwek Hong Png was born in Tong An district, Fujian province, a district that produced many Hokkien entrepreneurs including the famous Tan Kah Kee. Kwek received some traditional Chinese education in his village, and at the age of 16, he left China for Singapore, and first worked as an apprentice in his relative’s hardware shop where he learnt how to do business. In 1941, after having accumulated a sum of $7,000 capital, he founded the Hong Leong hardware shop in Singapore with his three younger brothers. The word ‘Hong’ (Feng) means abundance and plentiful, while the word ‘Leong’ (Long) means prosperous. The combination of both words as the name of the shop suggested abundance and prosperity for its future business. See Kwek Hong Png, Wo Yu Feng Long (A Lifetime with Hong Leong), pp. 11–15 (Chinese Section), pp. 75–81 (English Section). 54 Ibid., pp. 19–36 (Chinese Section), pp. 83–101 (English Section);“Interview with Mr. Quek Hong Png (Kwek Hong Png) dated 7th September 1982”, Oral History Interview Transcript, 1983, pp. 1–21 (Singapore, Arhives and Oral History Department, Ministry of Information and the Arts, Republic of Singapore, 1983).

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The OCBC-Sime Darby group of companies, one of the largest Ethnic Chinese conglomerates based in Singapore and Malaysia, exemplifies the multi-family controlled pattern. This conglomerate consists of the OCBC and Sime-Darby groups of companies. In 1976, it consisted of 38 companies, 13 of them were the core companies, while the remaining 25 were satellite companies. The OCBC (Oversea-Chinese Banking Corporation), the major component part of the conglomerate, is the largest and oldest Ethnic Chinese financial establishment in the region.55 In 1976, its assets were estimated at S$4.3 billion and a net worth of S$929 million, and its branches spread to many parts of Southeast Asia and the globe. Its activities were not just confined to banking and finance, but also in the fields of insurance, tin-mining and smelting, plantation estates, manufacturing, trading, hotel, properties, and management services.56 The conglomerate is owned and controlled primarily by a few Singaporean and Straits Chinese families, prominent families among them were the Lee Kong Chian family, Lee Choon Seng family, Lee Wee Nam and Tan Siak Kew families; Tan Chin Tuan family and Yong Pang How family. Although Lee Kong Chian’s family has a largest holding in stocks of the OCBC, his sons have not played a prominent part in the management of the group. However, the Tan Chin Tuan and Yong Pung How families are involved more actively in the management of the group.57 Tan Chin Tuan had been its managing director for years,58 while one of his nephews, a former cabinet min55

For the history of first 40 years of the OCBC (1932–1972), see Dick Wilson, Solid As A Rock: The First Forty Years of the Oversea-Chinese Banking Corporation (Singapore, Oversea-Chinese Banking Corporation Ltd., 1972). 56 Lim Mah Hui,“The Ownership and Control of Large Corporations in Malaysia: The Role of Chinese Businessmen”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Vol. 1: Ethnicity and Economic Activity, p. 285; Lim Mah Hui, Ownership and Control of The One Hundred Largest Corporations in Malaysia, pp. 87–91. 57 Lim Mah Hui, Ownership and Control of The One Hundred Largest Corporations in Malaysia, pp. 91–92. 58 For Tan Chin Tuan’s long time involvement in the management of OCBC, see Grace Loh, Goh Chor Boon and Tan Teng Lang, Building Bridges, Carving Niches: An Enduring Legacy (Singapore, Oxford University Press 2000).

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ister and at present the President of Singapore, Dr. Tony Tan, was at one time holding the same position of the group.

The future of the conglomerates Like their counterparts in the West and East Asia, the Ethnic Chinese conglomerates have to go through the process of growth, expansion and development. Whether they have to take the same path like their counterparts or not is uncertain. What is certain is that they have to face keener competition as they grow larger and stronger; they have to become more competitive and efficient if they want to survive the fierce competition in the global environment. But at the same time, as their expansion extends far beyond their home grounds, they will have to deal with more and more governments of foreign countries, and some of the forces at work will be beyond their control. This unpredictability would increase their risks, and they have to watch every step for potential pitfalls and traps. Another aspect that will be certain for the Ethnic Chinese conglomerates is the formalization of their management structure like their counterparts in the West and East Asia. To improve their abilities for competition, efficiency and long-term planning have to be emphasized. Rational decisions based on concrete research results have to take precedence over decisions based on personal instinct. This would entail the modernization of the recruitment and promotion systems. Hundreds of top and middle level professional staff have to be employed to man the growing conglomerates, and they have to be recruited and promoted more on the basis of merit rather than kinship, dialect or personal connections. This would pave the way for the rise of professional class within the Ethnic Chinese conglomerates. The Ethnic Chinese tycoons are increasingly concerned with the succession of their business empires. Many founders or co-founders of the conglomerates are aging and close to retirement, and they have to hand over their empires to able and trustworthy successors who are likely to be selected from their children or close relatives. As many founders lack the opportunity of receiving higher education, they do see the value of higher education and the importance of knowledge

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in a competitive world. This leads them to send their sons and daughters overseas for higher education, and quite a number of their children have received both Chinese, or local Southeast Asian and Western education. Most of these young business empire successors have obtained their degrees in Economics, Business Management and Finance in the West, and have armed themselves with advanced knowledge from the West or Japan when they succeed the thrones. The training and preparation of future successors is extremely important to the well-being of the conglomerates, for the prospective tycoons are exposed to the advanced knowledge of business of the West and Japan. They must have been familiar with Western management theories and examples of Japanese management. They must have been impressed by the main thrust of the Classical Management masters’ theory that management is a process of planning, organization, command, coordination, and control. They again must also have been impressed by Frederick Winslow Taylor’s Scientific Management theory that “the principal object of management should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity for each employee”, “that the greatest prosperity can exist only as the result of the greatest possible productivity of the men and machines of the establishment”, and “the most important object of both the workmen and the management should be the training and development of each individual in the establishment, so that he can do (at his fastest pace and with the maximum of efficiency) the highest class of work for which his natural abilities fit him”.59 They must also have been exposed to the management theory regarding running organization not as a machine, but rather as an organism.60 They are at the same time familiar with examples of how Japanese Zaibatsus run their organizations by combining Western business theories with Confucian values. All of these would have impact on their thinking, and would lead them to try to combine Western 59

See Frederick Winslow Taylor, The Principles of Scientific Management (New York and London, Harper & Brothers Publishers, 1911), pp. 9–12. 60 See Gareth Mogan, Images of Organization (Sage Publications, Newbury, California, 1986), pp. 25–42.

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business practices with traditional Chinese cultural values. In short, these prospective Ethnic Chinese tycoons have prepared themselves well, and would use what they have learned from the universities to the running of the business empires that they would inherit from their fathers or uncles. On the other hand, these prospective Ethnic Chinese tycoons have also built up contacts with future managers or Chief Executive Officers (CEO) of Western and Japanese companies. Many of their classmates from Western or Japanese universities who have gone through the same courses with them would become future leaders of Western and Japanese corporations, and the friendship they have cultivated would be of great value if they could wisely use these contacts. They could even employ some of their former classmates from the West or Japan for the service of their conglomerates. There are signs to show that these future Ethnic Chinese tycoons are increasingly interested in Chinese culture and to tap the traditional Chinese values for the benefits of their conglomerates. As China emerges as a world economic power, and as Ethnic Chinese communities emerge as an important economic force, these future Ethnic Chinese tycoons cannot afford to ignore the importance of Chinese and Ethnic Chinese markets for their future expansion. They will turn to traditional values and traditional Chinese social organizations to seek strength for future development. Perhaps by that time, they would achieve a balanced view of the world and a balanced approach to the well-being of their business empires, and they would benefit from both Western and Eastern cultures.

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Chapter 6

Xinyong (Trust), Guanxi (Relationship), Business Networks and Ethnic Chinese Business

Xinyong and Ethnic Chinese Business Concept and importance of Xinyong It would not be an overstatement to say that ‘xinyong’ (trust) is a key concept in Ethnic Chinese business. It is the backbone of Ethnic Chinese business relations, and the basis of a particular type of business strategy which emphasizes personal relations and long-term connections. The term xinyong (alternatively Romanized as hsin-yung in accordance with Wade-Gile system or sun yung in accordance with Cantonese dialect) is literally meant the function of ‘trust’. The word ‘xin’ can be translated into English as trust, trustworthiness, confidence or credibility, while the word ‘yong’ can be translated as use or function. The concept of trust is vague and ill-defined. A leading American Sociologist, Bernard Barber, defines trust in terms of the expectations that social actors have of one another. He has indentified three kinds of expectations: the general expectation of the possession and continuity of the natural and moral order; the technical competence of actors in roles; and the expectation on fiduciary responsibilities of social actors.1 For instances, you expect that human being would behave according to certain moral and natural orders, and would not simply do any harm to you for no reasons; you trust an engineer to build a house or a bridge, a doctor to cure your sickness, 1

Bernard Barber, The Logic and Limits of Trust (Brunswick, Rutgers University Press, 1983), p. 9. 135

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and a plumber to fix your plumbing problems; and you expect politicians, police officials and government officials to carry out their duties faithfully, and place public interests before their own interests. The great German sociologist, Max Weber, explored the problem of trust in his comparative study of world religions. His main concern was with the foundation on which the trust was built. He identified two types of trust: particularistic and universalistic. The former was rooted in blood ties and kinship. It rested upon personal, familial and semi-familial relationships.2 The latter was built on the superior community of faith such as the Protestant belief in the West. To Weber, Protestant belief was universalistic, rational and impersonal and was capable of providing that essential bond for social actors.3 Weber further argued that it was this universalistic trust which laid the foundation for the emergence of capitalistic enterprises in Western Europe; while the dependence on the particularistic trust prevented China from the rise of modern capitalism.4 Another German Sociologist, Niklas Luhmann, defines trust in terms of its function and the social mechanisms that sustains it. Perhaps based on Max Weber’s concepts of particularistic and universalistic trusts, Luhmann goes a step further to specifically differentiate two types of trust: personal and system. The former is dependent on familiarity and is narrow in scope; while the latter is impersonal and is built on generalized media of communication such as money, power and truth. In his view, the personal trust is primitive, irrational and unreliable, while the system trust is independent of individual motivations. He even considers that transition from a reliance on personal trust to system trust is a part of great civilizing processes of modern life.5 2

Max Weber (translated and edited by Hans H. Gerth), The Religion of China: Confucianism and Taoism (New York, The Macmillan Company, 1951), p. 237. 3 Max Weber, The Sociology of Religion (London, Social Science paperback 1966), p. 235. 4 Max Weber, The Religion of China, p. 242. 5 See Wong Siu-lun, “Chinese Entrepreneurs and Business Trust”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia (Hong Kong, Centre of Asian Studies, University of Hong Kong), p. 14.

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Based on these sociological definitions, Professor Wong Siu-lun of Hong Kong University, pinpoints two types of trust in the Chinese business community in Hong Kong: system trust and personal trust. The system trust is based on legal institutions, political system and opportunity structure; while the personal trust is based on a wide range of personal connections, principally on family and regional ties. Although Wong has not clearly defined the concept of trust, he nevertheless helps crystallize the scope and typology of trust in Ethnic Chinese business.6 The importance of the concept of trust in Ethnic Chinese business is beyond doubt. One can probably postulate that Ethnic Chinese business cannot operate without personal trust. Various empirical studies on the Ethnic Chinese business have testified the existence and importance of the personal trust, the so-called xinyong. In a study of the Chinese in a small trading town in Java, Indonesia, Edward Ryan in 1961 found that the Chinese businessmen valued highly of the personal trust — kepertjajaan — in their business operation. They considered the possession of kepertjajaan was more important than the possession of capital.7 In another study of a vegetable wholesale market — the Kennedy Town Market — in Hong Kong, Robert H. Silin in 1972 found that personal reputation based on trust was most important factor in business success. Fear of losing this trust was the major deterrent to commercial malpractice in the market.8 This was verified by Clifton A. Barton’s extensive study of the Chinese businessmen and their business behavior in South Vietnam prior to the Communist take-over in 1975. Barton discovered that sun-yung (xinyong) was more than Western concept of ‘credit rating’, it carried a connotation of a businessman’s total reputation for 6

Ibid., pp. 16–25. See Edward J. Ryan, “The Value System of a Chinese Community in Java” (an unpublished Ph.D. dissertation of Harvard University, 1961), p. 25., quoted in Wong Siu-lun, “Chinese Entrepreneurs and Business Trust”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 13. 8 See Robert H. Silin, “Marketing and Credit in a Hong Kong Wholesale Market”, in W.E. Willmott (ed.), Economic Organization in Chinese Society (Stanford, Stanford University Press, 1972), p. 337. 7

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trustworthiness. He also noted that Chinese merchants in South Vietnam were successful in direct proportion to the amount of sun yung they possessed.9 In his study of Shanghainese textile industrialists in Hong Kong, Wong Siu-lun in 1988 found that the reputation of trustworthiness was one of the six most important factors for the success of the Shanghainese industrialists. It was seen as the most precious asset, and an industrialist had to be meticulous in honoring contracts and to be punctual with deliveries.10 In 1990s, Ms Yoko Ueda, a Japanese academic, who undertook a case study of a small Chinese community in Nakhon Ratchasima, Thailand, related a story how a Teochew Chinese businessman refused to abandon his factory in order to uphold the reputation of family’s name, a heavy premium for retaining trustworthiness in the Chinese business community.11 What can be summed up from these empirical studies is that xinyong exists and plays an important role in the operation of Ethnic Chinese business. But the Chinese term of xinyong is not equivalent to English word of trust, rather, it is equated with a part of the trust — the personal trust.

Structure and functions The importance of xinyong in Ethnic Chinese business would naturally lead us to probe further the questions of how does this xinyong work, and why has it played such important role in the Chinese 9

See Clifton A. Barton, “Credit and Commercial Control: The Strategies and Methods of Chinese Businessmen in South Vietnam” (an unpublished Ph.D. dissertation of Cornell University, May 1977), p. 152; Clifton A. Barton, “Trust and Credit: Some Observations Regarding Business Strategies of Overseas Chinese Traders in South Vietnam”, in Linda Y.C. Lim & L.A. Peter Gosling, (eds.), The Chinese in Southeast Asia, Vol. 1: Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983), pp. 49–50. 10 Wong Siu-Lun, Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong (Hong Kong, Oxford University Press, 1988), p. 167. 11 See Yoko Ueda, Local Economy and Entrepreneurship in Thailand: A Case Study of Nakhon Ratchasima (Kyoto, Kyoto University Press, 1995), p. 37.

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business operation. As what Barton has pointed out in his study that xinyong is more than credit-rating, it represents total trustworthiness of the businessman himself. Credit-rating is based on the assessment of borrowers’ income, assets and the ability to repay, while xinyong applies to both borrower and creditor, receiver and supplier. Not only a borrower has to keep his promises to repay a loan or paying a credit for goods and services on time, a promise made by a creditor or supplier has to be honored as well, otherwise the person would loose his xinyong.12 In this sense, xinyong is a double-edged sword cutting both ways. It is highly personal, accumulative and sometimes transferable. It is easy to understand the personal nature of xinyong because it involves first between two businesspersons, and then between two companies and later two groups of companies. It is accumulative because the business relationship between two persons and between two companies has to go through the process of testing, it is only through a long period of business transactions that a firm xinyong can grow between them. Once a person’s xinyong is established and grown, his reputation as a trustworthy businessman would be known to the business circles, and then travel far and wide. He thus possesses a gold card which would facilitate his business operation in the web of the Ethnic Chinese business world. Once a person has acquired a good reputation of xinyong, he still has to maintain and consolidate it. His xinyong is still subjected to constant scrutiny by his business partners or creditors. If a person has acquired good reputation in xinyong, but does not bother to maintain it, it would gradually weaken and diminish. If a person’s xinyong is ruined, his business would decline, and it would be tantamount to a death-sentence of his business. However, a well-maintained and well-consolidated reputation of xinyong not only would greatly benefit himself, his companies or his groups of 12

See Clifton A. Barton, “Trust and Credit: Some Observations Regarding Business Strategies of Overseas Chinese Traders in South Vietnam”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Vol. 1: Ethnicity and Economic Activity, pp. 53–57.

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companies, but would also be extended to his sons, relatives and even his business associates.13 The transferability of xinyong is one of the features of the Ethnic Chinese business. Although xinyong has to be acquired through personal efforts, it tends to favor those businesspersons who have strong financial backing of family, and to disadvantage those without it. This is because those with strong family backing inherit part of the xinyong from their parents or close relatives, and would be easier to get credits and loans than those without strong family financial support. As pointed out by Barton, xinyong operated in the Ethnic Chinese business at two different levels: a specific interpersonal relationship; and a general reputation for trustworthiness.14 As most Ethnic Chinese business are conducted on the basis of personal relationships, businessmen initiate relationship through introduction of mutual friends or relatives. A personal relationship is thus established, and an informal credit standing begins to develop. In the ensuing transactions which involve no official contracts or agreements, each party tests the xinyong of the other in a period of time. They thus proceed from small to large transactions, constantly testing and evaluating each other’s xinyong. Once xinyong is firmly established between them, they try to consolidate their relationship with a multiple approach. They are inclined to share tips about new business opportunities, to exchange market information, and to cooperate in new business ventures. They would further consolidate the ties by social and cultural activities such as inviting each other’s family to dinners, to social and cultural functions, and giving each other assistance and support. This interpersonal relationship branched out from business to social and cultural arenas.15 At

13

See Tong Chee Kiong, “Centripetal Authority, Differentiated Networks: The Social Organization of Chinese Firms in Singapore”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 182. 14 Clifton A. Barton, “Trust and Credit: Some Observations Regarding Business Strategies of Ethnic Chinese Traders in South Vietnam”, in Linda Y.C. Lim & L.a. Peter Gosling (eds.), The Chinese in Southeast Asia, Vol. 1: Ethnicity and Economic Activity, p. 53. 15 Ibid., pp. 54–55.

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the second level of operation, xinyong serves as a general reputation of trustworthiness in the society. Apart from personal quality such as good character and integrity, the possession of wealth was important to back up and sustain that general reputation. This demands demonstration of the possession of wealth by displaying wealth such as living in luxurious house, owning expensive car, first-class overseas travelling and staying in five star hotels, etc. This would invariably project a image that he is a successful man and has possessed sufficient wealth to back up his xinyong in business dealings.16 However, Ethnic Chinese businessmen are sometimes caught in a dilemma of the desire of displaying wealth and the risk of personal safety. The negative result of displaying wealth is to attract attention of undesirable elements in the society who may resort to blackmailing or kidnapping the businessman or his family members. Clifton Barton’s argument that excessive display of wealth among South Vietnamese Chinese businessmen would attract the attention of government and taxman has a sinister connotation that most Ethnic Chinese businessmen are trying to avoid taxes, and it cannot be substantiated.17 Some wealthy Ethnic Chinese businessmen, particularly those belong to older generation, are reluctant to display wealth partly because of their thrifty habits and partly because of their traditional belief that excessive display of wealth would invite jealousy and end up with the loss of that wealth.18 Three major functions of the xinyong can thus be discerned. Firstly, it functions as a lubricant for business; secondly, it functions as a sanction against any indecent business behavior; and thirdly, it short-circuits financial transactions. Since Ethnic Chinese business is highly personalized and Ethnic Chinese businessmen have to depend

16

Ibid., pp. 55–56. Ibid., p. 56. 18 This practice was common among older generation of rich Chinese businessmen in Singapore and Malaysia. Some years ago, one of the richest Chinese businessmen, Dai Jishan, was run over by a car in Kuala Lumpur. Dai was alleged to have cycled with his old bicycle when the accident occurred. 17

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on connections to do business, they need xinyong to sort out who can be trusted and who cannot be trusted. Sorting out the trustworthy clients from unworthy ones would enable them to do business easier and to facilitate their business transactions. Most of the modern Ethnic Chinese communities grew in the 19th century under Western colonial rule. The lack of protection from Chinese government and the unfamiliarity with Western legal practices led Ethnic Chinese businessmen to develop their own mechanisms to deter undue business behavior. Xinyong has been one of the most effective mechanisms that Ethnic Chinese have developed in the conduct of their business. Any breach of promises and any fraudulent behavior would diminish a person’s xinyong, and would result in the collapse of his business. Further, xinyong also functions like a modern credit card, and it helps to simplify and short-circuit the procedures of financial transactions between the concerning parties.

Business and social organizations The relationship between business and social organizations in the Ethnic Chinese communities is relatively under-explored area. Much of scholarly works on Ethnic Chinese social organizations tend to focus on the internal structure and functions, leadership and the use of power, and this includes some of my own works on the Chinese in Singapore and Malaya.19 However, in one of my works on the Wing On Company of Hong Kong and Shanghai, I have pointed out the importance of the Kwok brothers in using dialect and regional organizations for mobilizing Ethnic Chinese capital.20 Clifton Barton and

19

See for instance, my work entitled A Social History of the Chinese in Singapore and Malaya (Singapore, Oxford University Press, 1986). 20 See Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Proceedings of Conference on Eighty Years’ History of the Republic of China, 1912–1991 (Taipei, 1991), Vol. IV (English Section), pp. 77–117 ; see also the same article in Yen Chinghwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 218–219.

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other scholars have also drawn our attention to the intimate relationship between business and social structure.21 Ethnic Chinese social organizations provides an useful outlet for businessmen to display their wealth and building their reputation. There are a variety of social organizations for businessmen to participate. This includes kinship associations, dialect or regional associations, Chinese school management boards, religious organizations, cultural societies, alumni associations, sports organizations and international business associations such as Lions and Rotary clubs.22 As what have been conceded by some businessmen, their involvement in these organizations are motivated by the gaining of social standing, prestige, and indirectly to the benefit of their business.23 However, the involvement in the activities in these social organizations require time and money. Devotion of time would not make a businessman the leader of the organization, but rather the amount of money he could dispense. This is because a lot of work in the associations requires money, and it is a practice that the leader of the association has to set a good example by donating a large sum of money. Monetary requirement attached to the leadership position rules out many candidates who have not possessed sufficient wealth. Thus, leadership position of 21

See G. William Skinner, Leadership and Power in the Chinese Community in Thailand (New York, 1958); and Clifton Barton, “Trust and Credit: Some Observations Regarding Business Strategies of Overseas Chinese Traders in South Vietnam”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Vol. 1: Ethnicity and Economic Activity, pp. 57–58. 22 For merchants’ involvement in Chinese social organizations in Singapore in the 19th and 20th centuries, See Yong Ching Fatt, “Chinese Leadership in Nineteenth Century Singapore”, in Xinshe Xuebao (Journal of Island Society) (Singapore), Vol. 1 (English Section), pp. 6–12; C.F. Yong, “A Preliminary Study of Chinese Leadership in Singapore, 1900–1941”, in Journal of Southeast Asian History, Vol. 9, No. 2 (Singapore, September 1968), pp. 258–285. For Chinese merchants’ involvement in social organizations in Thailand, see G. William Skinner, Leadership and Power in the Chinese Community of Thailand (Ithaca, New York, Cornell University Press, 1958). 23 Several years ago when I was deeply involved in the Chinese Association of South Australia (being the President of that Association for 8 years), I was told by a former Chinese businessman of South Vietnam how Chinese businessmen benefited from their involvement in huiquan activities in Indo-China.

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social organizations is effectively used as an outlet for businessmen to display their wealth, and is taken as a symbol of prestige and social standing.24 Leadership positions also vary in prestige and social standing that reflect the amount of cost to acquire. A more prestigious and more coveted leadership position would cost more in monetary terms, but the return of benefits in terms of prestige and influence could also be greater. The contributions made by leaders are usually displayed conspicuously. They are either published in local Chinese newspapers, in acknowledgement booklets (zhengxin lu)25 or souvenir magazines of the particular associations, or displayed prominently in plaques hung in schools, temples and associations halls.26 The acquisition of the prestige and social standing have indirectly enhanced the credentials and credibility of the individuals which would lead to the desire for people to do business with him and to trust him. As a result, the person’s xinyong in business circles has increased.

Guanxi, Business Networks and Ethnic Chinese Business Guanxi: definition, importance and functions ‘Guanxi’ or romanized as ‘kuan-hsi’, is not an analytical concept, rather, it is a personal relationship loaded with affection and mutual obligations. It is aptly defined by a Western scholar as “personalistic,

24

In the Chinese communities in Southeast Asia, Hong Kong and Taiwan, it is still a practice to list on one’s business card with many positions held in social organizations as an indication of social standing and prestige. 25 For instance, the Kheng Jai Wee Kuan (The Hainanese Association) of Muar, Malaysia, published in 1971 a 90 page Acknowledgement Booklet (Zhengxin Lu) acknowledging donations made by members or supporters for the extension of Association’s club house. See Mapo Qiongya huiguan kuangjian xinxia zhengxin lu (The Acknowledgements of Donations for the Extension of the Club House of the Hainanese Association of Muar) (Muar, 1971). 26 This practice is still common in the Chinese communities in Singapore and Malaysia.

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particularistic and non-ideological ties between persons — based on a commonality of shared identification”.27 Guanxi is literarily meant ‘relationship’ or ‘connection’, and it has to take place at least between two persons or two organizations. There are many types of relationship radiating from self to family, social, economic and political circles. They are father-son relationship (fuzi guanxi), husband-wife relationship (fuqi guanxi), schoolmate relationship (tongxue guanxi), friends relationship (pengyou guanxi), social relationship (shehui guanxi), economic relationship (jingji guanxi), business relationship (shangye guanxi), and political relationship (zhengzhi guanxi) etc. In this sense, guanxi has penetrated individual, family, social and political lives of the Chinese people, and it has become an integral part of personal life and Chinese social structure. As pointed out by a leading Chinese sociologist, Ambrose Yeo-chi King (Jin Yaoji) that guanxi (kuan-hsi, personal relationship), renqing (jen-ch’ing, human obligation) and mianzi (mien-tzu, face) are key socio-cultural concepts to the understanding of Chinese social structure. These concepts are part of the essential ‘stock knowledge’ of Chinese adults in the management of everyday life.28 Guanxi in historical context, has been identified by Lloyd E. Eastman, an American historian on China, as a second major characteristic of Chinese social behavior. An individual Chinese tends to form useful personal relationships around him.29 Culturally, guanxi is also defined by an Ethnic Chinese anthropologist that guanxi can be 27

See J. Bruce Jacobs, “The Cultural Bases of Factional Alignment and Division in a Rural Taiwanese Township”, in The Journal of Asian Studies, Vol. 36, No. 1 (November 1976), pp. 80–81. For further explanation of the concept of ‘guanxi’, see J.Bruce Jacobs, Local Politics in a Rural Chinese Cultural Setting: A Field Study of Mazu Township, Taiwan (Canberra, Contemporary China Centre, Research School of Pacific Studies, Australian National University, 1980), pp. 40–60. 28 See Ambrose Yeo-chi King, “Kuan-hsi and Network Building: A Sociological Interpretation”, in Tu Wei-ming (ed.), The Living Tree: The Changing Meaning of Being Chinese Today (Stanford, Stanford University Press, 1994), p. 109. 29 See Lloyd E. Eastman, “The Family and the Individual in Chinese Society”, in Lloyd E. Eastman, Family, Field and Ancestors: Constancy and Change in China’s Social and Economic History, 1550–1949 (New York, Oxford University Press, 1988), p. 36.

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regarded as cultural model with which Chinese actors strategically and selectively operate in order to manage certain social meaning and economic benefit.30 Whatever the angles or perspectives we adopt, guanxi is undoubtedly a key concept for the understanding of Chinese behavior.

Guanxi, Confucian values and Chinese cultural capital The concept of guanxi is embedded in Confucian social theory which has a tendency of moulding Chinese character into group-oriented and socially dependent beings.31 In the Confucian family system, the relationships (guanxi) among members of the family were clearly set by the ‘five cardinal principles’ (wulun) that governed the relationships between father and son (fuzi), husband and wife (fuqi), and among brothers (xiongdi). There were also set rules governing the behavior of the members of the clan which was the extension of the family along the patriarchal line. The relationships were never be unilateral, but mutual and interactive. The father had to be benevolent and the son be filial, the husband be loving and protective, and the wife be subservient. This loving and subservient bond was also applied to the relationship between elder brother and younger brothers. Beyond the family, the same surname clan or lineage also set rules for the members to follow. The division of the members into different generations distinguished by different generation code words in their names helped to perpetuate the clan by clear responsibilities and obligations. The members of the younger generation had to pay respect to the members of the older generation, while the latter had to be loving and 30

See Yao Shouchou, “Guanxi: Sentiment, Performance and Trading of Words”, in Thomas Menkhoff & Sovay Gerke (eds.), Chinese Entrepreneurship and Asian Business Networks (London & New York, RoutledgeCurzon, 2002), p. 234; Shouchou Yao, Confucian Capitalism: Discourse, Practice and the Myth of Chinese Enterprise (London, RoutledgeCurzon, 2002), pp. 102–103. 31 See Ambrose Yeo-chi King, op. cit., p. 124.

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protective as what clan rules had indicated.32 The individual in the Confucian society, though loaded with many duties and obligations within the family and the clan, still had a great deal of autonomy outside the family and clan domains. He was the initiator of social communication and he could attempt to fulfil his ambitions in the society and in the state. The Confucian ideal of individual achievements in life, from selfcultivation (xiushen), to regulating the family (qijia), to governing the state (zhiguo) to bringing peace and prosperity to the world (ping tianxia) had motivated many ambitious Chinese men in the Confucian society. But to achieve these aims, every step required tremendous efforts in self-motivation, initiative, self-discipline, benevolence, uprightness, diligence and perseverance from the Confucian man. All of these qualities would make good social, political as well as business leadership. The Confucian society also upheld the values of loyalty (zhong), filial piety (xiao), benevolence (ren), propriety (li), righteousness (yi) and wisdom (zhi) for governing various human relationships, and they had been filtered through Chinese family and clan teachings which form the important part of Chinese embodied cultural capital.33 These Chinese embodied cultural capital have direct influence on the Ethnic Chinese businessmen in Southeast Asia, exemplified by the Chinese businesspersons in Singapore.34 32

For studies of traditional Chinese clan rules in China, see Liu Wang Hui-chen, The Traditional Chinese Clan Rules (New York, J.J. Augustin Incorporated Publisher, 1959); Hsien Chin Hu, The Common Descent Group in China and Its Functions (New York, Johnson Reprint Corporation, 1968). 33 This idea of embodied form of cultural capital is borrowed from Pierre Bourdieu, an eminent sociologist, in his article titled “The Forms of Capital”. According to Bourdieu, cultural capital can exist in three forms: in the embodied state, i.e., in the form of long-lasting dispositions of the mind and body; in the objectified state, in the form of cultural goods (pictures, books, dictionaries, instruments, machines, etc.) which are the trace or realization of theories or critiques of these theories, problematic, etc; and in the institutionalized state. See A.H. Halsey, Hugh Lauder, Phillip Brown, and Amy Stuart Wells (eds.), Education: Culture, Economy, and Society (New York, Oxford University Press, 1997), p. 47. 34 A most recent study on the impact of Chinese cultural capital on the Chinese businesspersons in Singapore, see Long Jian, “Xinjiapo huashang zhi wenhua ziben de

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Origins of the Ethnic Chinese business networks The origins of the Ethnic Chinese business networks are rooted in the history, culture and special circumstances in which the Ethnic Chinese operated in Southeast Asia. Early Chinese came to Southeast Asia to trade not to settle. Unlike European colonizers who came for territorial conquest, the Chinese traders stayed in Southeast Asia for a short period of time to conduct business, and returned to China with handsome profit. This transient nature of the early Chinese traders led them to set up various outposts in key ports in the region.35 Commencing in the 7th century during the early Tang Dynasty (618–907 A.D.), the Chinese traders began to construct such a trading network which was improved and consolidated through the Song (960–1127 A.D.) and Yuan (1280–1368 A.D.) dynasties. By the end of the Ming (1368– 1644 A.D.) and early Qing (1644–1911 A.D.) in the mid-17th century, Chinese trading and business networks were well-established.36 leiji yu zhuanhuan” (Cultural Capital Accumulation and Transfer of Singapore Chinese Businesspersons) (an unpublished Ph.D. thesis, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 2012). 35 For a discussion of early Chinese trading activities in Southeast Asia, see Anthony Reid, “The Unthreatening Alternatives: Chinese Shipping in Southeast Asia, 1567– 1842” (an unpublished paper presented at the Conference on Island Southeast Asia and World Economy, 1790s–1990s, held at the Australian National University, Canberra, 24–26 November, 1992; Anthony Reid, Southeast Asia in the Age of Commerce 1450–1680, Volume 2: Expansion and Crisis (New Haven and London, Yale University Press, 1993), pp. 1–61. 36 For a study of China’s foreign trade during the Song and Yuan Dynasties, see Chen Gaohua & Wu Tai, Song Yuan shiqi de haiwai maoyi (China’s Overseas Trade During the Song and Yuan Dynasties) (Tianjin, Tianjin renmin chubanshe, 1981). For a detailed study of China’s foreign trade during the Ming Dynasty, see Li Jinming, Mingdai haiwai maoyi shi (A History of Overseas Trade of Ming Dynasty) (Beijing, Zhongguo shehui kexue chubanshe, 1990), especially pp. 114–121. For a study of Chinese traders’ activities in East Asia during the late Ming and early Qing Dynasties, see a Taiwanese scholar’s work, Chang Pin-ch’un (Zhang Pinchun), “Shiliu zhi shiba shiji Huaren zai Tongya shuiyu de maoyi youshi (The Advantageous Position of the Chinese in East Asian Waters between the 16th and 18th centuries), in Chang Yenhsien (Zhang Yanxian) (ed.), Zhongguo haiyang fazhanshi lunwenji, disanji (Essays on the China’s Maritime History, volume 3) (Nangang, Taiwan, Zhongyang Yanjiuyuan Zhongshan Renwen Shehui Kexue Yanjiusuo, 1988), pp. 345–368.

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However, the European economic penetration into Southeast Asia during this period posed a great challenge to the Chinese traders and threatened their economic well-being. The subordination and integration of the Chinese traders into the new European economic system in the 18th and 19th centuries did not destroy the existing Chinese business networks, but rather they were left to grow as far as they did not pose a direct threat to the European interests.37 Large-scale migration and settlement of the Chinese in Southeast Asia since the mid-19th century changed the nature of the Ethnic Chinese business networks in the region. The enlargement of the Chinese communities in Southeast Asia and the growing demands for Chinese foodstuffs and other consumer items expanded the trade between Southeast Asia and China, and made Chinese business activities viable in the region.38 At the same time, the opening of several Treaty Ports on the China coast following the defeat of China in the infamous Opium War in 1842, and the emergence of Hong Kong as the commercial hub in the Far East provided an enormous stimulus for business activities and a new framework for regional trade between East and Southeast Asia. The Chinese traders and merchants who had hitherto been active in these regions were able to take advantage of the

37

Professor Wang Gungwu observed that The Hokkien Chinese merchants who had no support from their home governments in China, had to be content to become participants, even supporting agents for the state-backed European merchant empires. See Wang Gungwu, “Merchants without Empires: The Hokkien Sojourning Communities”, in Wang Gungwu, China and the Chinese Overseas (Singapore, Times Academic Press, 1991), p. 99. For a more exhaustive study of Hokkien merchants’ business activities in Southeast and East Asia during the 16th and 18th centuries, see James Chin Kong, “Merchants and Other Sojourners: The Hokkiens Overseas, 1570–1760” (an unpublished Ph.D thesis, Department of History, the University of Hong Kong, 1998). 38 See for instance, the trade between Singapore and China in the year 1829–1830 was estimated to be 72,357 tons. It increased to 181,834 tons in the year 1844–1845, 3 years after the opening of the Treaty Ports on the south-eastern coast of China. It increased phenomenally to 444,740 tons in the year 1865–1866. See Wong Lin Ken, “The Trade of Singapore, 1819–69,” An Independent Issue of the Journal of the Malayan Branch, Royal Asiatic Society, Vol. 33, Pt. 4 (December, 1960), p. 123.

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new opportunities to strengthen their existing business networks in Southeast and East Asia.39 Apart from a small group of prominent Ethnic Chinese families which had succeeded in constructing business networks in Southeast Asia and beyond, many descendants of the early Chinese settlers in Southeast Asia were banned from holding land which was reserved for indigenous people, and were also denied the opportunity of employment in the colonial or indigenous government services. What was open for them was business. Not only it offered them a promising opportunity to obtain wealth, but also opened a pathway leading to a bright future for their descendants. Once a business was established, it would bring material conform as well as social prestige and status.40 Thus, the pursuit of wealth through business almost became a common aspiration for many young Southeast Asian Ethnic Chinese. The retreat of the European Powers and the rise of the new indigenous states in the region after World War II did not shift the focus of the Ethnic Chinese on business, for many of them were still discriminated against or barred from getting a job in the government service. To pursue a career in business is regarded not only as respectable, but also as necessary as far as many young Ethnic Chinese are concerned, and how to preserve and expand the existing Chinese business networks for survival is still a major concern for many Ethnic Chinese in the region.

39

For the linkage between Hong Kong and Southeast Asian trade after the opening of Hong Kong, see Jung-Fang Tsai, Hong Kong in Chinese History: Community and Social Unrest in the British Colony, 1842–1913 (New York, Columbia University Press, 1993), pp. 26–31. 40 For a discussion of the relationship between wealth and social prestige and status in the Chinese community in Singapore and Malaya in the late 19th and 20th centuries, see Yen Ching-hwang, “Ch’ing’s Sale of Honours and the Chinese Leadership in Singapore and Malaya, 1877–1912”, in Journal of Southeast Asian Studies, Vol. 1, No. 2 (Singapore, McGraw- Hill Far Eastern Publishers, 1970), pp. 20–32; see also the same article reprinted in Yen Ching-hwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), pp. 177–198.

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Importance of Business Networks and Business Groups Explanations of the fast economic growth of East and Southeast Asian economies of the last three decades are many. They ranged from economic, political to social and cultural factors. Among the economic factors, the most frequently referred to are the correct economic policies and strategies such as export-oriented industrialization, importsubstitution, induced foreign investment and cheap labor cost.41 But increasingly scholars have been interested in exploring the role of business organization in the success of East and Southeast Asian economies.42 What is clearly discernable of these Asian capitalist economies is the domination of clusters of business networks or groups. The top 6 business groups in Japan, the top 10 in South Korea and top 5 in Hong Kong have achieved a control over a large portion of key sectors in their economies. In contrast with Western companies which operate more or less as autonomous actors engaged in competition with each other, the business firms in East and Southeast Asia are organized into corporate networks or groups. Members of these large business networks or groups are not headquarters-branches relationship, nor are they organized hierarchically on the basis of superior-subordinate relations. Instead, they are quite independent and free from frequent managerial interference. They shared some common purposes and aims and have some common 41

See The World Bank, The East Asian Miracle: Economic Growth and Public Policy (New York, Oxford University Press, 1993); Gerald Tan, The Newly Industrializing Countries of Asia (Singapore, Times Academic Press, 1995, 2nd edition; Anis Chowdhury & Iyanatul Islam, The Newly Industrialising Economies of East Asia (London, Routledge, 1997, reprint). 42 For instance, a group of scholars interested in the role of business organizations in the economic development in East and Southeast Asia met in 1986 at the University of California, Davis, and laid the groundwork for the formation of research teams at the University of Hong Kong, National University of Singapore, Tunghai University in Taichung, Taiwan and the University of California, Davis. The group held its first conference at Hong Kong University, 20–22 June 1989, and resulted in the publication of the papers in a book titled Business Networks and Economic Development in East and Southeast Asia edited by Gary Hamilton.

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business interests.43 In this sense, they are like industrial octopus swallowing large portions of market share and expanding fast to other parts of the world. This network structure of Asian capitalist economies and its immense economic power make Asian economic patterns different from their Western counterparts. However, what should be noted here is that Asian economic networks or groups are not uniform, and they differ from each other. Japanese business networks differ from the South Korean networks, and they are different from Ethnic Chinese business networks found in Taiwan, Hong Kong and Singapore. A business network consists of a group of business firms, and the number of firms vary according to the strength of the group. Their identity can be established by some common grounds: sharing of a common name and logo; membership of the leaders of the major firms in their group’s ‘presidents club’; membership in the public relations committee of the group; mutual cross-holding of stocks among group firms; preferential trade relations; common source of financial resources; and interlocking directorship.44

Features of Ethnic Chinese business networks Although Ethnic Chinese business networks share many common features with the Japanese and South Korean business networks, they

43

For instance, Noda Shoyu union, a Japanese cartel of soya sauce manufacturers was formed in June 1887. The cartel was to control supply, stabilize prices and guarantee markets. The cartel in its heyday could command the influence of 22 families of brewers in a dozen or more communities. The relationships among members of the cartel transcended family and kinship ties, and chronic violators of cartel policies were reported to the press for public censure. See W. Mark Fruin, “From Philanthropy to Paternalism in the Noda Soy Sauce Industry: Pre-Corporate and Corporate Charity in Japan”, in Business History Review, Vol. LVI, No. 2, A Special Issue on East Asian Business History (Cambridge, Massachusetts, Harvard Graduate School of Business Administration, Summer, 1982), pp. 172–174. 44 See Marco Orru, “Practical and Theoretical Aspects of Japanese Business Networks”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 248.

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are different from the Japanese and South Korean networks in two areas: the inter-firm relationship, and government-firm relationship. Firstly, as family loyalty overrides all other loyalties in the Ethnic Chinese communities, business relationship is also primarily dictated by family interests. That means the ties between firms owned by the same family are stronger than those between firms owned by different families. In contrast, because of their feudalistic history, the Japanese and South Koreans have developed a stronger commitment to broader institutions than to their families or extended families. Therefore, the inter-firm relationships in Japanese zaibutsus and South Korean chaebols are built firmly on mutual obligations to the group per se. This allows them to enlarge their sizes quicker and easier. Further, the inter-firm relationships within the Ethnic Chinese business networks are also affected by the different basis of personal trust. In the Ethnic Chinese communities, personal relationships (guanxi) are based on familial, kinship, geographical and dialect ties that reflect in the business relationship by narrowing the scope of the web; while Japanese and South Korean obligation networks are able to cut across these kinship and geographical ties, and have the ability to form strong bonds with people of different backgrounds.45 Secondly, Ethnic Chinese business networks enjoy less government patronage than those of Japanese and South Korean. Most Ethnic Chinese communities live under a foreign government, and Ethnic Chinese businesses may not be identical with the national interests of the entire country. The immigrants were not given due support by the governments of the day. Therefore, the Ethnic Chinese businesses have to strive to cultivate cordial relationship with the governments, and establish some kind of ad hoc relationship with the local ruling elite.46 However, the Japanese zaibatsus and South Korean chaebols possessed 45

See Gilbert Wong, “Business Groups in Hong Kong”, Ibid., p. 130. For instance, Chinese business cultivated good relationship with politically influential Malay elites by offering them board directorship. See James V. Jesudason, Ethnicity and the Economy: The State, Chinese Business, and Multinationals in Malaysia (Singapore, Oxford University Press, 1990), p. 129. 46

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different history. They were well integrated into the main streams of national economies, and enjoyed a high degree of patronage from the governments. In fact, many large chaebols were the creation of the South Korean government under President Pak Chung Hee in the 1960s.47

Structure of ethnic Chinese business groups The foundation of Ethnic Chinese business groups is personal networks (guanxi). ‘Guanxi’ is not an analytical concept, rather, it indicates a personal relationship loaded with affection and mutual obligations. It is defined by a scholar as “personalistic, particularistic and non-ideological ties between persons — based on a commonality of shared identification”.48 In the context of Ethnic Chinese society, this shared identification is based on kinship, geographical and dialect ties, school, college and university connections. The pattern of immigration and the nature of the Ethnic Chinese communities strengthened the kinship and geographical-dialect ties. The lack of home government protection further convinced Ethnic Chinese businessmen that 47

For the relationship between state and chaebols, see Kim Eu Mee, “From Dominance to Symbiosis: State and Chaebol in the Korean Economy, 1960–1985” (Ann Arbor, UMI Dissertation Service, Xerox reproduction, 1994); Karl J. Fields, “Chaebol and the State in Korea”, in Karl J. Fields, Enterprise and the State in Korea and Taiwan (Ithaca and London, Cornell University Press, 1995), pp. 28–62. 48 See J. Bruce Jacobs, “The Cultural Bases of Factional Alignment and Division in a Rural Taiwanese Township”, in The Journal of Asian Studies, Vol. 36, No. 1 (November 1976), pp. 80–81. For further explanation of the concept of ‘guanxi’, see J. Bruce Jacobs, Local Politics in a Rural Chinese Cultural Setting: A Field Study of Mazu Township, Taiwan (Canberra, Contemporary China Centre, Research School of Pacific Studies, Australian National University, 1980), pp. 40–60. For a sociological analysis of the relationship between ‘guanxi’ and Chinese networking, see Ambrose Yeo-chi King, “Kuan-hsi and Network Building: A Sociological Interpretation”, in Tu Wei-ming (ed.), The Living Tree: The Changing Meaning of Being Chinese Today (Stanford, Stanford University Press, 1994), pp. 109–126; Chinese version of this article entitled “Guanxi and wangluo de jiangou: yige shehuixue de zhuanxi”, in Jin Yaoji (Ambrose Yeo-chi King), Zhongguo shehui yu wenhua (Chinese Society and Culture) (Hong Kong, Oxford University, 1992), pp. 64–85.

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they had to rely on these traditional Chinese social ties if they wanted to survive and prosper. Right from the beginning of existence of the Ethnic Chinese communities in Taiwan, Hong Kong and those in Southeast Asia, the founding of clan organizations (based on kinship ties) and huiguan (based on geographical and dialect ties) demonstrated the importance of the kinship and geographical bonds among the early Chinese immigrants.49 These organizations had tight grips over their members, including jobs, social and cultural lives as well as business activities.50 The modernization of the Ethnic Chinese communities have weakened these traditional ties, but they nevertheless survived and still form an important basis for business grouping. In Taiwan, the formation and development of the famous Tainanbang (the Tainan Business Clique) is a case in point. This business group consists of 27 companies in 1987, and was dominated by three core companies, the Tainan Spinning Company Limited, the Universal Cements Limited and the President Enterprise Corporation.51 The group has been controlled by three families, Wu Kedu and sons, Hou Yuli and family, and Wu Sanlian and family. These three families came from the same village of Bei Men of the Tainan district of Taiwan. Not only they came from the same village, but also spoke the same dialect, Southern Fujianese 49

For a study of kinship, geographical and dialect ties in the Chinese communities in Singapore and Malaya between 1800 and 1911, see Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986). 50 For a study of the relations between dialect group and occupation in the early Chinese communities in Singapore and Malaya, See Mak Lau Fong, “Occupation and Chinese Dialect Group in British Malaya”, in Leo Suryadinata (ed.), Chinese Adaptation and Diversity: Essays on Society and Literature in Indonesia, Malaysia & Singapore (Singapore, Centre for Advanced Studies, National University of Singapore & Singapore University Press, 1993), pp. 8–27; Mak Lau Fong, “The Structure of Occupation, Trade and Industry”, in Mak Lau Fong, The Dynamics of Chinese Dialect Groups in Early Malaya (Singapore, Singapore Society of Asian Studies, 1995), pp. 58–79. 51 See Ichiro Numazaki, “The Role of Personal Networks in the Making of Taiwan’s Guanxiqiye (Related Enterprises)”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, pp. 81–83.

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dialect (Hokkien). Geographical and dialect ties laid the foundation of their business alliance. Moreover, Wu Kedu and Wu Sanlian also shared the same surname of Wu. Although the two Wu families were not directly connected through kinship, they nevertheless believed that they had a common remote ancestor sometime in history. This common surname relationship, in Chinese as Tongzong, further strengthened the alliance. On the other hand, the relationship between Wu Kedu’s family and Hou Yuli’s family was also consolidated through history and former employer-employee relationship. The relationship can be first traced back as early as 1920s when Taiwan was still under the Japanese rule. Wu Kedu worked as an account keeper in a cloth store owned by Hou Yuli. Later, Wu Kedu’s elder son was also accepted as an apprentice in the same shop. Although Wu Kedu and sons later became established in their own business, they invariably felt indebted to the Hou family because of the past employer-employee relationship.52 The real foundation of the Tainanbang was laid with the founding of the Tainan Spinning Company Limited in 1955. In 1953, the Nationalist government in Taiwan announced first four-year economic plan for the development of the island economy. Light industry was given top priority in the plan, and the development of modern large textile industry was targeted. Two new 10,000 spindle spinning factories were planned, and private companies were encouraged to apply for the licences. Taking the opportunity arising, the Wu and Hou families joined force and succeeded in the bid for one of the two coveted permits. Their success was mainly due to the lobbying of Wu 52

For an excellent study of the origins and development of Tainanbang, see Hsieh Kuo-hsing (Xie Guoxing), Qiye fazhan yu Taiwan jingyan: Tainanbang de gean yanjiu (Corporation Development and the Taiwan Experience: A Case Study of Tainan Group) (Taipei, The Institute of Modern History, Academia Sinica, 1994), (Monograph Series No. 73, The Institute of Modern History, 367 pp.). Hsieh Kuohsing (Xie Guoxing), “Zai chuantong yu xiandai zhijian: Tainanbang de tuancheng, 1926–1955” (Between the Tradition and Modernity: The Formation of Tainanbang, 1926–1955), in Zhonghua minguo jianguo bashinian xueshu taolunji (Proceedings of Conference on Eighty Years History of the Republic of China, 1912–1991), Vol. 4: Social and Economic History (Taipei, 1991), pp. 500–527.

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San-lian who had been mayor of Taipei and had commanded enormous political influence within the Nationalist party. Wu was made a minor partner but the first managing director of the Tainan Spinning Company Limited when it was founded. The Wu Kedu and Hou Yuli familes were the largest shareholders of the Tainan Spinning (Hou’s family had contributed 6.66 million out of the 15 million, a 44.4%, while Wu Kedu’s family had contributed 5 million, a 33.3% of the total capital.) and had controlled the company.53 After the successful operation of the Tainan Spinning, the Wu and Hou families established a series of corporations which constituted parts of the Tainanbang Business Group, including a famous food company, the President Enterprise Corporation.54 In its process of expansion, the Wu and Hou families frequently used their geographical, kinship, marriage and other ties to recruit more companies into the Tainanbang. The history and growth of the Oversea-Chinese Banking Corporation Business group in Singapore and Malaysia offers another example of how the guanxi worked in the formation and development of the Ethnic Chinese business groups. A Malaysian economist, Lim Mah Hui, in his 1978 study of ownership and control of one hundred largest corporations in Malaysia, identified 8 business cliques, and the OCBC-Sime Darby clique was considered the largest and most powerful. It was the queen of the business cliques in Malaysia.55

53

Hsieh Kuo-hsing, Qiye fazhan yu Taiwan jingyan, Ibid., pp. 123–129; Hsieh Kuohsing, “Zai chuantong yu xiandai zhijian: Tainanbang de tuancheng, 1926–1955”, Ibid., pp. 516–521. 54 For a detailed study of the rise of the President Enterprise Corporation and its globalization, see Hsieh Kuo-hsing (Xie Guoxing), “Tongyi qiye: yige Taiwan xiangtu qiye de guojihua”(The President Enterprise Corporation: The Globalization of an Indigenous Taiwanese Enterprise), in Guofu jiandang geming yibai zhounian xueshu taolunji, di sice — Taiwan guangfu yu jiansheshi (Proceedings of Centennial Symposium on Sun Yat-sen’s Founding of the Kuomintang for Revolution, Vol. 4: Republic of China on Taiwan, 1950–1993) (Taipei, Jindai Zhongguo chubanshe, 1995), pp. 461–504. 55 See Lim Mah Hui, Ownership and Control of the One Hundred Largest Corporations in Malaysia (Kuala Lumpur, Oxford University Press, 1981), pp. 87–91.

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It consisted of two interest groups, the OCBC and the Sime Darby groups. The critical link between the two groups was OCBC together with its subsidiaries owning about 10% of Sime Darby Holdings capital, which represented the largest block of shares held in Sime Darby in 1976. The OCBC-Sime Darby clique embraced 38 of the top 100 corporations in Malaysia, and 13 out of the 38 were core companies of which the OCBC was most important. Its status in the business world in Singapore and Malaysia was considered the equivalence of the house of Morgan or Rockefeller in the United States. In 1976, the total assets of the OCBC was estimated in the vicinity of $4.3 billion, while its net worth was estimated at $929 million. Its activities covered a wide range of business, banking, insurance, tin-mining and smelting, rubber plantations, trading, hotels, properties, investment, manufacturing and management services. In the late 1970s, it was controlled by a few Chinese families. On the forefront was the Lee Seng Wee (son of Lee Kong Chian, the world renowned Rubber king) family which was its largest shareholder owning about 20% of the stocks. Other big shareholders of the OCBC included the Lee Choon Seng family, Lee Wee Nam and Tan Siak Kew families, Tan Hoon Siang family and Tan Tock San family. Although the OCBC was owned by a few wealthy Chinese families, most of them preferred to keep a low profile, but elected a few directors such as Tan Chin Tuan and Yong Pang How to represent their interests in various satellite companies.56 The OCBC (Oversea-Chinese Banking Corporation) came into being on 14 December 1932 as a result of amalgamation of three existing Chinese banks in Singapore: the Ho Hong Bank Ltd., the Oversea-Chinese Bank Ltd., and the Chinese Commercial Bank Ltd. In response to the impact of the World Depression in the early 1930s on business in the Singapore-Malayan region, the three Chinese banks were amalgamated to strengthen financial base and to avoid 56

Ibid., pp. 91–96.; Lim Mah Hui, “The Ownership and Control of Large Corporations in Malaysia: The Role of Chinese Businessmen”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Vol. 1: Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983), pp. 285–289.

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competition.57 Apart from financial consideration, what made the amalgamation possible was the personal networks based on geographical and dialect ties. They either shared some common founders, or their founders or major shareholders had shared common geographical and dialect ties (Dr. Lim Boon Keng was a founder of all three banks: the Ho Hong Bank, the Oversea-Chinese Bank and the Chinese Commercial Bank, while Lee Choon Guan and Lim Peng Siang were founders of both Chinese Commercial Bank and the Ho Hong Bank). In addition, all of the founders and major shareholders of the three banks came from the southern part of Fujian province and speaking a common Hokkien dialect.58 Emerging from the Depression of the 1930s, OCBC grew rapidly during the post World War II period. Taking advantage of the new political situation in the region and the retreat of British capital from Southeast Asia, it acquired the control of important British companies such as Straits Trading, Sime Darby, Petaling Tin and others, and it also diversified into other branches of business. Like the Tainanbang, the OCBC used geographical and dialect ties to expand and recruit companies into its group. In addition, the families that controlled the OCBC, used kinship ties to consolidate their business relationship. Many of their family members intermarried among themselves. For instances, Lee Kong Chian, the founder of the prominent Lee family 57

See Tan Ee-leong, “The Chinese Banks Incorporated in Singapore and Malaya”, in Journal of the Malayan Branch of Royal Asiatic Society, Vol. 26, Pt. 1 (July 1953), pp. 117–127; Dick Wilson, Solid As a Rock: The First Forty Years of the Oversea-Chinese Banking Corporation (Singapore, Oversea-Chinese Banking Corporation Ltd., 1972), p. 1. 58 For identifying socio-economic and dialect backgrounds of Dr. Lim Boon Keng, Lee Choon Guan and Lim Peng Siang, see Yong Ching Fatt, “A Preliminary Study of Chinese Leadership in Singapore, 1900–1941”, in Journal of Southeast Asian History, Vol. 9, No. 2 (Singapore, September 1968), pp. 258–285; the same article is also published in C.F. Yong, Chinese Leadership and Power in Colonial Singapore (Singapore, Times Academic Press, 1992), pp. 47–81; Yong Ching Fatt, “Minzu zibenjia Lin Pinxiang yu He Feng gongsi” (Indigenous Chinese Capitalist — Lim Peng Siang and the Ho Hong Company), in Yong Ching Fatt, Zhanqian Xinhua shehui jiegou yu lingdao chen chutan (Chinese Community Structure and Leadership in Pre-War Singapore) (Singapore, South Seas Society, 1977), pp. 103–116.

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within OCBC-Sime Darby group, married the daughter of Tan Kah Kee, the famous industrialist, business tycoon and philanthropist and a director of OCBC. Tan Chin Tuan, director of many OCBC member companies, married the daughter of Wee Theam Seng, a former General Manager of OCBC.59

The Role of Business Networking and the Globalization of Ethnic Chinese Business It would not be an overstatement that business networking play a major role in the rise of Ethnic Chinese business in East and Southeast Asia in the 1970s. Before that time, business networking was even more important because information technology and financial institutions were relatively underdeveloped in the Ethnic Chinese communities, therefore the traditional kinship and dialect ties played a significant role in acquiring information about business opportunities, raising capital, marketing and distribution of products. Before the 1970s, souvenir magazines distributed by Ethnic Chinese clan and dialect organizations served these purposes. For instance, the souvenir magazine published by the Federation of Gugang Zhou Six District Associations of Malaya (Malaiya Gugangzhou Liuyi zonghui tekan) in 1964 contained 360 advertisements, and the majority of them appeared to have been contributed by the members of the dialect group. The advertisements covered a wide variety of business, ranging from manufacturing, banking, transport, restaurants, sawmills, furniture-making, Chinese sauce and candle manufacturing, and oil-milling, to electrical goods, photo studios, hotels, cinemas and goldsmiths.60 Contributors of these advertisements were widely drawn from major cities in Malaysia and Singapore.61

59

See Lim Mah Hui, Ownership and Control of the One Hundred Largest Corporations in Malaysia, pp. 94–96. 60 See Malaiya Gugang Zhou Liuyi zonghui tekan (Penang, 1964), Section on Commercial Advertisements. 61 Major cities included Singapore, Kuala Lumpur, Malacca, Ipoh, Penang and Seremban, while minor cities such as Kampar, Taiping, Bidor and Batu Gajah were also included. Ibid.

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Most of these advertisements provided names of the companies or shops in both Chinese and English, with addresses and telephone numbers for contacts.62 The six districts of the Gugang Zhou (literally meaning Ancient Gang Prefecture) in the Guangdong province, consist of Xinhui, Taishan, Kaiping, Enping, Heshan and Chixi. The first four district are popularly known as the “Four Districts” (Si Yi, or in Cantonese as See Yap). The people of the six districts speak a distinctive subCantonese dialect, and their people are widely spread across Hong Kong, Southeast Asia, the United States, Canada and Australia.63 The souvenir magazine published by the Federation of the Gugang Zhou Six Districts Associations of Malaya was circulated widely among its members and the fraternal organizations overseas. Thus, the magazine effectively linked the members of this dialect group worldwide, and provided an useful mechanism for business networking. When a businessman from this dialect group in Penang or Ipoh wished to start a new business in electrical retailing, for example, he could find out from the magazine who were in electrical wholesale business in Kuala Lumpur or Singapore among his fellow districts folks. He would then make initial contacts using the information provided in the magazine. Having gathered the necessary information about the business, he could then get the supply either from that wholesaler or through him from other sources. Similarly, a manufacturer of this dialect group could also find out potential agents or customers from the magazine. Certainly this was not the only way he could do business, but he would prefer to do business with someone who spoke the same dialect and was bound by common linguistic and cultural ties. Further, he would feel more confident that he would not 62

Ibid. For the See Yap Chinese in early Australia, see C.F. Yong, The New Gold Mountain: The Chinese in Australia, 1901–1921 (Adelaide, Raphael Arts, Pty. Ltd., 1977). For the See Yap Chinese in the United States in mid 19th century, see Gunther Barth, Bitter Strength: A History of the Chinese in the United States, 1850–1870 (Cambridge, Massachusetts, Harvard University Press, 1964). For the See Yap Chinese in Canada, see Edgar Wickberg, From China to Canada: A History of the Chinese Communities in Canada (Toronto, McClelland and Stewart Ltd., 1982). 63

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be cheated by his supplier or agent because a social sanction against dishonesty existed within the dialect group. In a broad historical perspective, the rise of the Ethnic Chinese business in East and Southeast Asia in the 1970s was a result of the interplay of multiple factors. No single factor, regardless how important it may be, can account for the emergence of this historical phenomenon. In this context, business network is one of the several important factors such as government policies, economic strategies, global economic environment, geo-political factors and cultural strength. It would be difficult to judge whether the rise of the Ethnic Chinese business could have occurred without such networking, but it would be safe to suggest that the existence of these networks facilitated and speeded up the rise of the Ethnic Chinese business in the regions. Some scholars tend to discount the importance of business networks for the Ethnic Chinese business, and even believe that networking will become irrelevant once Ethnic Chinese companies become corporations.64 The argument for this view is based on the assumption that Ethnic Chinese business will eventually shift towards Western practices and abandon traditional Chinese networking once they grow.65 Undoubtedly, Ethnic Chinese business have to grow and expand by adopting more Western practices of accounting, planning and management. But they cannot and need not to change over completely to Western ways of doing business because they are still dealing mostly with Chinese and Asian customers. Chinese and Asian values that underpinned business operations in the past still work to some extent today. A complete reversal of business practice from Chinese to Western could end disastrously. Ethnic Chinese business 64

Edmund Terence Gomez, a Malaysian economist, even called Chinese business networking a myth. See Edmund Terence Gomez, Chinese Business in Malaysia: Accumulation, Ascendance, Accommodation (Richmond, Surrey, Cuzon Press, 1999), p. 183. 65 See Linda Y.C. Lim, “Chinese Business, Multinationals and the State: Manufacturing for Export in Malaysia and Singapore”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Volume 1: Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983), pp. 245–274.

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corporations need to adopt good Western practices, and to combine with the best of the Chinese values in order to produce a hybrid system which will suit the societies in which they operate. There were signs that Ethnic Chinese dialect and kinship organizations were losing ground in East and Southeast Asia in the 1970s when many of the Ethnic Chinese companies became corporations. But this trend was arrested in 1980s. The single most important factor was the emergence of China as potentially the largest market in the world. China’s shift of its focus from an ideology-driven to a market-based economy after 1978 altered the perception of China by many Southeast Asian countries, and changed their policies towards the Ethnic Chinese in their midst. China’s strategy of attracting Ethnic Chinese investment and technical expertise further stimulated the Ethnic Chinese communities in East and Southeast Asia to take advantage of that change.66 Many Ethnic Chinese businessmen in East and Southeast Asia regarded China not just as the birthplace of their ancestors, but also potentially the largest and most profitable market for investment and business. The Hong Kong Chinese who had no political problems investing in China, took the lead, and were followed by many Southeast Asian Chinese businessmen, and later by the Chinese in Taiwan. Following the withdrawal of Western and Japanese capital after the Tiananmen Crackdown in June 1989, the Ethnic Chinese in East and Southeast Asia increased their investment to fill the gap left by the Western and Japanese investors.67 66

For a study of Ethnic Chinese response to the opportunities in China after its opening, See Constance Lever-Tracy, David Ip & Noel Tracy, The Chinese Diaspora and Mainland China: An Emerging Economic System (London, McMillan Press Ltd., 1996), pp. 99–176. 67 See Chen Qiaozhi, “Guangdong jingji tengfei yu Gang Ao he Dongnanya huaren ziben de zuoyong” (The Role of the Chinese Capital of Hong Kong, Macau and Southeast Asia and the Rise of the Guangdong Economy), in Lim How Seng (Lin Xiaosheng) (ed.), Dongnanya Huaren yu Zhongguo jingji shehui (The Chinese in Southeast Asia and China’s Economy and Society) (Singapore, Singapore Society of Asian Studies, 1995), pp. 61–66; Chen Chunlai, “Foreign Direct Investment in China: Determinants, Origins and Impacts” (an unpublished Ph.D. thesis, Department of Economics, University of Adelaide, December 1997), pp. 13–14; Lu Ming, “Road

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In the escalation of investment in China, and as globalization gradually set in, those far-sighted Ethnic Chinese businessmen in the East and Southeast Asia believed that traditional kinship and dialect ties could be utilized for the service of their business. The idea was to extend and strengthen the existing regional kinship and dialect ties, and to globalize them for the benefit of those who wished to use them. The formation of several loose trans-continental dialect and kinship organizations — the Teochew International Convention (Guoji Chaotuan Lianyi Nianhui), the Hakka International Convention, and the Hainanese International Convention — in the 1980s crystallized that idea. This informal international dialect linkage provides regular contacts for the businessmen of the same dialect group worldwide through regular conventions held annually or biennially. An information center or secretariat was set up to publish newsletters or bulletins, and to help facilitate the organization of the conventions. The venue for the convention was rotated from one city to another, partly designed not to impose heavy burdens on a particular regional organization, and partly to attract more participants to these conventions.68 This globalization also occurred at the subdialect and kinship groups such as the An Xi International Convention and the Gan Clan International Convention in the 1980s and 1990s.69 to Prosperity: The Role of Ethnic Teochew Chinese in China’s Economic Development, 1978–2003” (an unpublished Ph.D. thesis, Departments of History and the Centre for Asian Studies, The University of Adelaide, 2007), pp. 145–147. 68 For instance, the first Teochew International Convention which was called in November 1981 in Hong Kong, resulted in the establishment of an information centre in Hong Kong with the responsibility of publishing a bulletin titled “Teochew International Convention Bulletin” (Guoji Chaoxun). The convention was to be held biennially. After the convention in Hong Kong, Teochew International conventions were successfully held in Thailand, Malaysia and Singapore respectively in 1983, 1985 and 1987. The 5th convention was held in Macau with nearly 2,000 delegates from 26 countries. See the “Opening speech delivered by the Chairman of the 5th Teochew International Convention, Xu Shiyuan in November 1989, Macau”, in Guo Weichuan (ed.), Guoji Chaoxun, No.11 (Teochew International Convention Bulletin, No.11) (Hong Kong, Internal Information Centre of the Teochew International Convention, March, 1990), pp. 2 & 6. 69 An Xi is one of the districts in southern Fujian province, An Xi Chinese are among Hokkien merchants in Singapore and Malaysia, and many of them are tea merchants

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One of the common aims of these conventions was to help the home province or home district to modernize, especially in economic arena. Since China was in shortage of capital and technical know-how in the course of its modernization, the Ethnic Chinese had an important role to play in this regard. Many Ethnic Chinese dialect and clan organizations had enormous capital to invest. According to one estimate in October 1996, the Chinese dialect and clan organizations in Malaysia had 10 billion ringgit (Malaysian currency) worth of properties and other financial resources,70 which can be turned into liquid capital for investment. Certainly, the emotional sentiment attached to their home districts and home provinces and the concern for the wellbeing for the district and provincial folks in China were not the only consideration for any investment in China, this sentimental and altruistic motives had to be matched by profits which could be extracted from these investments. The combination of Ethnic Chinese capital and technical knowhow with cheap and plentiful human resources in China would create a win-win situation for both parties. This would of course help to speed up the process of globalization of the Ethnic Chinese business. To put the ideas into action, an investment company which could mobilize Ethnic Chinese capital was suggested and formed, and it appeared to be a popular form of action taken by the Ethnic Chinese because the district of An Xi is famous of its tea products. Gan clan (or known as Yan or Yen clan) association is a leading Chinese clan organization in Singapore and Malaysia. It organized the first International Gan Clan Convention in Singapore in April 1991. For details of the First convention held on April 6th, 1991 in Singapore, and the 2nd convention held in Malacca, October 26th–28th, 1993, see Xinjiapo Yanshi gonghui sanshi zhounian jinian ji disanjie shijie Yanshi zhongqin lianyihui tekan (Souvenir Magazine of Singapore Gan Clan Association 30th Anniversary and 3rd World Gan Clan Conference, May 11th 1996) (Singapore, Gan Clan Association, 1996), pp. 130–144. 70 See Liu Hong, “Jiu guanxi, xin wangluo, haiwai Huaren shetuan de quanqiuhua jiqi yiyi” (Old Linkages, New Networks: The Globalization of Overseas Chinese Voluntary Associations and Its Implications), in Liu Hong, Zhongguo — Dongnanya xue: lilun jiangou, hudong moshi, gean yanjiu (Sino-Southeast Asian Studies: Theoretical Paradigms, Interaction Patterns, Case Analyses (Beijing, Zhongguo shehui kexue chubanshe, 2000), pp. 253 & 264.

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dialect and kinship organizations in Southeast Asia. In 1986 and 1988, in the two Guangxi International Conventions, the idea of setting up an Guangxi Investment Company was raised, and this idea was raised again in 1993 by the leader of the Guangxi community in Singapore. The proposed Guangxi Investment Company was to carry out investment in the Guangxi province. In 1990, at the International Convention of the Fuzhou Ten Districts Associations (Fuzhou shiyi tongxiang hui) held in Singapore resolved to establish an investment company which was to be registered in Hong Kong. In 1992, at the first International Convention of the An Xi Chinese in Singapore, the leader of the An Xi Association of Singapore, Tang Yu, proposed to establish a trans-national An Xi company specially for investment in China, this proposal was supported by the leader of the An Xi Association of Malaysia who advocated the mobilization of Ethnic An Xi Chinese capital for the investment in their home district which would lead to economic development of An Xi district in China. In 1992, at the inaugural International Convention of the Ethnic Feng Shun Chinese (shijie Feng Shun tongxiang dahui; Feng Shun is a district in Guangdong province) in Singapore, the delegates decided to raise 30 million dollar (Singapore currency) for establishing a World Feng Shun Investment Company, and planned to build a new Ethnic Chinese town and a hot-spring tourist village in Feng Shun district, and to build a 22 story Overseas Chinese Building (Huaqiao daxia) in Guangzhou city.71 All of these Ethnic Chinese dialect and kinship conventions provided opportunities for direct business contacts and for business negotiations completed in a pleasurable cultural and feasting environments, and the host country or cities also benefited directly for promoting tourism and stimulating economic activities. I had the privilege to witness a huge Ethnic Chinese International Convention in action. The 13th World Hakka Convention (Hakka is a major Chinese dialect group in Southeast Asia and Taiwan) was held in Singapore in November 1996. The convention was hosted by the 71

Ibid., p. 254.

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Nanyang Khek (Hakka) Community Guild of Singapore (Xinjiapo Keshu zonghui), and it was attended by 1,485 delegates from various Hakka associations throughout the world.72 To coincide with this important convention, the Nanyang Khek Community Guild of Singapore, in conjunction with 8 academic bodies in Singapore, Hong Kong and France, also hosted the 3rd International Conference on Hakkaology (Hakka Studies) in Singapore from 9–12 November 1996. I was privileged to be invited as the keynote speaker for the conference which was attended by more than 150 scholars from all over the world.73 Being treated as a part of the convention, the scholars were invited to attend some important functions which enabled me to talk with some of the Hakka delegates, and to observe how the convention was utilized as a means of advancing both the business and cultural interests of the Hakka Chinese. Each participating Hakka association prepared a booklet comprising a list of delegates with brief description of their business and interests, their addresses, telephone

72

This is the number of delegates from Hakka associations all over the world except Singapore. They included the Hakkas from China, Taiwan, Hong Kong, Macau, Japan, Malaysia, Indonesia, Thailand, India, Brunei, the United States, Canada, Central America, South America, Europe, Britain, Australia and Africa. The majority of the delegates came from China and Taiwan. Taiwan, for instance, sent 306 delegates. An estimated 3,000 people attended the convention, including local delegates and Hakka residents as well as scholars who attended the 3rd International Conference on Hakkaology (Hakka Studies). See Liang Chunqing & Zhang Kerun (eds.), Di Shisan jie shijie Keshu kenqin dahui (Souvenir Magazine of the 13th World Hakka Convention, November 1996, Singapore) (Singapore, the Nanyang Khek Community Guild of Singapore, 1996), pp. 144–146. 73 Ibid., p. 132. My keynote speech was titled “Hakka Chinese in Southeast Asian History”, in both Chinese and English. See Di Sanjie Kejiaxue guoji yantaohui lunwen zaiyaoji (Outlines of Papers for the 3rd International Conference on Hakkaology) (Singapore, Nanyang Khek Community Guild of Singapore, 1996), pp. 1–20. See also my memoirs in Chinese titled Chuanxing zai dongxifang wenhua zhijian: yige haiwai Huaren xuezhe jian shehui huodongjia de huiyilu (Moving between Eastern and Western Cultures: Memoirs of an Ethnic Chinese Scholar and Social Activist) (Hong Kong, Hong Kong Social Sciences Press Pte. Ltd., 2008), pp. 299–300.

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and fax numbers; some photographs were also printed for the convenience of identifying the delegates.74 Obviously, these delegates who attended the convention were motivated by the opportunity to meet fellow dialect speakers from other parts of the world, and for searching new business opportunities and business networking. The 13th World Hakka Convention was one of the largest ever held in the world, and it attracted much support from the local Hakkas and the government of Singapore. Mr. Richard Hu, the Finance Minister and Mr. Lee Hsien Lung, the First Deputy Prime Minister, both of Hakka origin, were invited to address the convention. The convention was celebrated with a big exhibition of Hakka cultural heritage organized by the History Museum of Singapore, a grand opening, and a feast for 3,000 people and conducted tours for the delegates, and it was completed with a grand concert of Hakka ballads. The financial benefits for the hosting country were substantial. Apart from money spent on hotels, food and sightseeing, the delegates through words of month, would bring in more tourists to Singapore in future.75 Perhaps the most serious attempt to institutionalize the existing business networks in the service of the emerging Ethnic Chinese business worldwide was the World Chinese Entrepreneurs Convention. The first convention was hosted by the Singapore Chinese Chamber of Commerce and Industry at the Mandarin Hotel, Singapore, from 10 to 12 August 1991. It was attended by 800 delegates from 75 cities in 30 countries.76 It was addressed by prominent Chinese 74

In one of the breakfasts at the Allson Hotel, Victoria Street, Singapore where I met some of the Hakka delegates from a town in Thailand, and was given a booklet with business information, addresses, telephone and fax numbers, and photographs of the delegates. 75 I was told that although many delegates had not been to Singapore before, the hospitality and good impressions they gained from the convention would encourage their relatives and friends to visit Singapore in the future. 76 See the foreword of Mr. Tan Eng Joo (Chen Yongyu in Mandarin), Chairman of the Organizing Committee and the President of Singapore Chinese Chamber of Commerce and Industry, in Fiona Hu (ed.), First World Chinese Entrepreneurs Convention: A Global Network (Shoujie Shijie Huashang dahui zhuanji) (Singapore, Singapore Chinese Chamber of Commerce and Industry, 1992), p. 7.

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scholars and personalities such as Mr. Lee Kuan Yew, the former Prime Minister of Singapore.77 For the first time, the convention brought Ethnic Chinese business leaders worldwide together to discuss problems and prospects for their business as well as opportunities for business contacts.78 Apart from business contacts and social networking, the convention also provided a forum for the dissemination of knowledge on up-to-date world economic trends, new business opportunities with a global perspective. Prominent Ethnic Chinese and Chinese experts in the fields were invited to address the delegates with topics of their expertise. These knowledge and information could be useful for delegates who sought to expand their business in global context. In the first convention in Singapore, several prominent Ethnic Chinese scholars were invited to address the delegates, they included Professor Tu Wei-ming, Professor of Chinese History and Philosophy of Harvard University; Professor John J. Kao of Harvard Business School; Professor Chang-lin Tien, Chancellor of the University of California, Berkeley; Professor Raymond W.Y. Kao, Professor of Entrepreneurship of the Faculty of Management, University of Toronto, Canada; Professor Paul Hsu Shih Chun, the Founding Dean of College of Management, National Taiwan University; Dr. Tong Chee Kiong, Senior Lecturer of the Department of Sociology, National University of Singapore, and Dr. Chan Kwok Bun, Senior Lecturer of the Department of Sociology, National University of 77

For the full text of Lee Kuan Yew’s keynote address to the convention on 10th August, 1991 in both English and Chinese, see Ibid., pp. 23–29. 78 The proceedings of the first convention in Singapore, which were published in 1992, contained information of 800 delegates worldwide. They included names of the delegates in both Chinese and English, names of their companies and lines of business, the positions they held in the companies or corporations, business addresses, telephone and fax numbers. These valuable information formed into a worldwide network for business contacts. The publication must have been sent to the participating organizations, and the information made available to Ethnic Chinese entrepreneurs. These 54 pages of information list were attached to the proceedings as appendix. See Fiona Hu (ed.), First World Chinese Entrepreneurs Convention: A Global Network, pp. 104–158.

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Singapore. All of them gave relevant and stimulating talks relating to the Ethnic Chinese culture or business. For instances, Professor Raymong W.Y. Kao’s topic was on the problems of succession in Ethnic Chinese family business titled “Planning for Succession”, while Dr. Tong Chee Kiong’s paper dealt with the structure and characteristics of Ethnic Chinese business firms titled “Networking The Chinese Way”.79 Another layer of contacts provided by the convention was the contact between government and business. The convention attracted a great deal of attention from the hosting country’s governments which were happy to patronize the convention to raise their profiles globally. The first convention in Singapore was addressed by Mr. Lee Kuan Yew, the former Prime Minister and Senior Minister of Singapore government. It was also addressed by Brigadier-General George Yong-Boon Yeo, Minister for Information and the Arts & Second Minister for Foreign Affairs; Mr. Philip Yeo Liat Kok, Chairman of Singapore Economic Development Board and Mr. Alan Yeo, Chairman of Singapore Trade Development Board. The Seventh convention which held in Kuala Lumpur, Malaysia in 2003, was hosted by The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM). It was officially opened by Dato Seri Dr. Mahathir bin Mohamad, the Prime Minister of Malaysia who also delivered his keynote address. Dato Seri Rafidah Aziz, Minister for International Trade and Industry of Malaysia, addressed a Special Pre-Luncheon gathering; while Dato Seri Abdullah bin Haji Ahmad Badawi, Deputy Prime Minister of Malaysia, was made Guest of Honour of the Gala Dinner. At the same time, 8 ministers and 9 deputy ministers, plus 2 Chief Minister and the Speaker of the Senate, Malaysia were listed as Honorary Advisers of the convention. The participation of many Malaysian ministers added extra weight to the convention, and provided contacts for those Ethnic Chinese businessmen who wished to invest or seek business opportunities in Malaysia.80 79

Ibid., pp. 83 & 87. See http://www.7th-wcec.com/index.html/03_committee01.hu For the Commemorative Proceedings of the 7th World Chinese Entrepreneurs Convention, 80

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The World Chinese Entrepreneurs Convention was made as a regular biennial gathering in the major cities in which the Ethnic Chinese resided, with the hosting institution, usually the Chinese Chamber of Commerce of the particular country, organizing the next convention. The inaugural Singapore convention was followed by the conventions held in Hong Kong, Bangkok, Vancouver and Melbourne in 1993, 1995, 1997 and 1999 respectively.81 How valuable and useful of these World Chinese Entrepreneurs Conventions to the Ethnic Chinese businessmen are difficult to judge. Some critics suggest that the convention may not be extremely useful, one scholar even equated it with a beautiful rainbow on the sky — beautiful with multi-colors, nice to look at — but it is temporary, flexible and the result of the interactions of complex social-economic factors in the Ethnic Chinese communities.82

see Leong Kai Hin & others (eds.), Di Qijie shijie huashang dahui jinian wenxian (The 7th World Chinese Entrepreneurs Convention: Commemorative Proceedings (Kuala Lumpur, The Associated Chinese Chambers of Commerce and Industry of Malaysia, 2003), 494 pp. 81 The 2nd World Chinese Entrepreneurs Convention was hosted by the Chinese General Chamber of Commerce of Hong Kong at the Hong Kong Convention and Exhibition Centre from November 22nd–24th, 1993, and was attended by 981 delegates from 94 cities in 21 countries or regions. See The 2nd World Chinese Entrepreneurs Convention, 22–24 November, 1993: Commemorative Album (Hong Kong, The Chinese General of Commerce of Hong Kong, 1994), pp. 5 & 32. The 4th World Chinese Entrepreneurs Convention was held in Vancouver, Canada, for the first time held outside Asia. It was hosted by the Chinese Entrepreneurs Society of Canada from August 25th–28th, 1997, and was attended by more than 1,300 delegates from 20 different countries and regions. See The 4th World Chinese Entrepreneurs Convention: Souvenir Album (Vancouver, Chinese Entrepreneurs Society of Canada, April 1998), pp. 12–13. 82 See Chen Tianxi, “Shijie Huashang de ‘caihong xing’ wangluo yu rentong” (The Rainbow Type of Networks and Identity of the World Chinese Businessmen), in Liao Chi-yang and Liu Hong (eds.), Cuozong yu shichang, shehui yu guojia zhijian: Dongya kouan chengshi de Huashang yu Yazhou quyu wangluo (Surfing the Interfaces of Market, Society and the States: Chinese Merchants in East Asian Coastal Cities and the Making of Business Networks) (Singapore, Nanyang Technological University & Global Publishing, 2008), pp. 51–74.

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The value and usefulness of the World Chinese Entrepreneurs Convention to individual Ethnic Chinese businessman who attended the convention is difficult to gauge. For those delegates who gained connections, knowledge and business from the convention would consider this as an important channel of contacts, and they would continue to attend the conventions held in different parts of the world. For those who did not gain much would probably attend one or two, and considered the cost of money and time would not justify the attendance. But for the Ethnic Chinese businessmen worldwide as a group, the conventions provided useful multi-faceted contacts for business expansion and globalization. To some of them, the convention was as important as the Boao Asian Economic Forum, hosted by the Chinese government of the People’s Republic of China, which was for the benefits of Asian entrepreneurs and governments.

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Chapter 7

Ethnic Chinese Businessmen and Entrepreneurs

Ethnic Chinese Businessmen The creation of an Ethnic Chinese business class Modern day Ethnic Chinese businessmen are not clearly identifiable from their outward appearances. They are just like other East or Southeast Asian businessmen wearing a Western suit, a necktie, leather shoes and carrying a business bag. They may speak fluent English or French or Mandarin Chinese, or a major Southern Chinese dialect such as Cantonese, Hokkien, Teochew, Hakka or Hainanese. They may also speak a Southeast Asian language such as Thai, Vietnamese, Cambodian, Malay-Indonesian or Filipino. Whatever appearances they have and whatever languages or dialects they speak, they invariably share some common historical backgrounds and cultural traits with each other. Western observers are sometimes puzzled by the fact that Ethnic Chinese businessmen outnumber the indigenous businessmen in Southeast Asia despite the efforts of the Southeast Asian governments in nurturing an indigenous business class. What motivates and encourages Ethnic Chinese to become involved in business are historical, social, institutional and circumstantial. Most modern-day Ethnic Chinese businessmen are born locally in Hong Kong, Macau, Taiwan and Southeast Asian countries. But they cannot shake off the baggage of history. Most of their ancestors came from the Southeastern provinces of Fujian and Guangdong. They were the marginal men leaving China for overseas in search of a better

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life.1 Strong desire for a better life led them to work hard and be frugal in order to make rapid economic advancement. The transformation of the early Chinese immigrants into businessmen took two different routes. For those who came through kinship-based system, their training as apprentices in their relatives’ shops or business establishments was extremely valuable. It laid the foundation for their future business career. In the absence of modern business-training institutions, apprenticeship provided them with knowledge and practical experience of how to do business, and gave them confidence in starting a similar business for themselves. For instance, Kwek Hong Png, the founder of Hong Leong group of companies in Singapore and Malaysia, worked as an apprentice in his relative’s hardware shop when he arrived in Singapore in 1928 at the age of 16. He worked very hard and learned studiously the trade of hardware business. After having worked for 12 years as apprentice, clerk and manager in his relative’s shop, he decided to start his own business in 1941 by founding the Hong Leong Company (meaning plentiful and prosperous) which was a trading firm dealing in ropes, hardware, building materials, paints and the supplies to rubber estates.2 Financial assistance or 1

For study of home environment of early Chinese emigrants in Guangdong and Fujian, see Ta Chen, Chinese Migration, With Special Reference to Labor Condition (New York, Paragon Book Gallery, Ltd., reprint, n.d.), pp. 22–24; for Chinese creditticket immigration to British Malaya, see P. C. Campbell, Chinese Coolie Emigration to Countries within the British Empire (Taipei, Ch’eng Wen Publishing Company, reprint, 1970), pp. 1–25. For study of factors contributing to Chinese migration to British Malaya between 1896 and 1941, see Joyce Ee, “Chinese Migration to Singapore, 1896–1941”, in Journal of Southeast Asian History, Vol. 2, No. 1 (Singapore, March 1961), pp. 31–51. For an analysis of cultural heritage of the early Chinese immigrants from Guangdong and Fujian, see Ng Chin-keong, “The Cultural Horizon of South China’s Emigrants in the Nineteenth Century: Change and Persistence”, in Yong Mun Cheong (ed.), Asian Traditions and Modernization: Perspectives from Singapore (Singapore, Centre for Advanced Studies, National University of Singapore & Times Academic Press, 1992), pp. 1–30. 2 See Kwek Hong Png, Wo Yu Feng Long (My Lifetime with Hong Leong) (Singapore, Hong Leong Group of Companies, 1987) (Chinese original), pp. 11–15; see also English translation titled A Lifetime with Hong Leong: An Autobiography of Mr. Kwek Hong Png, Founder & Chairman, Hong Leong Group of Companies, pp. 75–81. The

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business contacts of their kinsmen could help ensure the future success of their business. For those immigrants coming to the new land as indentured laborers (Coolies), their route to business world was more rugged. After having fulfilled labor contracts and having saved some money, many of them also ventured into business. They started as hawkers or food peddlers and learned the techniques of doing business, and later some were involved in rural trade with natives in Southeast Asia, and some were involved in local trade with fellow Chinese.3 Hawking, food-peddling and trading improved their capacity to save. With increased capital and with their diligence and thrift, they had been gradually transformed into businessmen accumulating profits for further investment. Although these indentured immigrants were placed in a competitive disadvantage vis-a-vis kinship-based immigrants, their independent spirit compensated their lack of kin support. Some of them turned out to be as successful as those kinship-based immigrants. One of the best examples is Towkay Yau Tat Shin (Yao Desheng), a Hakka tinmining magnate in Perak in the 19th century. Born in a poor peasant family, Yau worked as a transport coolie in China. He left China for Malaya in quest for wealth, and he worked as a mining coolie in Sungei Ujong in the state of Negri Sembilan, Malaya. With his diligence, thrift and ambition, he succeeded to transform himself into a businessman and then a mining magnate.4 By and large, the majority of these early Chinese immigrant-turn-businessmen had made a comfortable living, while only a few of them succeeded to become English translation has identified Kwek’s relative as his brother-in-law, but I am not sure of this point. I prefer to base most of my information on Chinese original because Kwek was not familiar with English language. 3 For Chinese immigrants’ involvement in trade with natives in British Malaya in 19th and early 20th centuries, see Tan Tek Soon, “Chinese Local Trade”, in The Straits Chinese Magazine, Vol. 6, No. 23 (Singapore, September, 1902), pp. 89–97. 4 See a short biography of Yau titled “Yao Gong Desheng” (Mr. Yau Tat Shin), in Pili Jiaying huiguan qishi zhounian jinian, xinxia locheng kaimu tekan (Souvenir Magazine of the Seventieth Anniversary and the Opening of the New Building of the Perak Ka Yin Association) (Ipoh, 1974), pp. 512–514.

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business tycoons building up vast business empires.5 Whatever scale of business they were involved, early Ethnic Chinese businessmen tended to pass their business skill and knowledge to their descendants. It is through the socialization within the Chinese family that the interest in business has been passed on. Except for Taiwan, early Chinese immigrants arrived in the new lands in Southeast and East Asia with a restricted economic and political environments. These lands were mostly the colonies of Western Powers, and were populated by indigenous people with semi-feudal systems. The Chinese were allocated definite economic roles in the colonial economies as manual laborers or middlemen. Seeking jobs and economic opportunities outside the assigned areas were possible, but difficult. Politically, the Ethnic Chinese were generally discriminated against. The door to colonial bureaucracies was closed except for some minor positions,6 major and important positions in the colonial bureaucracies were reserved for Europeans. Although the British colonial government introduced an open competitive examination system for the selection of civil servants in the Straits Settlements since 1882 and later in the Federated Malay States, it nevertheless imposed a color bar against non-Europeans.7 5

Song Ong Siang in his famous work, One Hundred Years’ History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967, reprint) has documented stories of many successful Chinese immigrants from 1819 to 1919. A. Wright’s Twentieth Century Impression of British Malaya (London, Unwin Brothers Limited, 1908) also contains many useful information on life stories of successful Chinese merchants in British Malaya. For a study of some prominent Chinese immigrants in the 19th century Singapore and Malaya such as Seah Eu Chin, Zhang Bishi, Yap Ah Loy and Yau Tat Shin and their success in climbing up social ladder, see Yen Chinghwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986), pp. 154–162. 6 Some of the junior positions in the Chinese Protectorates in the Straits Settlements and the Federated Malay States were occupied by Ethnic Chinese. For instance, in the Chinese Affairs Office (Chinese Protectorate) of Kinta district, Perak in 1891, three out of five staff were Ethnic Chinese, but they were holding junior position of clerk. See The Perak Government Gazette, 1891, Vol. 4, No. 26, p. 765. 7 See John G. Butcher, The British in Malaya, 1880–1941: The Social History of a European Community in Colonial South-East Asia (Kuala Lumpur, Oxford University Press, 1979), pp. 107–112.

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After the World War II when many Southeast Asian countries achieved independence, rapid political change in the post-war period gave rise to aggressive indigenous nationalism which tended to bar many nonindigenes (including many Ethnic Chinese) to enter into newly reconstructed bureaucracies. Even some of the talented Chinese professionals had difficulties in getting jobs in the government services because of certain policies which were in favor of the indigenes.8 These new political and economic realities also forced many of the Ethnic Chinese to seek fulfilments in business. The historical and circumstantial factors are insufficient to explain why Ethnic Chinese communities tend to produce more businessmen and entrepreneurs, and the creation of a strong business class. We need to seek also explanations in the social and institutional arenas. Early Chinese immigrants tended to congregate and to settle in ports, cities and towns in Southeast and East Asia, and their physical congregation determined the mode of their jobs and economic activities, and moulded their social values. In contrast with traditional Chinese societies where businessmen were placed at the bottom of social hierarchy, the Ethnic Chinese businessmen were held in high regard, and their business activities were much valued.9 Their high social status enabled them to capture leadership in the Ethnic Chinese communities. The close linkage between wealth, status and power aspired many Chinese to go into business.10 With a more open and fluid society, 8

This appeared to be the case in countries such as Malaysia where the Malays were given preference in the recruitment of public servants. 9 See Wang Gungwu, “Traditional Leadership in a New Nation: The Chinese in Malaya and Singapore”, in G. Wijeyawardene (ed.), Leadership and Authority: A Symposium (Singapore, University of Malaya Press, 1968), p. 210; Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911, pp. 147–148. 10 For the close relationship between wealth, status and leadership in the Ethnic Chinese communities in Singapore before World War II, see Yong Ching Fatt, “Chinese Leadership in Nineteenth Century Singapore”, in Journal of Island Society, Vol. 1 (Singapore, The Island Society, 1967), independent pages, 1–18; Yong Ching Fatt, “A Preliminary Study of Chinese Leadership in Singapore, 1900–1941”, in Journal of Southeast Asian History, Vol. 9, No. 2 (Singapore, Department of History, the University of Singapore, September 1968), pp. 258–285.

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the aspiring Ethnic Chinese can fulfil their dreams of having acquired wealth, social status and community leadership.11 In an immigrant society, a money-oriented culture was developed as a result of the pressure for making quick and more wealth. Immigrants’ prime motive of achieving fast economic advancement was transformed into a money-loving, money-accumulating and money-centered culture. These social and cultural values continue to inspire millions of Ethnic Chinese to do business, and help perpetuate their business pursuits. Institutions also played a part in the growth of numbers of Ethnic Chinese businessmen. Traditional Chinese clan and dialect organizations were conducive to business activities. They performed the role as business promoters, because their power and influence depended, to a greater extent, on the prosperity of their respective communities, and they invariably helped provide facilities for acquiring capital, labor and market information for their members.12 More important than clan and dialect organizations, traditional Ethnic Chinese business organizations — craft and business guilds — served as an important institution to perpetuate monopolization of occupations by different dialect groups, and were instrumental in the control of certain lines of jobs and business. Their tight-knit apprentice system was capable of producing large number of businessmen pursuing similar lines of business. This together with other informal business organizations — mutual-aid society and businessmen clubs — generated immense enthusiasm in business 11

One of the ways in acquiring social and leadership status with wealth was the purchase of Qing titles from China. For the sale of Qing (Ch’ing) titles and Overseas Chinese leadership, see Yen Ching-hwang, “Ch’ing’s Sale of Honours and the Chinese Leadership in Singapore and Malaya, 1877–1912”, in Journal of Southeast Asian Studies, Vol. 1, No. 2 (Singapore, McGraw-Hill Far Eastern Publishers, 1970), pp. 20–32. See also in Yen Ching-hwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), pp. 177–198. 12 See Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, p. 119; Mak Lau Fong, The Dynamics of Chinese Dialect Groups in Early Malaya (Singapore, Singapore Society of Asian Studies, 1995), pp. 76–77.

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activities. This helps to explain in part the dominance of the Ethnic Chinese in business in Southeast Asia.13

Cultural and social milieu Wherever they are born, Ethnic Chinese businessmen are brought up in Chinese family environment and a broader Chinese community. They are invariably exposed to certain Chinese cultural influence. Culture, as defined by Geert Hofstede, is “the collective programming of the mind which distinguishes the members of one human group from another”.14 He elaborates that culture is the interactive aggregate of common characteristics that influence a human group’s response to its environment, and it determines the identity of a human group in the same way as personality determines the identity of an individual.15 In short, the important ingredients of Hofstede’s concept of culture are collective programming of the mind and the distinctive identity of a human group. Using these concepts as a tool, and basing on the IBM survey of its employees in 72 countries during the period between 1967 and 1973, Hofstede uncovers the four dimensions of a national culture: power distance, uncertainty avoidance, individualism and masculinity.16 Hofstede’s four dimensional paradigm is useful for explaining the differences of national cultures, less to explain the composition of a national culture. Hofstede later found necessary to add another

13

See Yen Ching-hwang, “Traditional Ethnic Chinese Business Organizations in Singapore and Malaysia”, in Leo Suryadinata (ed.), Ethnic Chinese in Singapore and Malaysia: A Dialogue Between Tradition and Modernity (Singapore, Times Academic Press, 2002), pp. 195–217; see also Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), pp. 51–78. 14 See Geert Hofstede, Culture’s Consequences: International Differences in WorkRelated Values (Newbury Park, California, Sage Publications, Inc., 1980, Abridged edition), p. 21. 15 Ibid. 16 Ibid., pp. 65–210.

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dimension — Confucian dynamism — which he borrowed from the study of Michael Bond and his close associates.17 The Confucian dynamism which is characterized by long-term orientation consists of values such as persistence (perseverance), ordering relationships by status, thrift, and a sense of shame.18 These values are certainly some of the cultural values of the Ethnic Chinese businessmen. As Ethnic Chinese businessmen are mostly the descendants of the early Chinese immigrants, their values are not the Confucian values of traditional Chinese upper class, but of the values of lower strains. Gordon Redding has pointed out that the Confucian values for rulers and Mandarins may not be applicable to the Ethnic Chinese businessmen, but what they have received and influenced by those Confucian values are fundamental concepts such as propriety, harmony, reciprocity and righteousness.19 The cultural landscape of the inner world of the Ethnic Chinese businessmen is more complex than just keeping the essence of the Confucianism, it also consists strains of Western and indigenous cultures as a result of their exposure to these foreign influence through education and contacts.20 The mixture of these values varied according to demographic and cultural environments. 17

See Geert Hofstede, Cultures and Organizations: Intellectual Cooperation and Its Importance for Survival (London, Harper Collins Publishers, 1994, paperback), pp. 160–170. 18 Ibid., p. 165. 19 See S. Gordon Redding, The Spirit of Chinese Capitalism (Berlin & New York, Walter de Gruyter, 1990), pp. 46–49. 20 For the Western and Malay influence on the local born Chinese in Singapore and Malaya in the late 19th century, see Yen Ching-hwang, “Overseas Chinese Nationalism in Singapore and Malaya, 1877–1912”, in Modern Asian Studies, Vol. 16, p. 3 (Cambridge, July 1982), p. 400.; see also the same article in Yen Chinghwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), p. 201. For contemporary Western and indigenous cultural and educational influence on the identities of the younger generation of Southeast Asian Chinese, see various articles on the Chinese in Southeast Asia, in Leo Suryadinata (ed.), Ethnic Chinese as Southeast Asians (St. Leonards, NSW., Australia & Singapore, Allen & Unwin, and Institute of Southeast Asian Studies, 1997).

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In a society where Ethnic Chinese predominates such as Taiwan, Hong Kong, Macau and Singapore, the Chinese values constitute the main body of the cultural mixture, while Western values are complementary. In a society where Ethnic Chinese are a minority such as the Chinese communities in Southeast Asia, the Chinese values tend to mix more with Western and indigenous values.21 These account for the differences among Ethnic Chinese businessmen themselves. For instance, the cultural values of a Thai Chinese businessman or a Malaysian or Indonesian Chinese businessman are different from the Chinese businessmen of Hong Kong or Taiwan. However, the cultural environment is not the only major factor which shapes the values and behavior of the Ethnic Chinese, the social milieu in which the Ethnic Chinese businessmen are brought up is also important. Despite demographic and geographical differences, most of the Ethnic Chinese businessmen are brought up in a Chinese family and in a Chinese community with group and hierarchical orientations. Starting from childhood, they have been taught the importance of living in a group, to be accepted by the group and to place group interests above their self interests. In 1968, an amateur American anthropologist, Margery Wolf in her study of a Chinese village in Taiwan, discovered how Chinese developed their group orientation within the family and society. She said: “The interaction of the Taiwanese villager with his friends and neighbours is like the spice in his soup, savoury, but of little sustenance. It is with his family, his parents and grandparents, his children and grandchildren, that he takes the measure of his life. His relations with his parents may be strained, with his wife distant, and with his children formal, but without these people he would be an object of pity and of no small amount of suspicion. He would be pitied because he had no parents to ‘help’ him and no children to support him in his old age, pitied because he had no place in a group, 21

For a study of the changing identities of the Chinese in Southeast Asia since World War II, see Jennifer Cushman & Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II (Hong Kong, Hong Kong University Press, 1988). For changing Chinese identities among Ethnic Chinese in general, see Tu Wei-ming (ed.), The Living Tree: The Changing Meaning of Being Chinese Today (Stanford, Stanford University Press, 1994).

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because he didn’t belong anywhere. For these same reasons he would be the object of suspicion. A man not thoroughly imbedded in a network of kinship cannot be completely trusted because he cannot be dealt with in the normal way.”22

It is in the same family environment, Ethnic Chinese are taught the idea of hierarchy through the ranking of brothers and sisters and the respect for the seniority and authority. In a broader social context, Ethnic Chinese businessmen live in a complex web of social networks that is still dominated by kinship organizations, dialect and geographical associations. They also have been striving to be accepted and respected by other Ethnic Chinese, and to climb the social ladder in the Chinese communities.

Ethnic Chinese business behavior Ethnic Chinese business behavior is the best reflection of the values that Ethnic Chinese businessmen have embraced. Many years ago when I talked to some of Chinese business friends in Singapore and Malaysia, one of the common complaints about Australian businessmen was their incomprehensive business behavior. For instance, the Australian businessmen were treated with all the Chinese courtesies when they visited Singapore and Malaysia: they were met and welcome at the airport, sent to the hotel in private luxurious cars, and were taken out for dinners and entertainments etc. But these courtesies were seldom reciprocated when Chinese businessmen visited their business partners in Australia. At best, they were met at the airport and left in the hotel. This seemingly minor complaint is the best reflection of different cultural values that Ethnic Chinese and Australian businessmen have embraced. To the Ethnic Chinese businessmen, they accorded the Australian business partners with the best Chinese courtesy and expected to receive the same treatment in return when they visited

22

See Margery Wolf, The House of Lim: A Study of a Chinese Farming Family (New York, Appleton-Century-Crofts, 1968), p. 23.

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Australia. This was in accordance with Chinese value of reciprocity, a concept emphasized in Confucianism. On the contrary, the Australian businessmen who have been brought up in the Western value of individualism, have not felt obligated to reciprocate the courtesy that their Chinese business partners had accorded them, particularly if the cost of dinners and entertainments had to come out from their own pockets. The collective and hierarchical orientations nurtured in a Chinese family environment have affected the behavior of the Ethnic Chinese businessmen and their perceptions of the business world.23 Like Japanese and Koreans, Ethnic Chinese businessmen are more attached to groups than their Western counterparts, and feel comfortable in a group and would prefer to take collective actions;24 they tend to perceive the business world as consisting of many competing groups chasing the market shares for their products. From their hierarchical perspective, these competing business groups are far from equal, those more successful and powerful companies occupy the top of the hierarchy, and those less successful one are ranked in descending order. This hierarchical concept also provides internal strength for the Ethnic Chinese businessmen to strive for vertical mobility within that business hierarchy; at the same time, they would also assess foreign companies from that hierarchical perspective whenever they wish to choose suitable foreign business partners; if they have ranked their own companies at the very top of the Ethnic Chinese business hierarchy, they would choose top foreign companies as their partners which are considered to be compatible with their own status. We have in the previous chapter dealt with Ethnic Chinese businessmen’s concepts of xinyong (trust), guanxi (relationship) and business networking, there is no need to repeat here. What should be emphasized is this xinyong or personal trustworthiness is still an 23

S. Gordon Redding, The Spirit of Chinese Capitalism, pp. 54, 62. For group orientation of Japanese businessmen and Japanese companies, see Richard Tanner Pascale & Anthony G. Athos, The Art of Japanese Management (London, Penguin Books Ltd., 1986), pp. 116–134; Rodney Clark, The Japanese Company (New Haven & London, Yale University Press, 1979), pp. 83–87. 24

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important element of Ethnic Chinese business behaviour. Large Ethnic Chinese companies have increasingly relied on law to settle any business disputes, but small and medium-sized Ethnic Chinese companies have still emphasized xinyong in their business transactions.25 Any Ethnic Chinese businessmen who have lost xinyong, but may get away with law, will ultimately be abandoned by his business partners or customers in the Ethnic Chinese communities. Similarly, guanxi still has a role to play in the operation of Ethnic Chinese business, especially in the small and medium-sized ones. We may not wish to contribute to an overstatement that in Chinese business, ‘no guanxi, no business’, but the guanxi is still an ingrained concept of the Ethnic Chinese businessmen, and has influence on their business behavior. One striking aspect of Ethnic Chinese business behaviour is socalled ‘Face’. The term ‘Face’ (Mianzi) is literally meant ‘The face of a person’. It has a more profound meaning than Western terms of ‘self-esteem’ and ‘self-respect’; it involves not only the assessment of the worth of self, but also the evaluation of other people’s worth and their treatments of self in a system of complex human relationships.26 Chinese love of face has frequently puzzled Western observers. Some years ago, two New York Times journalists, Nicholas D. Kristof and Sheryl Wudunn who had spent sometime in China were astonished by the way Chinese and Ethnic Chinese businessmen displayed their wealth. According to them, a rich Chinese entrepreneur invited some Cantonese business tycoons (presumably from Hong Kong) spending 20,000 yuan (U.S.$3,500) for a banquet dinner. Afterwards, one of the Cantonese guests returned the treat by inviting the host and the group to a 60,000 yuan per-table dinner. Not to be outdone, the Beijing host arranged for another round bringing with him a suitcase which contained 350,000 (U.S.$61,000) in cash, and he politely told 25

“My Interview with Mr. Loh Cheng Chong, a Chinese businessman of Malaysia in Kuala Lumpur dated 4th May 1998”. 26 An excellent sociological analysis of relationship between ‘face’ and ‘shame’ in Chinese culture is Jin Yaoji (Ambrose Y.C. King), “mian, chi yu Zhongguo ren xingwei zhi fenxi” (An Analysis of face, shame and Chinese Behaviour), in Jin Yaoji, Zhongguo shehui yu wenhua (Chinese Society and Culture) (Hong Kong, Oxford University Press, 1992), pp. 41–63.

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the guests that they would finish that amount of money on a most lavish banquet.27 In 1982, Professor Redding of Hong Kong University in his study of the working of ‘face’ among the Hong Kong businessmen, explained how a Hong Kong Chinese businessman was confronted with a ‘face’ problem. The businessman was working with a company dealing in spare parts for a world-famous marine engineering company, and was in charge of organizing shipping seminars introducing new products for the clients in Hong Kong. He invited his clients — most of them were ship owners, captains and superintendents — by cards. For the clients of large shipping companies, he delivered the cards in person to show they were highly valued customers, and asked them to give him face to attend the seminar; while to less important clients, he sent the cards with a telephone call inviting them to attend. He also reserved the front seats for the representatives of important companies as a gesture of giving them more face than others. For a while this arrangement worked well. But after attending a few seminars, the representatives of the smaller companies noticed that they were invited only by cards and their seats were arranged in a lower order of importance. They complained to the host and threatened not to come. The businessman faced the dilemma that if he treated all of them the same, he might offend the representatives of the larger ones because they felt they were not given enough face which they deserved, and might threaten not to attend.28 The first instance shows the working of ‘face’ between Chinese and Ethnic Chinese businessmen, and it was not so much that both the host and the guest wished to demonstrate how rich they were; rather, it was that the host’s generosity and good-will could not be outdone by the guest, otherwise, it would be deemed to have lost face on the part of the host. The second instance illustrates the function of face in business networking. It worked partly as a lubricant for 27

See Nicholas D. Kristof & Sheryl Wuduun, China Wakes: The Struggle for the Soul of a Rising Power (London, Nicholas Brealey, 1994), p. 342. 28 See S. Gordon Redding, op. cit., p. 65.

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business activities, partly for satisfying the self-esteem and partly used as a bargaining chip. Of course, the love of face is not unique to the Ethnic Chinese businessmen, it is a general characteristic of Chinese people. Although the love of face is universal — members of civilized societies are sensitive towards what other people would think of them — its importance to Chinese is much greater. It is embedded in traditional Chinese culture. Unlike Western culture that is based on ‘guilt’, Confucian culture is based on ‘shame’.29 This concept of shame leads Chinese people to be extremely sensitive towards how other people would think of them and how they would be treated. It is not so much as reacting against the external pressure that you behave yourself, rather, it is the feeling of shame that shatters the individual. Therefore, the loss of face would be a serious blow to a Chinese as what a prominent Chinese anthropologist, Francis L.K. Hsu has pointed out that “loss of face is a real dread affecting the nervous system... more strongly than physical fear”30

Ethnic Chinese Entrepreneurs and Entrepreneurship Defining Ethnic Chinese entrepreneurs and entrepreneurship In the past years, I have been trying to define Ethnic Chinese entrepreneurs and entrepreneurship for the study of history of modern Ethnic Chinese enterprise.31 Before arriving a clear definition of these 29

Jin Yaoji (Ambrose Y.C. King), op. cit., pp. 46, 53–54. Francis L.K. Hsu, “Psychosocial homeostasis and Jen: conceptual tools for advancing psychological anthropology”, in American Anthropology, Vol. 73, 1971, pp. 23–43. Quoted in S.Gordon Redding, op. cit., p. 63. 31 See Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, first published in Proceedings of Conference on Eighty Years’ History of the Republic of China, 1912–1991 (Taipei, Chin-tai Chung-kuo ch’u-pan she, 1991), Vol. 4, (English Section), pp. 77–117; the same article was later published in Yen Ching-hwang, Studies in 30

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two terms, it is necessary for us to have a clear idea about the concepts of ‘entrepreneur’ and ‘entrepreneurship’. The origins of the term ‘entrepreneur’ can be traced back to the 17th century French word ‘entreprendre’ which was referred to some individuals who undertook the risk of a new enterprise. They were primarily contractors and merchants who bore the risks of profit or loss. Richard Cantillon, a 18th century French economist, was credited for giving the concept of ‘entrepreneurship’ a central role in economics. He was the first economist to emphasize the elements of uncertainty and risk. In 1755, he defined an entrepreneur as a person who paid a price to buy goods in order to resell for profit. But the unpredictability of the market involved a risk of losing his investment and effort. His risk-taking effort had increased consumption, generated demands, and stimulated economic activities.32 But Cantillon’s concept of entrepreneur is rather narrow. His entrepreneur was mainly confined to country traders or merchants who bought farm produce at certain prices; he repacked and transported them to cities to sell at uncertain prices. In about the same time, Adam Smith in his monumental work, the Wealth of Nation published in 1776 speaks of the ‘entrepreneur’ as a person who undertakes to form an organization for commercial purposes. His concept of a entrepreneur is more connected with a modern industrialist who has the foresight to recognize potential demand for new goods and services, and create an enterprise to meet that economic change.33 However, the crucial role of entrepreneur in economic activity was greatly lifted by the writings of an Austrian economist, Carl Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 196–236. Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study” (a paper presented at the International Conference on Chinese Diaspora: Their Legal, Political and Economic Status, held in San Francisco, 26–29 November 1992); it was published later in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 237–254. 32 See David H. Holt, Entrepreneurship (Englewood Cliffs, New Jersey, Prentice Hall, 1992), p. 3.; Mark Casson (ed.), Entrepreneurship (Aldershot, Hants, England, Edward Elgar Publishing Limited, 1990), p. xiv. 33 Holt., ibid., p. 3.

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Menger who in 1871 published his book titled Principles of Economics. Menger argues that economic change does not arise from circumstances but from the individuals’ awareness and understanding of those circumstances. These individuals are entrepreneurs who are the agents for economic change, and they transform resources into consumable goods and services. Menger not only ranks entrepreneur top of all the production elements (including land, labor and capital), but also considers it the decisive factor in the production. The existence of land, labor and capital would not automatically serve human needs unless the entrepreneur is prepared to take risks and organize them together to produce goods and services. Menger not only gives an important role to entrepreneur in economic activities, but also broadens the concept of an entrepreneur from a risk-taker and the captain of industry to a person who has intense love for wealth and a creator of new enterprises.34 The concept of entrepreneur and entrepreneurship remained fundamentally unchanged until 1934 when another Austrian economist, Joseph Schumpeter (1883–1950) published a series of influential economic treatises. Schumpeter, a professor of Economics at the Harvard University, describes entrepreneurship as ‘a force of creative destruction’, and a process of change. He also describes entrepreneur as innovator who uses the process to shatter the status quo and to induce change. In his view, an entrepreneur seeks “to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products... Entrepreneurship, as defined, essentially consists in doing things that are not generally done in the ordinary course of business routine.”35

The key elements of Schumpeterian concept of entrepreneurship involve innovation, the ability to exploit new invention or untried technology to create new products, and creation of new markets. A 34 35

Ibid., pp. 5–6. Quoted in Holt., op. cit., p. 7.

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general concept of entrepreneur and entrepreneurship can be defined by combining Schumpeterian elements and other concepts mentioned earlier. An entrepreneur is a person who has possessed capitalist attitude, foresight and business acumen, and is risk-taking and innovative; he is able to bring labor, capital and management together to create an enterprise. For the general definition of entrepreneurship, a simplified version of Robert Ronstadt’s definition is useful. “Entrepreneurship is a dynamic process of creating incremental wealth. This wealth is created by the entrepreneurs who assume the major risks of providing value for some products or services. The entrepreneurs created these values by bringing necessary skills and resources together.”36 I have in the past years defined an Ethnic Chinese entrepreneur as a man who brings capital, labor and management together and creates an enterprise. He possesses a capitalist attitude — the love of money and pursuit of profits, a courage to take initiatives and risks, and the determination to implement new ideas, and a strong will to succeed. He must also possess foresight, business acumen and imagination that would contribute to the success of an enterprise. Apart from these qualities, he must also be innovative and be able to lead, to communicate and to manage a successful enterprise. He is not only the creator, but also the perpetuator of an enterprise.37

Culture, religion and Ethnic Chinese entrepreneurs I have argued elsewhere that Ethnic Chinese entrepreneurship is a new type of modern Chinese entrepreneurship. It has a strong 36

Ibid. See Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Proceedings of Conference on Eighty Years’ History of the Republic of China, 1912–1991, Vol. 4 (English Section), pp. 106–110; also in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 224–227. Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 247–249. 37

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Chinese cultural input, and its distinctiveness is due to the interaction and integration of traditional Chinese cultural values with Western business practices in a Westernized political and economic environments in which the majority of the Ethnic Chinese resided.38 Traditional Chinese cultural values have an important role to play in the making of Ethnic Chinese entrepreneurs. They are derived from village folklore, Buddhist and Taoist belief, and Confucian teachings that were filtered through to the bottom of society through family’s and clan’s instructions.39 What should be noted here is that the Confucian teachings embraced by ordinary masses (including those of Chinese merchants), were not the high Confucianism which was more for the members of the Mandarin and Scholar-gentry class, but rather the low form of Confucianism contained in popular texts such as Trimetrical Classic (Sanzijing) and the Thousand Character Essay (Qianziwen).40 Since Chinese children were forced to recite the text of these two books, the ideas contained in these works and the explanations given by teachers were gradually sunk into their minds and slowly been digested. For instance, Chew Choo Keng, an Ethnic Chinese entrepreneur in Singapore, recalled the influence of his traditional Chinese education in a village in Tong An district, Fujian province. Chew was born in 1916 in Tan Ua (Tong An district), Fujian province. In his village, education was given an important place due to Tan Kah Kee’s promotion of modern education in Tong An, but according to Chew, 38

Ibid. The earliest Chinese family instructions, Yan Shi Jia Xun (The Family Instructions of the Yan Clan), written by an eminent Confucian scholar, Yan Zhitui in 6th century A.D., contains many Confucian values. See Yan Shi Jia Xun (Shanghai, Shanghai Gu Ji Chubanshe, 1980). For Confucian values incorporated into Chinese clan instructions, see Liu Wang Hui-chen, The Traditional Chinese Clan Rules (New York, J.J. Augustin Incorporated Publishers, 1959), and Hsien Chin Hu, The Common Descent Group in China and Its Functions (New York, Johnson Reprint Corporation, Second printing, 1968). 40 See Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911, p. 298. 39

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the opportunity for studying was limited to only those families who could spare the additional help in the farm. He stated that: I went to school at the age of eight and finished at thirteen. I studied the old textbook “Jin Chi Chor” (Ren Zhi Chu in Mandarin, The Beginning of Man) (the first sentence of the San Zi Jing, the Trimetrical Classic). An old teacher taught me Chinese, and asked me which character I liked best. I told him ‘Jin’ (Ren, benevolence)… My teacher explained that ‘Jen’ consisted of eight moral oblications. The first is ‘hau’ (xiao, filial piety), a person should be filial to his parents; ‘tay’ (ti, care for siblings), a person should be tolerant and affectionate towards his siblings; ‘tiong’ (zhong, loyalty), a person should be loyal to his country, devoted to his occupation and work; ‘sin’ (xin, trustworthiness), a person should be trustful and should not tell lies; ‘lay’ (li, etiquette), a person should treat others courteously; ‘ghee’ (yi, righteousness), a person should do a good deed; ‘liam’ (lian, honesty and noncorruptible), a person should accept only what is due to him and not what is not due; ‘thi’ (chi, sense of shame), when a person realizes his own mistake…Therefore the character of ‘jin’ consisting of eight moral obligations that was why from the beginning of those days I had borne these in mind”.41

The focus of these Confucian popular textbooks was on family upbringing ranging from how to be a good father and the head of a family, to the proper relationship and behavior within the family system. But the texts said nothing about trade or how to be a good entrepreneur, their emphasis on familism nevertheless contributed towards the essential loyalty that turned the family into a kind of trading organization.42 In addition to the Confucian teachings, the Ethnic Chinese were also exposed to the Buddhist and Taoist influence. To satisfy their 41

See “Chew Choo Keng: Hawker, Trader, Industrialist”, in Chan Kwok Bun & Claire Chiang, Stepping Out: The Making of Chinese Entrepreneurs (Singapore, Centre for Advanced Studies, National University of Singapore and Prentice Hall, 1994), pp. 77–80. 42 See Wang Gungwu, “Trade and Cultural Values: Australia and the Four Dragons”, in Asian Studies Association of Australia Review, 11:3 (April, 1988), pp. 7–8.; see also Wang Gungwu, Community and Nation: China, Southeast Asia and Australia (St. Leonards, NSW. Australia, ASAA and Allen & Unwin, 1992, New Edition), p. 310.

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spiritual needs in unstable immigrant communities, Ethnic Chinese built Buddhist and Taoist temples, and worshipped Buddha, the Goddess of Mercy (Guanyin), and a range of Taoist deities as well as some popular Chinese deities such as Tianhou (also known as Tianfei, the Goddess of the Sea-fearers or Ma Zu) and Guandi (The God of War and Righteousness).43 Unlike Christianity which has a secular inclination (particularly the so-called Protestant ethic), both Buddhism and Taoism repudiated the pursuit of materialistic achievements, least to prepare people to be good entrepreneurs. However, Buddhist practice of providing future guidance through the reading of printed slips, might have encouraged some ambitious Ethnic Chinese to become entrepreneurs, for they believed it was the Buddha’s wish that they made a lot of money, and in return they would donate a large sum of money to temples and monasteries. The worship of popular Sea Goddess Tianhou and God of War and Righteousness — Guandi, bore no direct linkage with the quality

43

Evidence of Chinese worship of Buddha and Taoist deities in Southeast Asia are numerous, for Malaysia, see Wolfgang Franke & Chen Tieh-Fan, Chinese Epigraphic Materials in Malaysia, 3 Volumes (Kuala Lumpur, University of Malaya Press, 1982, 1985 & 1987); for a study of the Chinese Buddhist and Taoist temples in Kuala Lumpur, see Choo Chin Tow (Zhu Jintao), “Yibai nian lai de Jilongpo huaren simiao” (One Hundred Years History of the Chinese Temples in Kuala Lumpur), in Xuelane Zhonghua dahuitang qingzhu wushisi zhounian jinian tekan (Souvenir Magazine of Fifty Fourth Anniversary Celebration of the Selangor Chinese Assembly Hall) (Petaling Jaya, Selangor, The Selangor Chinese Assembly Hall, 1977), pp. 616–631, see also Choo Chin Tow (Zhu Jintao), “Jilongpo huaren simiao zhi yanjiu” (A Study of Chinese Temples in Kuala Lumpur) (an unpublished M.A. thesis, University of Malaya, Kuala Lumpur, 1968). For the evidence of Chinese worship of Buddha and Taoist deities in Indonesia, see Wolfgang Franke, Claudine Salmon & Anthony Siu, Chinese Epigraphic Materials in Indonesia (Singapore, South Seas Society, 1988). For the evidence of worship of Guanyin a Buddhist goddess, Buddha and Guandi (Guangong), a popular Chinese deity by the Chinese in contemporary Singapore, see Tong Chee Kiong, Ho Kong Chong & Lin Ting Kwong, “Traditional Chinese Customs in Modern Singapore”, in Yong Mum Cheong (ed.), Asian Traditions and Modernization: Perspective from Singapore (Singpore, Centre for Advanced Studies, National University of Singapore & Times Academic Press, 1992), p. 83.

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of Ethnic Chinese entrepreneurship.44 But by believing they were protected by these popular Goddess and God in their business activities, they might have gained additional confidence in their undertakings. The uncertainties in the immigrant communities made the belief in gaining the protection and favor of God meaningful, and it was transformed into personal drive and a strong will to succeed. Traditional Chinese values derived from various sources constitute the basis of the Ethnic Chinese entrepreneurial thought. It was the integration of these values with Western business practice that produced Ethnic Chinese entrepreneurs. In the first generation of the Ethnic Chinese entrepreneurs who had no direct access to Western education, knowledge of Western business practice was first acquired through business contacts with European customers and later through business tours.45 This interaction was made possible only in Westernized societies such as the Ethnic Chinese societies in Southeast Asia and in the West as well as in the treaty ports of coastal China. The interaction produced the desire in the minds of the Ethnic Chinese entrepreneurs to imitate and then to evaluate the Western practices. In the process of interaction and integration, they would evaluate both traditional Chinese values and Western business practice to produce a new integrated system or practice to suit local Chinese environment.46 44

For the worship of Tianhou among the Chinese in Singapore and Malaya in 19th and early 20th centuries, see Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911, pp. 14–15, 41–42. For a comprehensive survey of Ma Zu (Tianhou) worship in Malaysia, see Soo Khin Wah (Su Jianhua), “Malaixiya Huaren de Ma Zu xinyang” (The Ma Zu worship by the Chinese in Malaysia), in Soo Khin Wah (Su Jianhua), Su Jianhua lunwen xuanji (Selected Academic Articles of Soo Khin Wah) (Seri Kembangan, Selangor, United Publishing House (M) Sdn. Bhd., 2009), pp. 74–102. 45 For instance, Kwok Chin, a founder of the Wing On Company of Hong Kong and Shanghai, benefited from his overseas tours. See Kwok Chin, Yongan jingshen zhi faren ji qi zhangcheng shilue (The Origins of the Wing On Spirit and a Brief History of Its Growth) (Hong Kong, 1961), p. 47. 46 See Yen Ching-hwang, “The Wing On Company of Hong Kong and Shanghai: A Case Study of Modern Ethnic Chinese Enterprise, 1907–1949”, in Proceedings of Conference of Eighty Years’ History of the Republic of China, Vol. 4 (English Section), pp. 109–110; see also Yen Ching-hwang, Studies in Modern Overseas Chinese History, p. 227.

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This process is perhaps analogous with the process of blending oriental ethics with occidental business practice adopted by the early Japanese entrepreneurs of Samurai background during the Meiji era. The blending of Chinese and Western values and business practice took higher form in the second and third generations of the Ethnic Chinese entrepreneurs. Those entrepreneurs who had the foresight of sending children to study in the West would have a better chance to maintain and expand their business empires. Returned from the West with degrees in economics or business administration, the future entrepreneurs would have a profound knowledge of how Western business works. At the same time, their formal and informal Chinese education together with traditional Chinese values gained from their parents would make the blending process smoother and enhance their chance of success in running modern enterprises. The Kwok brothers of Wing On Company in Hong Kong is a case in point. The Kwok brothers, Kwok Lock and Kwok Chin were the founders and perpetuators of the famous Wing On group of companies in Hong Kong and Shanghai. Throughout their careers, they realized the importance of knowledge in the running of modern business enterprise. Kwok Chin was particularly impressed by the economic success of the West and Japan, and he vowed to match with the Western and Japanese enterprises. But he realized his own limitations because of his lack of both formal Chinese and Western educations. He rested his hope in his children who would continue and expand their business empire. He had paid a great deal of attention to his children’s education. Four out of his five sons graduated from the Lingnan University in Guangzhou with degrees in agriculture, economics and commerce. Two of them went overseas for further study in England and the United States: one graduated from the University of Manchester in manufacturing engineering, the other studied at Stanford University receiving a MBA degree. The Lingnan University was founded by Western missionary with good academic standing, and the graduates of the University were proficient in both Chinese and English. All of Kwok Chin’s sons were placed in important positions within the structure of the Wing On empire. His elder son, Kwok

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Lin-shuang, for instance, was made the General manager of the Wing On Company in Shanghai for many years.47 Members of the third generation of the Wing On also received good bi-lingual education. When I interviewed the heads of two Wing On organizations in Hong Kong in 1990 — Dr. Russel Kwok and Mr. M.C. Kwok — I was impressed by their demeanor and their command of both the Chinese and English languages.48 Dr. Russel Kwok received Chinese education and a Doctorate in Commerce from an American University; while his cousin Mr. M.C. Kwok graduated from Hong Kong university and a law degree from England.49 Obviously, these second and third generation entrepreneurs of the Wing On are able to blend Chinese and Western cultures well, and they have benefited the best of the two worlds. They are able to sustain and expand the Wing On business empire in Hong Kong and in other Ethnic Chinese communities.

Educational, social and political capital of the Ethnic Chinese entrepreneur In the Chinese immigrant societies, educational and social backgrounds of the immigrants determined their chance of becoming successful entrepreneurs. Those immigrants whose families were connected with teachers, government underlings, artisans and petty traders had the advantage over those who derived from peasant stock. They invariably acquired an attitude favorable to doing business or learnt something about business practices, and they tended to have a good starting in business. In Singapore, for instance, 35 out of the 47 successful Chinese entrepreneurs in the 20th century had their fathers in trading, clerical or administrative works such as shop-owners and hawkers, artisans and craftsmen, teachers, principals or government 47

See Kwok Chin, op. cit., pp. 78–79. See “Interview with Mr. M.C. Kwok in Hong Kong dated 8th November 1990”, “Interview with Dr. Russel Kwok, the grandson of Kwok Chin and General Manager of Wing On Centre, in Hong Kong dated 11th December 1990”. 49 Ibid. 48

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officials.50 For literate immigrants, their literary could be turned into valuable capital for doing business. It enabled them to understand business principles and facilitated their business activities. It also gave them competitive edge over other aspiring Chinese immigrants. One of the best examples of this kind is the case of Seah Eu Chin, a prominent Teochew Chinese entrepreneur in early Singapore. Seah was born in the Cheng Hai district, Teochew (Chao Zhou) prefecture in Guangdong province in 1805. His father was a junior government officer, and Seah was literate in the Chinese language. Like many other early Chinese immigrants, he was attracted by new economic opportunities arising from the opening of Singapore as a free trading port after 1819. When he arrived in the port in 1823 at the age of 18, his literacy gave him a competitive edge over many other Chinese immigrants who aspired to start a business. He first worked as a clerk to several trading vessels learning the skill of doing business, and established contacts with the natives in the Malay Peninsula and Riau Archipelago. After several years of learning process, he started his own business in 1830 as a commission agent supplying junks with provisions and a trader of local produce. With his education and knowledge, he became a shrewd investor in real estate and cash crop plantation. He was a pioneer in gambier and pepper planting on the island, and reaped enormous profit for his foresight. He emerged as one of the most successful Chinese entrepreneurs of his time and the leader of early Teochew community in Singapore.51 50

This information is collected by the Archives and Oral History Department, Singapore through a project on the “Pioneers of Singapore”. See Chan Kwok Bun and Claire Chiang, Stepping Out: The Making of Chinese Entrepreneurs (Singapore, Prentice Hall, 1994), pp. 41–43; Pioneers of Singapore: A Catalogue of Oral History Interviews (Singapore, Archives & Oral History Department, 1984). 51 See Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967), pp. 19–20; “She Youjin xiansheng” (Mr. Seah Eu Chin), in Pan Xingnong (ed.), Malaiya Chaoqiao tongjian (The Teochews in Malaya) (Singapore, Nandao chubanshe, 1950), pp. 78–79; Yen Ching-hwang, “Power Structure and Power Relations in the Teochew Community in Singapore, 1819–1930”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), pp. 293–294.

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However, these social and educational capitals were not entirely predetermined by family background and the literacy achieved in China, they still can be acquired overseas on individual efforts. Theoretically, in a less structured and less rigid immigrant society, all Chinese immigrants would have a equal chance in acquiring social capital that was crucial in starting and expanding a business. But it was easier for those immigrants who came through the kinship migration and belonged to a larger kin or dialect group. They were endowed with more social resources simply because they had more kinsmen and fellow dialect speakers. In a strict business sense, they had broader and stronger customers base that facilitated the starting and expansion of their business. Further, as different dialect groups dominated certain lines of business in the Chinese communities,52 the chance of success in the same business line was far greater than those immigrants who did not have these connections. The majority of the successful entrepreneurs in 20th century Singapore interviewed by the Oral History Unit appeared to have come from the southern part of Fujian province, speaking similar Hokkien dialect.53 As the Hokkiens were a major component of the Chinese population in Singapore and more Hokkiens were involved in business, these Hokkien entrepreneurs commanded the business advantage over members of other dialect groups in terms of business information and marketing. Apart from kinship and dialect ties, the social capital can also be enhanced by broadening one’s social network to include alumni and god-parentage. Alumni relationship in the Ethnic Chinese society is 52

For a discussion of relationship between occupation (business lines) and the dialect groups in the 19th century and early 20th century Singapore and Malaya, see Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986), pp. 116–128; for a more general discussion on this topic, see Mak Lau Fong, “Occupation and Chinese Dialect Group in British Malaya”, in Leo Suryadinata (ed.), Chinese Adaptation and Diversity: Essays on Society and Literature in Indonesia, Malaysia and Singapore (Singapore, Singapore University Press, 1993), pp. 8–27. 53 See Chan Kwok Bun & Clare Chiang See Ngoh, Stepping Out: The Making of Chinese Entrepreneurs, pp. 34–35.

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relatively new phenomenon, especially those who received Chinese education. Chinese alumni associations in British Malaya existed as early as 1918. The first known Chinese alumni organization in Singapore, the Nan Lu Alumni Association came into being in August 1918.54 By the 1930s, at least 10 Chinese alumni associations existed in Singapore and 13 in Penang, the former had a combined membership of 2,000.55 This relatively new form of social organization, though similar to traditional Chinese “Tong Nian” relationship,56 had a much broader social base. Because the alumni shared several years’ of schooling together, personal relationship was nurtured and developed. This ties cut across the traditional kinship and dialect ties, and enhanced one’s social capital. The god-parentage is religionbased, and is a common Christian practice. Sharing the same religious belief, some Christian parents choose god-parents for their children in order to forge a closer relationship with friends. In times of need, god-parents could act as parents to god-sons and goddaughters. John T. Omohundro in his study of Chinese merchant families in a Philippine city, Iloilo, found classmate relationship (alumni) and god-parentage played an increasing role in the business relations of the Chinese in the Phillippines.57 They were invariably 54

Members of this organization shared the same primary education in the Dao Nan School founded in 1906 in Singapore by the local Hokkien community. See Lin Yun (ed.), Daonan xuexiao chuangxiao liushi zhounian jinian tekan (Dao Nan School 60th Anniversary Souvenir, 1906–1966) (Singapore, Dao Nan School, 1966), p. 29. 55 Ses Yang Jiancheng (ed.), Sanshi niandai Nanyang huaqiao tuanti tiaocha baogao shu (A Report on the Overseas Chinese Organizations in Southeast Asia During 1930s, Based on Japanese Intelligence Sources in Taiwan) (Taipei, Zhonghua xueshu yuan, 1984), pp. 99–100. 56 Tong Nian (literally meant the same year) relationship rested with the traditional Chinese examination system. Imperial examinations since 7th century were conducted at three different levels: prefectural, provincial and capital levels. Those candidates sat for the same examinations identified themselves as “Tong Nian”, that meant to participate the examination in the same year. It was another ties for social and political networking. 57 See John T. Omohundro, “Social Networks and Businses Success for the Philippine Chinese”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Volume 1: Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983),

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used as part of social capital to advance business interests, and contributed in part to the overall business success of the Chinese. The political capital has been one of the most important factors for the success of Ethnic Chinese entrepreneurs, especially for those who resided in Southeast Asia. Unlike Japanese or South Korean entrepreneurs who had the strong backing of their national government,58 Ethnic Chinese entrepreneurs have to struggle to gain government’s support. Even under a favorable government’s policy such as “Import Substitution Industrialization” (ISI) that favored local capitalists,59 the Ethnic Chinese entrepreneurs still had to earn the government’s favors through their political contacts. They are keenly aware of the importance of political capital for the success of their enterprises. Political capital is accumulative, and can be acquired through various channels: inheritance, affiliation with a governing political party, affiliation with power elites, and personal contacts. For those Ethnic Chinese entrepreneurs who had inherited political connections from their fathers or uncles, their political capital enhanced because they transformed this relationship into strong family ties unbreakable even at times of crisis.60 Affiliation with a governing party by a membership pp. 66–68. For a more detailed study of the Chinese merchant class in Iloilo, see John T. Omohundro, Chinese Merchant Families in Iloilo: Commerce and Kin in a Central Philippine City (Athens, Ohio, The Ohio University Press, 1981). 58 For Japanese government’s strong support for the Meiji entrepreneurs, see Johannes Hirschmeier & Tsunehiko Yui, The Development of Japanese Business, 1600–1973 (London, George Allen & Unwin Ltd., 1975), pp. 86–99. For South Korean government’s strong support, especially under President Park Chung Hee, see Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York, Oxford University Press, 1992, paperback), pp. 72–96; Eun Mee Kim, “Organization and Growth of the Korean Chaebol”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia (Hong Kong, Centre of Asian Studies, University of Hong Kong, 1991), pp. 280–282. 59 For the introduction of ISI by various newly independent governments in Southeast Asia, see Garry Rodan, Kevin Hewison & Richard Robison (eds.), The Political Economy of Southeast Asia: An Introduction (Melbourne, Oxford University Press, 1997). 60 One of the best examples is the case of Robert Kuok Hock Nien who inherited his father’s cordial relationship with the political elites in Johore, and he further

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or active involvement in its activity would have access to the information of economic development of the state, and could even influence the making of the policy in favor of their own business interests. It would be easier and more profitable if the governing political party is substantially Ethnic Chinese. Of course this would be rare among the countries in Southeast Asia except Malaysia and Singapore. In the case of Malaysia, for instance, many Chinese entrepreneurs have strong affiliation with the Malaysian Chinese Association (MCA, before 1963, its name was Malayan Chinese Association), a key member of the ruling political party in Malaysia — the Alliance and later the Barisan National (BN) — since its inception in February 1949. Many wealthy Chinese businessmen including its founder, Sir Tan Cheng Lock, dominated early MCA leadership (1949–1957).61 Close political contacts with ruling power elite have become more important in the strategy of Ethnic Chinese entrepreneurs, and their importance far exceeds the traditional kinship and dialect ties. These contacts are cultivated through personal bonds and mutual benefits, and their success or failure depend very much on personality and social networking. From the perspective of Ethnic Chinese entrepreneurs, the cultivation of close relationship with ruling power elites is a most effective way of enhancing their chance of success. This political influence could help frame a favorable strategy, or help quash unfavorable rules and regulations against his business. In his study of Malaysian capitalism, Peter Searle divided Chinese businessmen (entrepreneurs) into two distinctive groups: new wealth and old wealth. Regardless of their differences in the ways of raising capital, the attitude towards debt, and the way of expansion, they nevertheless shared a common feature consolidated that relationship to the benefit of his business. For Robert Kuok father’s cordial relationship with the political elites in Johore, see Zhou Shaolong, Guo Henian zhuan (The Biography of Robert Kuok Hock Nien) (Hong Kong, Ming Chuang Publishing Company, 1996), pp. 28–29. For Robert Kuok’s close relationship with Johore political elites, see Edmund Terence Gomez, Chinese Business in Malaysia: Accumulation, Ascendance, Accommodation (Surrey, Curzon Press, 1999), p. 40. 61 These prominent businessmen included Tan Siew Sin (son of Tan Cheng Lock) from Malacca, H.S. Lee from Selangor and Lau Pak Khuan from Perak. For details, see Heng Pek Koon, Chinese Politics in Malaysia: A History of the Malaysian Chinese Association (Singapore, Oxford University Press, 1988), pp. 60–63.

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of using political connections. Most of the new wealth Chinese tycoons were closely associated with prominent members of the Malay political business elites, while the old wealth tycoons tended to associate with a Malay institutional partner or former bureaucrat.62 Of course, these close political connections come with a price, and the Ethnic Chinese entrepreneurs are prepared to pay for it which they consider as a cost of investment. In Thailand and Malaysia, close political connections were acquired through the exchange of political influence for company directorship, a more structured form of mutual benefits. Chin Sophonpanich, the founder of the powerful Bangkok Bank group in Thailand, adopted the strategy of forging close political ties with the ruling military-bureaucratic elites since its inception in December 1944; several generals and ministers and a retired prime minister were invited to sit on the board of directors of the bank in exchange for political patronage.63 In Malaysia, prominent Malay political and bureaucratic elites were recruited into Chinese company’s establishment in exchange for their political influence. In 1965, with the help of Mohammad Noah Omar, father-in-law of two future Malaysian Prime Ministers — Tun Abdul Razak and Daduk Hussein Onn — Lim Goh Tong managed to obtain a casino license to start his famous Genting Highland resort.64 In return, Mohammand Noah was made the chairman of the board of directors of Genting Highland Berhad; later, another prominent Malay bureaucratic elite — Haniff Omar, the former Inspector General of Police — was made the deputy chairman for the Genting group and the Resorts World.65 62

See Peter Searle, The Riddle of Malaysian Capitalism: Rent-seekers or Real Capitalists? (St. Leonards, NSW., Australia, Allen & Unwin, and University of Hawaii Press, 1999), pp. 190–191. 63 See Kevin Hewison, Bankers and Bureaucrats: Capital and the Role of the State in Thailand (New Haven, Yale University Southeast Asian Monographs No. 34, 1989), p. 193. 64 For details of Lim Goh Tong’s founding of the Genting Highlands Sdn. Bhd. on 27 April, 1965 with the support of Tan Sri Haji Mohd Noah, see Lim Goh Tong, My Story (Subang Jaya, Selangor, Pelanduk Publications, 2006, 5th printing), pp. 71–92. 65 Another retired bureaucrat, Mohammad Amin Osman, a former Deputy Inspector General of Police was made a director of the Genting group and chairman of Lim

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Transformation of Ethnic Chinese entrepreneurs and their future The terms ‘Traditional’ and ‘modern’ cannot be clearly defined. A comparative study on Malaysian Chinese entrepreneurs shows a high degree of mixture of traditional and modern characteristics, and it is in this mixture that makes the categorization interesting. Mackie uses the method of doing business as the main yardstick to differentiate traditional and modern Chinese entrepreneurs.66 Of course, the method of doing business reflects the education, values and attitude towards the business between these two groups of entrepreneurs. But Mackie also lists several facts that blur the lines between traditional and modern entrepreneurs, this includes Loke Yew, a prominent traditional entrepreneur who applied modern technology to the operation of his mines.67 This seemingly contradictory position of Loke Yew is an indication that he was prepared to embrace both tradition and modernity as far as it worked. Although his outlook and management style were traditional, he was prepared to adopt modern technology to meet the challenge of competition and for the survival of his business, This “tradition in modernity and modernity in tradition” formula appeared to be a viable one adopted by many Ethnic Chinese entrepreneurs of his time. In pre-war Singapore and Malaya, Straits Chinese appeared to be the key group in transforming Chinese business from tradition to modernity. It was the new generation of entrepreneurs within this group that led the Chinese community in creating the modern sectors of banking and insurance.68 Lee Kam Hing argues that Western

Goh Tong’s Asiatic Development. See Edmund Terence Gomez, Chinese Business in Malaysia, pp. 50–56. 66 See Jamie Mackie, “Chinese Entrepreneurs in Malaysia: Traditional and Modern”, in Leo Suryadinata (ed.), Ethnic Chinese in Singapore and Malaysia: A Dialogue between Tradition and Modernity (Singapore, Times Academic Press, 2002), pp. 180–181. 67 Ibid., p. 185. 68 See Lee Kam Hing, “The Emergence of Modern Chinese Business in Malaya”, in Leo Suryadinata (ed.), Ethnic Chinese in Singapore and Malaysia, pp. 247–248.

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education, close relationship with colonial government and Western capital, and a more long-term local business outlook were responsible for the Straits Chinese success in transforming Chinese business from tradition to modernity.69 This view seems to have over-simplified the process of this transformation. Western education, close relationship with colonial government and Western capital, and a long-term local orientation were certainly important, but they were not the sufficient factors. The key to this process of transformation rested more with the ability of the Ethnic Chinese entrepreneurs to internalize various factors, and to integrate these factors with modern Western technology and business practice. Tan Kah Kee, for instance, did not need to be Western educated, nor be close to colonial political and economic establishments, nor a strong local orientation, still managed to transform traditional Chinese business into a modern one.70 The future of Ethnic Chinese entrepreneurs is bright. Like Japanese and Korean entrepreneurs, they are in the right track of integrating Confucian cultural values with Western business practice, and they have benefited from the best of the two worlds. The world is becoming smaller and more integrated as the result of technological and information revolutions. Globalization is taking place and is going strong. Free trade is calling shots in the 21st century, and competition among nations and among multi-national corporations are becoming more intense. The rise of Japan and the Four Little Dragons in Asia in the second half of the 20th century signaled the beginning of the end of the Western monopoly of world economic development. The emergence of China as a world economic powerhouse in the first decade of the 21st century has speeded up this process. In the future corporate Olympics, those countries and individual companies which hold the competitive edge will have a better chance of success. But this edge may have to derive partly from their 69

Ibid. See Yen Ching-hwang, “Tan Kah Kee and Overseas Chinese Entrepreneurship”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), pp. 123–144. 70

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respective cultures. Chinese culture is rich in the handling of human relationships. The Confucian concept of propriety (one knows your position or station in a hierarchical structure of the society), the idea of loyalty and reciprocity, a strong sense of self-discipline and responsibility, all of these can be utilized for the the benefits of management and industrial relations. However, Chinese culture of collectivism lacks a strong sense of change, creativity and innovation. The Ethnic Chinese entrepreneurs who have increasingly absorbed Western management ideas and techniques are aware of this deficiency in the Chinese culture, and are prepared to follow Western practice. As what Professor Rosebeth Moss Kanter in her well-known works — The Change Masters: Corporate Entrepreneurs at Work and When Giants Learn to Dance: Mastering the Challenges of Strategy, Management, and Careers in the 1990s — have argued that the key to corporate success in the 1990s and beyond rests with innovation within the corporate structure and processes. Corporations that aspire to succeed have to adopt integrative thinking and to embrace change. The creation of this integrative and change culture is conducive to innovation. On the contrary, the segmentalism prevailing in the corporation would lead it to decline and collapse.71 It is imperative for Ethnic Chinese entrepreneurs to adopt this change culture and value the concept of innovation. However, in the process of accepting change and implementing innovation, Ethnic Chinese entrepreneurs will have to evaluate and absorb the best ingredients of Chinese culture, and produce something even better for the running of Ethnic Chinese business enterprise.

71

See Rosebeth Moss Kanter, The Change Masters: Corporate Entrepreneurs at Work (Routledge, New York, 1993, paperback) and When Giants Learn to Dance: Mastering the Challenges of Strategy, Management, and Careers in the 1990s (Routledge, Londone and New York, 1992).

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Chapter 8

Ethnic Chinese Business Management

Confucianism and Traditional Chinese Business Management The term ‘Confucianism’ is understood here as a body of thoughts consisting of the teachings of Confucius, Mencius, Xun Zi — the classical masters of the Eastern Zhou period (722–221 B.C.), and other Confucianists throughout the centuries such as Dong Zhongshu of Han period (206 B.C.–220 A.D.), Zhu Xi of Song period (960–1127 A.D.), and Neo Confucianists such as Wang Yangming of Ming period (1368–1644 A.D.) and others. The teachings of the masters and the followers shared certain basic principles, but in details or on certain specific issues, they may not be consistent or even differ in their teachings. The core of Confucius’ teaching is ‘ren’ (benevolence). The Chinese character of ‘ren’ is a combination of two human beings. The Confucian philosophy places human beings and human relationships as its starting point, and they are also the starting points of the philosophy of Confucian management.1 Confucius himself greatly emphasized the importance of ‘ren’. In his dialogues with his disciples in famous ‘Lunyu’ (The Analects), he at least mentioned the concept of ‘ren’ 109 times, much more than other concepts such as ‘li’ (propriety), ‘dao’ (way), ‘de’ (virtue) and ‘yi’ (righteousness). Confucius believed all human virtues were contained in the concept of ‘ren’, and from it he systematically developed ideas of ‘human beings relationship with nature’ (ren yu ziran), ‘individuals and 1

See Li Honglei, Rujia guanli zhexue (The Philosophy of Confucian Management) (Guangzhou, Guangdong gaodeng jiaoyu chubanshe, August, 1997), pp. 18–19. 205

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society’ (ren yu shehui) and ‘human relationships’ (ren yu ren zhijian de guanxi). On one occasion, Confucius explained the concept of ‘ren’ to one of his students, he said ‘ren’ is to love people, to concern about other people, to help other people, to understand other people and to forgive other people.2 Mencius, the second most important classical master of Confucianism, developed Confucius’s concept of ‘ren’ to the management of the state, and formed his political theory of ‘ren zheng’ (benevolent governance). Recounting the history of ancient China, Mencius argued the sage kings of the ancient states of Yao, Shun and Yu, ruled the states with their benevolent governance, and gained the strong support from the people, while their descendants lost the states because of the lack of benevolent governance. Therefore, Mencius concluded that the rise and fall of dynasty were depended on the practice of benevolence. He warned that if the emperor did not practice benevolence, he would have lost the empire; if the king did not practice benevolence, he would have lost the state; if a minister did not practice benevolence, he would not be able to keep his ancestral temple for worship; if officers and ordinary people did not practice benevolence, they would not have been able to keep their jobs, properties and even their lives. Mencius concluded that the practice of benevolent governance would gain the hearts of the people, and would gain the rights to rule.3 Confucius’ key teaching of ‘ren’ (benevolence) perhaps to certain extent can be equated to God’s covenant in Christianity. Christian teaching of God’s covenant is unilateral, not contractual, and the initiative is taken by God. Similarly, in the traditional Chinese society which was organized hierarchically, the emperor and the king had to take initiative to give benevolence to their people, and the benevolence was given voluntarily and unilaterally without expecting 2

See Peng Zhenghui, Kongzi yu shangzhan lunli (Confucius and the Philosophy of Commercial Wars) (Wuhan, Hubei Renmin chubanshe, May 1996), pp. 14–15. 3 See Ma Tao, “Rujia renbenlun yu Dongya guanli moshi” (The People-Centered Theory of Confucianism and the Management Pattern of the East Asia), in Ma Tao, Rujia chuantong yu xiandai shichang jingji (The Confucian Tradition and Modern Market Economy) (Shanghai, Fu Dan daxue chubanshe, March, 2000), pp. 177–178.

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something in return. In applying this benevolence to business management, the owners and managers at the top would practice benevolence towards their staff and workers. It was unconditional. On the other hand, the staff and workers who received the benevolent treatments felt obliged towards the owners or managers, and were prepared to work hard in repayment of the gratitude. This repayment of gratitude was spontaneous and whole-heartedly. From this perspective, the practice of benevolence would unleash tremendous positive energy and power among the staff and workers for the good of the enterprise which would have competitive advantage over other enterprises. Further, the practice of benevolence towards staff and workers would induce loyalty and devotion from them. The loyalty to the enterprise would give them a strong sense of belonging of which they would feel they are members of a large family striving for excellence and success. The loyalty and devotion would also generate harmony and a strong internal cohesion which is indispensable for the success of an enterprise.4 In addition, the Confucian management also emphasized the use of talents (rencai) who would manage the enterprise well and lead the enterprise to growth and expansion. The selection of talents in the service of an enterprise is a key to the success of traditional Chinese business. This people-centered and benevolence-driven Confucian management style was capable to lead an enterprise to expand larger and larger, and achieve fast growth. The case of Ruifuxiang (or Romanzed as Jui-fu-hsiang) Company of Beijing is case in point. Started with a small firm in the 17th century in a district township in Shangdong province, Ruifuxiang was owned by a Meng family. It was a wholesale and retail firm of native cloth. The fortune of the firm went through vicissitudes and was revived in the 1870s under the leadership of Meng Luochuan (Meng Lo-ch’uan), an able entrepreneur. He had combined an unwavering sense of traditionalism with an uncanny ability to take advantage of changing market conditions.5 Until 1893, 4

Ibid., pp. 178–179. See Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firm and Its Modern Reform”, in Business History Review, Vol. 56, No. 2

5

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Ruifuxiang’s native cloth business was only confined to Jinan, the capital city of Shandong province. In that year, with the help of his able assistant, Meng Jinhou (or Romanized as Meng Chin-hou), Meng Luochuan began to branch out into imported fabrics, cosmetics and other foreign luxury goods new to Chinese market. He set up branches in Beijing where he had established 5 stores, and then he expanded to Qingdao, Chefu in Shandong, and Shanghai. He also diversified his business into pawnshops, Chinese pharmacies, and handicraft weaving. At its height of expansion around 1925, his chain of business had 26 shops employing about 1,000 men and had over 600,000 taels in annual turnover. It was one of the 8 largest piece goods establishments in Beijing.6 The management system of Ruifuxiang was basically a highly centralized system: the power was concentrated at the top, and it was paternalistic and top-down. Most of the important decisions were made by Meng Luochuan with the help of his assistant Meng Jinhou. He developed a highly personalized system to control the operation of the group’s business. Each branch was headed by a branch manager with four assistant managers, and all branch managers were selected and appointed by him. He controlled the branches through a formal structure of meetings and written reports so as to keep himself informed the operations of all the branches. He required formal reports in writing from each branch manager once every 5 days, and he held in his own home 2 major meetings each year attended by all the branch managers and their chief assistant.7 Ruifuxiang did not have a salary system for senior staff, instead it adopted a ‘qian–ren’ system of remuneration. The word ‘qian’ means money or capital, while the word ‘ren’ means people or staff. The (Summer 1982): A Special Issue on East Asian Business History (Cambridge, Mass., Harvard Graduate School of Business Administration, 1982), p. 222. 6 Ibid.; for details of Ruifuxiang history, see “Beijing Ruifuxiang jianshi” (A Concise History of Ruifuxiang Company of Beijing), in Zhongguo kexueyuan jingji yanjiusuo, Zhongyang gongshang xingzheng guanliju (eds.), Beijing Ruifuxiang (The Ruifuxiang Company of Beijing) (Beijing, Shenghuo, Dushu, Xin Zhishi Sanlian shudian, March, 1959), pp. 2–18. 7 See Wellington K.K. Chan, op. cit., p. 224.

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system was based on the division of the annual profits of Ruifuxiang at the end of the year.8 70% of the profits went to the capital (the Meng family), while 30% became the remuneration of the staff. It was claimed that before the reign of Guangxu emperor of the Qing dynasty (1875–1908), the division was 60%–40% instead of 70%–30%. The 30% of the staff shares were further divided into 220–230 ‘li’, and were distributed among senior staff including Meng Luochuang, Meng Jinhou and other branch managers. Meng Luochuang besides taking 70% of the total profits for his Meng family, he also took 10 ‘li’ for his own because he was the chief manager of the firm. The adoption of this ‘qian–ren’ system was to encourage staff to work hard for the firm, and to unleash their positive energy.

Modern Ethnic Chinese Business Management Management is the coordination of resources (land, capital and labor) to fulfill a projected goal. It provides the planning, organization and direction which are necessary for business operation.9 Any business, small or large, needs a management. No business can survive without a reasonably good management. Traditional Chinese business, as exemplified by the Ruifuxiang company of Beijing, was capable of producing good management for its large business organization. Concentration of decision-making power at the top, and the creation of a network of trusted subordinates were the two characteristics of the management of large traditional Chinese business.10 This highlights a people-oriented approach of management which was compatible with Confucian elitest philosophy. 8

Wellington K.K. Chan used the term “jen-li” (ren-li in Pinyin) which means human labor to describe this system. I think the term “qian-ren” system is a more appropriate translation of the system in Chinese. Ibid., p. 223; Beijing Ruifuxiang (The Ruifuxiang Company of Beijing), op. cit., pp. 132–133. 9 See Bayard O. Wheeler, Business: An Introductory Analysis (New York, Harper & Row & John Weatherhill, Inc., Tokyo, A Harper International Student reprint, 1964), p. 198. 10 See Wellington K.K. Chan, op. cit., pp. 222–226; Beijing Ruifuxiang (The Ruifuxiang Company of Beijing), pp. 2–18.

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Modern Ethnic Chinese management had not greatly departed from the traditional pattern. The concentration of decision-making at the top and the creation of a network of trusted subordinates were retained with some modifications. Most modern Ethnic Chinese entrepreneurs had received some forms of traditional Chinese education. How imperfect this education it could be, they nevertheless absorbed similar Confucian values of paternalism and responsibility, believing they had to dedicate maximum time and energy to strive for success of the enterprise and to take absolute authority to run the family company which in their eyes was the extension of the family. Tan Kah Kee’s management style is case in point.11 Tan Kah Kee was one of the best known Ethnic Chinese entrepreneurs in Southeast Asia and South China before World War II. His business empire centered at Singapore, and extended widely to other parts of Southeast Asia and South China. His management style was characterized by a centripetal authority or known as ‘paternalistic style of management’. Power and authority were concentrated at the top, and the decision-making process was top-down rather than bottomup. Confucian elitist concept of paternalism drove him and many other Ethnic Chinese entrepreneurs with heavy executive and administrative duties. What should be pointed out here is that the foundation of this paternalism was not based on Western concept of “power” but on responsibility (ze-ren). The traditional Chinese and Ethnic Chinese entrepreneurs tended to make most of the decision of their enterprises not because they enjoyed making them, but felt obligated to run the business properly.12 The highly-centralized decision 11

For discussion of Tan Kah Kee’s management style, see Lim How Seng, “Chen Jiageng de jingying linian yu qiye guanli” (The Entrepreneurial Ideas and Management of Tan Kah Kee), in Lim How Seng (Lin Xiaosheng), Xinjiapo huashe yu huashang (Singapore Chinese Community and Entrepreneurs) (Singapore, Singapore Society of Asian Studies, 1995), pp. 153–166. Yen Ching-hwang, “Tan Kah Kee and Overseas Chinese Entrepreneurship”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), pp. 134–139. 12 See Yen Ching-hwang, “Tan Kah Kee and Overseas Chinese Entrepreneurship”, ibid., p. 134.

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making at the top was reflected in the structure of Tan Kah Kee’s companies. The head office in Singapore which had over a hundred staff at its peak of operation, was the nerve-center of the operation. The control of the head office over branches and factories was firm and effective. All branch managers, deputy managers, treasurers and book-keepers were directly appointed by the head office, while branch managers were only empowered to appoint shop assistants and apprentices. A check and balance system was built into the branch structure to prevent abuse of power or corruption. All branches and factories were required to report to the head office every month on business and management, together with reports on finance, administrative and sundry expenses; every three months they were required to submit stock reports.13 Tan Kah Kee appeared to have made most of the important decisions at the head office with the help of his younger brother Tan Keng Hean. Tan Kah Kee’s devotion to his business may not be as dedicated as Meng Luochuan of Ruifuxiang in Beijing whose only hobby was reading of company’s account books, nevertheless, he devoted much of his time to building up of his business empire. Rising early in the morning to inspect his factories and branches in Singapore became his daily routine, and his regular meetings with staff and subordinates qualified him as a workaholic.14 His dedication to business not only injected dynamism into the organization, but also became a model for emulation among his staff and subordinates. Tan Kah Kee’s paternalistic style of management was inherently Confucian. Having attended traditional sishu school for 7 years in his home village of Jimei, Tong An district, and learned the Trimetrical Classics (Sanzi Jing) and the Confucian Classics of the Four Books 13.

See “Chen Jiageng gongsi fenhang zhangcheng” (The Rules and Regulations of the Tan Kah Kee Company Pty. Ltd. (Singapore, 1929), p. 39. I wish to thank Dr. C.F. Yong of Flinders University, South Australia for providing this document. 14 According to the recollections of his son, Tan Kok Keng (Chen Guoqing), Tan Kah Kee got up at 5.30am, and after exercise and breakfast, he left with Kok Keng to inspect factories and branches. See Tan Kok Keng, “Wo de fuqin” (My Father Tan Kah Kee), in Huiyi Chen Jiageng (Recollections on Tan Kah Kee) (Beijing, Wenshi ziliao chubanshe, October, 1984), p. 54.

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(The Great Learning, Doctrine of the Mean, The Analects, and Mencius), Tan Kah Kee invariably absorbed a reasonable amount of Confucian ideas,15 which he had unconsciously incorporated into his management thought. He and his younger brother, Tan Keng Hean made most of the important decisions on the operation of his various enterprises before the company was incorporated in 1919; and he continued to do the same thing with a small group of trusted managers after 1919. He thus concentrated the decision-making, executive and administrative powers in his own hands, assuming the roles of the chairman of the board of directors, the chief executive officer and manager. He offered strong and absolute leadership at the top. The Kwok brothers of the Wing On Company of Hong Kong offered another pattern of paternal style of management of modern Ethnic Chinese business — the dual-leadership paternal style of management. The Kwok brothers, Kwok Lock (or Romanized in Pinyin as Guo Le, he was also known as James Gocklock) and Kwok Chin (or Romanized in Pinyin as Guo Quan, he was also known as Philip Gockchin) were two among six brothers of the Kwok family originated in the Chuk Sau Yuen village of Xiang Shan district (modern Zhongshan district) of Guangdong province. Both Kwok Lock and Kwok Chin were astute entrepreneurs who began their business careers in Sydney, Australia. With the desire for business expansion and foresight, they founded the Wing On Company in Hong Kong in 1907, one of the largest Chinese department stores in modern China.16 Both brothers were founders of the company and were 15

See Tan Kah Kee, Nanqiao huiyi lu (Reminiscence of My Life and Activities in the Chinese Communities in Southeast Asia, thereafter My Autobiography), Volume 2 (Singapore, Chen Jiageng guoji xuehui, Chen Jiageng jijinhui, July, 1993), p. 479; Yen Ching-hwang, “Tan Kah Kee and Oei Tiong Ham: A Comparative Study of Overseas Chinese Entrepreneurs”, in Leo Suryadinata (ed.), Tan Kah Kee and Lee Kong Chian in the Making of Modern Singapore and Malaysia (Singapore, Chinese Heritage Centre, June 2010), p. 76. 16 For the history of the founding of the Wing On Company in Hong Kong, see Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 197–203.

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actively involved in the management. Kwok Chin who was physically involved in getting the company started in Hong Kong on August 28, 1907, was joined by his elder brother Kwok Lock in 1909, two years after its inception. Kwok Lock who was by nature charismatic with business acumen and foresight, was made the chairman of the company, and became the chairman of the board of directors when the company was incorporated later. While Kwok Chin whose personality was introvert, quiet but shrewd was made manager and later general manager. Kwok Lock’s more sociable personality was suitable to deal with external affairs of the Wing On, while Kwok Chin concentrated his attention on the operation of the company. In 1932 when Wing On celebrated its 25th anniversary, the management of the Hong Kong head office consisted of a General Office, Cashiers’ Office, Purchasing Office, General Accounting Office, Bills and Cost Accounting Office, Shares Office and Estates Office. The general staff were attached to various sub-departments under the control of a head. In that year, there were 50 sub-departments covering a wide range of commodities.17 The management style of Wing On was paternalistic and top-down. The decisions made at the top were carried out downwards to the sub-departments. Both Kwok Lock and Kwok Chin had equal status in the company’s hierarchy and appeared to have equal power. They complemented each other by their different personalities not by subordination. In contrast with Tan Kah Kee and his younger brother Tan Keng Hean, the former held the dominant position in the company and called most of the shots, while the latter served more or less like his assistant, their status in the company was not equal but sub-ordinate. Both Kwok brothers received several years of traditional sishu education in their home village in Xiangshan, and had absorbed Confucian values of paternalism and moralism. Both of them considered Wing On as a big family unit, and they were the heads of the family with all the employees as the members of this large 17

See Yen Ching-hwang, “Wing On and the Kwok Brothers: A Case Study of Pre-War Overseas Chinese Entrepreneurs”, in Kerrie L. MacPherson (ed.), Asian Department Stores (Richmond, Surrey, Curzon Press, 1998), p. 54.

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extended family. They were morally obligated to look after the interests of the employees, and in return, the employees were to work hard for the prosperity of the company. Both were strong believers of character building of their staff through moral cultivation: injection of traditional Chinese values of hard-work, thrift, loyalty, sincerity, uprightness and trustworthiness; and example-setting by senior staff for the junior staff to follow.18 As modern Ethnic Chinese entrepreneurs were exposed to foreign influence, and were experimenting or building their business empires in a foreign or semi-foreign environment, they naturally learned, evaluated and absorbed Western ideas and principles of doing business. Since most of the modern Ethnic Chinese enterprises were created by the founding entrepreneurs who had neither received direct Western education nor spoke a fluent Western language, their understanding of Western business practice was limited. This imperfect knowledge of Western business practice was blended with traditional Chinese values that constituted the basis of modern Ethnic Chinese management. A principal feature of modern Ethnic Chinese management was strong domination of ownership over management.19 Unlike a traditional Chinese business enterprise in which ownership and management were completely identical, and unlike a modern Western public company in which ownership and management are mostly separated, the modern Ethnic Chinese enterprise had integrated these two different practices, and had taken a middle path. Usually, the controlling family or families would have one of its able members to serve in the capacity of managing director or deputy general manager to ensure the 18

See Kwok Chin, Yong An jingshen zhi faren ji qi zhangcheng shilue (The Origins of the Wing On Spirit and a Brief History of Its Growth, thereafter My Autobiography) (Hong Kong, Wing On Company?, 1961), pp. 27–28; Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, op. cit., p. 209. 19 For discussion of this issue, see Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 245–246; S. Gordon Redding, The Spirit of Chinese Capitalism, pp. 158–159.

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implementation of the decisions of the board. In Hong Kong, the Wing On Company’ management was dominated by one of its founders, Kwok Chin (Guo Chuan) for more than twenty years, while Wing On’s major branch in Shanghai was under the control of Kwok Chin’s son for a long period.20 In Singapore and Malaysia, the Oversea-Chinese Banking Corporation which came into being in 1932 was owned and controlled by a few Singaporean and Malaysian Chinese families headed by Lee Kong Chian’s family. These families had maintained control over the group’s management for a long period.21 This overlapping of ownership and managerial responsibility may not be desirable in a modern Western multi-national corporation, but in the Ethnic Chinese communities, the overlapping gave the management additional authority to run the company. This is testified by Gordon Redding’s study of a group of Ethnic Chinese business executives, and he has pointed out that Ethnic Chinese employees have generally more respect for ownership than managerial responsibility.22 This combined ownership and managerial responsibility made the management of modern Ethnic Chinese companies all powerful in running their enterprises. 20

In addition of being the manager of Wing On from August 1907 to 1911, Kwok Chin (Guo Chuan) was the General Manager of Wing On Company from 1912 to 1932. See Liu Tianren (narrated), “Ben gongsi erhshiwu zhounian zhi jingguo” (25 Years’ History of the Wing On Company) in Xianggang Yongan youxian gongsi nianwu zhounian jinian lu (The Wing On Company Limited, Hong Kong: In Commemoration of 25th Anniversary, 1907–1932) (Hong Kong, Tian Xiang Press, 1932), ‘Shi Lue’ (Brief Historical Records) column, p. 12. For Kwok Shong Lum’s (Guo Shuanglin, son of Kwok Chin) occupation of the position of managing director of the Wing On Company in Shanghai, see “Yongan qiye jituan de Guo Shuanglin” (Kwok Shong Lum of the Wing On Group of Companies), in Xu Dixin (ed.), Zhongguo qiyejia liezhuan (Biographies of Chinese Entrepreneurs) (Beijing, Jingji Ribao, 1988), Vol. 2, pp. 216–228. 21 See Lim Mah Hui, Ownership and Control of the One Hundred Largest Corporations in Malaysia (Kuala Lumpur, Oxford University Press, 1981), pp. 91–92; Lim Mah Hui, “The Ownership and Control of Large Corporations in Malaysia: The Role of Chinese Businessmen”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Vol. 1: Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983), pp. 285–288. 22 S. Gordon Redding, The Spirit of Chinese Capitalism, pp. 158–159.

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Another important feature of modern Ethnic Chinese management was the integration of Western principle of meritocracy and traditional Chinese practice of personal connections which ranged from kinship, dialect, geographical and other ties. The main weakness of the pure meritocracy principle in the recruitment system is the lack of a strong link between the employees and the employer. Under the operation of this principle, the employee is led to believe that he deserves the job because of his personal merits. He does not feel indebted to the employer and his relationship with the company is purely financial. A strong loyalty to the company is lacking, and his loyalty could easily be swayed by a better offer from another company. This could result in frequent changes of personnel and a disruption in the operation of the company.23 On the contrary, the traditional Chinese practice of personal relationship tends to generate complacency, inefficiency and nepotism.24 A combined formula would strengthen and complement each other. Under this combined formula, a manager of a modern Ethnic Chinese enterprise was recruited partly on his merit, and partly on his connections with the employer through kinship, dialect or common geographical origins. He thus felt indebted to the employer and had sealed a strong bond with the company. His link with the company was not just hinged upon financial rewards, but also on moral and personal obligations. He was morally obligated to repay the gratitude he owed to the employer, and his loyalty to the company could not easily be swayed by a higher financial offer from another company. Thus, this integrated formula of meritocracy and personal connections provided the modern Ethnic Chinese business enterprise with strong cohesion, continuity and stability.

23

See Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, p. 246. 24 See S. Gordon Redding, op. cit., p. 158; Tu I-ching, “Family Enterprises in Taiwan”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia (Hong Kong, Centre of Asian Studies, University of Hong Kong, 1991), pp. 116–122.

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Lee Kong Chian, the well-known ‘Rubber King’ of Singapore and Malaysia, successfully applied this combined Western and Chinese management formula. Lee himself had received both Chinese and Western educations, and founded his Lee Rubbers in August 1928. It prospered to become the leading rubber producing company in Southeast Asia. The bulk of workers in Lee Rubbers were Hokkien speakers, and were recruited through recommendations. They were recruited into the work force because of their dialect and geographical connections with Lee who was the native of Nan An, a southern district of Fujian. Lee himself was actively involved in selecting senior management staff among Hokkien speakers according to their individual ability. His senior staff were proved to be excellent managers and were absolutely loyal to the company. This contributed greatly to the success of Lee’s business empire in Southeast Asia.25 Successful modern Ethnic Chinese enterprises had to go through the process of competition, growth and expansion. Unlike European business houses in East and Southeast Asia, modern Ethnic Chinese enterprises did not enjoy government patronage. Any assistance from Western colonial governments was deemed to be a bonus. They had, to a large extent, depended on their own efforts for survival and growth. But compared with traditional Chinese business, modern Ethnic Chinese enterprise had the advantages of access to diverse source of capital. They could continuously tap traditional source of

25

For a good study of Lee Kong Chian’s management style, see Lim How Seng (Lin Xiaosheng), “Li Guangqian de qiye wangguo, 1927–1954” (The Business Empire of Lee Kong Chian, 1927–1945), in Yazhou wenhua (Asian Culture), No. 9 (Singapore, Singapore Society of Asian Studies, April 1987), pp. 3–20; see also the same article published in Lim How Seng (Lin Xiaosheng), Xinjaipo huashe yu huashang (Singapore Chinese Community and Entrepreneurs) (Singapore, Singapore Society of Asian Studies, 1995), pp. 183–226. For another work on Lee Kong Chian’s business and his contributions to education in Singapore and Malaysia, see Wu Hin Yung (Hu Xingrong), “Li Guangqian (Lee Kong Chian): Yi shang yangru xingxue zhi dianfan” (Lee Kong Chian: A Model of ‘Business for Education’s Philanthropy’), in Lim Chooi Kwa (Lin Shuihao) (ed.), Malaxiya Huaren lishi yu renwu: Rushang bian — chuangye yu hugen (Malaysian Chinese History and Personalities: The Entrepreneurial Elites (Kuala Lumpur, Centre for Malaysian Chinese Studies, June 2003), pp. 95–122.

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deposits by relative, kinsmen and people from same districts and prefectures;26 they could acquire bank credits; and they could change the structure of the enterprise from partnership to share-based limited liability companies.27 However, the absence of stock markets in China and the Ethnic Chinese communities at that time prevented them from seeking capital from the general public. In contrast, the Japanese modern entrepreneurs of the Meiji period not only enjoyed government’s patronage, but also floated capital in the stock market.28

Contemporary Ethnic Chinese Business Management Three points need to be borne in mind before we proceed our discussion on contemporary Ethnic Chinese business management. Firstly, the contemporary Ethnic Chinese communities in which Ethnic Chinese businessmen operate are more local-oriented and better integrated than the communities before the Second World War. Secondly, the contemporary Ethnic Chinese communities are more integrated with the global economy, and subjected more to outside influence. Thirdly, the founders and operators of the contemporary Ethnic 26

For an ingenious use of Ethnic Chinese capital (including capital of clansmen and people coming from same district) by Kwok brothers of Wing On, see Yen Chinghwang, “The Wing On Company of Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Proceedings of Conference on Eighty Years’ History of the Republic of China, 1912–1991, Vol. 4, pp. 99–101 (English Section); see also Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 217–218. 27 For instance, the Sincere Company (Xianshi gongsi) of Hong Kong carried out limited sales of company stocks to the public for the expansion of its branch in Shanghai. But most of the stocks were sold to friends and relatives of the original investors. See Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firm and Its Modern Reform”, in Business History Review, Vol. LVI, No. 2 (Summer 1982), p. 231; Xianshi gongsi ershiwu zhounian jinianji (The Sincere Company Limited: Twenty Fifth Anniversary, 1900–1924) (Hong Kong, Shangwu yinshuguan, 1924), ‘Jizai’ (Records) column, p. 12. 28 See Johannes Hirschmeier & Tsunehiko Yui, The Development of Japanese Business, 1600–1973 (London, George Allen & Unwin Ltd., 1975), p. 112.

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Chinese business are better educated than their predecessors before the Second World War. In the small and medium-sized Ethnic Chinese business, the strength of familism and centripetal authority is evident. Familism provides a strong bond for members of the business. Management and workforce who are directly or indirectly related to the family tend to share a common goal for the business, and are prepared to work hard for the realization of that goal. The blurring of the line between management and workforce as a result of the operation of familism avoids any serious disputes within the business. At the same time, as many of them are connected with the family, they tend to pay their absolute loyalty to the company and are not easily induced by higher offers outside to abandon the company. This also helps to provide continuity and stability for the operation of the business.29 As solidarity and stability are important ingredients for the success of any business, the possession of these ingredients has made Ethnic Chinese family business competitive. At the same time, the centripetal authority provides the business with a dedicated leadership. If the leader is able and of strong personality, the centripetal authority he commands would contribute greatly to the success of the business. In the small and medium-sized Ethnic Chinese business enterprise, where the division of labor is not greatly emphasized, the ‘people-oriented management’ has certain advantages. Firstly, it provides flexibilities for the decision makers, not everything has to be made according to rules and regulations. Secondly, the style of management generates strong bonds of human relationship, reenforced by the Confucian value of mutual responsibility. Therefore, the spirit of cooperation and solidarity prevails. However, this family and people-oriented management style has shortcomings such as exhaustion of supply of managerial personnel, conservatism in its financial policies (because it worries external 29

See Lin Pao-an, “The Social Sources of Capital Investment in Taiwan’s Industrialization”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 96.

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interference and takeover by other companies), and lack of initiatives from below.30 In the discussion of management system of Ethnic Chinese conglomerates, the relationship between culture and management should be first attended to. Linda Lim in her study of Chinese business in Singapore has boldly postulated that “Chinese business loses whatever ‘ethnic’ character it has when it enters modern, technologicallybased industries oriented to the world market....The theoretical implication here is that ethnicity becomes increasingly irrelevant as industrial capitalism develops and spreads internationally: national (here Chinese) and foreign (multinational) capital become increasingly undifferentiated. Capital loses not only its face, but also its color”.31 Her postulation contradicts with a more authoritative study on the Ethnic Chinese business in ASEAN countries by Victor Limlingan. A broadly-based study on Ethnic Chinese business strategies and management practice in ASEAN, Limlingan concludes that “The Chinese managerial system, as part of the Asian managerial system, shares with the Japanese and the Korean managerial systems the corporate values of group orientation and close interpersonal relationship based on respect for authority. This system has been fashioned to implement the distinct business strategies of the Overseas Chinese. It is these distinct business strategies, acting on the Chinese culture of the Overseas Chinese in the ASEAN region, which have created the distinguishing characteristics of the Chinese managerial system in the ASEAN region: family control of the business, focus on entrepreneurship as the distinct area of family competence, astute placement of non-entrepreneurial family members in custodial positions and a

30

See Tong Chee Kiong, “Centripetal Authority, Differentiated Networks: The Social Organization of Chinese Firms in Singapore”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 181. 31 Linda Y.C. Lim, “Chinese Business, Multinational and the State: Manufacturing for Export in Malaysia and Singapore”, in Linda Y.C. Lim & L.A. Peter Gosling (eds.), The Chinese in Southeast Asia, Volume 1: Ethnicity and Economic Activity (Singapore, Maruzen Asia, 1983), pp. 245–246.

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willingness to delegate to professional managers the administrative functions of the business”.32 Linda Lim’s postulation which is based on her study of a group of Chinese electronic companies in Singapore and Malaysia region, has implicitly denied the role of Chinese culture in modern technologically-based Chinese business. Her generalization about culture and Chinese business is under question. Firstly, the scope of her study is relatively narrow, any findings cannot be generalized. Secondly, it appears she was writing with an economist bias which failed to see beyond statistical evidence. On the contrary, the scope of Limlingan’s research covered the entire region of ASEAN; and as a scholar of management, he incorporated intangible factors such as culture, values and history in the study of Chinese management.33 Limlingan’s thesis — Ethnic Chinese management has been greatly influenced by Ethnic Chinese culture — has been verified by another important study conducted by Gordon Redding of Hong Kong University. Redding who consistently interviewed a group of Chinese ownermanagers from Hong Kong, Taiwan, Singapore and Indonesia, has convincingly established the impact of Chinese culture (Confucian and other religious values) on Ethnic Chinese business, including their organizations, management and commercial behavior.34 It would be incredible to suggest that culture or ethnicity has nothing to do with management of the contemporary Ethnic Chinese conglomerates. Western management which sometimes pretends to be a universal management system suitable for all people, is principally based on Anglo-American model which is derived from Christian values. The model would be most effective in countries which shared those values. As Geert Hofstede, a Dutch social psychologist, has aptly defined, culture is “the collective programming of the mind 32

See Victor Simpao Limlingan, The Overseas Chinese in ASEAN: Business Strategies and Management Practices (Manila, De La Salle University Press, 1994, second printing), p. 155. 33 Limlingan’s book was based on his Ph.D. thesis done at the Harvard Business School and ASEAN region, See Victor Limlingan, op. cit., pp. vii–viii. 34 See S. Gordon Redding, The Spirit of Chinese Capitalism, especially chapters 4, 5, 7 & 8.

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which distinguishes the members of one human group from another”.35 In his monumental study on cultural differences of 40 countries, Hofstede identifies four dimensions of the differences between these national cultures: power distance, uncertainty avoidance, individualism and masculinity.36 If we apply Hofstede’s concepts to our study, we would find that the contemporary Ethnic Chinese culture, represented in Hofstede’s samples by the Chinese of Singapore and Hong Kong, possesses high power distance index, low uncertainty avoidance index, low individualism and medium masculinity indexes.37 This means that Ethnic Chinese culture is characterized by high status consciousness, hierarchical ideas, high risk-taking, high collective values and group spirit, and medium liberal attitude towards women. These cultural characteristics of the Ethnic Chinese derived from Hofstede’s study are similar to the traditional Ethnic Chinese values — hierarchy, paternalism, respect for authority, reciprocity and righteousness — which are derived from Confucianism.38 The management culture of contemporary Ethnic Chinese conglomerates is neither Eastern nor Western, but both Eastern and Western. It is the hybrid of Eastern and Western cultural values. Among Eastern culture, Ethnic Chinese management also 35

See Geert Hofstede, Culture’s Consequences: International Differences in Workrelated Values (Newbury Park, California, Sage Publications, Inc., 1984, Abridged edition), p. 21. 36 For detailed explanation of the concepts of these dimensions, see ibid., chapter 3 to chapter 6, pp. 65–210; for a brief summary of Hofstede’s thesis, see Derek S. Push & the Open University Course Team, “Cultural Differences in Attitudes and Values”, in Theodore D. Weinshall (ed.), Societal Culture and Management (Berlin & New York, Walter de Gruyter, 1993), pp. 87–93. 37 In Hofstede’s findings, Singapore scores 74 PDI (Power Distance Index), Hong Kong 68 PDI; Singapore scores 8 UAI (Uncertainty Avoidance Index), Hong Kong 29 UAI; Singapore scores 20 IDV (Country Individualism Index), Hong Kong 25; Singapore scores 48 MAS (Country Masculinity Index), Hong Kong 57 MAS. Ibid., pp. 77, 122, 158 & 189. 38 See Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 238–244.

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incorporates best of the Japanese and South Korean management practices. It is difficult to state precisely what percentage of the Eastern or Western values it composes of. A significant factor in determining the composition of management practices of an Ethnic Chinese conglomerate is education of the founder or the owner/ manager of the company. If the founder or the owner/manager has received more Chinese education, the retention of traditional Chinese values is eminent. If he received more Western or Japanese education, the Western or Japanese values tend to dominate. But whatever education he has received, he has been trying to reconstruct a management system in consonant with the character of the Ethnic Chinese, social and political environments, and the needs of the targeted markets. Chang Yung-fa (Zhang Rongfa), the founder and chairman of the Evergreen group of companies (Chang Yung jituan), one of the largest Ethnic Chinese conglomerates in Taiwan, states that the management model of his conglomerate is neither Japanese, nor Harvard, but a ‘Evergreen’ model, a model he claimed to be his own creation out of the combination of the bests of various systems.39 Chang received both Japanese and Chinese educations, and had been keenly learning from the West, this is why his ‘Evergreen’ model is composed of Chinese, Japanese and Western values which have been partly reflected in the ‘spirit of the Evergreen’: challenge (tiaozhan), innovation (chuangxin) and team spirit (tuandui), and the motto of the conglomerate’s management — harmony (hexie), sharing (fenxiang), and joint prosperity (gongrong).40 The spirit of pragmatism appears to be another element of management culture of the Ethnic Chinese conglomerates. The Chinese term, ‘shishi qiushi’, which can be translated as ‘seeking truth from facts’, gained tremendous popularity in China after Deng Xiaoping had made such a remark in a speech on December 13, 1978.41 The 39

See Chang Yung-fa (Zhang Rongfa), Chang Yung-fa huiyi lu (The Memoirs of Chang Yung-fa) (Taipei, Yan Liu chuban shiye gufen youxian gongsi, 1997), p. 317. 40 Ibid., pp. 314–316. 41 This speech was made at the closing session of the Central Working Conference which made preparations for the Third Plenary Session of the Eleventh Central

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spirit of pragmatism became an important guiding principle for Deng’s important economic reform in China. This spirit seems to have been shared by many of the Ethnic Chinese entrepreneurs and conglomerates founders, and it has helped them to build up vast commercial empires. It is amazing to observe that many of the founders of the Ethnic Chinese conglomerates have not received high formal education. Many of them learned the management knowledge and skills from practical experience, from keen observation and a desire to learn something new. The integration of practical experience with observation and bookish knowledge made them superior to those who only have either empirical or bookish knowledge, and gave them competitive advantage. Chang Yung-fa in his memoirs again has emphasized the principle of ‘seeking truth from facts’ and investigate thoroughly. He always advised his staff to “listen more, observe more and find out the principle behind the facts” in order to solve problems. He himself travelled frequently overseas to learn new things relating to technology, marketing and aircraft construction.42 Another well-known conglomerate founder from Taiwan, Wang Yung-ching (Wang Yongqing), — the founder and the chairman of the Formosa Plastics group of companies (Tai Shuo jituan) — believes that spirit of hard-work, knowledge and experience are the three prerequisites for good enterprise management. He emphasizes that the combination of the three would guarantee success. He warns that the lack of spirit of pragmatism and the sole reliance on bookish knowledge would lead to bad management and problems for the enterprise.43 Committee of the Chinese Communist Party. This speech titled “Emancipate the mind, seek truth from facts and unite as one in looking to the future” was the keynote address to the Third Plenary Session. For original Chinese version, see Deng Xiaoping wenxuan (Selected Works of Deng Xiaoping, 1975–1982) (Beijing, Renmin chubanshe, 1983), pp. 130–143; for official English translation, see Selected Works of Deng Xiaoping (1975–1982) (Beijing, Foreign Languages Press, 1984), pp. 151–165. 42 See The Memoirs of Chang Yung-fa, pp. 329–332. 43 See Wang Yung-ching’s speech to the third batch of new recruits of the Formosa Plastics, in Wang Yongqing (Wang Yung-ching), Wang Yongqing tan Zhongguoshi

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The contemporary Ethnic Chinese business management possesses all the basic characteristics of the modern Ethnic Chinese business management: paternalistic style of management, strong domination of ownership over the management, and the integration of Western principle of meritocracy with traditional Chinese practice of personal connections. In addition, the contemporary Ethnic Chinese conglomerates also emphasize on human resource management. In relation to paternalistic style of management, it was developed and refined by the founders or managing directors of the conglomerates. The conglomerate is usually hierarchically structured. Like many Western and Japanese conglomerates, it is organized like a pyramid. It has fewer people at the top, and the majority of the employees constitute the base of the structure. At the top of the pyramid is the board of directors who are usually derived from the members of the controlling families and some professional managerial staff. In the middle rung is the medium managers and professionals, and the ordinary workers and employees constituted the base of the pyramid. The chairmanship of the board of directors is usually assumed by the founder or co-founder, and the board has enjoyed supreme power in the decision-making. Victor Limlingan is right to point out that the structure of Ethnic Chinese managerial system is neither entrepreneurial nor administrative, but both entrepreneurial and administrative.44 The integration of entrepreneurial spirit and administrative expertise is a key feature of the Ethnic Chinese conglomerates. Entrepreneurial spirit is complementary to administrative expertise or vice versa. Since many of the leaders of the Ethnic Chinese conglomerates are outstanding entrepreneurs, they are not necessarily the best administrators. Their entrepreneurship is usually complemented by the administrative expertise of professional managers whose jingying guanli (Wang Yung-ching on Chinese Style of Business Management) (Nanchang, Jiangxi renmin chubanshe, 1998), pp. 92–95. 44 See Victor Limlingan, The Overseas Chinese in ASEAN: Business Strategies and Management Practices, op. cit., p. 144.

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professional knowledge and skill are purchasable in the employment market. This duality of Ethnic Chinese managerial system gives Ethnic Chinese conglomerates a competitive edge. Decision-making process of the conglomerate is generally topdown, that means decision made at the top are to be implemented through the management to the entire organization. The Japanese style of involving lower echelon leadership in the process of decisionmaking seems to be absent. The decision-making is highly centralized, and the centripetal authority converged at the top. In the Ethnic Chinese conglomerates which are run by the first-generation leaders, the power of decision tends to rest just on one person, usually the founder of the conglomerate. This would not surprise scholars who are familiar with traditional Chinese culture. Since the tradition rested so much power with the leader of family and clan or other social organizations, it seems naturally for the founder to regard the business organization as a large family and he himself the head of this extended family. He regards himself morally obligated to discharge his duty to the best of his ability. So he makes major decisions with the assistance of the members of the board. One contemporary study on Ethnic Chinese business enterprises in Singapore found this type of centripetal authority is quite common among first-generation dominated enterprises. The eldest son of a Chinese businessman in Singapore claimed that “My father made all the decisions when was alive. He formed a board to help him run the business; this board made the decisions. But this was only in name. In actuality my father made all the decisions himself still, especially in non-technical matters like investment, getting loans, negotiations with banks, finance companies, suppliers and so on. But he consulted the rest in very technical things. Anyway, he has the final say. After all, the business is his. Even when we, his children, had any suggestions, we had to go through our father’s friends first, because my father felt that as head of the family he was to be obeyed at all time.”45 45

See Tong Chee Kiong, “Centripetal Authority, Differentiated Networks: The Social Organization of Chinese Firms in Singapore”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, p. 181.

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As the Ethnic Chinese conglomerate grows in size with tens of thousands of employees, and operates in an increasing blurred frontier as the result of globalization, human resource management becomes significant in deciding its success or failure. The acquisition of talents in managing the conglomerate can no longer be confined to the members of the founding families and their relatives. Therefore the search for business talents outside traditional Chinese networks is necessary. It was claimed that Li Ka-Shing (Li Jiacheng), the richest Chinese entrepreneur in the world, succeeded to build up a vast business empire because of his ability to acquire and use talents. He placed them in key management positions and gave them power and authority to run the show. He applies traditional Chinese saying of “trusting your subordinates once you find them trustworthy, and do not use them if you find them untrustworthy” (yongren buyi, yiren buyong). Because of this practice, he gained a number of talents who were willing to work for him and work for the company to the best of their abilities.46 In the selection of talents, Li Ka-shing adopted the Western practice of meritocracy. Regardless of their family or ethnic backgrounds, those who have demonstrated their capacity in management and business were promoted to senior positions in his conglomerate. He once claimed that he had a team of 300 capable lieutenants helping him to run the vast empire, 200 of them were Chinese from Hong Kong, while the rest 100 were foreigners.47 In the case of the Evergreen group of companies in Taiwan founded by Chang Yung-fa (Zhang Rongfa), the recruitment system is based on a competitive public examination which is targeted at fresh graduates and newly retired soldiers. Those who succeeded in the written examination were required for interviews which were conducted by Chang Yung-fa himself and some senior staff, and the successful candidates depended 46

Qin Pu, Li Jiacheng jingshang zhi dao (Li Kah Sing’s Way of Doing Business) (Taipei, Funu yu shenghuo she wenhua shiye youxian gongsi, February, 2012), pp. 171–188. 47 Ibid., p. 181.

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more on their potentials, attitude towards work and their moral character; less on their qualifications and academic results.48 The emphasis on harmony in industrial relations is an important feature of contemporary Ethnic Chinese management. The word ‘harmony’ (he) is an important concept in traditional Chinese culture. Traditional Chinese sayings such as “family harmony accounts for its prosperity” (jiahe wanshixing), “harmony is most precious” (yi he weigui) and “harmony will generate wealth” (heqi shengcai). The first saying is usually applied to family members. The traditional Chinese family system was a large consanguinity unit of three to four generations. Tension and conflict tended to generate among the members that would undermine the cohesion and unity of the family. The emphasis on harmony among the members would help the family to grow and become prosperous. The second saying was a general statement to encourage harmonious relationship and to avoid conflicts. The last saying was relevant to the business. The owner of the business has to be kind and polite in dealing with customers; and has to be kind and tolerant in dealing with employees. This concept of harmony was probably derived from Confucian concepts of benevolence and propriety. Most contemporary Ethnic Chinese entrepreneurs, especially those purely Chinese-educated, tend to regard their enterprise as an extended family, and the employers and employees only assume different status and roles. It is on the basis of harmony and cooperation among the members of this large unit that the enterprise can grow and prosper. The entrepreneurs are not unaware of the potential conflict of interests between capital and labor, between management and workforce. Unlike the Marxists who tend to see industrial relations in strict class terms and tend to regard the class relationship as antagonistic and irreconcilable, the Ethnic Chinese entrepreneurs tend to perceive the employer-employee relationship as senior-junior partnership in a common endeavor, and their relationship is harmonious, co-operative and complementary. Therefore the emphasis on harmony predisposes the mental attitude of both partners towards the 48

See The Memoirs of Chang Yung-fa, pp. 285–289.

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enterprise and towards each other, and helps to smooth industrial relations.49 Liem Sioe Liong (Sudono Salim), founder of the famous Salim group of companies in Indonesia, realized the importance of harmony in his management of his workforce. He emphasized the ideas of “spirit of team work” (hezhong gongji), “being in the same boat” (tongzhou gongji) and “to survive and prosper together” (gongchun gongrong) so as to work harmonious together. It was in this spirit of harmony and togetherness, and a sense of sharing the same fate and prosperity that the zeal and dedication would be unleashed.50 Chang Yung-fa, the founder of the chairman of the Evergreen group of companies in Taiwan elaborated the importance of harmony in the operation of conglomerates. He claimed that the management philosophy of the Evergreen group was to create harmony in this large extended family. The company provided staff and workers with good wages and welfare, good working environment and promotion prospect. At the same time, the company was prepared to spend money and time to train staff and workers, and to share its profits. This would enable the staff and workers to nurture their roots and grow confidently in the company, and work for the company like working for their own business. The management, staff and workers would work like family members, intimate and united. He also hoped that the staff and workers would regard the company as a large family, and cordial relationship should prevail among them. The good working environment and atmosphere would naturally attract them to work for the company.51 The Japanese style of life-time employment is also found among Ethnic Chinese conglomerates. Under this system, workers and professionals are employed by the company on the understanding that they would work for their whole life for the company. They are expected to

49

See Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, p. 241. 50 See Sung Chek Mei (Song Zhemei), Lin Shaoliang zhuan (A Biography of Liem Sioe Liong) (Hong Kong, Southeast Asia Research Institute, 1988), pp. 69–70. 51 See The Memoirs of Chang Yung-fa, pp. 319–320.

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pay absolute loyalty to the company, work to their utmost capacity for the interests of the company. From their perspective, the company they work with is like their extended family where they receive job security and protection. On the other hand, the company is morally obligated to look after the employees’ interests. Not only it provides a secure job, but also a career path leading to their aspiration within the company’s structure. The company also helps to look after the welfare of the employees by providing cheaper holidays and other forms of recreational activities for employees’ families. Essentially, this life-time employment system, whether it is Japanese or Ethnic Chinese, is based on the Confucian concept of mutual responsibility (reciprocity), the company’s benevolence is reciprocated by loyalty of workers.52 The operation of the life-time employment system together with the lack of strong union organizations make the industrial relations smoother than their counterparts in the West. There are relatively less industrial disputes in the Ethnic Chinese conglomerates than their competitors in the West. The life-time employment system establishes certain moral obligations for both employers and employees. The Confucian moral code serves as a deterrent to the worst form of exploitation of workers by the Chinese employers. Of course, there are some who disregard the moral guidance and exploit their employees mercilessly. But their business would not last if they continue down that path. The Confucian concepts of reciprocity and harmony do influence the attitudes of the management and workforce of the Ethnic Chinese conglomerates. The extreme form of unionism driven by ideology and institutional interests find no room in the Ethnic Chinese Business. At the same time, most political leaders of Asian developing countries reject the extreme form of Western unionism, and emphasize employer-employee cooperation. In Singapore, unions are improving the well-beings of the members not by confronting the employers, rather by involving them in union enterprises of which the profits are used to subsidize the members. 52

For a discussion of the concept of “reciprocity”, See Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, p. 242; S. Gordon Redding, The Spirit of Chinese Capitalism, p. 97.

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Part III Regional Studies

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Chapter 9

Chinese Business in Thailand Coastal Trade and Early Chinese Business Early Sino-Siamese trade Chinese trade with Siam (an older name for modern Thailand) was one of the earliest in Southeast Asia. Chinese traders could have visited the Gulf of Siam as early as 2nd century B.C.1 Chinese trade with the Siamese Gulf region grew during the Sui and Tang period from 7th to 10th centuries as a result of general growth of trade between South China and the Southeast Asian region. The growing demand for goods of exchange between China and the West, the rise of Persians and Arabs as middlemen, China’s advancement in shipbuilding, navigation and trading methods accounted for such a growth. But most important of all was Chinese quest for valuable goods; first for decorative goods such as pearls, ivory and colorful feathers of birds; and then for perfumes, incense and dyes, and further extended to drugs, medicines and spices.2 At the time when the first Siamese kingdom, Sukhothai, was established in mid 13th century, China was in political turmoil. The ethnic Chinese Song dynasty fell and was replaced by the Mongol Yuan dynasty. China’s trade with Southeast Asia was generally disrupted, including those with Sukhothai. However, as the Mongols were entrenched in their rule in China, they started paying attention to the Southeast Asian trade, and in the latter part of the 13th century, the Mongol court demanded the Sukhothai king Ramkambaeng 1

See Wang Gungwu, “The Nanhai Trade: A Study of the Early History of Chinese Trade in the South China Sea”, in Journal of the Malayan Branch, Royal Asiatic Society, Vol. 31, Pt. 2 (Kuala Lumpur, June, 1958) (an independent issue), p. 14. 2 Ibid., p. 108. 233

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to send tributes to China. In complying with the new powerful overlord in the East, Sukhothai kings sent tributary missions to China from 1296 to 1323 incessantly.3 In addition to this official trade under the tributary system, private Chinese trade with Sukhothai ports continued to grow right up to the fall of the Mongols in 1368.4 The rise of Ayudhya, a new Thai kingdom in the Chao Phraya delta in mid 14th century coincided with the rise of the Ming Dynasty. Ayudhya dominated the trade in the Gulf of Siam and extended its influence over the neighboring area. Its port became the international entrepot of the Gulf of Siam.5 But Ayudhya’s dominant position would have been weakened without China’s recognition. Ayudhya kings acquired this political legitimacy through tributary system which characterized the trading relationship between Southeast Asian states and China for a long period.6 International trade bore enormous profits to the coffers of the Ayudhya kings, and it was also the source of power on which the kingdom depended. This was why they were tempted to extend Ayudhya’s hegemony over a neighboring kingdom, Malacca Sultanate, which emerged in the early 15th century to occupy a dominant position in the Straits of Malacca trading zone.7 But the ambition of Ayudhya kings was thwarted by the Ming emperor’s intervention.8 Realizing the limits of their power, the 3

See Xue Yujong, “Xianluo guozhi” (Siamese Gazetteer), Bangkok, Nanhai tongxunshe, 1949), cited in G. William Skinner, Chinese Society in Thailand: An Analytical History (Ithaca, New York, Cornell University Press, 1962, 2nd edition, p. 2. 4 G. William Skinner, ibid. 5 For the concept of five trading zones in 14th century Southeast Asia, see Kenneth R . Hall, Maritime Trade and State Development in Early Southeast Asia (Honolulu, University of Hawaii Press, 1985), pp. 225–227. 6 See Anthony Reid, Southeast Asia in the Age of Commerce, 1450–1680, Volume Two Expansion and Crisis (New Haven and London, Yale University Press, 1993), pp. 15–16; Wang Gungwu, “China and Southeast Asia, 1402–24”, in Jerome Ch’en & Nicholas Tarling (eds.), Studies In the Social History of China & Southeast Asia: Essays in Memory of Victor Purcell (Cambridge, Cambridge University Press, 1970), pp. 394–396. 7 Kenneth R . Hall, op. cit., pp. 225–226. 8 Ayudhya was twice warned by the Ming emperor, Yongle, in 1407 and 1419 not to invade Malacca, See Wang Gungwu, “The First Three Rulers of Malacca”, in Journal

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Ayudhya kings left Malacca alone, and concentrated their attention on the trading network in the Gulf of Siam by developing a cordial tributary relations with Ming China. In a period of 22 years from 1402 to 1424, Ayudhya sent 22 tributary missions to the Ming court.9 Though Ayudhya’s tributary missions were not treated with special imperial favor, it invariably benefited from this continuous trading contacts with the Southern Chinese coasts.10 It continued sending tributary missions to China with less frequency throughout the Ming period.11 In the 276 years of Ming rule, the Sino-Siamese trade was firmly established on the basis of tributary relations. The system seemed to be satisfactory to both parties. On Siamese part, the Ayudhya rulers benefited both politically and economically. It conferred political legitimacy on the incumbent king and ruling house, and it was also the quickest way to acquire Chinese commodities as well as extracting revenue from China trade.12 On the Chinese part, the Ming rulers were greatly satisfied with the homage and respect that the tributary mission had brought along. The members of the ruling class in China were also assured of the supply of foreign products.13 The turmoil accompanying dynastic change in mid 17th century China disrupted Sino-Siamese trade, but provided the opportunity for both parties to reassess their positions. Although private trade in South China coast was suspended in the first 23 years of Manchu rule because of the incessant wars waged of the Malaysian Branch, Royal Asiatic Society, Vol. XLI, Pt. 1 (July 1968), pp. 18 & 20; see also the same article in Wang Gungwu, Community and Nation: China, Southeast Asia and Australia (St. Leonards, NSW., Australia, Allan & Unwin, 1992, New Edition), pp. 153 & 155. 9 See Wang Gungwu, “China and Southeast Asia 1402–24”, in Jerome Ch’en & Nicholas Tarling (eds.), Studies in the Social History of China & Southeast Asia (Cambridge, Cambridge University Press, 1970), p. 394; see also Wang Gungwu, Community and Nation, p. 123. 10 Wang Gungwu, “China and Southeast Asia 1402–24”, in Jerome Ch’en & Nicholars Tarling (eds.), ibid., p. 396. 11 See G. William Skinner, Chinese Society in Thailand: An Analytical History, p. 4. 12 Ibid., p. 6. 13 See Li Jinming, Mingdai haiwai maoyi shi (A History of Overseas Trade of Ming Dynasty) (Beijing, Zhongguo shehui kexue chubanshe, April 1990), pp. 24–25.

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against the Manchus by the Ming loyalists in the South led by the famous Koxinga, tributary trade between China and some longstanding countries such as Korea and Siam was still allowed to continue with some restrictions. Siam was the first tributary state to be allowed by the Manchus to trade at Canton which was under the protection of the Guangdong regime of Shang family (Shang Kexi who was one of the three feudatories tolerated by the early Manchu conquerors). It was Shang Kexi who requested the authorization of Manchu court to receive the first Siamese mission in 1652.14 The Manchus, in fear of the lucrative foreign trade falling into the hands of Ming loyalists led by Koxinga, banned the private trade and restricted tributary trading. In 1653, a year after having received the first Siamese tributary mission, the Manchu court decreed that goods brought in by tributary ships had to be sold at the foreign envoys’ residence under stringent supervision. Further, no other types of commercial transactions related to the tributary mission were allowed when the main tributary ship was not in port.15 After 1664, tributary missions from Siam were fixed at once every three years with restriction to three ships only.16 This was to prevent the abuse of that privilege at the expense of China. This Sino-Siamese official trade in early Qing period seemed to have worked to great advantage to Siam. Usually fine porcelain, silk, cash and other high-valued commodities were bestowed by the Manchu emperors in recognition of respect and homage by the Siamese kings. The imperial gifts were highly valued by the Siamese aristocracy, and fetched high prices in local markets, and sometimes they were re-exported to the West. The tributary missions also enabled Siam to acquire some needed strategic materials such as copper, iron and other metals which were normally banned for export. The Qing government exempted these items under the tributary system.17 14

See Sarasin Viraphol, Tribute and Profit: Sino-Siamese Trade, 1652–1853 (Cambridge, Massachusetts, Harvard University Press, 1977), pp. 29–30. 15 Ibid., pp. 30–31. 16 Ibid., p. 31. 17 Ibid., p. 39.

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Early Chinese settlers and Chinese trading activities Early Chinese settlers in Siam consisted of political refugees, private traders and pirates. Political refugees settled in Siam mainly for finding a sanctuary as a result of dynastic changes in China. In late 13th century, Chen Yuzhong who fled from Guangdong to Champa (Vietnam) because of the fall of the native Song dynasty, moved to Siam with his followers in 1283 when the Mongols sacked the Cham’s capital.18 The political adversaries of the Ming court, including someone named He Bahuan, took refuge in Siam at the beginning of the 15th century, but they were extradited by the Ayudha king at the request of Emperor Yongle.19 The number of these early political refugees to Siam is difficult to ascertain. With their relatives and followers, they could have numbered to hundreds or thousands. But there is a lack of written records to verify their numbers. Ming’s policy of prohibition of seafaring almost killed off the entire private trade between China and Southeast Asia,20 the lifting of the prohibition in 1567 was proven to be too late to revive a healthy trade in the region. Lured by high profits, many private merchants were prepared to defy law. They organized and armed themselves to carry out illegal trade with Southeast Asian countries. When some of them were caught and jailed, they managed to flee China and turned into pirates infesting coastal region of South China. Many of them used Southeast Asian ports as launching pads for the attack of prosperous areas of Guangdong, Fujian and Zhejiang. Port like Pattani in the Southern part of Siam which was strategically located in the Gulf of Siam trading zone was used as the base. In 1540, the notorious Xu brothers (Xu Song, Xu Nan, Xu Dong and Xu Zi) who had based their activities in Pattani, collaborated with the Portuguese from

18

See G. William Skinner, Chinese Society in Thailand, p. 4. Ibid. 20 See Yen Ching-hwang, Coolies and Mandarins: China’s Protection of Overseas Chinese during the Late Ch’ing Period, 1851–1911 (Singapore, Singapore University Press, 1985), p. 8. 19

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Malacca to trade in South China coast.21 In 1554, two other formidable pirates, He Yaba and Zheng Zongxing stationed in Pattani from where they carried out raids on the China coast.22 But the most notorious Chinese pirate based in Pattani was Lin Daoqian. Lin, one of the most fearsome Chinese pirates in late Ming period, was a native of Chaozhou. He was a petty officer, but committed a crime and fled overseas to become a pirate. He was described in Chinese historical records as a crafty, cruel and bloodthirsty pirate who slaughtered innocent people in hundreds and thousands. Based in Taiwan and Penghu area, Lin pillaged the coastal ports of Fujian, Zhejiang and Guangdong, but he was driven out by Ming forces from that region. In 1573, Lin was further driven away from South China coast and led his fleet to Southeast Asia. He and his followers settled in port Pattani, but led raids to Ayudhya which had requested protection from the Ming government.23 Whatever legends and myths surrounding Lin Daoqian, his settlement in Pattani is beyond doubt. According to the research of Professor Hsu Yun-ts’iao (Xu Yunqiao), he had ruled over Pattani for sometime as a result of his marriage to a local Malay princes, and after his accidental death, his wife became the first queen in the history of Pattani.24 Private Chinese traders had established themselves in ports and market towns of the Gulf of Siam when the Thai reached the Jaophraya Delta and the Malay Peninsula in the 13th century.25 The Chinese merchants shipped local produce such as pepper and aromatic woods to China and in return they carried Chinese cargoes such as silks and

21

See Hsu Yun-ts’iao (Xu Yunqiao), Beidanian shi (A History of Pattani) (Singapore, Nanyang bianyisuo, 1946), p. 107. 22 Ibid., p. 110. 23 See Zhang Zengxin, Mingzi dongnan Zhongguo de haishang huodong, shangpian (Maritime Activities on the Southeast Coast of China in the Latter Part of the Ming Dynasty, Vol. 1 (Taipei, China Committee for Publication, 1988), pp. 88–91. 24 See Hsu Yun-ts’iao (Xu Yunqiao), op. cit., pp. 119–120; G. William Skinner, op. cit., pp. 4–5. 25 G. William Skiner, ibid., p. 1.

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porcelain for sale in local markets.26 The profits must be enormous, for the goods they carried to two distant markets were much desired by the rich and the powerful. The number of the Chinese traders settled in the ports and market towns in the Gulf region must have increased over time, for there was no restriction on private trade between China and Southeast Asia before 1368. There are evidence to suggest that in late 13th century, a large Chinese trading community already existed in Ayudhya city, the forerunner of the Ayudhya. The community was probably located on the both sides of the Menam river immediately south of the city, an area now known as Bangkacha. In the year 1282, this Chinese community was enlarged because of the arrival of about 200 political refugees from the fallen Song dynasty in China.27 It appeared that the majority of the population of the Chinese community in Ayudhya in late 13th and early 14th centuries were involved in local and foreign trade. The community became rich and powerful to the extent that one of the sons of a Chinese merchants, Uthong became the founder of the new kingdom of Ayudhya.28 The number of Chinese traders in Siam during the Ming period (1368–1644) is difficult to assess. Presumably the early Ming’s imposition of the ban on private trade must have effect on the number of private Chinese traders coming to settle in Siam. However, those who were strongly inspired by high profits and those who had connections in Siam would still have broken through the prohibition net to come to the new land. Ma Huan, who accompanied Admiral Zheng He’s missions to Southeast Asia in early 15th century, recorded Chinese

26

See Charnvit Kasetsiri, The Rise of Ayudhya: A History of Siam in the Fourteenth and Fifteenth Centuries (Kuala Lumpur, Oxford University Press, 1976), p. 80. 27 Ibid., p. 81. 28 It was claimed that Uthong, a son of a powerful Chinese merchant, Choduk Setthi, was married to the princes of Ayudhya and became king. For discussion of the myth of Uthong and the founding of Ayudhya kingdom, see ibid., pp. 61–64; David K. Wyatt, Thailand: A Short History (New Haven and London, Yale University press, 1984), p. 65.

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private trading ships visiting Siam.29 After lifting of the ban on seafaring in 1567, the number of Chinese private traders visiting and settling in Siam must have increased. A Portuguese account of 16th century Siam verified that Chinese merchants established themselves everywhere in Thailand.30 In early 17th century, the number of Chinese settlers increased substantially. This was verified by Dutch accounts. In 1616, the Dutch Resident at Pattani recorded that the number of Chinese settlers outnumbered the natives. In 1620, the Chinese community of Nakhon Si Thammarat was large, and the majority of them were engaged in trade. The commercial importance of the Chinese community there warranted a special trip by an English trader who desired to establish commercial links with it.31 During the reign of king Prasat Thong (1629–1656), the position of the Chinese traders in Siam was strengthened by two developments. Firstly, as the king was an usurper who seized power against the desire of the influential Japanese element at court, he in 1632 massacred the Japanese community in Siam and drove Japanese merchants out of the kingdom in fear of a plot against him. As a consequence, the lucrative Siamese-Japanese trade passed to the hands of Chinese merchants. This had effectively eliminated a major foreign competitor of the Chinese merchants. Secondly, the adoption of a royal trade monopoly in 1629 by king Prasat Thong had initially undermined the trading interests of the Chinese, but the adaptability of the Chinese traders proved to be great survivors and prospered under the new system. Many of the Chinese merchants established close links with the court, and had convinced the king that the expert service they rendered would be most profitable to the kingdom. They began to staff the king’s tributary missions. With special grace from the court, they were allowed to trade outside the royal monopoly system.32 29

See Ma Huan, annotated by Feng Chengjun, Yingya shenglan jiaozhu (Beijing, Zhonghua shuju, 1955), p. 21. 30 See G. William Skinner, Chinese Society in Thailand, p. 7. 31 Ibid., pp. 7–8. 32 Ibid., pp. 9–10.

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An important historical event such as the Manchu conquest of China in 1644 was bound to have serious impact on the Ethnic Chinese communities in Southeast Asia. The fall of the native Ming dynasty saw the exodus of political refugees from China, especially in the South that suffered extreme cruelty as the result of a prolong Chinese resistance to the Manchu conquest. Two groups of Chinese refugees which could number to thousands arrived in Siam from Guangdong and Fujian. Those from Chaozhou, the so-called Teochews, settled in Southeast Siam based in Bangplasoi; and those from Southern Fujian, the so-called Hokkiens, took refuge in Southern part of Siam based in Songkhla.33 These refugees were quickly absorbed into local communities. With their superior techniques in agriculture and trade, they were welcome by the natives, and intermarried with them. Some of the them became officers of the Siamese court and some prominent Teochew merchants were actively involved in rice trade between Siam and China, these included Huang Shunxiang and Chen Chengfa.34 The general demographic and occupational profiles of the Chinese in 17th century Siam can be reconstructed on the basis of Western, Chinese and local records. According to G. William Skinner, the Chinese population in Siam in the second half of the 17th century numbered at least ten thousand; one third of them lived in the capital, Ayudhya, while two thirds of them spread in ports and country towns. The Chinese in the capital lived both inside and outside the city walls. Inside the city, the Chinese quarter was located at the southeast corner with Chinese market and shops which were known as ‘China Row’. Outside the city, Chinese quarters laid across the canals and rivers to the south and east.35 Chinese community, like other foreign trading communities in Ayudhya, was under the control of two leaders who were given Siamese official tittles by the king and 33

Ibid., p. 12. See Wu Fengbin, “Chaoren zai Taiguo de fazhan yu gongxian” (The Development and Contributions of the Teochew Chinese in Thailand), in Tay Lian Soo (Zheng Liangshu) & Chang Chak Yan (Zheng Chiyan) (eds.), Chaozhouxue guoji yantaohui lunwenji, xiace (Collected Essays from the International Symposium on Teochew Studies), Vol. 2 (Guangzhou, Jinan University Press, 1994), p. 1002. 35 G. William Skinner, Chinese Society in Thailand, p. 13. 34

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were regarded as Siamese functionaries. Their power was extended to the control over other Chinese communities outside the capital.36 The bulk of the 4,000 Chinese population in the capital of Ayudhya in the 17th century was made up of merchants and traders, but contemporary European accounts also suggest the existence of other occupations such as pig breeders and artisans of various kinds. There were also Chinese actors and actresses whose dramatic performance attracted Chinese population, and they were also popular with Siamese court. There appeared to have small number of Chinese scholars-officials who were probably the remnants of the Ming court officials taking refuge in Ayudhya. In short, the occupational profile of the Chinese in 17th century was a sophisticated one. It reflects a well-developed Chinese community which consisted of a variety of occupations though it was predominated by merchants and traders.37 The Chinese trading communities in Siam were greatly expanded in the second half of the 18th century as the result of the rise of king Taksin, a Sino-Thai descendant with a Chinese name Zheng Zhao. Taksin’s father, Zheng Da (after migrating to Siam, he had changed his name to Yong,) a native of Chenghai district of Chaozhou prefecture, Guangdong province, migrated to Ayudha. Zheng Da was likely to be a trader, and probably arrived in Ayudha in early 18th century. He prospered in the new land, and married a Thai girl. He became a rich and influential merchant with close contacts with Thai aristocrats. He held the gambling farm of Ayudhya and was awarded a noble rank of Khun and was known as Khun Phat.38 Taksin was born in 1734, and had shown his talent when he was a child. Because of his father’s connections with Thai aristocracy, he was adopted by a Thai nobleman and worked as a royal aide at court. In 1764, at the age of 30, he was appointed governor of Rahaeng. Later he was 36

Ibid., p. 14. Ibid., pp. 14–15. 38 See Chen Yutai, “Zhengwang zuxi” (The Genealogy of King Taksin), in Taiguo yanjiu (The Study of Thailand), Vol. III (Bangkok, 1941), cited by G. William Skinner, Chinese Society in Thailand, p. 20. 37

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promoted to the position of governor of an important province, Kamphaengphet, and was awarded a highest royal rank of ‘Phraya’ and known as ‘Phraya Tak’. When Burmese force sacked and laid waste to the capital of Ayudhya, Taksin retreated to the southern Siam where he mobilized the support of Chinese and defeated the invaders. He was proclaimed king and ruled Thailand for 14 years (1767–1781). It would be difficult to estimate the size of Chinese population in Thailand under king Taksin’s reign. But the overall picture is clear. Chinese immigrants, especially from Chaozhou, the native home of King Taksin’s ancestors, increased and the size of Chinese communities enlarged. A large Chinese settlement and market grew up in the capital on the east bank of the river based at Thatian, near the site of the present royal palace.39 Under his rule, certain privileges were accorded to the Chinese, and Chinese business prospered. In 1770, an eye-witnessed account of the early years of Taksin’s rule claimed that “The Chinese colony is the most numerous and flourishing, by the extent of its commerce and by the privileges which it enjoys”.40 It would seem natural for king Taksin, a descendant of a Chinese immigrant, to be pro-Chinese in his outlook. It was not only emotionally for him to be inclined to Chinese, but also his power was partly built on the support of the Chinese business class. Presumably, the provision of his army and the contribution of Chinese merchants strengthened his position. Being a descendant of Teochew origin, king Taksin especially favored Teochew Chinese who were during his reign known as ‘Royal Chinese’ (jin-luang), and his policy had attracted many Teochew immigrants to settle in Bangkok where they are still predominant nowadays.41

39

G. William Skinner, ibid., p. 21. See M. Turpin, History of the Kingdom of Siam, translated from French into English by B.O. Cartwright (Bangkok, American Mission Press, 1908), cited by G. William Skinner, op. cit., p. 21. 41 G. William Skinner, ibid. 40

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The Rise of Modern Chinese Business Enterprise (1851–1942) Forces of change and the rise of modern Chinese business enterprise The rise of modern Chinese business enterprise in Thailand in the second half of the 19th century was the result of interplay of several forces that preceded this period: The opening of both China and Thailand to the West, the technological change in transportation, and the increased economic penetration of the West into Thailand. The middle of the 19th century saw the opening of China and Thailand. China was forced to open its door by the West following its humiliating defeat in the Opium War in 1842. The rise of treaty ports on China’s coast and the change in its international trade provided excellent opportunities for those aspiring Chinese immigrants who saw a new world of opportunities opening up in Southeast Asia. At the same time, the ascendancy of Rama IV, King Mongkut, to the throne of Thailand in 1851 commenced a new era of reform and modernization that generated vibrant economic activities. Technological change and the opening of Suez Canal facilitated the incorporation of East and Southeast Asia into the orbit of a newly-emerged world economic system. The increased economic penetration of the West into Thailand forced Chinese to change and reconstruct a commercial system which would make Chinese business in Thailand viable in the modern world. The Chinese position in the Thai economy prior to the middle of the 19th century was solid, and they were predominant in many economic sectors such as foreign trade, internal trade, tax farming and tin-mining. During the first half of the 19th century, Chinese dominated Thailand’s foreign trade and shipping. Much of the cargoes for China market were carried in Chinese junks, and many of which were built by the Chinese in Thailand.42 42 Ibid, p. 99; one source claims that most Siamese overseas vessels were indistinguishable from Chinese junks, and they were built in Bangkok which became a centre for building Chinese style of junks. See Jennifer Wayne Cushman, Fields From The Sea: Chinese Junk Trade with Siam During the Late Eighteenth and Early Nineteenth Centuries (Ithaca, New York, Southeast Asia Program, Cornell University, 1993), p. 56.

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Chinese supremacy in the Sino-Siamese junk trade was almost complete. They not only owned most of the junks, but also staffed most of the junk crews who were either Teochew or Hokkien speakers.43 They also controlled most of the import and export agencies, and exported large quantity of Thai products to the China market such as rice, cotton, pepper, gamboges (a resin), sticklac (a resinous excretion from the lac beetle), sugar, sappan wood, red wood, agila wood, cardamom, tin and hides.44 In return, they imported large quantity of Chinaware, earthenware and textiles. In addition, there were other Chinese products such as salted vegetables and fruits, tiles, umbrellas, combs, herbs and medicinal preparations, and paper.45 The Chinese merchants appeared to have acquired an excellent working relation with the Thai government as far as foreign trade was concerned. They were given encouragement and special privileges in trade. European observers before 1850 agreed that the Chinese were well-entrenched in foreign trade, and were industrial and entrepreneurial.46 The position of the Chinese in domestic trade was even more prominent. By 1850, they had gained complete control of the interregional trade in Thailand. Chinese traders carried consumer goods into regions accessible by water transport as well as inaccessible remote villages. They exchanged for local produce or sold goods for cash. The local produce acquired through barter were brought back to Bangkok for urban consumption or for export. The cordial relationship established between Chinese traders and Thai officials facilitated their retailing activities and consolidated their hold on the interregional trade.47 In addition to trading activities, the Chinese were also dominant in the production of sugar and tin. During the reign of Rama III (King Nang Klao, 1824–1851), Chinese were encouraged by the king to undertake sugar production to meet an international demand for sugar. As a result of this 43

Jennifer Wayne Cushman, ibid., p. 97. Ibid., p. 75. 45 Ibid., p. 83. 46 See James C. Ingram, Economic Change in Thailand Since 1850 (Stanford, Stanford University Press, 1955), p. 28. 47 Ibid., pp. 19–20. 44

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encouragement, new lands near the outskirt of the capital were opened up for planting of sugar-cane, and more than 30 sugar mills were established by the Chinese; close to 10,000 people were employed by these mills, and all of them appeared to be of Teochew origins. The Teochew sugar millers transferred most of their sugar processing techniques from their home prefecture in China.48 Tinmining in Southern Thailand was a Chinese monopoly throughout the 19th century. The tin island of Puket was the center of tinmining activity. But the mining was of small-scale and the method was traditional. The tin mining was at its low ebb during the reigns of the first two kings of the Jakkri dynasty (1782–1824).It slowly recovered during the reign of Rama III, and took off on a largescale production after 1851.49 Two forces that undermined the dominant position of the Chinese in Thai economy were technological change and Western penetration. Technological change in transport was especially obvious. Chinese junks had been the main vehicles for carrying cargoes and passengers between China and Southeast Asia for centuries. Although some improvements in construction techniques were made over time,50 the structure of the junks remained unchanged when the Western economic penetration came to the region in early 16th century. Western square-rigged vessels were superior to junks in terms of holding capacity and speed. But the junks still enjoyed dominant position in Sino-Siamese trade before the opening of China because special concessions were accorded to them in Chinese ports.51 After the opening 48

See Xu Zhaolin, “Taiguo huaren shequ de bianqian” (Changes in the Chinese Communities in Thailand), in Lim How Seng (Lin Xiaosheng) (ed.), Dongnanya huaren yu Zhongguo jingji yu shehui (The Chinese in Southeast Asia and China’s Economy and Society) (Singapore, Singapore Society of Asian Studies, 1995), pp. 192–193. 49 G. William Skinner, op. cit., pp. 109–110; James C. Ingram, op. cit., pp. 98–99. 50 For a discussion of the improvements on the construction procedures made to the junks in the two hundred years from mid 14th to mid 16th centuries, see Chen Xiyu, Zhongguo fanchuan yu haiwai maoyi (China’s Junks and Overseas Trade) (Xiamen, Xiamen daxue chubanshe, 1991), pp. 108–109. 51 See Jennifer Wayne Cushman, Fields from the Sea, p. 60.

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of China in 1842, administrative impediments were removed against the Western vessels on China’s coast, and this put the pressure on Chinese junks for fair competition. Furthermore, as steamers were gradually introduced into East and Southeast Asia waters since the middle of 19th century, Chinese junks had difficulty in surviving this new competition. This technological change in transport posted a serious challenge to Chinese merchants in Thailand who had hitherto enjoyed the dominant position in Thailand’s foreign trade. Another force that posted an even greater threat than the technological change was Western penetration into Thai economy. Western countries traded with Thailand long before the middle of the 19th century. The Dutch East India company which had a dominant position in Southeast Asian trade started an office in Siam since 1608.52 The Dutch were followed by the British and other European traders. But the Western traders were unable to compete with Chinese merchants who had long held sway on Siamese trade and enjoyed special privileges with the Siamese court. Western economic penetration did not pose any serious threat to Chinese interests until the signing of the Bowring Treaty in 1855. The treaty was the triumph of British diplomacy and Western trading interests in Southeast Asia. Sir John Bowring, the governor of Hong Kong and British Plenipotentiary for China, secured the equal commercial rights and additional privileges for British traders in Thailand, and the same privileges were extended to other European and American traders through a series of treaties. Since then, Western traders enjoyed consular protection, extraterritorial privileges, freedom of trade in all seaports and the right to travel into countryside with permits.53 The Western economic penetration of Thailand which was codified in treaties, represented a formidable challenge to the Chinese commercial interests in the kingdom. These two forces of change were extremely difficult to be contained especially in a pro-reform and pro-Western political climate prevailing at the Thai court. When 52

See George Vinal Smith, The Dutch in Seventeenth-Century Thailand (Detroit, Center for Southeast Asian Studies, Northern Illinois University, 1977), p. 48. 53 See G.William Skinner, Chinese Society in Thailand, p. 100.

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Prince Mongkut missed his chance to succeed to the throne in 1824, his ambition to become a great king had never subsided. Although he was forced to retire to monkhood, he gathered around him a group of reform-minded aristocrats and waited in the wing. His half-brother, King Rama III died in 1851 and he succeeded to seize the throne with his progressive supporters.54 Mongkut was keenly aware of the danger that Thailand was too closely adhered to its tradition and resisted change. He had seen how the powerful China was brought to its knees by Western cannons and gunboats; he also saw how Thailand’s traditional enemy, Burma, was subdued by the British in the Anglo-Burmese wars (1824 and 1852). The only alternative for Thailand to keep its independence in the tide of rising world imperialism was to undertake reform and Westernization. This was why he was so prepared to sign the Bowring Treaty with the British in 1855 and gave concessions to Westerners in his Kingdom. Chinese merchants and entrepreneurs in Thailand were aware of new situation they were in. To contain the uncontainable forces would be a foolish act. Instead of resisting change, they went along with the change and tried to preserve their dominant economic position and find niches in the new system. In coping with technological change, they took a slow but steady change trying to preserve the core interests. The technological change in transport greatly affected Chinese shipping business which was reflected in the decline of Chinese share of shipping.55 However, this decline did not end Chinese dominant position in Thailand’s foreign trade. A British Consul report in 1890 showed that Chinese still had a lion share of 62% of Thai foreign trade at Bangkok, and they were followed by the British 26%, Indian 8% and others 4%.56 What accounted for the Chinese ability to withstand the impact of the 54

See David K. Whatt, Thailand: A Short History, pp. 166–167, 175–180; David Joel Steinberg (ed.), In Search of Southeast Asia: A Modern History (New York, Praeger Publications, 1971), pp. 113–114. 55 G. William Skinner, op. cit., pp. 101–102. 56 Ibid., p. 102.

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technological change in transport was their intimate knowledge of the Thai market and their strategy of tightening the relationship between foreign and domestic trade, and the relationship between wholesale and distributing networks. As Chinese had been long entrenched in Thailand and established their collecting and distributing networks, they were familiar with supply and demand of many variety of goods both in domestic and international markets. While the Western importers and exporters who were handicapped by the language and the mode of conducting local business, were at the mercy of the Chinese. They had to depend on Chinese compradors to gather market information, distributing goods and conducting transactions of various kinds. This was easily manipulated by the Chinese competitors to their advantage.57 To cope with Western competition, Chinese merchants adopted a set of strategies such as expansion of trading networks, increase of market share, vertical integration and mechanization. Since Chinese occupied dominant positions in wholesale and retailing trade, they were able to expand and tighten the networks of distribution and collection. Foreign consumer goods brought in by Chinese junks or foreign owned vessels were distributed by Chinese traders to consumers in cities, towns and villages through effective functioning of Chinese networks. With Chinese practice of ‘xinyong’ (trust), credits were advanced to distributers. They were further bonded with strong dialect ties because many of them were Teochew speakers. At the same time, local produce were also collected in remote villages, townships, and channelled through to the Chinese exporters for export. With the functioning of efficient Chinese networks, Chinese traders could afford to sell goods at a very reasonable price to the consumers and ensured a ready market. This strategy of ‘boli duoxiao’ (minimum profit, maximum turn-over) had been adopted and increased the market share of the Chinese business. It guaranteed Chinese dominant position in trade in the face of Western competition. Vertical integration is a strategy to maximize the profit and guarantee the supply. Since Chinese controlled both wholesale and 57

Ibid., pp. 102–103.

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retailing trade, Chinese trading companies tended to control some retailing outlets, own or partner in banking and shipping. Vertical integration was facilitated by ethnicity and kinship. As the majority of the Chinese merchants in Thailand were Teochews, common dialect identity and kinship ties strengthened the bond between wholesalers and retailers. This vertical integration cut cost and increased efficiency which made Chinese business competitive. The mechanization was a strategy new to the Chinese merchants at the time, but it was a necessary step that Chinese tried to close the technological gap between Chinese and the West. In rice milling, for instance, Chinese lacked far behind the West in this regard. The first steam rice mill in Thailand was built by an American company in 1858, three years after the Bowring Treaty. A decade later (1867), Western owned steam mills increased to five. Steam milling saved labor and increased productivity. It also produced clean rice which appealed to customers. Chinese rice millers would have been ousted from competition if they had failed to change with time. In 1870, Chinese millers imported several steam mills from England. The number of Chinese steam mills increased rapidly from 17 in 1889 to over 50 in 1912.58 In coping with Western business challenge, Chinese businessmen also tried to find niches in the new economic system. What attracted them was the revenue-farming. Certainly, revenue farming was not new before 1850s. As early as the 17th century, Ayudhya kings already farmed out some revenue collections to private individuals. Chinese involvement in revenue farming was not new either. The father of King Taksin was a farmer of gambling revenue in Ayudhya in the 1730s.59 What was new in this revenue farming enterprise was its large size, the degree of collaboration among wealthy Chinese capitalists or between Chinese capitalists and Thai aristocrats, and the close link between politics and revenue farming in the southern states of Thailand. The revenue farming in Thailand after the 1850s covered 58 59

Ibid., pp. 103–104. Ibid., p. 20.

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many variety of activities. The larger ones consisted of opium, gambling and liqor; while the minor ones covered collections of dues on local produce such as fruit trees, coconut trees, pepper, sugar, cotton, tobacco and teak, on producing activities such as fishing and the preparation of fish sauce and shrimp paste, and the sale of consumer goods such as Chinese sweets, Chinese papers and other Chinese consumer items.60 Since the consumers of opium, gambling and liqor were largely Chinese, Chinese merchants had the advantages to bid for these large revenue farms, for they had the numbers, the organizational networks and capital to make the system work, especially in the frontier areas.61 Indeed, when Chinese merchants faced potentially keen competition from Western businessmen, they invariably re-assessed their own position and the position of their competitors, and consolidated their hold on sectors such as revenue farming which they had competitive edge over Western or Thai competitors. In the southern states such as Phuket, Songkla and Pattani where Chinese influence was well entrenched, economic interests and political power were intertwined. Revenue farms of various kind became Chinese monopoly. In the 1870s the Chinese governors in the Southern provinces began to integrate all local tax farms into larger combined farms (including tin, trade, opium, alcohol and gambling) under their personal control. They also became major tax farmers, a phenomenon which was unique in Thailand.62 It would appear that they had used their political power to acquire the monopoly of revenue farms, and consolidated their political power with the wealth partly derived from the tax farms. 60

See Constance M. Wilson, “Revenue Farming during the Early Bangkok Period”, in John Butcher & Howard Dick (eds.), The Rise and Fall of Revenue Farming (New York, St. Martins Press, 1993), p. 148. 61 See Anthony Reid, “The Origins of Revenue Farming in Southeast Asia”, in John Butcher & Howard Dick (eds.), ibid., p. 72. 62 Constance M. Wilson, “Revenue Farming in Early Bangkok Period”, in John Butcher & Howard Dick (eds.), ibid., p. 153.

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Case Studies: Chen Cihong and Khaw Soo Cheang Families Two cases have been selected to illustrate the rise of modern Chinese business enterprise in Thailand during this period. The Chen family of Bangkok and the Khaw family of Ranong, Southern Thailand are perhaps the two best examples for the study of powerful Chinese business empires built in the period. The former was a trading empire centered at Bangkok, but spread its wings in many parts of East and Southeast Asia including Hong Kong, Swatow, Bangkok and Singapore. The latter was an tin-mining and shipping empire centered at the southern Thai states as well as Penang. Chen Hongli company, a trading company, was founded by Chen Cihong (1844–1921) in 1871 in Bangkok. Cihong was a prominent Teochew merchant in Hong Kong and Thailand. He succeeded his father’s import and export business in Hong Kong, and expanded to Bangkok and Singapore and South China coast. His father, Chen Huanrong (or known as Chen Xuanyi) was the pioneer of regional trade between Hong Kong, South China and Southeast Asia known as the SouthNorth Trade (Nanbei hang), and the firm his father founded in Hong Kong, the Kin Tye Lung (Qian Tai Long) Company was the leader in the entrepot trade.63 At the time when Chen Cihong founded the Chen Hongli company in 1871, he was at the age of 30. Being groomed by his father and being ambitious, Cihong had the vision of creating a business empire covering East and Southeast Asia. With the shortage of rice in Southern Chinese provinces and the great potential of Thailand as the largest rice provider, he founded the Chen Hongli company specialized in exporting Thai rice for 63

For the story of Chen Huanyong and his pioneering of the South-North Trade in Hong Kong, see Chapter 4 of this book. For the founding of the Kin Tye Lung company by Chen Huanyong (Chen Xuanyi) and probably with his brother Chen Xuanmin, see Choi Chi-cheung, “Competition among Brothers: The Kin Tye Lung Company and Its Associate Companies”, in Rajeswary Ampalavanar Brown (ed.), Chinese Business Enterprise in Asia (London, Routledge, 1995), pp. 96–97; see also the same article re-published in R. Ampalavanar Brown (ed.), Chinese Business Enterprise, Volume 1 (London, Routledge, 1996), pp. 65–81.

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Hong Kong and South China markets. He also founded rice mills in Bangkok to ensure the continual supply of this precious commodity.64 Although the Chinese were not rice producers in rural Thailand, they controlled the rice trade due to their extensive trading networks. The founding of rice mills in Bangkok ensured Chen Hongli company’s supply of rice for export. This integration of supply and export gave the company a competitive edge over other competitors. Chen Cihong was probably one of the earliest Chinese businessmen to introduce Western steam mills in Thailand. Chinese sources suggest that Chen introduced new rice mills in the 1870s.65 The founding of Western-style rice mills made his rice business competitive, and further ensured the supply of rice for export. Well aware of keen competition in international markets, he took a step further to integrate his rice trading networks internationally. He together with his kinsmen founded an import-export company named Chen Shengli Company in Singapore which was later renamed Chen Yuanli Company. The company specialized in rice trade distributing rice to Malaya, Dutch East Indies and Brunei.66 He further founded an import-export company named Hongli Zhan Company in Shantou (Swatow), the heart of his home prefecture, Chaozhou in China. The Hongli Zhan company also dealt in mainly rice for distribution in

64

See Zhang Yingqiu, “Taiguo zhi Chenghai yimin: Gao Huishi yu Chen Hongli jiazu de yeji” (The Chenghai Immigrants in Thailand: Business Achievements of Gao Huishi and Chen Hongli Families), in Lin Tien-Wai (Lin Tianwei), Yatai difang wenxian yanjiu lunwenji (Collected Essays on Local History of the Asian — Pacific Region: Contribution of Overseas Chinese) (Hong Kong, Centre of Asian Studies, University of Hong Kong, 1991), pp. 241–242. 65 See Wang Mianchang, “Hongli jiazu ziben de lishi” (History of the Capital of the Hongli Family), in Zhongguo renmin zhengzhi xieshang huiyi Guangdongsheng Shantoushi weiyanhui, wenshi ziliao weiyuanhui (eds.), Haiwai Chaoren shiliao zhuanji (The Committee of Literature and History of the Committee of Shantou City of Guangdong Province, Chinese Political Consultative Committee (eds.), Special Issue on Historical Materials of Overseas Teochews) (Shantou, 1990), p. 3. 66 Ibid.

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South China as well as dealing with remittances.67 The establishments of the trading companies in Singapore and Shantou and their integration with Hong Kong and Bangkok laid the solid foundation for the creation of a vast trading empire in East and Southeast Asia. This empire focused its trading activity on rice and extend to cover other local produce from East and Southeast Asia. Chen Cihong retired from active management of his trading empire in 1903, and was succeeded by his second son, Chen Limei (also known as Chen Lunkui). Limei was born in Thailand in 1881 by a Thai mother. He had shown his business acumen at very young age and was groomed by his father as the future successor. In 1903 at the age of 23, he was at the helm of the entire operation of the empire. Under his leadership, the Chen Hongli business empire was further consolidated and expanded. Aware of the decline of traditional junks, he chartered modern steamships to carry rice from Bangkok to Hong Kong and China, and southward to Singapore and Dutch East Indies. After World War I, as the demand for rice increased considerably in all parts of East and Southeast Asia, he chartered 10 ships from a Norway Shipping company to ply between ports in Southeast Asia and China.68 Chen Limei expanded his business empire through vertical integration and diversification. Apart from his control over the supply and distribution of rice and other commodities, his trading empire would have been at the mercy of financiers if it had no control over money supply. The fluctuation of supply and demand in the international markets called for financial regulation. What Chen Limei had done was to 67

Ibid.; Zhang Yingqiu, “Taiguo huaqiao Gao Chuxiang yu Chen Hongli jiazu de yeji” (Business Achievements of the Thai Chinese Gao Chuxiang and Chen Hongli Families), in Zhongguo renmin zhengzhi xieshang huiyi Guangdongsheng Shantoushi weiyuanhui, wenshi ziliao weiyuanhui (eds.), Haiwai Chaoren shiliao zhuanji, p. 29. 68 Wang Mianchang, op. cit., pp. 5–6; Zhang Yingqiu, “Taiguo zi Chenghai Yimin: Gao Huishi yu Chen Hongli jiazu de yeji” (The Chenghai Immigrants in Thailand: Business Achievements of Gao Huishi and Chen Hongli Families), in Lin Tien-Wai (Lin Tianwei) (ed.), Yatai difang wenxian yanjiu lunwenji (Collected Essays on Local History of the Asia — Pacific Region: Contribution of Overseas Chinese), p. 244.

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develop a financial network subordinated to his trading networks. Beginning from 1912, he founded various remittance companies, Hongli Zhan companies, in the key ports of the region such as Bangkok, Hong Kong, Swatow, Singapore, Penang and Saigon. Remittance company was known popularly in the Chinese communities in Southeast Asia as ‘Hui Dui’ which acted as a small money house for Ethnic Chinese. Since most Ethnic Chinese in Southeast Asia at that time were males who had to send back money regularly to feed their family members in China, remittance became an important link of the Ethnic Chinese with their Southern China homeland. Because of the intimate human relationship between remitters and remittance companies, these companies provided a very useful service and survived to recent times.69 The Hongli Zhan remittance companies therefore served as sponge to absorb scattered funds in the Chinese communities. The deposits collected through these remittance companies helped to ease cash flow problems of the trading empire. They became the forerunner of the Hongli Zhan Banking.70 This vertical integration of finance with trading consolidated the Chen Hongli business empire. Chen Limei also diversified his business into real estate in Bangkok and other cities.71 As population grew, the value of the properties increased substantially. This diversification helped consolidate the economic foundation of the Chen Hongli business empire. Apart from managing and expanding his business empire, Chen Limei was also actively involved in founding trade organization and the Chinese Chamber of Commerce. He had been the president of Chinese Rice Mills Association, and was involved in the founding of 69

For a study of Chinese remittance in Singapore, See Kua Bak Lim (Ke Mulin), “Xinjiapo qiaohui yu minxinye yanjiu” (A Study of Chinese Remittance in Singapore), in Kua Bak Lim and Ng Chin Keong (eds.), Xinjiapo huazushi lunji (Collected Essays on the History of the Chinese in Singapore) (Singapore, Nanyang daxue biyesheng xiehui, 1972), pp. 159–210. 70 See Wang Mianchang, “Hongli jiazu ziben de lishi” (A History of the Capital of the Hongli Family), in Haiwai Chaoren shiliao zhuanji (Collections of Historical Materials on Overseas Teochews), p. 5. 71 Ibid., p. 6.

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the Chinese Chamber of Commerce of Thailand. The Chamber was founded in 1908 in Bangkok with the strong support of the Qing government. It was partly political and partly for the mutual benefits of the Chinese businessmen in Thailand. The first Chinese Chamber of Commerce in Southeast Asia was founded in Singapore on 16th March 1906 by the Qing high-ranking officer, Zhang Bishi who was also a wealthy Chinese businessman from British Malaya.72 Under the Qing government’s encouragement, Chinese Chambers of Commerce spread widely throughout Southeast Asia, including the Chamber of Commerce in Bangkok. Apart from this political push, the protection of Chinese interests vis-a-vis Western competition was urgently felt among leading Chinese Businessmen in Thailand such as Chen Limei. European businessmen in Thailand had formed the Bangkok Chamber of Commerce in 1898 to advance their interests in the Kingdom. Competition from growing Western enterprise in shipping, import-export, rice milling and banking prompted Chinese businessmen to get together to found the Chinese Chamber of Commerce in 1908.73 As a founding member and a leading businessman in Bangkok, Chen Limei was elected vice-president for the first three batches, and was elevated to the position of President in the fourth batch. By involving in the Chamber’s activities, he was well-informed about market changes and was placed in a better position for effective business networking. His position in the Chamber raised his prestige and reputation in the Chinese community, and provided him with political contacts with both Chinese and Thai governments. All these had directly or indirectly benefited the operation of his business. Chen Limei died in August 1930, and was succeeded by his second son, Chen Shouming. Shouming (1904–1945) was born of a Chinese mother, and was one among seven sons of Limei. Like his

72

For the founding of the Chinese Chamber of Commerce and Qing government’s political motive, see Yen Ching-hwang, “Ch’ing China and the Singapore Chinese Chamber of Commerce, 1906–1911”, in Leo Suryadinata (ed.), Southeast Asian Chinese and China: The Politico-Economic Dimension (Singapore, Times Academic Press, 1995), pp. 133–160. 73 See G. William Skinner, Chinese Society in Thailand, p. 170.

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father, Shouming had shown his business talent at very young age, and this was why he was groomed to be the successor of a vast business empire. At the time when he took over the reign, he was at the age of 26. In the 15 years from 1930 to 1945 under his stewardship, the Chen Hongli business empire had reached its peak. It was a diversified and highly integrated business entity covering trading, rice milling, shipping, banking and insurance, real estate and housing development.74 Two important developments of the Chen Hongli business empire happened with Shouming at the helm. Firstly, he founded the Hongli Zhan Bank in 1933 in Bangkok and was one of the key founders of the Bangkok Commerical Bank (Mangu Shangye Yinhang) which came into being in 1944; he also founded an insurance company named Luanli Insurance Company Ltd.75 74

According to one study, the Chen Hongli family under Chen Shouming owned the Chen Hongli Company (headquarters, trading, shipping and real estate) in Bangkok. In addition, it owned four modern rice mills, one bank, one insurance company, two import-export companies, one shipping company and one milling machine company. All of them were located in the capital city of Bangkok. In Hong Kong, the family owned the famous Kin Tye Lung trading company which was involved in rice trade and finance, and another trading and shipping company. In Swatow, the Hongli Zhan company was involved in rice trade as well as finance, another two trading companies plus one real estate company named Shanli Company. In Saigon, the family owned a trading company named Qianyuanli involved mainly in rice trade and exporting local produce. In Singapore, the family owned two import-export companies involved mainly in rice trade. The original compilation was made by Lo Xiaojing and the article was published in the Dongnanya lishi xiekan (Journal of Southeast Asian History) Vol. 4, p. 43 (Guangzhou, Zhongshan daxue chubanshe, 1987), cited by Zhang Yingqiu, “Taiguo zhi Chenghai yimin: Gao Huishi yu Chen Hongli jiazu de yeji” (The Chenghai Immigrants in Thailand: Business Achivements of Gao Huishi and Chen Hongli Families), in Lin Tien-Wai (Lin Tianwei) (ed.), Yatai difang wenxian yanjiu lunwenji (Collected Essays on Local History of the Asian-Pacific Region: Contribution of Overseas Chinese), p. 246. 75 See Wang Mianchang, op. cit., p. 8; for the founding dates of both Hongli Zhan Bank and the Bangkok Commercial Bank, see Li Jian, “Taiguo shangye yinhang de fazhan” (The Development of the Commercial Banks in Thailand), in Taiguo Zhonghua zongshanghui niankan, di ershijiu jie (The Annal of the Chinese Chamber of Commerce of Thailand, 29th Batch (Bangkok, 2509 in Buddhist calendar), pp. A19–A20.

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Banking and insurance were important for the growth of his vast trading empire; the lacking of these financial facilities not only would have jeopardized its growth, but would also have threatened its survival. The second achievement of Shouming was his focus on the real estate business. Apart from buying up more urban land in Bangkok, he developed shops and houses in Swatow in the 1930s which gained him handsome profit.76 Like his father, Shouming was active in the Chinese Chamber of Commerce of which he served as president from 1932 to 1936. He was also made the commercial commissioner in Thailand for the Nationalist government in Nanjing. The social and political powers he commanded invariably lifted his standing in the community and gave him sufficient contacts to maintain his vast business empire.77 The Chen Hongli business empire was thus considered one of the top eight business conglomerates in pre-war Thailand.78 The story of the Khaw business empire in Southern Thailand offers a different pattern of growth of modern Chinese business in Thailand. The founder of the empire was Khaw Soo Cheang (Xu Shichang). He was born on 25th November, 1797 in the village of Xia Xie She, Long Xi district of Zhangzhou prefecture, Fujian province.79 With a humble family background, Soo Cheang and his older brother might have been the members of a secret society named Xiao Dao Hui (Small Dagger Society), and fled to Penang after it was suppressed by the Qing government in 1822.80 His rise from poverty to the status of wealth and power was one of the frequently told ‘rags to riches’ stories of Chinese immigrants. What was different about this story was he made his wealth from two different states, Thailand and Malaya, and his wealth was intertwined with immense political power. 76

Wang Mianchang, ibid., p. 9. Ibid., p. 11. 78 Ibid., p. 9. 79 See Hsu Yun-ts’iao (Xu Yungqiao) (compiled), “Taiguo Linlang Xu shi zongpu” (The Genealogy of Khaw Clan of Ranong, Thialand), in Xu Jiaozheng et al. (eds.), Xu Shi Zongpu (The Genealogy of Xu (Khaw or Koh) Clan) (Singapore, Xu Clan of Singapore, 1963), p. B 161. 80 See Jennifer W. Cushman, Family and State: The Formation of a Sino-Thai Tin-Mining Dynasty, 1797–1932 (Singapore, Oxford University Press, 1991), p. 9. 77

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Soo Cheang’s early activities in Penang and Ranong was shrouded in myth.81 But what is certain is that he had started business before moving to Southern Thailand. He started off as a pedlar of fruits and vegetables, and later became a trader in fruits. With diligence and thrift, he accumulated some capital and purchased land, and extended his trading activities to South Thailand.82 Soo Cheang probably moved to Southern Thailand in the early 1830s, and could have settled first in Takuapa. It is claimed that in his early stage in Thailand, he was assisted in business by a woman named Thao Thepsunthorn who was a wife of a Thai high-ranking officer, Noi Na Nakhon who was the most important political figure on the peninsula until his death in 1839. Thao Thepsunthorn was identified as one of the daughters of Koh Lay Huan, the Chinese Kapitan of Penang.83 With financial support of Thao Thepsunthorn, he was able to do a prosperous trade between Southern Thailand and Penang. Soo Cheang’s political connections with Noi Na Nakhon of Takuapa and the Chinese Kapitan family in Penang opened up tremendous economic opportunities in the region. He aimed at the acquisition of monopoly of tax farms and tin-mining, two pillars of big business of the time. In 1844, he succeeded to acquire the tax farms and later added the tin monopoly right in Ranong. His new economic position soon was recognized by the Thai court which awarded him a noble title of ‘Luang Rattanasetthi’. With enhancement of both economic and political power, he was in 1854 appointed the governor of Ranong with an elevated title of ‘Phra Rattanasetthi’, and further elevated in 1862 to the rank of ‘Phraya’, the second highest rank of nobility.84 81

One source claims that one day Soo Cheang was walking along the beach with his oranges in baskets across his shoulders, some Europeans landed a boat. Frightened by the European’s appearance, he dropped his baskets and ran into jungle. On his return, he found the oranges neatly split in half, the pulp eaten, but each one filled with a dollar coin. These money enabled Soo Cheang to purchase land. Ibid., p. 10. 82 Ibid. 83 For an account of Kapitan Koh Lay Huan, see C.S. Wong, A Gallery of Chinese Kapitans (Singapore, Ministry of Culture, 1963). 84 See Jennifer W. Cushman, Family and State, pp. 11–12.

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Undoubtedly, Khaw Soo Cheang, a Chinese immigrant, built up a business empire in Southern Thailand and Penang in a matter of slightly more than three decades. This business empire was centered at Ranong and was built on revenue farms, tin-mining and regional trade. I have no intention to engage any debate whether the Khaw family business empire is a form of ‘Bureaucratic Capitalism’ or not,85 what is certain is that Khaw Soo Cheang had shrewdly used political connections for the advancement of his economic interests, and in turn to use economic power to help him obtain the governorship of Ranong.86 What can be further suggested is that Khaw Soo Cheang probably had used secret society and dialect connections to help his advancement both economically and politically. His connection with Koh Lay Huan’s daughter, Thao Thepsunthorn, is an useful lead. Koh Lay Huan, the first Chinese Kapitan, was a native of Zhangzhou, Fujian province. Khaw Soo Cheang was also a native of Zhangzhou speaking a common southern Hokkian dialect.87 Koh Lay Huan, according to C.S. Wong’s study, could aslo be the leader of a Chinese secret society in Penang.88 Given the fact that Soo Cheang and his older brother were members of the Small Dagger Society who fled China for Penang, he could have contacts with Koh Lay Huan’s family because of this underworld connection. Khaw Soo Cheang had laid a solid foundation for the creation of a vast business empire based on revenue-farming, tin-mining, trading 85

See Craig J. Reynolds’s foreword of Jennifer W. Cushman’s book, Family and State, pp. xi–xiii; Michael Godley, The Mandarin-capitalists from Nanyang: Overseas Chinese Enterprise in the Modernization of China, 1893–1911 (Cambridge, Cambridge University Press, 1981), pp. 35–37; Albert Feuerwerker, China’s Early Industrialization: Sheng Hsuan-huai (1844–1916) and Mandarin Enterprise (Cambridge, Massachusetts, Harvard University Press, 1958), pp. 242–251. 86 See Jennifer W. Cushman, Family and State, pp. 11 & 119. 87 For identifying Koh Lay Huan as native of Zhangzhou, see C.S. Wong, A Gallery of Chinese Kapitans, p. 12. 88 C.S. Wong tried to establish that the term ‘Tikoo’ appeared in British colonial records in 1803 was in fact Cantonese pronunciation for ‘Taiko’, a common term used for the leader of a Chinese secret society. Ibid., p. 11.

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and shipping. His monopoly of the revenue farms of Ranong in 1842 led the way. His acquisition of the mining rights of Southern Thailand and his founding of the Koe Guan (Gao Yuan) Company in Penang in the 1870s paved the way for future expansion.89 Soo Cheang was an empire builder. His vision and determination steered the direction and process of the empire building. It is remarkable that Soo Cheang was able to overcome the succession problem and created conditions conducive for future expansion of his empire. His foresight lent him discipline and groomed his children to take over the reins. He had six sons, two of them died young, while the remaining four were prominent in both political and business circles.90 All of them were awarded with noble ranks ranging from Luang to Phraya (second highest rank). Three of his sons were particularly prominent. Khaw Sim Kong, the second son, succeeded Soo Cheang to become the governor of Ranong, and was awarded the noble rank of ‘Phraya’; Khaw Sim Tek, the fifth son, was made ‘Phraya’ and the governor of Lang Suan; while Khaw Sim Bee, the youngest son, was the governor of Phuket with ‘Phraya’ rank as well.91 Political power alone was no guarantee of the continuity and expansion of the business empire. What was important was the unity and solidarity among the second generation of the Khaw brothers. As Siu-lun Wong has pointed out in his study of Chinese family firms that the relinquishment of control over the family firm by the father-entrepreneur would see a gradual process of segmentation of the firm.92 Khaw Soo Cheang was well aware of the problems of succession in Chinese tradition. As Chinese had no clear principle of primogeniture, the family property was equally divided among sons. 89

See J.W. Cushman, “The Khaw Group: Chinese Business in Early Twentiethcentury Penang”, in Journal of Southeast Asian Studies, Vol. 17, No. 1 (March 1986), p. 64; Jennifer W. Cushman, Family and State, p. 59. 90 See Hsu Yun-ts’iao (Xu Yunqiao), “Taiguo Linlang Xushi zongpu” (The Genealogy of Xu Clan of Ranong, Thailand), in Xu Jiaozheng et al. (eds.), Xu Shi Zongpu (The Genealogy of Xu (Khaw or Koh) Clan), pp. B 161–B 163. 91 Ibid. 92 See Siu-lun Wong, “The Chinese Family Firm: a Model”, in The British Journal of Sociology, Vol. 36, No. 1 (March, 1985), p. 64.

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Further, equal claims to family wealth would lead to internal bickering and disunity. He was shrewd to combine Western and Chinese practices in solving the succession problem. He adopted the Western concept of having a ‘will’, and combined with Chinese concept of equity and fair share of family wealth by male descendants. Before his retirement in 1874, he drew up a will stipulating that his business interests in Ranong were to be managed by Sim Kong, the Koe Guan interests in Penang by Sim Khim, and the business interests in Langsuan by Sim Tek. His will also stipulated that the remaining of his estate was to be divided into 60 shares, 16 of which were reserved for the purpose of setting up a welfare Trust sixteen years after his death.93 The income generated from the Trust was to take care of expenses of ancestral worship (sacrificial ceremonies for Soo Cheang and his wives), marriage gifts for all descendants of Khaw clan, wedding and funeral expenses etc.94 Soo Cheang’s idea of forming a welfare Trust could have derived from a traditional Chinese practice adopted by wealthy and powerful clans in China.95 The collective assets vested in the group rather than individuals are central to the corporate nature of Khaw clan, and they were important in the later expansion of the family’s business interests in the early 1900s. The corporation of the clan was one of its principal strengths and ensured its survival as a vast business empire.96 Revenue farming and tin-mining were the two pillars of the Khaw business empire. Since 1844 when Soo Cheang obtained the right to collect revenues in Ranong, he step by step tightened his hold on this tax monopoly. After Soo Cheang’s death in 1882, his second 93

See Jennifer W. Cushman, Family and State, pp. 16–17. Ibid., p. 17. 95 This practice can be compared with the practice of having ‘Yi Tian’ (land of common welfare) in traditional China. It was deemed to be belonging to the ancestors for the welfare of all clan members. The founder of first ‘Yi Tian’ in China was Fan Zhongyan (988–1052), a famous scholar and high-ranking official of the Song Dynasty. See Hsien Chin Hu, The Common Descent Group in China and Its Functions (originally published by The Viking Fund, INC., New York, 1948, reprint, New York, Johnson Reprint Company Limited, 1968), pp. 72–73. 96 See Jennifer W. Cushman, Family and State, pp. 18–19. 94

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son, Khaw Sim Kong, was re-appointed revenue-farmer of Ranong with increased payment to the Thai court.97 Revenue farming was an important source of wealth for Khaw business empire. As a result of the lack of a salary system for officers in Thailand at that time, the farmers were compensated with the proportion of revenue collected. This was subjected to the estimation of the total revenue that left room for manipulation. It was claimed that Khaw Soo Cheang for years had merely remitted 4,700 baht to the Thai court, while himself netted at least 160,000 baht.98 The enormous profit derived from the farming prompted the second and third generation Khaw leaders to expand in this area. Khaw Sim Bee, the youngest son of Khaw Soo Cheang who became the governor of Phuket province in 1890, had the monopoly of the lucrative Phuket opium farm.99 Besides his interests in Phuket farms, Sim Bee, through his connection with a prominent Chinese merchant, Cheah Choo Yew in Penang, was also involved in the Bangkok syndicate which won the bid for the Central Farm of Thailand in 1905.100 Khaw Joo Ghee (son of Sim Kong) and Khaw Joo Choe (son of Khaw Sim Khim) who were the leaders of the third generation of the Khaw dynasty, were actively engaged in opium farming in southern Thailand. Their farming activities had further extended to Penang and Singapore. Khaw Joo Choe was especially active. He was connected with revenue farming since he was 18, and had been a Director of the Phuket opium farm for 6 years, and later also became Director of the Singapore opium and spirit farm from 1904 to 1909.101 97

Ibid., p. 36. Ibid., p. 32. 99 Ibid., p. 80; Hsu Yun-ts’iao (Xu Yunqiao), “Taiguo Linlang Xushi zongpu”, op. cit., p. B163. 100 This central farm included the opium monopoly of Bangkok and many other Thai cities. See Jennifer W. Cushman, pp. 80, 87. 101 See A. Wright & H.A. Cartwright, Twentieth Century Impressions of British Malaya: Its History, People, Commerce, Industries and Resources (London, Lloyd’s Greater British Publishing Company, 1908), pp. 155–156; Michael Godley, “Chinese Revenue Farm Networks: The Penang Connection”, in John Butcher & Howard Dick (eds.), The Rise and Fall of Revenue Farming: Business Elites and the Emergence 98

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Since revenue-farming was a form of big business in the 19th and early 20th centuries Southeast Asia, it attracted big players with huge capital and political influence. Khaw family’s monopoly of certain lucrative farms in Southern Thai states invited envy and competition from other powerful Chinese in the region. One of them who posed a threat to Khaw’s monopoly was Tan Kim Ching, a wealthy and powerful Chinese capitalist in Singapore with political influence both in the Straits Settlements and Thailand.102 He tendered for the right to collect the combined taxes of the western seaboard province of peninsular Thailand in 1872, but he failed in his bid because his presence in that area would have upset the balance of power on the peninsula.103 He tried repeatedly in 1872, 1874 and 1875 for the farms in Phuket, Langsuan and Ranong with attractive financial offers, but failed again and again in these bids. Tan’s failures in these moves illustrates a classic case of the intertwining of political power and economic interests of the Chinese business. His bids, if successful, would have undermined Khaw’s monopoly of revenue farms. Certainly, the Khaw family would have used its political muscle to fan off such a challenge. In 1877 when Khaw Sim Kong succeeded his father as the governor of Ranong, he was asked by Bangkok to investigate Tan Kim Ching’s failure of both taking the oath of allegiance to the Thai sovereign and paying his taxes.104 This act had eliminated Tan’s chance of ending Khaw’s monopoly of revenue farming in Southern Thailand. Tin-mining was another pillar of the Khaw business empire. Khaw family’s unique bureaucratic position in Southern Thailand enabled it to control tin production. In addition, it possessed necessary capital, of the Modern State in Southeast Asia, p. 92; Jennifer W. Cushman & Michael Godley, “The Khaw Concern”, also in John Butcher & Howard Dick (eds.), The Rise and Fall of Revenue Farming, p. 267. 102 For a portrait of Tan Kim Ching, see Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967), p. 92; a short biography of Tan Kim Ching (Chen Jinzhong) is also found in Su Xiaoxian (ed.), Zhangzhou shishu lu Xing tongxianglu (The Zhangzhou Chinese in Singapore) (Singapore, Qiaoguang chubanshe, 1948), pp. 58–59. 103 See Jennifer W. Cushman, Family and State, p. 33. 104 Ibid., pp. 34–36.

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administrative structure, cheap labor and market to make tin production a lucrative business. The topography of the tin-producing provinces of Thai peninsula was not very different from Malay states such as Perak and Selangor; alluvial tin deposits were rich and hydraulic power was intensively used. Production method was also similar.105 Since the 1870s during the later days of Khaw Soo Cheang, the Khaw family operated many of the the large commercial tin concessions, principally in the Phuket island where about half of the output of Thai tin was produced,106 and it also controlled local smelters which processed the tin from Ranong and the neighboring provinces.107 The control over production, smelting and marketing of the Thai tin guaranteed the Khaw family’s success. However, the secret of Khaw’s tin production rested with its control over the supply of mining labor. Officials and mine owners in Phuket had long been complaining the difficulty of getting uninterrupted supply of needed labor because contracted coolies once reached Singapore were poached by others, and few would have reached the island of Phuket. When Chinese coolies were engaged in China and their passages were paid by the employers, they were obliged to work for the employers until the passage money had been repaid. But this law was difficult to be enforced in the Straits Settlements, because the Singapore authorities would not force a coolie to go to anywhere outside the colony unless he was willing to do so.108 However, the Khaw 105

See John H. Heal (Inspector-General of Royal Department of Mines and Geology), “Mines and Mining Administration”, in Arnold Wright & Oliver T. Breakspear (eds.), Twentieth Century Impression of Siam: Its History, People, Commerce, Industries and Resources (London, Lloyd’s, 1908), pp. 182–185, reprinted in Chatthip Nartsupha & Suthy Prasartset (eds.), the Political Economy of Siam, 1851–1910 (Bangkok, Sangroong Printing, 1981), pp. 206–208; for Chinese mining method used in Western Malay states, see Wong Lin Ken, The Malayan Tin Industry to 1914: With Special Reference to the States of Perak, Selangor, Negri Sembilan and Pahang (Tucson, The University of Arizona Press, 1965), pp. 48–50. 106 See John H. Heal, “Mines and Mining Administration”, in Chatthip Nartsupha & Suthy Prasartset (eds.), op. cit., p. 206. 107 Jennifer W. Cushman, Family and State, p. 48. 108 See John H. Heal, “Problems Facing the Tin Mining Industry”, in Chatthip Nartsupha & Suthy Prasartset (eds.), op. cit., p. 221.

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family overcame this difficulty by having its own shipping lines. Its Penang-based steamship company, Koe Guan (Gao Yuan, literarily meant the high source of an river) became the main carrier of Chinese coolies for its mines.109 The control of supply of labor enabled the Khaws to minimize wages and reaped greater profit. This strategy of minimization of costs contributed partly to the coolie unrest in 1876.110 Khaw’s tin business was further expanded under the stimulus of high prices of tin in world markets since the late 1890s. The expansion was made possible by Khaw Sim Bee, a leader of the second generation of the Khaw dynasty. Sim Bee was an able administrator and an astute entrepreneur, and was the central figure of modernization of Thai tin industry. His many innovations as governor of Trang (1890–1900) earned him a reputation of an able administrator of the ‘banner province of Siam’. This indirectly led to his appointment as the High Commissioner of Monthon Phuket, a tin-rich province.111 With his powerful bureaucratic position in the region, he was able to carry out reform in tin production for the benefits of the state and his family. In 1905, bucket dredging, one of the major technological innovations in the Thai mining history, was introduced to Phuket.112 The Khaw family’s tin business continued to expand from World War I to 1930 under the stimulus of rises of tin price in the world markets. Khaw Joo Ghee and Khaw Joo Tok, the leaders of the third generation of the Khaw dynasty, became important new players in the international tin business, and they played the game with skill and expertise that helped to ensure the success of the Khaws in tin business.113

109

See J.W. Cushman, “The Khaw Group: Chinese Business in Early Twentiethcentury Penang”, in Journal of Southeast Asian Studies, Vol. 17, No. 1 (March, 1986), p. 64. 110 Jennifer W. Cushman, Family and State, pp. 37–40. 111 See J.W. Cushman, “Chinese Enterprise in Early Twentieth-Century Penang”, in Asian Culture, No. 14 (Singapore, Singapore Society of Asian Studies, 1990) (A Special Issue on Ethnic Chinese Abroad, edited by Yen Ching-hwang), p. 83. 112 Ibid. 113 See Jennifer W. Cushman, Family and State, pp. 100–108.

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Similar to the Chen business empire, Khaw’s main strategy for building and sustaining its empire was diversification and forward vertical integration. The success of these strategies ensured the perpetuation of its dominant position in Southern Thailand. After having entrenched in both revenue-farming and tin-mining in the region, it continued to expand geographically to include the British part of the Malay Peninsula and diversified into shipping, trading and insurance. The base for this southward expansion was Penang, an thriving international port located at the northern end of the Strait of Malacca. The shipping and trading arm of the Khaw business empire in Penang was Koe Guan, a company founded in the 1870s. In the 1890s, Koe Guan had only possessed a few small steamers. It emerged in 1902 as the largest shipping firm in Penang. In June 1902, it bought 8 vessels belonging to the Kong Hock fleet; and 7 months later, it further purchased 4 steamships from the Union Steamship Company of New Zealand.114 With these new vessels, Koe Guan moved beyond coastal trade (between Penang and Southern Thai provinces) into south China trade. It became a principal carrier of Chinese coolies to Penang.115 Apart from coolie trade, Koe Guan steamers were also involved in moving passengers, cargoes as well as provisions for the mines in Southern Thailand of which opium was the principal item. The Koe Guan trading activities not only executed Khaw’s strategy of diversification that helped minimize business risks, but also fulfilled the aspiration of forward vertical integration. The successful operation of tin business required the control of production process (including dredging of tin, supply of labor and provisions to mines), transporting and melting of tin for international markets. The success of Khaw’s strategy of vertical integration helped it to survive in a highly competitive international environment. 114

See J.W. Cushman, “The Khaw Group: Chinese Business in Early Twentiethcentury Penang”, in Journal of Southeast Asian studies, Vol. 17, No. 1 (March, 1986), p. 67; Jennifer W. Cushman, Family and State, pp. 65–66. 115 J.W. Cushman, “The Khaw Group: Chinese Business in Early Twentieth-century Penang”, ibid.

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What the Khaw business empire differed from the Chen’s empire was the integration of political and economic powers. The intertwining of bureaucratic positions with business interests ensured its perpetuation. One strategy that made the Khaw business unique among modern Chinese business in Thailand was internationalization of some of its enterprises. The principal aim of internationalization was the access to advanced Western technology. Technology was the leverage in the competition in tin business. Some of the technology could be purchased in the Western markets, but those available were not necessarily the best in the field. To compete with the Western companies in a level playing field, Khaw Concern must have direct access to advanced technology. Unlike the Chen family which attempted to catch up with the West in technology by direct purchasing of what was available in the market, Khaw emphasized collaboration with selected Western companies and formed joint enterprises. The founding of Tongkah Harbor Dredging Company is the example of this approach. In this joint enterprise, Khaw Concern’s principal Western partner was Captain Edward T. Miles, an Australian. Captain Miles, who was known as ‘Teddy’, was a former minister of Land, Mines, Works and Railway of Tasmania. Having left politics, Miles became a broker of the Union Steamship Company of New Zealand and a trade representative of a Hobart company. His sale of four steamers to Koe Guan sealed a long-term relationship with the Khaw family.116 Having seen gold dredges in New Zealand, Miles believed that dredging could be applied to tin-mining. His introduction of the bucket-dredge was one of the most advanced techniques in tin-mining anywhere in the world.117 The Tongkah Harbor Tin Dredging Company (No Liability) was registered in Hobart, Australia on 23 November 1906 with an authorized capital of 150,000 sterling pounds which was divided into 150,000 shares. The Khaw family owned at least 30,000 shares, and Khaw Joo Tok was on the Board of Directors of the company.118 116

Jennifer W. Cushman, Family and State, p. 66. Ibid., p. 70. 118 See J.W. Cushman, “Chinese Enterprise in Early Twentieth-Century Penang”, in Asian Culture, 14 (April 1990), p. 83. 117

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The Rise of Chinese Business Conglomerates Background leading to the rise of the conglomerates Military dominance of Thai politics in the 1950s and 1960s set the political framework for economic growth. This military-bureaucratic polity failed far short to modernize Thailand completely, it nevertheless provided political stability which was conducive to economic growth.119 The perceived threat of Communism, both internally and externally, led to the alliance of the Thai ruling military-bureaucratic elite with Americans. The pumping of US$2 billion of American aid into Thailand consolidated the bureaucratic polity. Under the American influence, the Thai military rulers undertook a series of economic reforms which laid the foundation for rapid economic growth. Post-war economic nationalism swept through Southeast Asia, Thailand was of no exception. It was expressed most clearly during the decade of second Phibun Songkram rule (1947–1957). This nationalist impulse combined with modernizing impulse led the government to actively engage in economic development. The Thai Financial Syndicate, a combined government and semi-government bank, was set up in 1952 to lead the way for the formation of a series of commercial and financial syndicates which were designed to weaken foreigners’ hold in this sector. Further, state’s enterprises were established with monopoly in areas such as brewing, paper manufacturing, sugar refining and gunny sack production.120 Thai economic nationalism had its roots back to Phibun’s first admin119

For the first use of the term ‘bureaucratic polity’ by Western scholars, see Fred. Riggs, Thailand: The Modernization of a Bureaucratic Polity (Honolulu, East West Center Press, 1966). This term has since been accepted by many scholars to describe the joint military and bureaucratic control of Thai politics. See for instance, the work of Anek Laothamatas, Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism (Boulder, Colorado, Westview Press, Inc., 1992). 120 See Chris Dixon, Southeast Asia in the World Economy: A Regional Geography (Cambridge, Cambridge University Press, 1994, reprint), p. 173.

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istration (1938–1944). The policy was designed to weaken the power and prestige of the old regime, and to create economic prosperity based on active participation of both the state and petty bourgeois class.121 The nationalist economic policy was less successful in Phibun’s first administration, but it was brought to a sharper focus in his second term. The government struggled to reduce its dependence on rice and other raw materials exports by promoting industrialization — expanding its scope of mechanization of rice and paper mills, setting up oil refinery, tobacco industry etc. At the same time, it also expanded its infrastructure facilities. They included the construction of a new irrigation system with the Chao Phraya (Chainat) dam, the improvement of the railway system and the reconstruction and expansion of the Khlong Teai Port.122 General Sarit Thanarat’s coups in 1957–58 ended the Phibun era in the history of post-war Thailand. The coup ushered into a period of authoritarian rule which was highly paternalistic. But the Sarit government attempted to continue the unfinished task of economic modernization based on the concept of economic nationalism. The new formula was to halt the expansion of state enterprises and confine the state to the role of infrastructure development. It strengthened and expanded the private sector of economy through the strategy of import substitution industrialization (ISI). The new economic developments were undertaken within the authoritarian political framework.123 Acting on the recommendations of a report brought out by World Bank, the Sarit government focused its attention on fostering private enterprises, encouraged domestic and foreign investments, and improved the investment environment by adopting conducive legislation and establishing a number of government agencies.124

121

See Kobkua Suwannathat-Pian, Thailand’s Durable Premier: Phibun through Three Decades, 1932–1957 (Kuala Lumpur, Oxford University Press, 1995), p. 145. 122 Ibid., pp. 149–151. 123 See Kevin Hewison, “Thailand: Capitalist Development and the State”, in Garry Rodan, Kevin Hewison & Richard Robison (eds.), The Political Economy of Southeast Asia: An Introduction (Melbourne, Oxford University Press, 1997), p. 101. 124 Ibid, p. 102.

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Instrumental in the implementation of government’s ambitious programmes was the establishment of the Investment Board in 1959 which was to take charge of all related decisions. Under the new Promotion of Industrial Investment Act adopted in 1962, new industries were classified into A, B and C groups for different preferential treatments. The A group of industries was totally exempted from import duty, business tax on raw or necessary materials. Group B received reduction of the duty and tax by 50%, while Group C was only granted reduction up to 33.5 %.125 Marshall Sarit’s efforts in promoting private enterprise gave a big boost to Thai industry, and provided a broader scope for the participation of domestic capital in the modernization of the kingdom.

The development and characteristics of the Chinese conglomerates Like many other countries in Southeast Asia, the rise of Chinese conglomerates in Thailand was principally a post-war phenomenon. The combination of political authoritarianism with economic liberalism provided a right environment for Chinese business to grow and expand. The impact of the indigenous economic nationalism was cushioned by the Chinese strategy of cultivating cordial relationship with ruling military-bureaucratic elite, a relationship which benefited both partners and guaranteed the success of Chinese business. This was socalled the ‘Clientelism’, a term that denotes the patron-clientele relationship. The patron, the indigenous Thai military-bureaucrats, protected the economic interests of the Chinese, while in return, the Chinese businessmen provided economic benefits in the form of directorship or adviser-ship in the conglomerates. This ‘Patronclientele’ system is similar to the Cukong system found in Indonesia.126 125

See T.H. Silcock, “Promotion of Industry and the Planning Process”, in T.H. Silcock (ed.), Thailand: Social and Economic Studies in Development (Canberra, Australian National University Press, 1967), pp. 268–269. 126 See Anek Laothamatas, “From Clientelism to Partnership: Business-Government Relations in Thailand”, in Andrew Macintyre (ed.), Business and Government in

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Marshall Sarit, the benevolent autocrat, saw great value in domestic Chinese capital, absorbed the Chinese into the main stream of the Thai society and allowed them to participate fully in economic activities.127 It was during this period of authoritarian capitalism (1957– 1973) that Chinese conglomerates achieved their full development. In the two decades from 1951 to 1969, Thailand’s economy had achieved strong growth. An annual growth rate of 6.6% was recorded. The gross national product (GNP) was lifted from 35.2 billion baht in 1951 to 112.4 billion baht in 1969, a three-fold growth in two decades. Per capita income of the same period also rose about two and a half times from 1,475 baht in 1951 to 3,769 baht in 1969.128 The Chinese business in Thailand grew with the pace of the national economic development. With strong economic foundation laid in pre-war period, Chinese conglomerates emerged one after another, and had substantial share in some important sectors such as banking and finance, manufacturing industry, agro-industry and retailing. Chinese conglomerates in Thailand were characterized by their family-based ownership, strong dialect, kinship and matrimonial ties, and the close relationship with bureaucratic political elite.129 Many of these Chinese conglomerates had their origins back in the pre-war period. Historical continuity provided families with wealth, power, connections and networks which were essential conditions for capturing the opportunity in the 1950s and 1960s to

Industrialising Asia (St. Leonards, NSW., Australia, Allen & Unwin Pty. Ltd., 1994), p. 195. For a discussion of Cukong system, see Leo Suryadinata, Pribumi Indonesians, the Chinese Minority and China (Kuala Lumpur, Heinemann Educational Books (Asia) Ltd., 1978), p. 141. 127 See Anek Laothamatas, Business Associations and the New Political Economy of Thailand: From Bureaucratic Polity to Liberal Corporatism, p. 28. 128 See James C. Ingram, Economic Change in Thailand, 1850–1970 (Stanford, Stanford University Press, 1971), pp. 221–222. 129 See Chen Dabing, “Taiguo de huaren zituan” (The Ethnic Chinese Business Groups in Thailand), in Wang Muhan (ed.), Dongnanya huaren qiye zituan yanjiu (Study of Chinese Business Groups in Southeast Asia) (Xiamen, Xiamen daxue chubanshe, 1995), pp. 249–252.

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develop into large business conglomerates. The Bangkok Bank group had its origin back in 1939 when the founder, Chin Sophonpanich (Chin Pik Chin, or Romanized in pinyin as Chen Bichen) founded his Asian Trading company. The Central Department Stores Group had its origins back in the mid 1920s with a Hainanese Chinese family retail business in Thonburi under Chirathivats. While the Yip-In-Tsoi Group can trace its origin to 1926 when a mining and trading company was established by a group of Chinese businessmen headed by Yip-In-Tsoi and Chu Chutrakul.130 The C.P. (Charoen Pokphand) group, the second largest Chinese conglomerate in Thailand has its origins back in 1921. In that year, Chia Ek Chaw and his younger brother, two Teochew immigrants, set up a small shop named ‘Hang Chia Tai Chung’ to trade eggs and seeds with Hong Kong. It expanded its business in the 1930s and 1940s. In 1958, the Chia brothers reorganized their traditional trading company into a modern limited company named Chia Tai Company Limited.131 Chinese family as an business unit was capable of bringing resources together for common goals, and its solidarity provided strength for making business a success. Especially during the early stage of the family business, the founder was the father-entrepreneur who commanded almost absolute power over his children. His authority was respected and feared, family solidarity ensured the growth and expansion of the family business.132 Like other parts of Southeast Asia, the control of the Thai Chinese conglomerates was still in the hands of a single family or a group of families. Despite its rapid growth and internationalization, the core family is still able to have a firm grip over the direction and operation of the business. The control of the 130

See Kevin Hewison, Bankers and Bureaucrats: Capital and the Role of the State in Thailand (New Haven, Yale University Southeast Asian Studies, 1989), pp. 154–155, 192. 131 See Akira Suehiro, “Modern Family Business & Corporation Capability in Thailand: A Case Study of the CP Group” (paper presented at the Workshop on Asian Business Networks held in Singapore, 31 March 1998 to 2 April 1998), p. 10; Chen Dabing, op. cit., p. 267. 132 See Siu-lun Wong, “The Chinese Family Firm: A Model”, in the British Journal of Sociology, Vol. 36, No. 1 (March, 1985).

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Bangkok Bank group and the Charoen Pokphand group is still firmly in the hands of Sophonpanich and Chia families respectively. Dialect and geographical ties was important in the Ethnic Chinese communities in Southeast Asia. Although its influence has waned as time passes, it still plays a role in many aspects of life of the Ethnic Chinese. In pre-war Southeast Asia where the Chinese communities were relatively segregated, the dialect and geographical ties was most significant in the socio-economic and cultural activities. It served as the foundation for most of the social and economic contacts, and determined the success or failure of business activities. The dialect and geographical ties was reinforced by kinship ties which emphasized the importance of blood relations traceable to many generations back to ancestral land in China. The Thai Chinese communities were of no exception. Although Teochews were predominant in the Chinese communities, there were still other Chinese dialect speakers such as Hakka, Hokkien, and Hainanese. Undoubtedly, the dialect was an important factor in business contacts and for the inter-conglomerate relationship. The Teochews, being numerically strong and entrenched earlier in the Chinese communities, tended to guard the business sectors which they had monopolized before. On the other hand, other Chinese minority groups resented such a monopoly, and tended to work to break down the existing system. This gave rise to inter-dialect tension, but strengthened the role of dialect and geographical ties in the business which led to dialect monopoly of certain branches of business. Among the four largest Chinese banking groups in Thailand, three were owned by Teochew families: The Sophonpanich’s Bangkok Bank group, the Ratanarak’s (Li Muchuan) Ayudhya Banking group and Tejaphaibul’s (Zheng Wulou) Bangkok Metropolitan Bank group. All the founders of these three financial conglomerates were Teochew dialect speakers.133 The 133

See Kevin J. Hewison, “The Financial Bourgeoisie in Thailand,” in Journal of Contemporary Asia, Vol. 11 (1981), No. 4, pp. 401–404; Chen Dabing, op. cit., p. 250; for Tejaphaibul’s founding of the Bangkok Metropolitan Bank (Jinghua yinhang), see Duan Lisheng, Zheng Wulou zhuan (A Biography of Tejaphaibul) (Guangzhou, Zhongshan daxue chubanshe, 1994), pp. 130–140.

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dialect and kinship ties in business was further consolidated by matrimonial relationship. The leading business Chinese families, not only desired to ensure their wealth perpetuated forever, but also increased their business and social contacts which served as bridge for marriages between their children. This conscious and unconscious processes of matrimonial interaction made powerful Chinese business families even more powerful and lasting.134 The most notable characteristic of the big Chinese business in Thailand is its close relationship with the ruling military-bureaucratic elite. Since the late 1950s, Chinese tycoons worked hand in glove with members of Thai ruling class to bring about enormous economic growth. This close collaboration between government and business is unmatched in other developing countries in Southeast Asia. Under this arrangement, the generals and bureaucrats, the militarybureaucratic elite, acted as patrons, while Chinese tycoons became the clients. The generals and bureaucrats provided political protection as well as government’s contracts, while the Chinese tycoons received necessary political influence as well as economic benefits. In return, the general-bureaucrats were recruited on the boards of directors of the conglomerates, and shared benefits. Further, they also skimmed revenue from rising business profits to build up their personal fortunes and political career. While the Chinese tycoons obtained privileges and special favors from the government which could be critical in business competition.135 Since the interests of the Chinese conglomerates were not identical, and the Thai general-bureaucrats were also divided into factions, their political and economic alignments tended to generate tension and conflict. This Thai model of state-business relationship, as one scholar has observed, is characterized by a larger and more active role for business in policy-making process and a substantial degree of

134

See G. William Skinner, Leadership and Power in the Chinese Community of Thailand (Ithaca, Cornell University Press, 1958), pp. 183–186. 135 See Pasuk Phongpaichit & Chris Baker, Thailand’s Boom (St. Leonards, NSW., Australia, Allen & Unwin, 1996), p. 21.

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government corruption.136 However, the making of this model has its historical and socio-economic dimensions. During the 1940s and early 1950s, the rise of indigenous economic nationalism together with a perceived threat of Chinese Communism led the Thai government to adopt an anti-Chinese policy. The Chinese in Thailand were subjected to harassment and extortion. Their vulnerability was summarized by a news report in early 1950s as follows: ‘It is easier in the world to bleed Chinese in our country. Merely preferring a charge of being Communist or having Communist tendencies is more than sufficient for members of the police to obtain huge sums of money from them as they please’.137 In the heyday of anti-Communism in Southeast Asia in the early 1950s and without effective protection from the Nationalist government in Taiwan, the Chinese in Thailand were left to find their ways to protect their interests. The Chinese businessmen, being politically weak while financially strong, were able to find the ways around the anti-Chinese legislation by the alliance with the Thai generals-bureaucrats. After all, this practice was not new in Thai history, and there was historical precedence that Chinese businessmen collaborated with court officials or regional governors for mutual benefits. From the perspective of Chinese businessmen, they had no choice in that particular political and social environments, and they had to make friends with the ruling elite or even resort to bribery in order to protect their economic interests. As one Chinese tycoon has succinctly put it, ‘Because we have no social security, the Ethnic Chinese habit is to save a lot and to make a lot of friends’.138

Case Study: Bangkok Bank Group Perhaps the best case study to illustrate the rise and development of the Chinese business conglomerates in Thailand is the history of Bangkok Bank Group. The Group is one of the largest Ethnic

136

See Anek Laothamatas, “From Clientelism to Partnership: Business-Government Relations in Thailand”, in Andrew Macintyre (ed.), Business and Government in Industrialising Asia, pp. 195, 196. 137 Ibid., p. 198. 138 See Pasuk Phongpaichit & Chris Baker, Thailand’s Boom, p. 26.

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Chinese conglomerates in Southeast Asia. Its flagship is Bangkok Bank, and its assets were estimated in 1990 at 520.6 billion baht with over 70 subsidiaries. Its core business is banking, but has expanded into manufacturing, real estate, trading, information technology and service industry.139 The Bangkok Bank is one of the largest banks in Southeast Asia, one of the 50 largest listed banks in the Pacific region, and among the top 250 banks in the world.140 In August 1989 when the bank celebrated its 45th anniversary, it had 357 branches with over 20,000 employees, and an estimated assets of US$14.5 billion. The bulk of its branches spread throughout Thailand with 15 branches in Asia, Europe and America.141 The Bangkok Bank had a humble beginning. Founded in August 1944 by Chin Sophonpanich (Chin Pik Chin, or Romanized as Chen Bichen) and Luang Rop Rukij, it had registered capital of 4 million baht and assets of 11 million baht with 23 staff. The founder, Chin Sophonpanich, was a son of a Teochew immigrant born in Thonburi in 1910. His father, Chen Zigui migrated to Thailand from Chaoyang district, Guangdong province, China in search for a better life. Like many other Chinese immigrants, Zigui’s life was hard because his income was low. At the age of 5, Chin Sophonpanich was sent back to China with his mother for Chinese education. The village life was hard. The poverty forced him to work like many other poor family’s children to pick pig’s dung to earn a few dollars. But this poverty drove Chin to study harder, and strove for future success.142 139

See Chen Dabing, “Taiguo de huaren qiye jituan” (Ethnic Chinese Business Groups in Thailand”, in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (A Study of the Ethnic Chinese Business Groups in Southeast Asia) (Xiamen, Xiamen daxue chubanshe, 1995), p. 256. 140 See Kevin Hewison, Bankers and Bureaucrats: Capital and the Role of the State in Thailand, p. 192. 141 See Lu Pingyang & Wu Shubin, Pangu zhilu: Taiguo Pangu yinhang sishi wunian (The Road of the Bangkok: 45th Anniversary Celebration of the Bangkok Bank) (Beijing, Zhongguo guoji guangbo chubanshe, 1990), p. 2. 142 Ibid., pp. 152–153; Anonymous, Shijie huaren fuhao liezhuan (Biographies of the World Ethnic Chinese Billionaires) (Hong Kong, Sansi chuanbo youxian gongsi, 1992), p. 61.

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At the age of 17, Chin left his home village for Bangkok to improve his economic well-being. In a classic rags-to-riches story of early Chinese immigrants, he toiled and struggled to his utmost to improve his economic position. He had worked as coolie, food-peddler, shopassistant and clerk before establishing his business. He spent his leisure hours to learn Thai language from Thai monks, and with three years’ effort, he mastered both the speaking and written languages. Traditional Chinese virtues of diligence and thrift combined with personal drive and business acumen made him a successful businessman. He first founded a small ‘Bangkok Timber company’ and a grocery shop in the 1930s, both were not very successful. In 1939 at the age of 29, he founded the Asian Trading Company, a hardware, grocery and trading company which provided provisions to government departments. It was a great success that laid a sold foundation for his business expansion.143 The founding of the Bangkok Bank in 1944 was the cornerstone in the history of the banking in modern Thailand. The bank was not a private bank owned by Chin Sophonpanich, but a joint privategovernment financial enterprise. Chin was undoubtedly the moving spirit behind the founding of the bank. The circumstances under which the bank was founded illustrates the foresight, business acumen and the right business strategy of Chin Sophonpanich. European banks dominated pre-war banking market in Thailand. The Second World War undermined the positions of the European banks, and created a vacuum to be filled. Although the Chinese had dominated Thai business for centuries, their banking system was weak, and failed to compete successfully with European rivals.144 The closure of the European banks in Thailand presented a new opportunity for the indigenous and Chinese financial institutions to grow. Seizing this golden opportunity, he together with a retired Thai high-ranking 143

Lu Pingyang & Wu Shupin, op. cit., pp. 155–156; Kevin Hewison, op. cit., p. 193. See Li Jian, “Taiguo shangye yinhang de fazhan” (The Development of Commercial Banks in Thailand”, in Taiguo Zhonghua zongshanghui di ershijiu jie niankan (The Souvenir Magazine of the 29th Anniversary of the Chinese Chamber of Commerce of Thailand) (Bangkok, 2509 (Buddhist calendar), p. A18. 144

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officer, Luang Rop Rukij and other Thai businessmen founded the Bangkok Bank in December 1944.145 From the outset, the bank had established close relationship with bureaucrats and generals. Khuang Aphaiwong who was the prime minister briefly after the war, was made the chairman of the Board of Directors. He was replaced by Chaophaya Rama Raghob, a wealthy prince who prospered through his close relationship with the King Vajiravudh.146 Chin Sophonpanich’s close relationship with bureaucrats, especially with the Soi Rajkhru group, saved the Bank from its early crisis. Police General Phao Sriyanond became one of Chin’s closest friends, while Colonel Siri Siriyothin (Deputy Minister for Economic Affairs) and Major-General Pramarn Adireksan were also invited to join the bank’s Board.147 This strong political connection not only provided the bank with necessary protection, but also supported it with public revenue. In 1953, Siri was able to convince the cabinet that the Bangkok Bank should be supported by government funds. An injection of 30 million baht into the bank’s coffers made the Ministry of Economic Affairs the largest share-holder which controlled 60% of the bank’s shares.148 With this semi-government status, the bank was advantaged in getting government contracts as well as lifting its status and prestige in the eyes of prospective depositors. The bank went through certain stages of rapid growth. In the decade of 1950s, the bank was under the helm of Chin Sophonpanich who was elected to the position of Managing Director of the bank. Changing external and internal political environments provided excellent opportunity for growth. The starting of the Korean war in the early 1950s and later the Vietnam war in the late 1950s stimulated Thai export of rice and rubber which in turn animated general economic activity in Thailand. Starting in 1957 when the Sarit government came into power, the general economic thrust of the new 145

See Lu Pingyang & Wu Shupin, Panguo zhilu (The Road of the Bangkok), p.22; Kevin Hewison, Bankers and Bureaucrats, p. 192. 146 Kevin Hewison, Bankers and Bureaucrats, p. 193. 147 Ibid. 148 Ibid.

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government was to encourage the growth of private enterprise and generate economic activity. This provided the bank with excellent opportunity to grow rapidly. When Chin was in the saddle of power, he undertook a series of measures to strengthen the bank for rapid expansion. He appointed two Chinese professionals, Prasit Kangchanawat (Xu Tunmao) and Boonchu Lochianasathian (Huang Wenpo) on his staff. Prasit was a legal expert, with a degree from the Jinan university in China and a law degree from a Thai University. He was versed both in Chinese and Thai with great deal of management experience. Boonchu was also a graduate of a Thai university specializing in auditing and finance. He was a banking and finance expert. Both were recruited by Chin and became his right-hand men in helping to plan for expansion.149 Apart from recruiting talents on his management team, he succeeded to raise the bank’s capital from the initial 4 million baht to 50 million by increasing the number of shareholders, and by the injection of government’s capital. The increase of the capital enabled the bank to expand rapidly. Internally, Chin Sophonpanich tightened the structure of the bank, and re-oriented it towards providing good services for the customers. It also provided special assistance to customers who wished to start manufacturing or export business.150 This customer-centered strategy gained a great deal of support from the Chinese and indigenous business communities that resulted in rapid increase of number of customers. The enhanced popularity and prestige enabled the bank to expand its domestic markets by setting up more branches in Bangkok and other cities in Thailand. However, the biggest ambition of Chin Sophonpanich was to make Bangkok Bank an internationally reputable bank competing equally with other great banks in the world. He selected Hong Kong for setting up Bangkok’s first overseas branch. Hong Kong was a Chinese city where Chin had frequent business contacts and it also imported large quantity of Thai rice. Following the establishment of the Hong Kong branch in June 1954, a string of overseas branches 149 150

See Lu Pingyang & Wu Shupin, Pangu zhilu (The Road of Bangkok), pp. 37–38. Ibid., pp. 44–45.

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were also set up, including Tokyo (1955), Singapore and London (1957), Kuala Lumpur (1959), Saigon (1961) and Jakarta (1968).151 The Bangkok Bank group continued to grow in the 1970s and 1980s, and the direction and strategies laid down by Chin Sophonpanich were closely adhered to under the leadership of Boonchu and Chin’s second son, Chatri Sophonpanich. Personal attributes, cultural values, correct policies and strategies accounted for the success story of the Sophonpanic family and the Bangkok Bank group. Chin Sophonpanic typified the Ethnic Chinese entrepreneurs. He can match with other Ethnic Chinese entrepreneurs such as Ma Yingpiao and Kwok brothers of Hong Kong, Zhang Bishi and Oei Tiong Ham of Dutch East Indies. Like other Ethnic Chinese entrepreneurs, Chin was gifted with business acumen and foresight, social skill and leadership. His ability to bring labor, capital and management together to create a vast business empire should be partly credited to his entrepreneurship. Secondly, Chin embraced both Chinese and Thai cultures. His Chinese education shaped his attitude towards life and business. Like many other Chinese immigrants, he had the quality of hard work and thrift. Both of these virtues enabled him to accumulate needed capital for investment in business. Without necessary savings, he would not have been able to start his first business in the late 1930s. Other Confucian values which appeared to have influenced his attitude and the way he managed business included self discipline and men-centered management style. His life style was well-regulated. According to his personal assistant for many years, Chin got up at 7.00 a.m., and spent great deal of time in newspaper reading before starting his work in the Bank, he did not return home until 6.00 p.m.152 His regulated life style enabled him to oversee the

151

Ibid., pp. 48–50; Chen Dabing, “Taiguo de huaren qiye jituan” (The Ethnic Chinese Business Groups in Thailand), in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (A Study of the Ethnic Chinese Business Groups in Southeast Asia), p. 261. 152 See Shijie huaren fuhao liezhuan (Biographies of the Ethnic Chinese Billionaires in the World), p. 64.

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operation of his business, and to make quick judgements in response to rapid changing political and economic environments. Like many other Ethnic Chinese entrepreneurs, Chin Sophonpanich was influenced by the Confucian value of men-centered approach. This led him to believe that a successful enterprise depended very much on talents. This was why he appointed Prasit Kangchanawat (Xu Tunmao) and Boonchu Lochianasathian (Huang Wenpo) to his top management team when he took over the running of the Bangkok Bank. What should be noted is that both Prasit and Boonchu were not ethnic Teochews like Chin, but because of their knowledge and ability, they were recruited into the leadership team. This shows that in human resource management, Chin Sophonpanich had broken away from the traditional Chinese mould of dialect and kinship ties, and emphasized on individual merits. He appeared to have embraced the Confucian humanistic approach to human and industrial relations. He was modest and kind, and treated his staff and workers well.153 He was very concerned with the retirement life of his old staff, according to his daughter, and financially supported them from his private charity fund.154 The Confucian emphasis on knowledge and his vision of training future successors led him to pay great attention to the education of his children. All of his six sons and one daughter received higher education, and some of them were sent overseas for training. This ensured his business empire to continue, and the advanced management knowledge acquired overseas helped to consolidate and expand his business empire. His second son, Chatri Sophonpanich who studied banking and finance in Scotland, applied his Western management knowledge, and computerized the entire Bangkok Bank administrative system.155

153

See Chen Lie, “Feisheng guoji de Taiguo huaren yinhangjia — Chen Bichen” (Chin Sophonpanic — an International Reputable Chinese Banker from Thailand), in Zhongguo renmin zhengzhi xieshang huiyi, Shantoushi weiyuanhui wenshi ziliao weiyuanhui (eds.), Haiwai Chaoren (The Overseas Teochews) (Shantou, 1990), p. 66. 154 Ibid., p. 65. 155 See Lu Pingyang & Wu Shupin, Pangu zhilu (The Road of Bangkok), pp. 181–188.

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Chin Sophonpanich’s policy of forging a close relationship with the Thai military-bureaucratic elite was fundamental in the success of the Bangkok Bank group. The dilemma of Southeast Asian Chinese — economically powerful but politically weak — was their dire need for political patronage. Chin was well-aware of this fact. His joint enterprise with Thai retired officials and businessmen was a shrewd move. When the bank was placed under his control in 1953, the mutual interests of the Chin family and the Thai military-bureaucratic elite were carefully crafted. The latter provided necessary political protection for the bank, while he ensured steady income and other financial benefits for the generals and bureaucrats sitting on the bank’s Board.156 After the 1957 coup, Marshal Sarit’s faction took control of the Thai politics. This political change was well-reflected in the personnel of the Board of Bangkok Bank. One of the prominent generals of the Sarit faction, Pabu Jarusadin was appointed the chairman of the Board. He continued to occupy the position until 1973 when Sarit’s faction lost its government due to students’ uprising.157 Another strategy which also accounted for the fast overseas expansion of Bangkok Bank was the utilization of Ethnic Chinese networks in East and Southeast Asia. The basis of this Ethnic Chinese networks was the dialect and regional affiliation. Teochew business networks existed in Hong Kong, South China and Southeast Asia long before Chin Sophonpanich came on the scene. Being prominent Teochew businessman, Chin was respected by other Teochew businessmen throughout the region, and he had commanded respect and status within the Teochew communities. It was easy for him to utilize the existing Teochew networks and enhanced his business activities. Using Teochew networks as his core, his business networks cut across dialect and kinship lines and embraced other Ethnic Chinese tycoons. Chin was particularly interested in Hong Kong which emerged as an international financial center in the Far East. He had close connections with at least three Chinese commercial banks in Hong Kong: 156

See Chen Dabing, “Taiguo huaren qiye jituan” (The Ethnic Chinese Business Groups in Thailand), in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (A Study of the Ethnic Chinese Business Groups in Southeast Asia), p. 259. 157 Ibid.

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the Hong Kong Chinese Bank, the Commercial Bank of Hong Kong and the Liu Chong Hing Bank.158 His close business relationship with Ethnic Chinese tycoons in East and Southeast Asia was reflected in the partnership in some of these banks. For instance, the directors and major shareholders of the Commercial Bank of Hong Kong included his close friend Ma Kam Chan of Tai Sang Bank of Hong Kong; Robin S.K. Loh of the Robin Group, Singapore; Dato Ng Soongchoon of Ng Soong-choon and Brothers, Malaysia; Tan Sri Lim Goh Tong of Genting Group, Malaysia; M.Y. Liu and Liu Lit Man of Liu Chong Hing Bank, Hong Kong; Robby T.K. Loh of Ednasa Investment and Dorah Loh of Edsana Shipping, Hong Kong. Representing the Sophonpanich family interests on the Board of Directors were Chin Sophonpanich, Choedchu Sophonpanich and John C.C. Cheung representing Bangkok Bank Group, plus Chin’s son, Robin Chan of Bangkok Mercantile (the largest rice importing company in Hong Kong).159 What should be pointed out here is that Chin Sophonpanich not just embraced Confucian cultural values, but also absorbed Western and Thai values into his management style. Like Ma Yingbiao of Sincere Company, the Kwok brothers of Wing On in Hong Kong, Zhang Bishi of Dutch East Indies and Tan Kah Kee in Singapore, he succeeded in integrating Eastern values with Western business practices for his enterprise. On the one hand, he adopted Confucian elitist and men-centered approach emphasizing human relationships; on the other, he absorbed Western values of accentuating efficiency, individual merits, system and service-oriented approach. The successful combination of both cultures helped him to create a vast business empire.

158 159

See Kevin Hewison, Bankers and Bureaucrats, p. 198. Ibid., p. 199.

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Chapter 10

Chinese Business in Singapore and Malaysia

Entrepot Trade, Middlemen and Chinese Business Before the coming of the West to Southeast Asian waters in the early 16th century, Chinese traders had already had substantial share of the entrepot trade in the Singapore and Malayan region. Chinese traders established business outposts in Malacca moving large quantity of Chinese products such as silk, porcelains, copper and iron wares, and exchanging for Indian textiles and Southeast Asian spices, camphor, sandalwood, musk and seed-pearls.1 The Chinese traders, principally the Chinese from southern Fujian province popularly known as Hokkiens, were the masters of this early Sino-Malayan trade.2 These early Chinese businessmen were able to hold their positions in Southeast Asia against the early onslaughts of the Portuguese and 1

See Paul Wheatley, “A City that was made for Merchandise — the Geography of Fifteenth Century Malacca”, in Hsu Yun-ts’iao (Xu Yunqiao) (ed.), Nanyang yanjiu (The Bulletin of the Institute of Southeast Asian Studies) (Singapore, Institute of Southeast Asian Studies, Nanyang University, 1959), pp. J1–J8; Paul Wheatley, The Golden Khersonese: Studies in the Historical Geography of the Malay Peninsula before A.D. 1500 (Kuala Lumpur, University of Malaya Press, 1961), pp. 306–320. 2 See Yen Ching-hwang, “Early Fukienese Migration and Social Organization in Singapore and Malaya before 1900”, in Pin-tsun Chang (Pincun Zhang) & Shih-chi Liu (Shiji Liu) (eds.), Zhongguo haiyang fazhanshi lunwenji (Essays in Chinese Maritime History), Vol. 5 (Taipei, Sun Yat-sen Institute for Social Sciences and Philosophy, Academia Sinica, 1993), p. 681.; see also Yen Ching-hwang, Community and Politics: The Chinese in Colonial Singapore and Malaysia (Singapore, Times Academic Press, 1995), p. 73. 285

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Dutch traders. However, the growing dominance of British and European trade in the Malay Peninsula in the late 18th century saw the process of incorporation of Chinese traders into the new entrepot trading system.3 The Chinese traders had no match with the economic and political powers of the British and other European merchants, and had to subordinate themselves to the Western companies. At about same time, a group of Malacca-born Chinese merchants came on the scene, and was integrated into the new system as ‘middlemen’. Many of them were Hokkiens, probably born of Malay mothers but maintained Chinese manners and customs. They received both English and Chinese education in Malacca, and were able to speak English, Malay as well as Hokkien dialect. This linguistic ability made them most suitable to fill the position of ‘middlemen’.4 Some of them were employed by British or European firms in Singapore and Penang as compradors serving the trade between the Europeans and the natives.5 Moreover, a small group of enterprising Chinese immigrants from China also seized the opportunities in the new ports to advance their economic well-being. They founded trading companies and were involved actively in entrepot trade. They forged a close relationship with the British and European companies, and were integrated into the new entrepot system.

3

For growing British dominance in trade of the Malay Peninsula in late 18th century, see K.G. Tregonning, The British in Malaya: The First Forty Years, 1786–1826 (Tucson, The University of Arizona Press, 1965), pp. 1–8, 109–126. 4 See Lim How Seng (Lin Xiaosheng), “Kaifuo chuqi de Xinhua shehui” (The Chinese Society in Early Singapore), in Kua Bak Lim (Ke Mulin) & Lim How Seng (Lin Xiaosheng) (eds.), Xinhua lishi yu renwu yanjiu (Study on the History and Personalities of the Chinese Society in Singapore) (Singapore, South Seas Society, 1986), pp. 27–29. 5 See Twang Peck Yang, “Chinese Maritime Trading Network and Organization based in Singapore, 1820s–1960s” (an unpublished paper presented to the International Conference on Island Southeast Asia and the World Economy, 1790s–1990s, held at the Australian National University, Canberra, 24–26 November, 1992), p. 2.

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This new system that prevailed in the 19th century Singapore and Malaya consisted of a three-tier structure. The top of the hierarchy was occupied by the British and European merchants who imported Western manufactured goods and exported Southeast Asian produce. In the middle rung were the Chinese businessmen who distributed Western goods and collected native produce in Southeast Asia for export; at the same time, Chinese businessmen also imported Chinese produce and foodstuffs and exported island produce to China. At the bottom of the structure were the native traders who brought native products to the new ports for exchange of Western and Chinese commodities.6 The middlemen’s role of the Chinese businessmen in the 19th century was important for the Colonial economy, for the Western manufactured products could not have been effectively distributed among vast native population without the Chinese, and the native products in Singapore and Malayan region could not have been effectively collected for export to the world markets without Chinese service.7 On the other hand, the Chinese entrepot traders also greatly benefited from this role. They established firm connections with Western companies and a complex but efficient network of collection and distribution of goods among the natives in Southeast Asia, and they also founded modern shipping lines to facilitate this lucrative

6

See Chiang Hai Ding, “Sino-British Mercantile Relations in Singapore’s Entrepot Trade, 1870–1915”, in Jerome Ch’en & Nicholas Tarling (eds.), Studies in the Social History of China and Southeast Asia: Essays in Memory of Victor Purcell (Cambridge, Cambridge University Press, 1970), pp. 106–124. 7 John Thomson, a British observer, commented on the role of Chinese in the trade of Penang in 1874 as “To convey some idea of their (Chinese) usefulness, I need only say, that they can make anything required by a European and in trade they are indispensable to us, as they have established connections in almost all the islands to which our foreign commodities are carried. Their agents reside in Sumatra, Borneo, and on the Indo-Chinese mainland, collecting produce by barter with the natives, to whom they are not infrequently related by social, as well as by commercial ties. In this way much of the produce shipped from Penang to England and other foreign countries, passes through the hands of Chinese middlemen...” See John Thomson, The Straits of Malacca, Indo-China and China (London, Sampson Low, Marston, Low & Searle, 1875), pp. 11–13.

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business operation.8 Some of them had successfully amassed great fortune from this booming entrepot trade, and their companies became well-known business establishments in the region. Some big names of Chinese merchants in 19th century Singapore and Malaya such as Seah Eu Chin, Tan Kim Seng, Tan Kim Ching and Lee Cheng Yan, were among the most successful entreprot traders.

Case Studies: Seah Eu Chin and Tan Kim Seng Seah Eu Chin or known as Sia U Chin (Romanized in Chinese as She Youjin) was born in Yu Pu village of Cheng Hai district, Guangdong province in 1805. He was a Teochew speaker. His father Seah Keng Liat (She Qinglie) held the position of secretary to the yamen of the Pu Ling district. Because of his family background, Eu Chin received some traditional Chinese education that enabled him to read and write. In 1823 at the age of 18, he arrived in Singapore as a clerk on board a Chinese junk. His literacy and enterprising attitude impressed the owner of the junk who recommended him to be a clerk of several trading vessels looking after their accounts. During his five years of roving sea life, he was involved in bartering with the natives in the Straits of Malacca, Rhio islands and east coast of the Malay Peninsula. He therefore acquired a wide range of knowledge about their customs, habits and needs that gave him confidence to start his own 8

One of the early shipping lines founded by the Chinese in Singapore was the Wee Bin & Company which became prominent in the decade between 1859 and 1869. The founder, Wee Bin was born in China in 1823. The firm began as a trading company dealing in produce from Dutch East Indies, and later it built up a fleet of over twenty vessels for Chinese and East Indies trade. See Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967), p. 114. A modern Chinese shipping company founded in 1890 in Singapore was the Straits Steamship Company Limited. For a detailed history of this company, see K.G. Tregonning, Home Port Singapore: A History of Straits Steamship Company Limited, 1890–1965 (Singapore, Oxford University Press, 1967). For the founding of another modern Chinese shipping company in Penang — The Eastern Shipping Company Limited — by the Khaw family, see Jennifer W. Cushman, Family and State: The Formation of a Sino-Thai Tin-mining Dynasty, 1797–1932 (Singapore, Oxford University Press, 1991), pp. 65–66.

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business. In 1830 at the age of 25, he had already established himself in Kling Street and later in Circular Road, Singapore as a commission agent. He supplied junks with provisions they needed and received from them all of the native produce for sale on commission. As Singapore was in its early decades of development, entrepot trade was the main source of wealth and Eu Chin’s business was so lucrative that he emerged as a wealthy merchant of his time. In 1835 merely at the age of 30, Seah Eu Chin saw the risk of fluctuation of entrepot trade, he decided to invest large sums of money in landed property and cash crops planting. It was claimed that he was the first to plant pepper and gambier on a large-scale on the island. For that purpose he purchased a large track of land extending country-wards for 8 to 10 miles from the upper end of River Valley Road to Bukit Timah and Thompson Road. It was said that Seah first tried planting tea, nutmegs and other tropical produce but not successful as what he had hoped. He gave them up and tried gambier which was in demand in the world market. But the price of gambier plummeted to 75 cents and pepper to $1.50 a pikul. He was dismayed by the depressed market and was about to give up. However, due to the encouragement of his friend Mr. Church, he persevered and made a huge sum of profit from it.9 After having possessed sufficient wealth, Seah Eu Chin began to quest for social power. In 1830 though still in his young age, he gathered a group of Teochews from his home district, Cheng Hai, and the neighboring district of Hai Yang (modern Chao An) and founded the Ngee Ann Kun (Yi An Jun), the predecessor of the Ngee Ann Kongsi (Yi An Gongsi), the first Teochew social organization in Singapore. 9

See Charles B. Buckley, An Anecdotal History of Old Times in Singapore, 1819–1867 (Kuala Lumpur, University of Malaya Press, 1965, reprint), p. 151; Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore, pp. 19–20; anonymous, “She Youjin xiansheng” (Mr. Seah Eu Chin), in Pan Xingnong (ed.), Malaiya Chaoqiao tongjian (The Teochews in Malaya) (Singapore, Nandao chubanshe, 1950), pp. 78–80; Pan Xingnong, “Huigu Xin Rou Chaoren ganmi shi” (A Retrospective of the History of Planting of Gambier by the Teochews in Singapore and Johore), in Pan Xingnong, Chaoqiao shuoyuan ji (Collection of Papers on the Origins of the Teochews in Singapore) (Singapore, Bafang wenhua qiye gongsi, 1993), pp. 60–62.

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Seah Eu Chin assumed the position of the Director (Zongli) of the management committee. His grip on Ngee Ann Kun and later Ngee Ann Kongsi (the name was changed in 1845) was firm and probably autocratic. Due to the important functions of the Ngee Ann Kongsi, his power over the Teochew community in Singapore was absolute.10 With his economic and social powers, Seah Eu Chin developed close relationship with the British colonial government and the European community in Singapore. In 1840, he was admitted into the Singapore Chamber of Commerce, the forum for European and native business barons in Singapore. From 1851 onwards, he was frequently called upon to act as a grand juror, and in 1853, he was naturalized as a British subject in the Straits of Malacca that gave him British legal and diplomatic protection wherever he went. In 1867 when Singapore came under the Crown rule, he was honored by the new Governor, Sir Harry Ord with the coveted Justice of Peace, becoming one of the few Chinese to receive such honor from the British Colonial government.11 Tan Kim Seng was born in Malacca in 1805. His grandfather came from Yong Chun district (Eng Choon) of southern Fujian province and settled in Malacca, while his father was also born in Malacca. In this sense, Kim Seng was a second generation Straits-born Chinese. He attended local traditional Chinese school -sishu- to learn some Chinese; and also studied in church schools to learn English and Dutch.12 It was also claimed that he was good in Malay. He moved from Malacca to Singapore in search of better economic opportunity after Singapore was opened in 1819 as a free port. He embarked as a trader seizing every opportunity to benefit himself. His diligence, perseverance and business acumen, combined with his linguistic ability of speaking English, 10

See Yen Ching-hwang, “Power Structure and Power Relations in the Teochew Community in Singapore, 1819–1930”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), pp. 293–294. 11 Ibid., p. 288. 12 See “Tan Kim Seng”, in Kua Bak Lim (Ke Mulin) (ed.), Xin Hua lishi renwu liezhuan (The Biographies of Historical Figures of the Chinese in Singapore) (Singapore, Singapore Federation of Chinese Clan Associations, 1995), p. 81.

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Dutch, Malay and Hokkien, enabled him to rise rapidly in the business world. His firm Kim Seng and Company was a famous trading company in Singapore which was founded before 1840. From 1847 to 1849, it had other partners. As the firm grew in leaps and bounds, it established a branch in Malacca and an office in Shanghai. Like many other successful entrepot traders, he also invested his money in land which was a safer form of investment with higher return. Part of his Pasir Panjang property (in the decade of 1859–69) turned into a limited liability company known as “Kim Seng Land Co., Ltd.13 As a successful trader and land owner, Kim Seng used his financial power to bid for community leadership. He was the leader of the Yong Chun (Eng Choon) sub-group within the powerful Hokkien Pang (dialect group) in Singapore. The Yong Chun sub-group grew in strength in the 1840s, but failed to wrest the control of the Hokkien Pang from the dominant Zhangzhou (Changchou) sub-group after its leader, Tan Tock Seng, passed away in the 1850s.14 However, Kim Seng claimed his Hokkien community leadership through patronizing education. In 1849, he gathered a group of rich merchants to found the Chong Wen Ge, the first Hokkien dialect school in Singapore. He donated a substantial sum of $880 to the school which was completed in 1852. In 1854, he donated a block of land valued at $1,710 for the founding of the famous Cui Ying Shu Yuan (Ts’ui Ying Shu Yuan, or known as The Chinese Free School), a major Hokkien community school which had 70 students in January 1889.15 13

See Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore (Singapore, University of Malaya Press, 1967), p. 114. 14 See Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986), p. 183. 15 Tan Kim Seng’s involvement in the founding of Chong Wen Ge and the Cui Ying Shu Yuan was under the name of Chen Juchuan. His official name Romanized in Mandarin as Chen Jinsheng, but Juchuan was his other name. See “Xing jian Chong Wen Ge beiji”(Inscription of the Founding of the Chong Wen Ge School), and “Cui Ying Shu Yuan beiwen” (Inscription of the founding of the Cui Ying Shu Yuan), in Chen Ching-ho and Tan Yeok Seong, Xinjiapo huawen beiming jilu (A Collection of Chinese Inscriptions in Singapore) (Hong Kong, The Chinese University Press, 1972), pp. 283–292; Lat Pau, 17/1/1889, p. 2.

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Although Tan Kim Seng failed to win the Hokkien community leadership, he by-passed the Hokkien community and bid for the entire Chinese community leadership in Singapore. With his linguistic ability and his wealth, he established extensive business and social networks with the Europeans in Singapore. He befriended them and gained valuable social and business contacts. In May 1861, he gave a lavish ball in the Masonic Lodge on the Esplannade to all the Europeans.16 His bid for the entire Chinese community leadership was subtly expressed in his generosity of donating large sum of money for public works for the benefit of the general public. He constructed the Kim Seng Bridge over the river close to the Stadt House in Malacca; he built and endowed the Chinese Free School known as “Chui Eng Si E’ in Amoy Street, Singpore, and dedicated to the public the thoroughfare known as Kim Seng Road, leading from River Valley Road to Havelock Road. In November 1857, he donated a large sum of money ($13,000) to the government for improvement of water supply in Singapore. Although the water works were not completed until 1878, 14 years after his death (1864), his benefactions were much appreciated by the government and the general public.17 In 1850, he was made Justice of Peace, a much coveted title, and later he was made a Grand Jury and a Magistrate. He had then developed a close relationship with the government of the Straits Settlements. In 1851, in an official occasion, the Governor of the Straits Settlements, Colonel W.J. Butterworth acknowledged Tan Kim Seng as his friend,18 and Kim Seng was recognized as a leader of the Chinese community who was consulted on affairs dealing with the Chinese. His help was sought by the government to mediate the Hokkien Teochew Riot in 1854. He accompanied W.H. Read to meet the headmen of the rival parties in the Reading room in Raffles Square where he witnessed the signing of the peace agreement.19 16

See Charles Burton Buckley, An Anecdotal History of Old Times in Singapore, 1819–1867 (Kuala Lumpur, University of Malaya Press, 1965), p. 685. 17 See Song Ong Siang, op. cit., pp. 46–49. 18 See Charles Burton Buckley, op. cit., p. 554. 19 See Kua Bak Lim (Ke Mulin) (ed.), Xin Hua lishi renwu liezhuan (The Biographies

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Both Seah Eu Chin and Tan Kim Seng were successful entrepot traders making substantial money from the entrepot trade. Presumably the trade though lucrative was still subjected to economic fluctuations which they had no control. In addition, as shrewd businessmen, they were unwilling to put all the eggs in one basket, and they diversified into other businesses. Seah saw the rise of cash crop agriculture, gambier and pepper, the capturing of a substantial share of international market in these cash crops would have made him a very wealthy man. Moreover, another consideration for him would have been the increase of his social and ethnic powers in the early Chinese community in Singapore. Since gambier and pepper planting was labor intensive economic activity, he could have imported many Teochew laborers from his home and neighbouring villages to man the activity. This would have increased the number of Teochews in the Chinese community, and consolidated his social leadership in the Teochew and the Chinese communities.20 In contrast, entrepot trade was Tan Kim Seng’s key business and he stayed in that game longer than Seah Eu Chin; he also expanded his trading activities to other parts of the Straits and even to China’s treaty ports such as Shanghai, and he was one of the most successful entrepot traders in Southeast and East Asia. At the time of his death, it was claimed that he had accumulated about 2 million dollars which was a colossal amount of money in March 1864.21 However, for the safety of his business he also invested some money into land property that would have appreciated its value quickly in a growing port like Singapore.

of Historical Figures of the Chinese in Singapore); “Tan Kim Seng”, in Lee Kam Hing & Chow Mun Seong (eds.), Biographical Dictionary of the Chinese in Malaysia (Petaling Jaya, Selangor, Pelanduk Publications, 1997), p. 160. 20 For analysis of the use of economic power to enhance social power among the early Teochew community, see Yen Ching-hwang, “Xinjiapo zaoqi de Chaozhou ren yu Fujian ren” (Teochews and Hokkiens in Early Singaapore), in Yen Ching-hwang, Haiwai huaren de chuantong yu xiandaihua (Tradition and Modernity in the Ethnic Chinese Communities) (Singapore, Centre for Chinese Language and Culture, Nanyang Technological University, and the Global Publishing, 2010), pp. 99–100. 21 See Song Ong Siang, op. cit., p. 50.

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Commercial Agriculture, Tin-Mining and Revenue Farming Chinese involvement in commercial agricultural planting such as pepper, gambier, sugar and tapioca in Singapore and Malayan region began with the founding of the Penang in 1786. With the twin aims of breaking Dutch monopoly of the international spice market and finding a stable source of revenue for the new government, Francis Light, the founder of the new settlement, encouraged local Chinese settlers to plant pepper. Pepper vines were bought from Acheh in 1790 by the first Chinese Kapitan, Koh Lay Huan (Che Kay).22 This new commercial enterprise was essentially a joint European-Chinese venture. The European planters financed and controlled large pepper estates, while Chinese owned small holdings. European planters usually hired Chinese contractors to develop their estates with Chinese immigrant labor.23 The main market for this new industry was Europe where political instability dashed the hope for any prosperity. After an existence of about 4 decades, pepper planting ceased to exist in mid 1830s. The Chinese had a more successful story in pepper and gambier planting in Singapore and Johore region. Originated from the Riau island near Singapore, Chinese pepper and gambier planters moved to Singapore when the new settlement was founded in 1819. The opening of Singapore as a free port had effectively linked the British settlements in the Straits of Malacca with the international markets. The majority of these early Chinese planters were Teochews who spoke a distinct dialect from the eastern part of Guangdong province.24 Linguistic and ethnic solidarity, accumulated experience in 22

See C.S. Wong, A Gallery of Chinese Kapitans (Singapore, Dewan Bahasa dan Kebudayaan Kebangsaan, 1964), p. 13; James C. Jackson, Planters and Speculators: Chinese and European Agricultural Enterprise in Malaya, 1786–1921 (Kuala Lumpur, University of Malaya Press, 1968), p. 95. 23 James C. Jackson, ibid., pp. 99–100. 24 See Pan Xingnong, Malaiya Chaoqiao tongjian (The Teochews in Malaya), p. 40; Carl A. Trocki, “The Origins of the Kangchu System, 1740–1860”, in Journal of the Malayan Branch of the Royal Asiatic Society, Vol. 49, No. 2, p. 138.

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pepper and gambier planting, unlimited supply of cheap immigrant labor from China, as well as the coercive power of the secret society, accounted for the success of the Teochew planters in early Singapore. This reflected in the rapid increase of pepper planting on the island from 2,350 acres in 1836 to about 6,000 in 1841; while the production of gambier rose from 22,000 pikuls in 1836 to 80,000 pikuls in 1848.25 Land exhaustion as a result of intensive cultivation forced Teochew planters in Singapore to expand into the neighboring state of Johore where the supply of land was plentiful. In 1845, 52 new Chinese pepper and gambier plantations were reported to have been opened in Johore within 6 months. This dynamic movement was bolstered by a migration of Teochew planters from Riau island where vast land was also exhausted. By 1860s, there were 1,200 Chinese pepper and gambier plantations in Johore with a labor force of 15,000 people.26 The expansion into Johore reached its peak in the early 1890s with an estimated 210,000 Chinese pepper and gambier planters in the state.27 What accounted for the remarkable success of Chinese commercial agriculture in Johore in the second half of the 19th century was the introduction of the Kanchu system. Kangchu, literally meant the lord of the river, was a Chinese headman who took the lease of river settlement from the Malay ruler who delegated his authority to the headman with a river document. The headman was given administrative and legal powers to run the settlement as he saw fit, in return he paid a fixed rent or tax to the Malay ruler. The headman was responsible to maintain law and order, constructed and maintained paths, and provided the upkeep of the river communications. To compensate his administrative duties, the state also granted him the rights to sell opium and run gambling dens, together with other exclusive rights of pawn-broking, selling liquor, 25

James C. Jackson, op. cit., pp. 8–13. Ibid., pp. 14–15; Carl A. Trocki, Prince of Pirates: The Temenggongs and the Development of Johor and Singapore (Singapore, Singapore University Press, 1979), pp. 88–89. 27 James C. Jackson, op. cit., p. 25. 26

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slaughtering pigs and selling pork.28 This Kangchu system well suited the Chinese entrepreneurs who had commanded capital and labor, and wanted to run the settlement in his own way. Since most Chinese planters were Teochews and many of them were related through kinship or marriage, linguistic and kinship ties became the foundation of his rule. It was frequently reinforced by the coercive power of Chinese secret societies of which many of the planters were leaders.29 This therefore ensured his success in the production of pepper and gambier. At the same time, many of these planters also founded trading companies in Singapore where they marketed their produce. The monopoly of the production and distribution of these commercial agricultural produce made many Teochew businessmen very wealthy and powerful in the Chinese communities in Singapore and Johore.30 The pace of economic development of modern Singapore and Malaya would have been much slower had there been no active 28

For works on the Kangchu system, see A.E. Coope, “The Kangchu System in Johore”, in Journal of the Malayan Branch of Royal Asiatic Society, Vol. 14, No. 3 (1936), pp. 247–263; Carl A. Trocki, “The Origins of the Kangchu System, 1740–1860”, in Journal of the Malayan Branch of the Royal Asiatic Society, Vol. 49, No. 2 (1976), pp. 132–155. 29 For instance, Kapitan Tan Kee Soon, a Teochew pepper and gambier planter, was also the leader of Ngee Heng in Johore in mid-19th century. See Pan Xingnong, Malaiya Chaoqiao tongjian (The Teochews in Malaya), p. 42.; see also Carl A. Trocki, Prince of Pirates, pp. 104–105. A new study on the Teochew settlements in Johore is Tay Lian Soo’s (Zheng Liangshu) book titled Roufo zhou Chaoren tuozhi yu fazhan shigao (A Preliminary Study of Teochew Settlements in Johore) (Johore, Southern College Press, 2004). 30 For instance, Tan Hiok Nee who emerged after 1863 as the most prominent Teochew planter in Johore, was made ‘Major China’ of Johore by the Maharaja around 1870. By 1866, Tan also established himself as a prosperous pepper and gambier trader at Boat Quay, Singapore, under the Chop Kwang Hong. See Carl A. Trocki, Opium and Empire: Chinese Society in Colonial Singapore, 1800–1910 (Ithaca and London, Cornell University Press, 1990), pp. 136–148; Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore, p. 335; Zhang Qingjiang, “Chen Xunian yu zizhengdi” (Tan Hiok Nee and His Zizheng House), in Lim How Seng (Lin xiaosheng), et al. (eds.), Shile guji (Historical Relics of Singapore) (Singapore, South Seas Society, 1975), pp. 225–230.; Tay Lian Soo, Roufo zhou Chaoren tuozhi yu fazhan shigao, pp. 274–276.

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Chinese participation in the tin-mining industry, one of the two economic pillars of modern Malayan economy. Tin-mining had existed long before the arrival of the Chinese, but the contribution of the Chinese to the development of this industry was significant. Throughout the 19th century, the Chinese provided much of the capital and labor needed for tin-mining, and greatly improved the methods of production and distribution. Tin was mined for export in the Malay Peninsula since the time of the Malacca Sultanate in the 15th century,31 and it was continuously mined by the Portuguese and Dutch governments in Malacca in the 16th to 18th centuries as a major export commodity.32 British acquisition of Malacca in 1824 and the formation of the Straits Settlements in 1826 created a right political climate for economic expansion into the Malay states. The Chinese businessmen who had successfully accumulated capital in the straits were prepared to take advantage of the new situation and to invest money in the Peninsular mines.33 At the same time, the rivalling Malay chiefs in the Western Malay states competed for tin-mining revenue, and were prepared to give Chinese entrepreneurs large tracts of land for mining tin. The first tin-mining town with substantial Chinese tin miners was Lukut in the state of Selangor (later it was incorporated into the state of Negri Sembilan). As early as 1815, Chinese miners had already arrived at that settlement opening up tin mines at the invitation of the local Malay chief. In 1818, Chinese tin miners in Lukut were estimated to have 200 under the control of a Chinese Kapitan appointed directly by the Sultan of Selangor. However, a quarrel over the tax on tin export between the Malay Chief and the Chinese tin miners ended this early settlement in tragedy.34 The failure of the first Chinese tin mining settlement did not terminate Chinese involvement in 31

See Fei Xin, Xingcha shenglan (Beijing, Zhunghua shuju, 1954), p. 20. See Wong Lin Ken, The Malayan Tin Industry to 1914 (Tucson, University of Arizona Press, 1965), pp. 17–18. 33 See Khoo Kay Kim, The Western Malay States, 1850–1873: The Effects of Commercial Development on Malay States (Kuala Lumpur, Oxford University Press, 1975), pp. 62–64. 34 Wong Lin Ken, op. cit., p. 18. 32

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tin-mining in the Peninsula. Other Chinese entrepreneurs continued to venture in other parts of the Malay states. By 1840s, several new tin mining settlements with substantial Chinese miners sprang up in Selangor, Perak, Negri Sembilan and Malacca. By the 1860s, these new settlements grew into prosperous mining centers with large Chinese populations. For instance, the Chinese population in Larut, Perak, was estimated to have 20,000 to 25,000 men in 1862.35 In the two decades from 1874 to 1895, the development of Malayan tin-mining industry reached its peak. It topped the ranking of world tin producers, outstripping tin productions in Great Britain, Australia and Dutch East Indies. It accounted for 55% of world tin produce. During this period, despite active participation of Western companies in the tin production, the Chinese tin-miners still remained dominant and their leading position unchallenged in the Malayan tin industry.36 What accounted for the success of the Chinese in Malayan tin industry was a combination of various factors: ample supply of capital from the Chinese financiers in the Straits Settlements,37 unlimited supply of cheap labor from southern China, well-regulated labor force, cost effective mining methods, and entrepreneurship. Among all these factors, the entrepreneurship was most important in the success of Chinese tin-mining. Being marginal men, Chinese immigrants were highly motivated and prepared to work hard for prosperity. The conditions in the late 19th and early 20th century Malaya allowed that to happen. British intervention in the Malay Peninsular in 1874 brought political stability and economic development, and provided excellent opportunities for Chinese immigrants to acquire wealth. The integration of Malaya into the world economic system that saw the steep rise of tin prices, further stimulated the production of tin for export. Chinese immigrants who had possessed business acumen, foresight and courage grasped the opportunities to become 35

Ibid., p. 27. Ibid., pp. 53–117. 37 For the supply of Chinese capital to the tin mines in Malaya, see Khoo Kay Kim, op. cit., pp. 62–79. 36

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entrepreneurs. They borrowed capital from Chinese financiers in the Straits, organized a well-disciplined labor force through kinship and dialect ties, and acquired concessions from Malay rulers on the Peninsula. The successful stories of reputable tin-miners such as Foo Chee Choon (Hu Zichun) and Yau Tuck Seng (Yao Desheng) of Perak, Yap Ah Loy (Ye Yalai) and Yap Kwan Seng (Ye Guansheng) of Selangor, and Loke Yew (Lu You) of Selangor and Pahang testified to the spirit of their entrepreneurship.38 They fitted well into the image of modern Ethnic Chinese entrepreneurs who succeeded in bringing capital, labor, technology and management together. They were the creators and perpetuators of a modern Ethnic Chinese enterprise, and were personally involved in making decisions for the growth, expansion and perpetuation of that enterprise. They also possessed a capitalistic attitude — the intensive love for money, the pursuit for profit, the 38

For a biographical note on Foo Chee Choon, see Yen Ching-hwang, The Overseas Chinese and the 1911 Revolution: With Special Reference to Singapore and Malaya (Kuala Lumpur, Oxford University Press, 1976), p. 133, for a short biography of Foo in Chinese, see Anonymous, “Hu Zichun xiansheng” (Mr. Foo Chee Choon), in Kejia: Pili Keshu gonghui kaimu jinian tekan (Kejia: Souvenir Magazine of the Inaugural Celebration of the Hakka Association of Perak) (Penang, Kanghua yinwu gongsi, 1951), p. 570. For a short biography of Yau Tuck Seng in Chinese, see anonymous, “Yao Desheng” (Mr. Yau Tuck Seng), in Huang Weiqiang et al. (eds.), Malaixiya Jiashu huiguan lianhehui yinxi jinian tekan (Sourvenir Magazine of the Silver Jubilee Celebration of the Federation of Ka Yin Chu Associations of Malaysia) (Kluang, Malaysia, Pustaka Pendidekan (M) SDN. BHD., 1976), pp. 602–604. For a biography of Yap Ah Loy, see S.M. Middlebrook, Yap Ah Loy, An Independent Issue of the Journal of Malayan Branch of Royal Asiatic Society, Vol. 24, Pt. 2. For a short biography of Yap Kwan Seng in Chinese, see Anonymous, “Benyuan chuangbanren Ye Guansheng zhuanlue” (The Founder of the Tung Shin Hospital, Kuala Lumpur — Yap Kwan Seng), in Yang Zhongzhi et al. (eds.), Tongshan yiyuan bailing shouqing jinian tekan, 1881–1981 (Tung Shin Hospital Kuala Lumpur: Centenary Souvenir Magazine 1981) (Kuala Lumpur, Tung Shin Hospital, 1981), pp. 28–29. For a biographical note of Loke Yew, see Yen Ching-hwang, The Overseas Chinese and the 1911 Revolution, p. 292; for a short biography of Loke Yew in Chinese, see Cao Yaofei, “Lu Yu poshi” (Dr. Loke Yew), in Malaiya Gugangzhou liuyi zonghui tekan (Souvenir Magazine of Pan-Malayan Gugangzhou Six Districts Associations) (Penang, 1964), pp. 51–52.

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courage to take initiatives and risks, and the determination to implement ideas into practice.39 Revenue farming (tax farming) was a big business in Malaya and Singapore during the second half of 19th and early part of 20th centuries. It was also a big business enterprise for Chinese businessmen, and an important form of Chinese business in the region. The revenue farm was essentially a capitalist institution which was adopted by European colonial governments in Southeast Asia to facilitate their collection of revenue without heavy expenses. A farm by definition was a monopoly that gave rise to the possibility of long-run super-profits for farmers, and maximization of revenue by the colonial governments.40 The revenue farming mainly consisted of opium, spirits, gambling and pawn-broking. These different farms were auctioned publicly at fixed times, and the highest bidders would secure the contracts. The Chinese businessmen, with their capital, knowledge and networks, were the main players in these money games. Among these revenue farms, the opium farm was most important. In Singapore, for instance, it accounted for about 50% of the total revenue in the period between 1820 and 1860.41 The public auctioning system was considered by both government and farmers as fair and transparent, and both would abide by the agreements signed. After a successful bidding, a wealthy Chinese businessman or a syndicate was selected as an opium farmer, and an agreement was signed between the farmer and the government. The farmer agreed to pay the government a fixed amount of rent each month, and to purchase from the government the required quantity of opium at a 39

For a discussion of Ethnic Chinese entrepreneurship, see Yen Ching-hwang, “The Wing On Company of Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949” and Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 224–227, 247–249. 40 See Howard Dick, “A Fresh Approach to Southeast Asian History”, in John Butcher and Howard Dick (eds.), The Rise and Fall of Revenue Farming (New York, St. Martin’s Press, 1993), pp. 8–9. 41 See Carl A. Trocki, Opium and Empire: Chinese Society in Colonial Singapore, 1800–1910 (Ithaca and London, Cornell University Press, 1990), pp. 71–72.

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fixed rate. In return, the farmer received the exclusive right to prepare and distribute the opium for a period of one to three years. On the part of the government, it had to ensure that the farmer’s monopoly was not infringed, and it had to pass laws to prohibit any import and private sale of opium, and imposed heavy penalties on those who violated the laws. After the agreement was signed, the farmer within three days had to deposit two months’ rent in advance as a token of good faith in the agreement; failure to pay the deposit would result in the resale of the opium farm, and he or the syndicate was liable for any costs incurred.42 The process of auctioning and the conditions of the agreement of other revenue farms were similar to the opium farm. In the highly profitable opium and gambling farms which required huge amount of capital, organization and management skill, the tenders were usually very rich Chinese businessmen. To reduce their risks and to improve the chance of success in public bidding, they tended to group together in a syndicate which stood a better chance to acquire the farm. The profitability of these big revenue farms gave rise to rivalry and conflict between big syndicates that generated tension in the local Chinese communities. The struggle between Tan Seng Poh and Cheang Hong Lim in Singapore in the 1860s is a case in point. Tan, a wealthy Teochew businessman, headed a Teochew syndicate that was buttressed by the extensive pepper and gambier holdings of his brother-in-law, Seah Eu Chin. While Cheang Hong Lim, a wealthy Hokkien businessman, inherited the opium farming interest from his father, Cheang Sam Teo, and became the head of the Hokkien syndicate. Their conflict lasted the entire decade.43 The profit of revenue farms in rural or frontier areas was lower, and the capital required was also less. This provided opportunities for those aspiring Chinese businessmen who would use the profit from these farms to finance their expansion into other business undertakings. Eu Kong Pui, father of famous businessman Eu Tong Sen, is case in point. In 1882, Eu Kong Pui, an emigrant, succeeded to 42

See Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800–1911 (Singapore, Oxford University Press, 1986), p. 227. 43 See Carl A. Trocki, op. cit., p. 118.

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obtain revenue farm of Gopeng, a small mining town in Perak, Malaya. This farm included collection of taxes on opium, gambling, spirits, pawn-broking and pork retailing. He used the proceeds from the revenue farming to start local tin-mining, and expanded his business into grocery and Chinese medicine in Perak and Penang.44 After Eu Kong Pui’s death in 1891, his son, Eu Tong Sen at the age of 21, inherited his father’s business, and succeeded to build up a vast business network in Singapore, Malaya and Hong Kong. He expanded his tin-mining business in Perak and Selangor, owning 8 tin mines in these two states. He also diversified his business into rubber plantation, banking and Chinese medicine. He renamed his father medical shop, Yan Sang into Eu Yan Sang, and modernized it to become a reputable Chinese medical company in the region. He succeeded to build up a business empire in Southeast Asia and Hong Kong.45

Case Studies: Tan Hiok Nee and Yap Ah Loy Tan Hiok Nee, or known as Tan Yeok Nee, or Romanized in Mandarin as Chen Xunian, was born in Jin Sha village, Chao An district of Guangdong in 1827. Born in a poor family, he was deprived of a joyful childhood and education. But poverty strengthened his desire for wealth and toughened his spirit for hardwork and perseverance. For the pursuit of economic advancement, he like many Teochew immigrants landed in Singapore to realize his dream. He began his career as cloth pedlar making daily visits to Telok Belanga which was predominantly a Malay area. His honesty and friendliness earned him many customers, including members of the Temenggong Ibrahim’s family. His friendship with Temenggong’s son Abu Bakar 44

See Stephanie Po-Yin Chung, “Surviving Economic Crisis In Southeast Asia and Southern China: The History of Eu Yan Sang Business Conglomerates in Penang, Singapore and Hong Kong”, in Modern Asian Studies, Vol. 36, Pt. 3 (Cambridge, Cambridge University Press, 2002), pp. 588–591. For another study of regional opium farm in Kedah in the late 19th century, see Wu Xiao An, Chinese Business in the Making of a Malay State, 1882–1941: Kedah and Penang (Singapore, NUS Press, New Edition, 2010), pp. 73–80. 45 Stephanie Po-Yin Chung, ibid., pp. 594–609.

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proved to be the most valuable asset for his career. Chinese sources claimed that the friendship developed into a cordial and lasting relationship that both became sworn brothers.46 Sworn-brotherhood was a strong bond outside the Confucian Five Cardinal relationships in traditional China, but operated like blood brothers which was nicknamed “Brothers of different surnames”. Hiok Nee’s speedy rise in his fortune was predicated on this cordial relationship with Abu Bakar who later became the Maharajah and Sultan of the state of Johore. In 1853 at the age of 26, he grabbed the opportunity of the rise of commercial agriculture in Johore by being involved in cash crop planting. Benefiting from his close relationship with the Temenggong’s family, he in 1853 obtained a river lease (Surat Sungai) for the Bukit Berangan, a tributary of the Johore River. Due to his shortage of capital, he was partnered with another Teochew businessman, Tan Ban Tye. In 1854, he further acquired a concession in another partnership a stretch of the left bank of the Johore River between Bukit Berangan and the Kong Kong River.47 He thus emerged from a pedlar or petty merchant to a reputable “Lord of the River” (Gang Zhu, or known as Kangchu) producing pepper and gambier for export. His ambition of becoming the largest and most powerful Kangchu was fulfilled in 1863 when he within one week (5–11) in September acquired another four river concessions which enabled him to control the entire left bank of the Johore River from slightly south of Kota Tinggi to the western watershed of Sungei Tukang, opposite Pulau Ubin.48 Obviously his sworn-brotherhood with Abu Bakar who succeeded to the throne in Johore had an important role to play in his remarkable rise. In 1870, he was made the “Major China” of Johore that confirmed his leadership of the Chinese community and the most 46

See Tay Lian Soo (Zheng Liangshu), Roufozhou Chaoren tuozhi yu fazhan shigao (The Settlement and Development of the Teochews in Johore), p. 274; Kua Bak Lim (Ke Mulin) (ed.), Xin Hua lishi renwu liezhuan (The Biographies of Historical Figures of the Chinese in Singapore), p. 75. 47 See Carl A. Trocki, Prince of Pirates: The Temmenggongs and the the Development of Johor and Singapore, 1784–1885, p. 125. 48 Ibid.

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influential merchant in the state. Shrewd utilization of political ties was undoubtedly a key to Hiok Nee’s success, but his connections with the Teochew Ghee Hin (or known as Ngee Heng, or Romanized in Mandarin as Yi Xing) secret society was also important, for it provided him with a power base on which the operation of the Kangchu system depended. The Kangchus through this connection controlled the life of their employees: from employment, life styles to social entertainments. In 1846, at least 4,000 Teochew Ghee Hin members in Singapore under the leadership of Tan Kee Soon moved to Johore and founded an important agricultural settlement for secret society members. Tan Kee Soon’s close connection with the Temenggong legitimized the status of the Teochew Ghee Hin, and Kee Soon was made the Kapitan China of Johore to rule over the entire Chinese community.49 Tan Hiok Nee was a shrewd businessman and entrepreneur. He realized that the maximum profits could be made from pepper and gambier if he could control the chain of production, pricing and marketing. With his business connections in Singapore, he set up 4 shops on the island to market his cash crop products, the shops were named ‘Guang Feng’ (Extensive and Plentiful), ‘Yi Feng’ (Suitable and Plentiful), ‘Qian Feng’ (Courteous and Plentiful) and ‘Yi Long’ (Suitable and Prosperous).50 This forward vertical integration served him well, and he derived huge profits from pepper and gambier business. His diversification strategy led him to get involved in revenuefarming which was a big business of the time, and it was lucrative but risky. He partnered with another Teochew businessman, Tan Seng Poh and a prominent Hokkien merchant, Cheang Hong Lim, to run the Singapore-Johore, Malacca and Riau opium and spirit farms in various stages between 1863–1865 and 1870–1879, the profits from these farms must be huge.51 Tan Hiok Nee’s involvement in the opium and spirit farms was not just a smart business strategy of not 49

Ibid., p. 101; Tay Lian Soo, op. cit., pp. xv–xvii. Tay Lian Soo, ibid., p. 275. 51 See Carl A. Trocki, Opium and Empire: Chinese Society in Colonial Singapore, 1800–1910, pp. 118–119, 152–153. 50

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putting all his eggs in one basket, but also a means to extract huge profits. Like most of Chinese immigrants of his time, the quest for wealth was the top priority for Tan Hiok Nee. But after having accumulated immense wealth, his desire was to acquire social status and honour so as to glorify his ancestors. With the wealth and power he possessed in the Teochew communities in Johore and Singapore, he was recognized as a prominent Teochew community leader as well as a Chinese community leader in Singapore by the British colonial government in Singapore. On 26th May, 1871, a ball was organized at the Government House on the occasion of Queen Victoria’s birthday, Tan Hiok Nee was one of the eleven Chinese community leaders who were invited. Other prominent Chinese leaders included Whampoa, Tan Kim Ching, Seah Eu Chin and his two sons Seah Cheo Seah and Seah Liang Seah, and Tan Seng Poh. In January 1882, he together with four other Chinese community leaders formed the Chinese deputation to welcome the visit of Prince Albert Victor to Singapore.52 To bring honor to his ancestors in China, Tan Hiok Nee also purchased Qing honors which was much valued by the Chinese in Singapore and Malaya at that time. He purchased a brevet Qing official title ‘Zi Zheng’ which entitled him to wear an official robe and headdress, and to participate in official functions organized by the Qing Consul-General in Singapore.53 Yap Ah Loy may not be the typical Chinese tin miner in 19th century Malaya, the selection of him as the representative of Chinese tin mining capitalists rests with a new pattern of Chinese tin-miners, i.e., ‘politician turned tin miner’. In fact, he was better known in the 52

See Song Ong Siong, One Hundred Years’ History of the Chinese in Singapore, pp. 162, 208. 53 On February 12th, 1888, on the occasion of celebration of the Chinese new year, an official function was organized at the Chinese Consul-General office, and 18 Chinese community leaders with Qing titles were invited. Tan Hiok Nee as the eldest among them led the way in paying homage to the tablet of Qing Emperor Guangxu. See Yen Ching-hwang, “Xinjiapo zaoqi de Chaozhou ren yu Fujian ren” (The Teochews and Hokkiens in Early Singapore), in Yen Ching-hwang, Haiwai huaren de chuantong yu xiandaihua (Tradition and Modernity of the Overseas Chinese), p. 103.

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history of the Chinese in Southeast Asia as a powerful Chinese Kapitan, the founder of modern Kuala Lumpur. His mining activity was viewed at best the bonus of his distinguished political career. This is not so, as his mining activity and the income derived from it formed the mainstay of his power. Yap Ah Loy’s life story was not very different from the stories of rags to riches of Chinese immigrants. Born in an impoverished Hakka family in Hui Yang district of Huizhou prefecture, Guangdong province, Ah Loy experienced extreme hardship in his childhood. Working as ‘cowboy’ (muniutong) and a farmhand before the age of 13, he was deprived of having any form of education. His desire for wealth and social mobility must be more intense than other Chinese leaders of his time such as Seah Eu Chin and Zhang Bishi (Chang Pi-shih) who had some forms of traditional Chinese education in China.54 Arriving in Malaya as an immigrant in 1854 at age of 17, and with the help of his kinsmen, he worked in Malacca and then Lukut as a mining worker, a shop assistant and a cook, and had the opportunity to learn how to do business and to accumulate a small sum of capital that was crucial for starting a small business. With the help of another kinsman, he moved to Sungei Ujong where his district folks — the Huichew Hakkas — congregated. Ah Loy stumbled on his luck by getting to know a fellow district folk, Liu Renguang (in Pinyin) on his way to Sungei Ujong. Liu was one of the two chieftains under the Chinese Kapitan, Sheng Mingli (in Pinyin), and through him Ah Loy was appointed as Liu’s deputy which sealed his fate of a speedy rise in politics. The murder of Kapitan Sheng in a civil war among Malay chiefs for tin mining in 1860 left a void for Ah Loy to fill. In 1861, he was recommended to fill the shoes of Kapitan Sheng at a very young age of 24 years old. Next year, he moved to Kuala Lumpur, a new and a promising mining town, on the invitation of his old friend Liu Renguang who appointed him as the manager looking after Liu’s mining and gambling business. He showed his extraordinary ability in 54

See Yen Ching-hwang, A Social History of the Chinese In Singapore and Malaya, 1800–1911, pp. 154–158.

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both business and politics. He gained the trust of Liu and emerged as a leader of the local powerful Huizhou Hakka group. In 1868 at the age of 31, he succeeded Liu as the Chinese Kapitan of Kuala Lumpur after Liu’s death.55 Yap Ah Loy’s speedy rise to political power in Selangor was the result of interplay of various factors: military prowess,56 political acumen, the ability to use talents, perseverance, resoluteness and good fortune. Without military prowess, he would not have been selected as Liu Renguang’s deputy and later the Kapitan of Sungei Ujong at such a young age. His political acumen led him to decide his departure from Sungei Ujong for Kuala Lumpur to face an uncertain future. His ability to use talents saw him surrounded by a group of able advisers and subordinates who were endowed with different expertise. His ability to judge and take their advices was an important factor for his success in warfare and administration. Further, his other personal qualities of perseverance and resoluteness enabled him to implement his military strategies and policies. On top of these, his luck and good fortune placed him in the right place and the right time to succeed the positions of the Chinese Kapitans of Sungei Ujong and Kuala Lumpur after the untimely death of both Sheng Mingli and Liu Renguang. Yap Ah Loy’s success as a businessman and tin miner matched his political achievement. At a very young age in Lukut (1856–1859), he had already shown his potential as a shrewd businessman. After 3 years working as a chef in a local tin mine, he accumulated some capital and started a buying-and-selling business of pigs and tin ore which earned him a handsome profit. After moving to Kuala Lumpur in 1861, he acted as the manager for his friend, Liu Renguang’s extensive business that enabled him to gain further experience in managing 55

See S.M. Middlebrook, “Yap Ah Loy”, in Journal of the Malayan Branch, Royal Asiatic Society, Vol. 24, Pt. 2 (July, 1951), pp. 13–29; Wang Zhiyuan, Ye Delai Zhuan (A Biography of Yap Ah Loy) (Kuala Lumpur, Yi Hua chuban yinxua youxian gongsi, 1958), pp. 19–31, 41–49, 66–69. 56 See Sharon A. Carstens, “Chinese Culture and Polity in 19th-century Malaya: The Case of Yap Ah Loy”, in Sharon A. Carstens, Histories, Cultures, Identities: Studies in Malaysian Chinese Worlds (Singapore, NUS Press, 2012), p. 12.

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larger business enterprises which laid the foundation for his own business success. In addition to managing business for his friend, he also opened two tin mines on his own account, and in 1865, he also started a Chinese medicine shop named “Chop Tet Sang” (Shop De Sheng).57 As the victor of the Selangor civil war and the de facto ruler of Kuala Lumpur, Yap Ah Loy had the town under his feet, and had no scruple to use his political power for his economic benefits. He owned nearly half of the tin-fields around Kuala Lumpur and leased to all Chinese miners. He also took the lead in opening up new tin fields further away from Kuala Lumpur such as Kuala Kubu in Ulu Selangor, Serendah, Kepong and Chenderas. He also controlled the sale of tin ore, and benefited greatly from selling and buying of tin mines as the prices of tin fluctuated constantly. To lift the productivity of his tin mines and the competitiveness of Chinese tin mining, he began to modernize his tin mines to compete with Western tin miners in Malaya. In 1881, he installed a steam engine for pumping in his mine, one of the first in Malaya. In 1885, he owned several of the steam engines in Selangor.58 Undoubtedly, Yap Ah Loy was the main player in tin mining in Selangor, and in 1879, it was reported that he was the main producer of tin in the state.59 Adding to his considerable wealth, Yap Ah Loy also held vast tract of urban land, approximately two thirds of land of Kuala Lumpur east of the Klang river; in 1880 he owned 64 out of 220 shops in the city. In addition, he owned a brickfield and a kiln, a smelting shed and a mine workshop, cattle sheds and slaughter houses etc. In short, Yap Ah Loy was a successful tin miner and a wealthy businessman, but a great deal of this seems to have derived from his political power and influence.

57

See S.M. Middlebrook, op. cit., pp. 14, 20–21; Wang Zhiyuan, op. cit., pp. 24–25, 47–48. 58 S.M. Middlebrook, op. cit., p. 97. 59 See “Report on the Revenue and Expenditure of the State of Selangor for the year 1879 by the British Resident dated 12th May, 1880”, in Straits Settlements Legislative Council Proceedings, 1880, Appendix No. 15.

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Chinese and the Rise of Rubber The single most important economic change in the Chinese communities in Singapore and Malaya between the 1900 and the Second World War (1941–1945) was the rise of rubber and its related industry. The process of experiment of commercial rubber planting began earlier than 1900. The first experimental planting took place in 1877 when a consignment of 21 rubber seeding arrived in Singapore. They were planted in Singapore and Kuala Kangsar, Perak. The arrival of H.N. Ridley in November 1888 as the Director of Botanical Gardens, Singapore, opened a new chapter in the history of rubber. Due to Ridney’s efforts and influence, two groups of planters undertook the first experiment of commercial planting. In 1896, a Chinese planter, Tan Chay Yan (Chen Qixian), planted 40 acres at Bukit Lintang in the northeast of Malacca. At about same time, European planters, the Kindersley brothers planted 5 acres in Kajang, Selangor. These marked the beginning of the rise of rubber as a most valuable crop for Malayan economy.60 Tan further developed a large tract of land of more than 2,000 acres in Bukit Asaham, Malacca, as rubber plantation, the first of its kind in the history of rubber. Tan came from a rich Chinese business family in Malacca and Singapore. His grandfather, Tan Tock Seng, was a famous merchant and philanthropist whose name was connected with the famous hospital — Tan Tock Seng Hospital — for paupers. His father, Tan Teck Guan (Chen Deyuan), was a rich Chinese planter in Malacca. With his family background and his father’s influence, Tan Chay Yan developed a keen interest in cashcrop planting.61 This interest together with his business acumen, foresight and courage enabled him to take the first step towards 60

See James C. Jackson, op. cit., pp. 211–218; J.H. Drabble, Rubber in Malaya, 1876–1922: The Genesis of the Industry (Kuala Lumpur, Oxford University Press, 1973), pp. 14–19; Wu Tiren, Redai jingji zhiwu — xiangjiaoshu (Rubber — the Tropical Cash Crop) (Singapore, Guang Hua, 1951), pp. 6–8. 61 For a biography of Tan Chay Yan, see Wu Tiren, “Chen Qixian, 1872–1916”, in Wu Tiren, Zhichan xiangjiao tuofangren (The Pioneers in Rubber Planting) (Hong Kong, Da Tong yinwu gongsi, 1966), pp. 39–51.

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commercial planting of rubber, a crucial first step which earned him immense wealth and a place in history. Tan’s commercial venture inspired many Chinese planters in Malaya and Singapore to follow suit. More Chinese-owned rubber estates were developed in Selangor, Perak, Malacca and Singapore. The news of enormous profit made by Tan Chay Yan for the sale of his Asaham estate to an European company (about $2,000,000, 10 times of what Tan had invested) sparked off another round of commercial planting of rubber by the Chinese entrepreneurs in the region. It included renowned Ethnic Chinese entrepreneur, Tan Kah Kee who bought 180,000 rubber seeds from Tan Chay Yan, and planted them in his Fu Shan estate, Singapore in 1906.62 This marked the beginning of a large-scale commercial rubber planting in Singapore and led to the rise of rubber-related industry on the island. Tan Chay Yan’s commercial success also encouraged the European planters to focus on rubber planting. In the 6 years between 1899 and 1905, 17 British rubber companies were formed in Britain, and they acquired large tracks of land from the government of Federated Malay States (FMS) for commercial ventures. The combined efforts of Chinese and European planters resulted in a rapid increase of rubber planting in the Malay Peninsula. The total acreage of rubber plantation in the FMS was increased from 345 acres in 1897 to a phenomenal figure of 43,425 acres in 1905.63 What stimulated and sustained the enthusiasm of Chinese and European planters in rubber was the escalating prices of the commodity. The price for rubber in the London market rose from $2.36 per kg in 1900 to $5.55 per kg in 1906. Underpinning the growing high prices in the international market was the ever increasing demand for natural rubber as a result of fast growing electrical, bicycle and automobile industries at the end of 19th and early 20th centuries. Rubber was the indispensable raw material to feed these fast growing new industries.

62

See Tan Kah Kee (Chen Jiageng), Nanqiao huiyilu (Autobiography) (Singapore, Nanyang Printing, 1946), Vol. 2, pp. 403–404. 63 See J.H. Drabble, op. cit., p. 28.

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The rise of rubber and Tan Chay Yan’s pioneering efforts have two important implications for Chinese business in Singapore and Malaya. Firstly, it helped to transform the economy of Malaya as well as the Chinese society in the region. It made Chinese society more and more dependent on a major world commodity subject to frequent fluctuation of prices, and resulted in economic instability. But at the same time, it also made many Chinese businessmen wealthy, and provided a large number of Chinese a livelihood.64 Secondly, Tan Chay Yan’s pioneering efforts inspired more Hokkien businessmen to follow his footsteps. Through the functions of dialect and kinship ties, the commercial planting of rubber and development of rubber-related industry were mostly in the hands of the Hokkiens.65 This had effectively barred the participation of other Chinese dialect groups, and made the rubber planting, distribution and manufacturing a preserve for the Hokkiens.

The Rise of Modern Ethnic Chinese Banking and Manufacturing Industry The Chinese in Singapore and Malaya had access to modern banking facilities since 1840 when a branch office of the Union Bank of Calcutta was opened in Singapore. Following the footsteps of the Union Bank was a string of other European banks which opened 64

For instance, Tan Kah Kee in Singapore had in 1920s built his business empire on rubber and rubber products. See C.F. Yong, Tan Kah-kee: The Making of an Overseas Chinese Legend (Singapore, Oxford University Press, 1987), pp. 55–58. 65 This can be seen from the fact that powerful rubber traders and manufacturers were Hokkiens such as Tan Kah Kee (Chen Jiageng), Lee Kong Chien (Li Guangqian) and Tan Lake Sye (Chen Liushi). For studies of these three prominent Ethnic Chinese entrepreneurs, see Lim How Seng, “Chen Jiageng de jingying linian yu qiye guanli (Tan Kah Kee’s Mangement Ideas and Management Style), Lim How Seng, “Li Guangqian de qiye wangguo” (Business Empire of Lee Kong Chian), and Lim How Seng, “Chen Liushi de qiye shijie” (The Business World of Tan Lak Sye), in Lim How Seng (Lin Xiaosheng), Xinjiapo huashe yu huashang (Singapore Chinese Community and Entrepreneurs) (Singapore, Singapore Society of Asian Studies, 1995), pp. 148–263.

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branches in the Straits Settlements and the FMS, including two leading British banks, the Chartered Bank and the Hong Kong and Shanghai Banking Corporation. However, Chinese needs for banking services were sometimes deterred by the language barrier. Further, the buoyant business activities in the region made the need for the founding of a modern Chinese bank even more pressing. The founding of the Kwong Yik Banking Company Limited in Singapore in 1903 marked the beginning of modern Chinese commercial banking in Southeast Asia.66 The name ‘Kwong Yik’ (Romanized in Mandarin as Guangyi) was literally meant to ‘Benefit the Cantonese People’. Its founder was Wong Ah Fook (Huang Yafu) who was a leader of the Cantonese communities in Singapore and Johore.67 Kwong Yik bank was a Bang (A large dialect and regional group) bank serving the interests of the Cantonese community as what the name had implied. Although it did not specify to serve just Cantonese customers, it had the policy of discriminating in favor of Cantonese customers. In addition, most staff of the bank were Cantonese speakers and would make non-Cantonese customers feel uncomfortable and inconvenient in gaining services. The founding of this first Chinese communal bank stimulated other Bangs to follow suit. In 1907, the Sze Hai Tong Banking Company Limited (Sihaitong yinhang) was founded by some leaders 66

See Tan Ee Leong, “The Chinese Banks Incorporated in Singapore and the Federation of Malaya”, in Journal of the Malayan Branch of the Royal Asiatic Society, Vol. 26, No. 1 (1953), p. 114. 67 Wong Ah Fook (this is Romanized according to Cantonese dialect, and it can be Romanized in Mandarin as Huang Yafu) or known as Wong Fook Kay (Huang Fuji) or Wong Po Tien (Huang Putian) was a leading Chinese merchant in Singapore and Johore region. For a biographical note of him, see Yen Ching-hwang, The Overseas Chinese and the 1911 Revolution: With Special Reference to Singapore and Malaya, pp. 274–275. For a short biography of Wong Ah Fook under the name of Wong Fook Kay (Huang Fuji), see Huang Zhailing (ed.), Malaiya Taishan huiguan lianhehui jinian tekan (Commemorative Bulletin of the Federation of Toi Sun Association, Malaya, Inaugural Issue) (Singapore, Malaiya Taishan lianhehui, 1948), p. 1; a more recent and complete biography of Wong Ah Fook is Patricia Lim Pui Huen’s work titled Wong Ah Fook: Immigrant, Builder and Entrepreneur (Singapore, Times Edition, 2002).

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of the Teochew community in Singapore to serve the local Teochew businessmen. Three prominent Teochew bankers were among a small group of the founders. They were Tan Teck Joon (Chen Derun), Yeo Chang Boon (Yang Zuanwen) and Leow Chia Heng (Liao Zhengxing).68 It was more than a coincidence that the first Chinese commercial bank in the Malay Peninsula was also founded by the Cantonese in July 1913 carrying the similar name of “Kwong Yik Banking Corporation of Selangor” which was located in Kuala Lumpur. The founder was Cheong Yeok Choy (Zhang Yucai), a wealthy Cantonese merchant and philanthropist. The founding of this bank was the result of a collective effort of the Cantonese community which was the dominant group among the Chinese in Kuala Lumpur, and it was primarily to provide services and facilities for the local Cantonese businessmen.69 Following the footsteps of these early Chinese banks, there were at least 9 other Chinese banks coming into existence in the period between 1903 and 1941 among which the most important one was the Oversea- Chinese Banking Corporation founded in 1932 in Singapore.70

68

Tan Ee Leong, op. cit., p. 115; Lee Sheng-yi, The Monetary and Banking Development of Singapore and Malaysia (Singapore, Singapore University Press, 1990), p. 38. 69 See Tan Ee Leong, “The Chinese Banks Incorporated in Singapore and the Federation of Malaya”, in Journal of the Malayan Branch of the Royal Asiatic Society, Vol. 26, No. 1 (1953), pp. 137–138. 70 The Oversea-Chinese Banking Corporation (OCBC) was born out of a response of the Hokkien community in Singapore to the Great Depression in the early 1930s. Three small Hokkien banks in Singapore — the Chinese Commercial Bank, the Ho Hong Bank, and the Oversea-Chinese Bank — were amalgamated into a new bank with the name of Oversea-Chinese Banking Corporation so as to arrest the decline of business under the impact of the Great Depression. See Dick Wilson, Solid as a Rock: The First Forty Years of the Oversea-Chinese Banking Corporation (Singapore, Oversea-Chinese Banking Corporation, 1972), p. 1. For the later history of OCBC up to the 1980s, especially on its expansion under the leadership of Tan Chin Tuan, see Grace Loh, Goh Chor Boon and Tan Teng Lang, Building Bridges, Carving Niches: An Enduring Legacy (Singapore, Oxford University Press, 2000).

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Most of these Chinese banks possessed the characteristics of modern Western banks. They were involved in deposits and loans, financed trade bills, and transacted foreign exchange. Their functions were more complex than the traditional Chinese money houses — qianzhuang — which was confined to deposits and loans.71 Another characteristic of the Chinese banks was their communal nature. They were either entirely founded by a particular dialect group, or were dominated by a large dialect group but affiliated with other small ones.72 The close dialect connection implies that these banks were to serve primarily the interests of that particular dialect group, and most likely that the pool of customers was also derived from the same group. The weakness of these dialect-based Chinese banks was their narrow social base, and any downturn in dialect-based business would threaten their survival. Further, their loan policy was not based on sound judgement of repayability and security of the clients, but on the good faith arising from personal and dialect connections.73 However, the rise of modern Chinese banks helped to transform the Chinese communities in the region. It lubricated Chinese business activities, stabilized Chinese financial positions, stimulated export trade, and gave rise to a group of professional bankers who had increasingly played an important role in the economic and social well-being of the Chinese communities.

71

For works on traditional Chinese Ch’ien Chuang, see Zhang Guohui, Wanqing Qianzhuang he Piaohao yanjiu (A Study of Qianzhuang and Piaohao of the Late Qing Period) (Beijing, Zhong Hua shuju, 1989). 72 Tan Ee Leong, op. cit., pp. 114–120; Lee Sheng-i, The Monetary and Banking Development of Singapore and Malaysia, pp. 40–41; Rosalind Chew, “Local Chinese Banks in Singapore”, in Leo Suryadinata (ed.), Chinese Adaptation and Diversity: Essays on Society and Literature in Indonesia, Malaysia and Singapore (Singapore, Singapore University Press, 1993), p. 58.; Shue Kwong Tau, “The Evolution and Prospect of Chinese Banking in Malaysia”, in Nyaw Mee-Kau and Chang Chak-yan (eds.), Chinese Banking in Asia’s Market Economies (Hong Kong, Overseas Chinese Archives, CCAS, The Chinese University of Hong Kong, 1989), pp. 210–213. 73 Lee Sheng-i, op. cit., p. 41; Patricia Lim Pui Huen, Wong Ah Fook: Immigrant, Builder and Entrepreneur, pp. 120–121.

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The nature of colonial economy hampered the development of Chinese manufacturing industry in the Singapore and Malayan region. The basic economic functions of a colony were to provide markets for the surplus industrial products from the mother country; while at the same time to provide raw materials to feed the factories of the colonial home land. Singapore and Malaya were of no exception. Britain’s involvement in the First World War between 1914 and 1918 disrupted its export of manufacturing products to Southeast Asia. This provided excellent opportunity for local industry to grow. Some Chinese merchants in the Straits who had capital and foresight were prepared to take the calculated risk to develop manufacturing and other related industries, especially in rubber and food processing. The first Chinese pineapple canning factory was probably established in Singapore by Tan Kee Peck (Chen Qibo), father of the famous Chinese entrepreneur, Tan Kah Kee (Chen Jiageng), at the turn of the present century. Tan had made handsome profits of this venture, and had inspired other Hokkien businessmen to follow suit.74 By the first decade of the present century, there were more than 10 Chinese pineapple canning factories on the island.75 The outbreak of the First World War brought both misfortune and opportunity to the Chinese industry in the region. The war practically devastated the pineapple canning industry by cutting off its lucrative markets in India and Europe resulting in the closure of many canneries in Singapore and Malaya. But the war created immense opportunity for export of processed rubber. Seizing the opportunity to satisfy the world market was a group of Chinese entrepreneurs in Singapore and Malaya including famous entrepreneur, Tan Kah Kee who had established two rubber processing mills in Singapore 74

See C.F. Yong, Tan Kah Kee: The Making of an Overseas Chinese Legend, pp. 21–22; Chui Kuei Ch’iang, “Zhanqian Xinjiapo Minnanren de gongshangye huodong” (Industrial and Commercial Activities of the Hokkien Chinese in Pre World War II Singapore), in Lim How Seng (Lin Xiaosheng) (ed.), Dongnanya huaren yu Zhongguo jingji yu shehui (Southeast Asian Chinese and China’s Economy and Society) (Singapore, Singapore Society of Asian Studies, 1995), p. 146. 75 See A. Wright and H.A. Cartwright, Twentieth Century Impressions of British Malaya (London, 1908), p. 504.

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between 1916 and 1917. By 1918, there were an estimated 72 rubber processing mills in Singapore and Malaya.76 The high price of processed rubber earned handsome profits for a number of Chinese businessmen, and made the Chinese communities prosperous. However, the declining rubber prices after the First World War compelled Chinese businessmen to develop rubber-related manufacturing industry. On the forefront was Tan Kah Kee who had converted one of his largest rubber mills into a rubber manufactory, turning out a variety of rubber products such as raincoats, tennis balls, rubber umbrellas, sports shoes, rubber boots, rubber sleepers and toys. In addition, Tan Kah Kee also ventured into the production of tyres and tubes for the growing world motor car market.77 Another Chinese industry which achieved prominence during the two World Wars was coconut oil refinery. To produce cooking oil to satisfy local market and for export by using local raw material was an idea attractive to some astute Chinese businessmen. Modern coconut oil refineries were established in Singapore and Penang where the supply of copra was plentiful. By 1925, at least 5 Chinese coconut oil refineries existed in these two ports. Two major refineries in Singapore were owned by Lim Peng Siang (Lin Bingxiang) a Hokkien business magnate, while two in Penang (Ban Tuck Bee & Sun Ho Lung) were owned by a Hokkien and a Cantonese respectively.78 Apart from coconut oil refineries, other manufacturing industries also came into existence, principally the making of biscuits and soap. Three biscuit makers made their reputation by providing good quality biscuits for local consumption. They were Ho Ho Biscuit Company, Tan Kah Kee’s Globe Biscuits and Chung Hwa Biscuit Company.79 They adopted modern techniques and high standard of hygiene to produce good quality biscuits which were entirely different from traditional

76

See C.F. Yong, Tan Kah-kee: The Making of an Overseas Chinese Legend, p. 52. Ibid. 78 See Li Changfu, Nanyang huaqiao kaikuang (Present Conditions of the Overseas Chinese in Southeast Asia) (Shanghai, Hua Feng Printing, 1930), pp. 95–96. 79 See Yen Ching-hwang, “Historical Background”, in Lee Kam Hing and Tan Chee Beng (eds.), The Chinese in Malaysia (Shah Alam, Malaysia, 2000), p. 21. 77

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Chinese biscuits produced in small home factories. Their products were to satisfy the growing local market as well as the expanding markets in other Ethnic Chinese communities in Southeast Asia. Ethnic Chinese industry in Singapore and Malaya during this inter-war period showed signs of change from tradition to modernity. Traditional Ethnic Chinese business characterized by family ownership, small size in operation and mixture of unpaid family labor and wage labor gradually gave way to modern structure and management.80 Some industries were owned solely by particular families, but some had already changed to partnership or joint stock companies. The size of operation was expanded, and the management was no longer relied entirely on close family members, but on a mixture of kinship and professionalism. The Ho Hong group of companies led by Lim Peng Siang, a Hokkien entrepreneur, adopted embryonic form of modern joint-stock company. He sold shares to his kinsmen and friends, but he and his brothers still controlled the operation of the group.81 On the other hand, the Tan Kah Kee Company under the sole ownership of the Tan family,82 enlarged its operation, and diversified into various types of business. The company also broadened its social base in the recruitment of its staff. It included relatives, kinsmen, fellow district folks from the Tong An county and also the same dialect speakers from southern Fujian province.83 This integration of traditional Chinese practice of personal connections with Western principle of meritocracy provided the Chinese business in Singapore and Malaya with strong cohesion, continuity and vitality. 80

Ibid., pp. 21–22. See C.F. Yong, “Lim Peng Siang and the Building of the Ho Hong Empire in Colonial Singapore”, in Asian Culture (Singapore, Singapore Society of Asian Studies), No. 28, June 2004, pp. 12–17. 82 See Lim How Seng, “Chen Jiageng de jingji linian yu qiye guanli” (Tan Kah Kee’s Management Ideas and Management Style), in Lim How Seng (Lin Xiaosheng), Xinjiapo huashe yu huashang (Chinese Society and Chinese Merchants in Singapore), p. 157; Yen Ching-hwang, “Tan Kah Kee and the Overseas Chinese Entrepreneurship”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), p. 136. 83 See C.F. Yong, op. cit., pp. 60–61. 81

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Case Studies: Wong Ah Fook and Tan Kah Kee Wong Ah Fook is chosen as the representative of early Chinese bankers in Singapore and Malaya not because of his banking knowledge and experience, but because of his being a principal founder and later manager of the Kwong Yik Bank (Guangyi yinhang), the first Chinese bank founded in 1903 in Singapore. Wong Ah Fook (Huang Yafu), or known as Wong Fook Kee (Huang Fuji), or Wong Yin Theng (Huang Yaoting) or Wong Poh Thin (Huang Putian), was born in Yanjingcun (Spectacles village) of Taishan district, Guangdong province in 1837. Taishan was one of the four districts (Shiyi, or known in Cantonese as See Yap) which were famous home for many Chinese immigrants who left for North America and Australia. The immigrants’ success in business and the wealth they had brought back to the villages in Shiyi must have stirred the imagination of young Ah Fook who spent his childhood in poverty. He must have aspired to become a rich businessman overseas and returned home with wealth and honor. What prompted the young boy to leave home for Singapore was the impact of the Hakka-Punti war starting in 1850 that ravaged the countryside in Taishan.84 In 1854 at the age of 17, young Ah Fook arrived in Singapore. As many of early Cantonese immigrants in Singapore were skilled tradesmen, Ah Fook had no difficulty to find a job as a carpentry apprentice to learn his trade. After having repaid the passage money he owed and having saved some capital, the ambitious young man started his business career as a carpenter. From a business perspective, Ah Fook possessed the quality of being an Overseas Chinese entrepreneur: a capitalist attitude, a strong desire for business pursuit, the courage to take initiatives and calculated risks, the determination to implement ideas and the will to succeed, plus other personal attributes such as foresight, business acumen and sociability.85 His sociable character 84

See P. Lim Pui Huen, Wong Ah Fook: Immigrant, Builder and Entrepreneur, p. 25. For discussion of Overseas Chinese entrepreneurship, see Yen Ching-hwang, “The Wing On Company in Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 224–227; Yen Ching-hwang, 85

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enabled him to build up social and business networks that were essential for doing business in the Chinese community. His effective networking led him befriend prominent Cantonese businessmen such as Hoo Ah Kay (better known as Whampoa) who had commanded considerable influence both in Chinese and European circles.86 With the patronage of Hoo Ah Kay, Wong Ah Fook who was 21 years Hoo’s junior, rose rapidly as an successful construction contractor. It was claimed that through Hoo’s influence that Ah Fook in 1864, 10 years after his arrival in Singapore and at the age of 27, secured a major contract to build two godowns for Paterson & Simon for a sum of $10,000.87 In addition to construction business, he had also built up a prosperous ships’ chandlering business, and was a supplier and contractor to Her Majesty’s navy. As an ambitious businessman, Ah Fook was not satisfied with what he had achieved in Singapore, and he had cast his eyes beyond the island to Johore Bahru where new opportunities opened up for Chinese pepper and gambier cultivators. By chance or by design, he had met the Maharaja Abu Bakar through the introduction of Hoo Ah Kay. With his successful construction of two godowns for Paterson & Simon, he was entrusted by the Maharaja as the contractor to build a “Tan Kah Kee and Overseas Chinese Entrepreneurship”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics, p. 139. 86 Hoo was a very wealthy Cantonese merchant in Singapore. Born in Whampoa near Canton (Guangzhou) about 1816, and came to Singapore in 1830 to assist his father in business. His knowledge of English gave him a distinct advantage over other Chinese merchants and he rapidly emerged as a leading Chinese businessman in Singapore. In recognition of his distinguished services rendered to the government, he was appointed as a member of Straits Settlements Legislative Council in 1869, and a few years later, he was appointed as an extraordinary member of the Executive Council, a position never been held by any Chinese before. In 1877, he was appointed as the first Chinese Consul in Singapore by the Qing government, the first of its kind in Overseas Chinese communities worldwide. Hoo Ah Kay was known in Chinese official records as Hu Xuanze (Hu Hsuan-tse). See Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore, pp. 52–55; Yen Ching-Hwang, Coolies and Mandarins: China’s Protection of Overseas Chinese During the Late Ch’ing Period (1851–1911) (Singapore, Singapore University Press, 1985), pp. 142–144. 87 See P. Lim Pui Huen, op. cit., p. 35.

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grand and luxurious palace known as Istana Besar under the supervision of an European architect. The work for building the palace started in 1864, and it was completed in 1866 that Wong Ah Fook was only 29 years of age.88 He continued constructing some big buildings for the Johore government. Although Wong Ah Fook became a reputable contractor and builder, he did not make enormous amount of money from them, for the construction of those buildings were on deferred payment terms. But he used his cordial relations with the Sultan and Johore government to acquire land concessions and revenue farming. He then became Kangchu (Lord of the River) of river settlements which produced pepper and gambir crops for international markets. He owned several estates in Mersing and Segamat where he cultivated pepper, gambier and rubber. In addition, he also went into real estate business, owning considerable landed properties in both Singapore and Johore.89 It was the progression from a contractor, a builder, to a revenue farmer, a planter and a property owner that Wong Ah Fook became a major founder of the Kwong Yik Bank in Singapore, the first of its kind in the region. Wong Ah Fook’s idea of founding a Chinese bank was the result of the combination of his personal experience and changing financial conditions in the Straits Settlements. As a planter, he brought in hundreds of Chinese coolies to work in his plantation estates. They had to be housed, fed and paid. It was in the dealing with the payment of his workforce that he came to realize the importance of having a stable currency and a financial institution with which to handle the currency. At that time, a variety of currency was in circulation including money minted in Hong Kong, Mexico, Peru, Bolivia and Spain. The abundance of currencies with different denominations created confusion in the financial market. In 1890, the shortage of supply of the 88

Ibid., pp. 36–49. Ibid., pp. 66–74, 79–98; Song Ong Siang, One Hundred Years’ History of the Chinese in Singapore, p. 354; Lee Kam Hing & Chow Mun Seong, Biographical Dictionary of the Chinese In Malaysia (Petaling Jaya, Selangor, Malaysia, Pelanduk Publications (M) Sdn Bhd, 1997), pp. 176–177. 89

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Mexican dollar which was recognized as standard currency in the East added to the financial problem. Wong Ah Fook, like some of the Johore plantation owners, produced his own paper currency for his own estates. At about this time, the British Colonial government undertook reform in currency. A British dollar was minted in 1894 in Bombay, India, and in 1903, a Straits dollar was introduced.90 Through his social and business networks in Singapore and Johore, he had no difficulty to gather a group of 11 Cantonese rich merchants to found the Kwong Yik Bank on December 16, 1903. Being a far-sighted entrepreneur, Ah Fook sensed that a Chinese bank would meet the needs of Chinese customers. Though the existence of British banks in Singapore had already provided services to Chinese businessmen, but language barrier sometimes led to misunderstanding and inconvenience. However, a modern Chinese bank not only would serve Chinese customers well, but also would open up financial services that could be a profitable business for investors. Wong Ah Fook and his Cantonese business partners raised enough money to cover S$850,000 paid-up capital and operation cost. A public announcement in a form of advertisement appeared in a major local Chinese newspaper, Lat Pau (Singapore Daily), on 6th December, 1903 (21st day of 10th moon of 29th year of Guangxu). It published names of the management team and the regulations for depositors and rates of interest, and business hours (from 9.00 a.m. to 3.00 p.m., Monday to Saturday). The management team appeared to be divided into two: board of directors and managers. Surprisingly, Wong Ah Fook, as a major founder, did not hold the position of chairman of the board, he was only one of the six directors. The chairmanship went to Lam Wai Fong, a prominent Cantonese businessman, and a proprietor of two pawnshops in Singapore. Two positions of deputy chairman went to Wong Gai Seung, a comprador, and Boey Lian Chin, another pawnbroker. It is noticeable that 5 out of 11 founders of the bank were connected with pawnshop business. They were Lam Wai Fong, Boey Lian Chin,

90

See P. Lim Pui Huen, op. cit., p. 110.

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Wong Mun Po (manager), Wong Kwong Yam (director) and Mui Bak Fook (director).91 Heavy representation of Chinese pawnbrokers in the Kwong Yik bank was perhaps an indication of the transition of the Chinese financial institutions from tradition to modernity. Traditionally, Chinese pawnshop provided loans to individual and small business on mortgage, but the expansion of pawnshop business was restricted by risk factor. The Cantonese pawnbrokers who were the founders of the Kwong Yik bank saw the potential in this banking service business, and the risk was minimized by the limited propriety in modern banking system. The explanation for Wong Ah Fook’s low profile in the management team of the Kwong Yik rests perhaps with his problems of time allocation. He was already occupied himself with a range of business, construction, plantation, real estates and others. Further, he had no expert knowledge in dealing with finance like pawnbrokers had. His low profile gave him a better chance to learn the new business. Tan Kah Kee was a giant in the modern history of the Chinese in South East Asia. His reputation as a philanthropist, educationist and patriot went far beyond the geographical confine of Southeast Asia to China and other parts of the world. His educational activities in Fujian province, South China, especially the founding of the famous Amoy University (Xiamen University now), his community leadership and his leading role in the mobilization of Southeast Asian Chinese support for resisting Japanese aggression in China have been welldocumented in Dr. Yong Ching Fatt’s definitive work on Tan Kah Kee.92 Here we are focussing on Tan Kah Kee’s business activities, exploring his business world, and assessing Tan as an entrepreneur, a

91

Lam Wei Fong was the proprietors of Po Yuen pawnshop and Ban Yik pawnshop; Boey Lian Chin was the proprietors of Ban Yuen pawnshop and Seng Fatt pawnshop; Wong Mun Po was a proprietor of Ban Yik pawnshop; Wong Kwong Yam was the proprietors of Mei Yuen pawnshop and Yuen Lai pawnshop; and Boey Pak Fook, was the proprietor of Ban Lung pawnshop and Ban Seung pawnshop. Ibid., p. 112; Lat Pau, 6/12/1903, reproduced in P. Lim Pui Huen, ibid., p. 114. 92 See C.F. Yong, Tan Kah-kee: The Making of an Overseas Chinese Legend.

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successful businessman and an early Chinese manufacturer in the region. Born in 1874 in Jimei village of Tong An district, Fujian province, China, Tan spent his childhood in a physical environment of a mountainous landscape and vast coastal line of South China that produced qualities of thrift, honesty, tenacity, adventure and independence,93 which helped to mould Tan Kah Kee’s character. Like many Chinese villages in South China at the time, Tong An was marked by poverty and underdevelopment that forced many Tonganese to venture into the South Seas (Southeast Asia) to eke out a living. Tan Kah Kee was born into an Overseas Chinese family which enabled him to receive some forms of traditional Chinese education, reciting the Trimetrical Classic (Sanzijing) and the Four Books that laid the foundation of his knowledge. Tan Kah Kee left his home village for Singapore in 1890 at the age of 16. He worked in his father’s rice shop as an apprentice. It was not unusual for an Overseas Chinese to train his son as a future businessman by placing him as an apprentice learning the trade through the hard way. Kah Kee’s father, Tan Kee Peck was a reputable merchant in the Chinese business circle before Kah Kee’s arrival. His father’s rice shop, Soon Ann (meaning smooth and safe) was a typical Chinese family business in which division of labor and management was unknown, and the management was in the hands of a relative. However, this blurring of labor and management gave Tan Kah Kee a good overall training as a businessman. Soon Ann was a whole-sale rice establishment importing rice from Thailand, Vietnam and Burma, and distributing it to local rice retailers. Kah Kee demonstrated his business acumen and managerial competence at a very young age when he took over the entire operation of the rice business, and he acted as both manager and treasurer of Soon Ann at the age of 18 when the manager left Singapore for China in 1892. He further benefited from his father’s other diverse business operations that gave

93

Ibid., p. 16.; Yang Guozhen, Chen Jia Geng (Tan Kah Kee) (Beijing, Renmin chubanshe, 1987), p. 1.

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him insight into the operation of various types of business in Singapore.94 In 1903, at a relatively young age of 29, Tan Kah Kee had the opportunity to fulfil his cherished ambition of founding his own business. The collapse of his father’s business in that year left him a sum of S$7,000 as his starting capital. He began with familiar rice business and pineapple canning by founding a rice shop named “Khiam Aik” (Qian Yi in Mandarin, meaning modesty and benefits) in 1904, he then founded rice mills in Thailand to ensure the supply of rice. Rice was the basic diet of Chinese, and the demand for rice in Southeast Asia and South China was enormous and ever increasing that ensured its profitability. In the same year, he founded 2 pineapple-canning factories supported by a pineapple estate. This vertical integration strategy was the hallmark of Tan Kah Kee’s business activities. In this early period of his business activity, an important decision taken by him was to invest in rubber planting. Pioneered by a Chinese planter in Malacca, Tan Chay Yan (Chen Qixian in Mandarin), rubber planting required large sum of capital, lengthy development period, and an unpredictable market. But its profit was colossal with a challenging future.95 While many wealthy Chinese businessmen were unsure about the risk of planting rubber, Tan Kah Kee demonstrated his entrepreneurial quality of business acumen and calculated risk-taking in 1906 by purchasing 180,000 rubber seeds from Tan Chay Yan, and planted them among the pineapple crops in his Hock Shan (Fu Shan in Mandarin) plantation estate. In 1909, he added another 500 acres of land to his Hock Shan estate for rubber planting, making a total of

94

See Yen Ching-hwang, “Tan Kah Kee and Overseas Chinese Entrepreneurship”, in Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics, p. 127. 95 For Tan Chay Yan’s pioneering planting of rubber in Malacca and the early development of rubber, see Wu Tiren, Redai Jingji Zhiwu — Xiangjiao Shu (Rubber — The Tropical Cash Crop) (Singapore, Kuanghua Publishing Company, 1951), pp. 6–8; James Jackson, Planters and Speculators: Chinese and European Enterprise in Malaya, 1786–1921, pp. 211–218; J.H. Drabble, Rubber in Malaya, 1876–1922: The Genesis of the Industry (Kuala Lumpur, Oxford University Press, 1973), pp. 14–19.

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1,000 acres of rubber plantation, the largest estate on the island of Singapore.96 Tan Kah Kee as an astute businessman and entrepreneur was put to test during the World War I period (1914–1918). He was confronted with an uncertain future. Having owned and run businesses for a decade from 1904 to 1913, he had accumulated a great deal of experience of how to cope with a rapid changing world. The war presented him with a crisis and an opportunity as what Chinese term ‘crisis’, ‘wei ji’ (‘wei’ literally means danger, while the word ‘ji’ means opportunity). There will be new business opportunity if he handled the danger shrewdly. The war ruined his lucrative Indian and European markets for cooked rice and canned pineapple, resulting in severe losses of profits, retrenchment of staff and the closure of his rice mills and pineapple canneries. However, the war created a great demand for transport facilities and strategic war materials such as rubber. With foresight, courage and determination, Tan Kah Kee adopted a new strategy of diversification and restructuring of his existing enterprise to meet the war needs.97 He founded a shipping line to transport food and war materials, and converted some of his pineapple canneries into rubber mills as well as producing tin plates to meet the war needs. This new strategy was proven a wise move, earning him enormous profits. In the period between 1915 and 1918, he made a net profit of S$4.5 million.98 Tan Kah Kee’s reputation as a formidable Chinese industrialist was achieved during the post-war period (1919–1925). The end of World War I signalled drastic political and economic changes both in Singapore and abroad. He changed his strategy accordingly to capture the new opportunities. To reduce risk of expansion, he 96

See C.F. Yong, Tan Kah-kee, The Making of an Overseas Chinese Legend, pp. 47–48. See Yen Ching-hwang, “Tan Kah Kee and Oei Tiong Ham: A Comparative Study of Overseas Chinese Entrepreneurs”, in Leo Suryadinata (ed.), Tan Kah Kee and Lee Kong Chian in the Making of Modern Singapore and Malaysia (Singapore, Chinese Heritage Centre, 2010), p. 66. 98 See Chen Jiageng (Tan Kah Kee), Nanqiao huiyi lu (Reminiscence of My Life and Activities In the Chinese Communities in Southeast Asia) (Singapore, Tan Kah Kee Foundation, 1993, reprint), Vol. 2, p. 500. 97

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restructured his business empire incorporating all of his enterprises into the Tan Kah Kee Company in 1919, a limited liability company. The group was a huge conglomerate with diverse business interests with rubber as its core. The range of business included rice trade, rice milling, pineapple planting and canning, sawmilling, medicine, shipping, brickwork, rock sugar, Chinese newspaper, printing works, soap making, biscuit manufacturing, tannery, iron foundry and real estate.99 The main thrust of his new business strategy was his venture into rubber manufacturing. The slum of rubber prices in the international market in the post-war era did not lead him to sell off his rubber estates and rubber mills. Instead, he transformed his Sumbawa rubber mill, his largest in Singapore, into a rubber manufactory in 1920 producing a variety of rubber products. This included rubber raincoats, rubber sheets, rubber umbrellas, rubber sleepers, sport shoes, boots, tennis balls and rubber toys, various types of tyres, and rubber caps and hats.100 As an astute entrepreneur, Tan Kah Kee saw a bright future for manufacturing not only in Southeast Asia, but also in South China. In the area of rubber manufacturing, he paid great attention to technology, and his rubber manufactory invested enormous amount of financial and human resources into Research and Development (R & D) as a long-term endeavor. Manufacturing of rubber products was an uncharted territory both in China and Overseas Chinese communities, without existing technology to rely upon. He had to start from scratch embarking on the path of industrial production. The manufactory had its own R & D facilities.101 Tan Kah Kee also paid considerable attention to the marketing of his products. He was aware of the importance of trade mark and brand to the consumers. The Bell brand was his principal trade mark. There 99

See William Tai Yuen, The Historical Experience of the Rise and Fall of Tan Kah Kee’s Enterprise (Kuala Lumpur, Nantah Education and Research Foundation, 2011), p. 9. 100 See C.F. Yong, Tan Kah-kee: The Making of an Overseas Chinese Legend, pp. 56–57. 101 See William Tai Yuen, op. cit., p. 11; William Tai Yuen, Chinese Capitalism in Colonial Malaya, 1900–1941 (Selangor Darul Ehsan, Malaysia, Penerbit Universiti Kebangsaan Malaysia, 2013), p. 238.

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were other types of trade marks for his other manufacturing products such as ‘coconut tree and lion’, ‘pineapple’, ‘three guns’, ‘hand and axe’, ‘tiger’ and ‘shell’ etc. He widely advertised his products in his owned Chinese newspaper, the Nanyang Shang Pau (Southeast Asian Commercial Press) and another Chinese newspaper, Sin Guo Min Ribao (New Citizen Daily) among Chinese consumers. In addition, he also promoted his manufacturing products among English and Western consumers in the Straits Times, the principal English newspaper in Singapore.102 In 1925, Tan Kah Kee’s business conglomerate reached its apex of development, and he claimed in his autobiography that he made a net profit of S$7.8 million, a colossal amount of money at that time.103 From this perspective, Tan Kah Kee was not just a manufacturer, but a formidable industrialist, his influence over manufacturing in the Chinese communities in Southeast Asia was profound, and he was once acclaimed as the “Henry Ford of Malaya”.104

The Development and Growth of Chinese Business in Malaysia Since 1957 In the first 12 years since the independence of Malaya in 1957 (in 1963, British colonies of Sarawak and North Borneo (Sabah) joined Malaya and Singapore to form the new state of Malaysia), Chinese business in Malaysia grew and prospered under the operation of the laissez-faire policy adopted by the government under the leadership of Tungku Abdul Rahman. Tungku, the founder of the new nation and the first prime minister of Malaya and later Malaysia, was a friend of the Chinese, and he had always taken a accommodating attitude towards the Chinese against a growing disquiet among his ranks. The prime minister was to adhere to an informal agreement with the leaders of the Malayan Chinese Association (MCA) reached before the 102

See William Tai Yuen, The Historical Experience of the Rise and Fall of Tan Kah Kee’s Enterprise, pp. 17–21. 103 See Tan Kah Kee, Nanqiao huiyi lu (Reminiscence of My Life and Activities In the Chinese Communities in Southeast Asia), Vol. 2, p. 505. 104 See William Tai Yuen, op. cit., p. 22.

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independence that the Chinese business should be left to grow while the Chinese would not challenge the Malay control of the government.105 In addition to the favorable political climate, the Chinese in Malaysia also benefited from the gradual retreat of foreign capital from Malaysian economy. Many Chinese businessmen formed into syndicates to take over large Western rubber estates and other business enterprises. As a result of these factors, the Chinese business made impressive gains in the 1960s. A number of large Chinese conglomerates emerged in the 1960s, but the majority of the Chinese business was still dominated by small and medium-sized business operations. One distinctive feature of the Chinese business in the 1960s was the diverse nature of its expansion. Many of them did not grow their wealth from old capital accumulated in the Straits Settlements, but rather from the new money made in the pre-war period. They started with small capital in retails or primary production, and evolved into wholesale, import and export business, and then expanded into manufacturing, banking and property development. One of the large Chinese conglomerates that emerged in Malaysia during this period was the Kuok Brothers’ Clique. Robert Kuok Hock Nien (Guo Henian) and brothers, the descendants of a Hokchiu (Fuzhou, northern part of Fujian province) immigrant, built up their business empire based in Johore Bahru in the southern part of the Malay Peninsula.106 Robert Kuok’s ancestors had built up a sugar and rice trading business in Johore before the Second World War. Having 105

See Harold Crouch, Government and Society in Malaysia (Sydney, Allen and Unwin, 1996), pp. 199–200. 106 For a history and development of Kuok brothers’ business empire, see Lin Wuguang, “Guoshi xiongdi jituan” (Kuok Brothers Group), in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (Study of the Chinese Conglomerates in Southeast Asia) (Xiamen, Xiamen University Press, 1995), pp. 110–124. For biographies of Robert Kuok in Chinese, see Zhou Shaolong, Guo Henian zhuan (A Biography of Robert Kuok) (Hong Kong, Ming Chuang chubanshe youxian gongsi, January 1996, 3rd edition), and Wang Yongzhi, Guo Henian: Duomian zhiwang (Robert Kuok: The King with Many Crowns) (Beijing, Guang Ming ribao chubanshe, June, 1997).

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studied in the Raffles College in Singapore, Kuok was influenced by both Chinese and English cultures. At the time he took over the family business, he began to expand it to the service industry and manufacturing. In the 1950s, he set up Rickwood and Company in Singapore to deal with general mechanising, ship brokering and adhesive manufacturing. In Malaysia, he founded Kuok Brothers Company Ltd. in Johore Bahru, Malaysia, to trade in rice, sugar and wheat, and soon established himself as the leading sugar broker. It was in sugar that Robert Kuok achieved his prominence in business. He founded in 1959 a large sugar refinery — the Malayan Sugar — the first of its kind in Malaysia, in partnership with the government agency, FELDA, and Japan’s Nissin Sugar Manufacturing. Kuok’s ability to bring the government agency and foreign capital together was the key to his future success. In the 1960s, Kuok diversified into other branches of manufacturing such as flour milling and wood veneer and shipping. In the 1970s, he also diversified into property development and tourist industry.107 The Chinese business in Malaysia took a sharp turn in 1971 after the introduction of the New Economic Policy (NEP) by the government as a result of the serious racial riots in Kuala Lumpur in 1969 known as the May 13th Incident.108 In response to racial unrest, the parliament was suspended and an authoritarian government with the name of National Operation Council (NOC) was put in place to rule the country under the leadership of Deputy Prime Minister, Tun Abdul Razak. The NOC was dominated by radical right-wing Malay leaders (7 out of the 9 members of the NOC) who were convinced that the root of the serious racial riots was in the unequal distribution of economic fruits among different races, and the only way to rectify that economic inequality was through the intervention of the state. The NEP had two proclaimed objectives: firstly, it was to restructure 107

See James V. Jesudason, Ethnificy and the Economy: The State, Chinese Business, and Multinationals in Malaysia (Singapore, Oxford University Press, 1990), pp. 60–61. 108 For a study of the May 13th Incident, see Goh Cheng Teik, The May Thirteenth Incident and Democracy in Malaysia (Kuala Lumpur, Oxford University Press, 1971).

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the employment market. Employment in the various sectors of the economy and all levels of professions should reflect the racial composition of the country by 1990; secondly, it was to restructure the ownership of the economy so that by 1990 the Malays and other indigenous people will own and operate at least 30% of the total.109 To achieve the twin professed goals of the NEP, the government established state corporations and trust agencies to act on behalf of the Malays and other indigenous people who were given a special name as the ‘Bumiputera’ (Sons of the Soil) so as to legitimize their claims of bigger share in employment and economy. The promulgation of the NEP and other related legislations were mainly targeted at the Chinese business which was considered by the Malay radicals as undesirable growth. Although there were resentments felt among the Chinese towards the NEP, their opposition was generally muted because the MCA that was to look after their interests was feeble in the national politics. The response of the Chinese business community to the new policy was passive, instead of opposing the government policy they went along with the new policy reluctantly. At the same time, Chinese business leaders also saw the danger of Chinese business being curtailed by the unfair competitions that the government enterprises and trust agencies had enjoyed. They saw the solution in the modernization and corporatization of Chinese business in order to survive under the new environment. Datuk Koh Pen Ting, chairman of the Chinese Chamber of Commerce of Penang in his speech delivered in December 1975, called upon fellow Chinese to change their ‘family type’ of business to modern large enterprises vis-a-vis competitors of large enterprises with political support. He predicted that family-based small business would decline, and urged the Chinese to form community-based large enterprises with utilization of capital and talents of the entire Chinese community.110 109

See Harold Crouch, op. cit., pp. 24–25. See Koh Pen Ting (Xu Pingdeng), “Malaixiya huaren jingji diwei de tantao” (The exploration into the economic status of the Chinese in Malaysia), in Koh Pen Ting (Xu Pingdeng), Ping Yan Ji (Collections of Fair Discourses) (Penang, Xin Tai yinwu youxian gongsi, 1979), pp. 26–27. 110

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Another reason for the feeble response of Chinese business to the NEP was the decimation of Chinese political parties. The MCA that primarily represented the interests of Chinese business within the Alliance was weakened. At the same time, the Malay leadership under Tun Abdul Razak was much shrewd politically than what Chinese had thought, and they adopted the strategy of absorbing minor Chinese opposition parties into a large political alliance that had further divided the Chinese politically. The weakening of Chinese political status reduced their bargaining power vis-a-vis the government. The loss of two key economic portfolios by the MCA (the Ministry of Finance and the Ministry of Trade and Industry which were traditionally held by the Chinese) in the second half of the 1970s signalled the marginalization of Chinese politics in Malaysia under the new order. The impact of the implementation of the NEP on the Chinese business in Malaysia can be examined at two different levels: the impact on the small and medium-sized Chinese business, and the impact on the large Chinese conglomerates. The small and medium-sized Chinese business faced increased competition and the loss of government contracts as the result of Malay entry into the business. The threat was clearly reflected in the increased numbers of Malay retail establishments from 13% to 34% of the total between 1971 and 1981 while the Chinese share declined from 74.6% to 57.7%.111 However, they survived by tightening their existing networks of consumers-retailers-wholesalers strengthened by ethnic and cultural ties. Since the consumers were found mostly among urban Chinese population, Malay wholesalers and retailers had difficulties to penetrate the Chinese consumer markets.112 They also survived by using Malay partners as front-men for business which was popularly known as the practice of Ali-Babaism. A Malay partner who contributed no capital to the business except his name was given partnership status, but he was to help obtain the licences and government contracts for the company, and he was paid a salary as well as given certain percentage of shares of the company. 111 112

See James V. Jesudason, op. cit., p. 148. Ibid., pp. 148–149.

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This practice was particularly prevalent in construction, transport and agricultural wholesale where government had predominant control.113 The impact on the large Chinese business conglomerates was also profound. In response to the grave situation and the calls for setting up large enterprises, Chinese communities began to establish some large multi-purpose holding companies based on dialect and political affiliations. These companies sold shares to their members in an attempt to compete with government agencies more effectively on the basis of collective economic strength. Taking the lead was the Multi-Purpose Holdings Berhad of the Malaysian Chinese Association which came into existence in 1975. Under the directorship of Lee Loy Seng (Li Laisheng), a wealthy Chinese tycoon and Tan Koon Swan (Chen Qunchuan), a shrewd corporate take-over player, the MPH had remarkable early success. Its maiden issue of $30 million shares in 1977 was over-subscribed, and it had claimed to have more than 200,000 shareholders. The MPH did not go into manufacturing, rather it went into property, plantation and financial business. Its bid to control the Malayan Banking Corporation and the Dunlop Holdings (the plantation giant) was thwarted by the UMNO youth for political considerations.114 Other dialect-based large holdings had no great success partly due to the internal squabbling and embezzlements of funds by directors. However, a more successful story was found in large Chinese business conglomerates owned by individual families. Many of these family-based conglomerates were able to grow and prosper under the operation of NEP. Being family-based, they were less plagued by internal dissension and embezzlement of funds, and were more flexible in terms of decision-making and were able to take advantage of 113

Ibid., p. 149. Ibid., pp. 155–157; Heng Pek Koon, Chinese Politics In Malaysia: A History of the Malaysian Chinese Association (Singapore, Oxford University Press, 1988), pp. 271–273; Peter Searle, The Riddle of Malaysian Capitalism: Rent-seekers or Real Capitalists? (St Leonards, New South Wales, Allen & Unwin, 1999), pp. 178–182.

114

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the new economic situation. Their success depended on the adoption of suitable strategies such as concentration on commercial projects rather than manufacturing, and on expansion by take-over or merger rather than starting companies afresh. In addition, political patronage and partnership with Bumiputra were also important ingredients of their success.115 One good example is the case of Malayan United Industries (or known as MUI), one of the largest family-based corporations in Malaysia. Mui was founded by Khoo Kay Peng, a Malaysian born Hokkien Chinese who started as a bank clerk with the OCBC in Singapore. With his banking experience and financial knowledge, Khoo built up his business empire rapidly. His company went public in 1971. In the period between 1979 and 1984, it increased its paid- up capital from $11.5 million to $823.5 million, and emerged as a large conglomerate with assets in property, finance, hotels and manufacturing. With the new take-over strategy, MUI expanded rapidly in the second half of 1970s and first half of 1980s. It gained the control of Central Sugars, an ailing sugar-refinery and Tong Bee Finance in the mid 1970s; and in the first half of 1980s, it took over the Kwong Lee Bank (1982) and the Pan-Malayan Cement Works (1983). It also acquired a number of large hotels in Kuala Lumpur. In the spread of its business overseas, MUI in the 1980s through its subsidiary, Malayan United Manufacturing, secured properties in Canada, Australia, Hong Kong and Singapore, including a large hotel in Vancouver, an international hotel-office complex in Perth, hotel chains (under the Ming Court banner) in Hong Kong, Singapore and Canada. In addition, it also owned a property investment company in California and a food distributing chain in Western Australia.116

115

See Heng Pek Koon and Sieh Lee Mei Ling, “The Chinese Business Community in Peninsular Malaysia, 1957–1999”, in Lee Kam Hing and Tan Chee Beng (eds.), The Chinese in Malaysia (Shah Alam, Malaysia, Oxford University Press, 2000), p. 124. 116 See James V. Jesudason, op. cit., pp. 151–152; Edmund Terence Gomez, Chinese Business in Malaysia: Accumulation, Ascendance, Accommodation (The Quadrant, Richmond, Curzon Press, 1999), pp. 101–112.

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The Development and Growth of Chinese Business in Singapore Since 1959 The story of the Chinese business in Singapore presents a different pattern of development and growth. Unlike the zigzag development of the Chinese business in Malaysia, the development and growth of the Chinese business in Singapore appeared to be steady and firm under the guidance of a strong centralized government under the leadership of Lee Kuan Yew. The main factor contributing to this growth was because the Chinese business did not have to face a hostile government and its restrictive policies. Judging by any standard, the economic performance of Singapore since its self-government in 1959 was a miracle. Singapore had emerged since the 1970s as one of the Four Asian Little Dragons. With the smallest territory and population and without any natural resources among the Four Little Dragons, Singapore had overcome all odds and achieved a remarkable economic growth rates of 8.9% for about a quarter of a century from 1960 to 1984. This sustained growth rate was among the highest in the world. Together with the achievement of rapid economic growth was the rise of living standards of the average Singaporeans. Per capital GNP income of the Singaporeans rose from $1,330 in 1960 to $15,008 in 1984, more than 10 fold increase in income for the same period.117 Singapore’s achievement of self-government coincided with the rise of People’s Action Party (PAP) under able leadership of Lee Kuan Yew. The PAP government after its ascendancy undertook the task of making Singapore a modern industrialized state. The main thrust of the government’s economic policy was to broaden and diversify Singapore’s economy. At the time when Singapore became a selfgoverning state in 1959, its economic prospect was gloomy. It depended too heavily on the entrepot trade, and its entrepot status was threatened by the increased attempts of neighboring states at direct trading with both producing and consumer nations. At the 117

See Lim Chong Yah, et al., Policy Options for the Singapore Economy, (McGraw-Hill Book Company, Singapore, 1988), p. 7.

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same time, substantial unemployment and explosive rate of population growth posed a serious problem to Singapore economy.118 Industrialization which would broaden the base of Singapore as well as to provide jobs for unemployed Singaporeans seemed to be the first logical step to be taken by the government. The establishment of the Economic Development Board facilitated the planning and execution of the industrialization. The channelling of government resources into the industrial sector, the creation of industrial sites and offering of excellent concessions for the investors (such as tax holidays, tariff protection, import quotas, term loans, training facilities and technical assistance) were combined to make the industrialization a success.119 The focus of the industrialization in this early stage was on the light industry such as textile and garments, metals and engineering industry and the petroleum industry. With a regulated and disciplined work force, reasonably low wages, stable government and efficient bureaucracy, the industrialization programme had no difficulty to attract foreign investors. This was reflected in the sharp increase of foreign equity capital in industry from $8.6 million at the end of 1962 to $84.4 million at the end of 1966 and further to $252.8 million in mid 1969.120 The largest investor was U.K., followed in order of importance by the United States, Hong Kong, Japan, Indonesia and Malaysia.121 In the 1970s, the focus of Singapore economic development was finance. The development of industry, entrepot trade and petroleum industry required effective financial services. In addition, Singapore had the great potential to become the financial center of Southeast Asia, matching the status of Hong Kong in East Asia. In 1972, the Singapore government removed control over foreign exchange, allowing free trading on foreign currencies. Further, the Singapore government had established stock exchange, gold trading and commodity trading centres. With the 118

You Poh Seng & Lim Chong Yah (eds.), The Singapore Economy (Singapore, Eastern Universities Press, 1971), p. 1. 119 Ibid., p. 7. 120 Ibid., p. 22. 121 Ibid.

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government’s encouragement and special concessions, more than 200 foreign banks were attracted to set up branches in Singapore. In the 1980s, the focus of the Singapore economic development was on the development of electronic industry. With the development of home computers, Singapore saw the excellent opportunity to cash in this new development. The government set up the National Computer Center in 1981, and with the support of two universities in Singapore, computer studies received much boost and generated a great deal of public interest in computer business. At the same time, the government also encouraged foreign companies to establish their branches in Singapore to produce computer hardware, software etc.122 Thus, electronic industry emerged as a mainstay of Singapore’ economy. In addition, Singapore government also developed the island as a tourism center of Southeast Asia. Starting in the middle of the 1960s, the government had built tourism infrastructures such as parks, gardens and museums. The building of Sentosa island tourist center, and the construction of the Tang City were two of the prominent projects that attracted tourists from Asian and Western countries. By early 1990, the number of tourists had exceeded 5 million. Rapid economic development in Singapore provided excellent opportunity for the Chinese business to grow and prosper. In the late 1960s Chinese business had just recovered from the shocks of the separation of the island republic from Malaysia in August 1965 and the inconveniences associated with the separation which had divided their businesses in two different countries. Thus, the Chinese business was a bit slow to take full advantage of the economic initiatives taken by the government. Their involvement in the pioneer industrial projects were not as much as what the government had wished. However, they did get involved in the pilot projects together with the Chinese from Malaysia, Hong Kong and Indonesia, but principally in the textile and garment making industries. In the 1970s, the Chinese business was actively involved in developing Singapore as the financial center in Southeast Asia. Most of the local Chinese banks (13 of 122

See Guo Yan, Sixiaolong tengfei zhimi (The Secret of the Taking-off of the Four Little Dragons) (Beijing, Gaige chubanshe, 1993), pp. 40–41.

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them) were involved and led by the OCBC group which had operated in Singapore and Malaysian region for over 40 years since 1932. The Chinese business was also involved in the development of electronic and tourist industries of which they played a positive supporting role. In general, Chinese business had dominated certain sectors of Singapore’s growing economy. In industry, Chinese had controlled the light industry manufacturing food (included canned food, beverages, vegetable oil, bakery and biscuits, noodles, rice vermicelli, confectionery), sawmilling, furniture, soap, cane, plastics, rubber processing, textiles and garment making. In commerce, they were predominant in shop-house business, hawking, restaurants, coffee house and hotels. They also shared wholesale business with large foreign firms. In transport and communication, the Chinese had a lion share in the land and coastal transport.123 In 1970, 10 Chinese bus companies had a combined 768 buses covering the city center and suburban networks.124 In financial sector, 13 Chinese banking groups had a reasonable share of the business, and were active in promoting Chinese share of industry and Chinese business activities. Three Chinese banking groups were of importance. The OverseaChinese Banking Corporation (OCBC) was founded in October 1932.125 In 1988, the group had paid up capital of S$559 million and an assets of S$19,196 million. It consisted 38 branches and 2 subsidiary banks in Singapore; 37 branches in Malaysia, 3 in Hong Kong, 2 each in China and Japan, 1 in U.K., 2 in the United States, 6 in Australia and 1 in Thailand. The principal activities of this banking 123

See Cheng Lim-Keak, Social Change and the Chinese in Singapore (Singapore, Singapore University Press, 1985), pp. 86–87. 124 See Chui Kuei-ch’iang (Cui Guiqiang), Xinjiapo huaren: Cong kaibu dao jianguo (The Chinese in Singapore: From the Early Settlement to the Founding of the Republic) (Singapore, Xinjiapo Zhongxiang huiguan lianhe zonghui, 1994), p. 258. 125 For early history of the Oversea-Chinese Banking Corporation (OCBC), See Dick Wilson, Solid As A Rock: The First Forty Years of the Oversea-Chinese Banking Corporation (Singapore, OCBC, 1972). For a later history of the bank, especially the role of Tan Chin Tuan, see Grace Loh, Goh Chor Boon & Tan Teng Lang, Building Bridges, Carving Niches: An Enduring Legacy (Singapore, Oxford University Press, 2000).

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group are in banking, finance, investment, stockbroking and property investment. It is also involved in fund management, trustee and nominee services, property development and management, hotel, gold and futures dealings.126 The second most powerful Chinese banking group in Singapore is the United Overseas Bank group (UOB) led by Wee Cho Yaw (Huang Zuyao), a well-known Hokkien banker.127 In 1988, the group had paid-up capital of S$447 million with total assets in excess of S$20,304 million. It had a network of 79 branches which covered every corner of Singapore. It also expanded its operations overseas, and its branches can be found in Malaysia, Indonesia, Hong Kong, China, Japan, South Korea, U.K., U.S., Australia and Canada. The group is also involved in a wide range of financial and other business activities. This includes corporate banking, corporate finance, international banking, investment, insurance, stockbroking, investment management, leasing and hire-purchase financing, bullion and financial futures, hotel and hotel management, property development and management, computer services, trustee services, nominee and custodian services, management services and shipping.128 The third largest Chinese banking group in Singapore is the Overseas Union Bank group (OUB) which was incorporated in Singapore in 1949. In 1988, it had a paid-up capital of S$307 million with assets in excess of S$10,367 million. It had 35 branches in Singapore, and had 70 branches and offices in 14 countries. The bank was founded and led by Lien Ying Chow (Lian Yingzhou), a wealthy 126

See Rosalind Chew, “Local Chinese Banks in Singapore”, in Leo Suryadinata (ed.), Chinese Adaptation and Diversity: Essays on Society and Literature in Indonesia, Malaysia & Singapore (Singapore, Singapore University Press, National University of Singapore, 1993), pp. 60–61. 127 For a biography of Wee Cho Yaw (Huang Zuyao) in Chinese, see Zheng Mingshan, Huang Zuyao zhuan (A Biography of Wee Cho Yaw) (Hong Kong, Ming Liu chubanshe, September, 1997). For the history of United Overseas Bank (UOB, Dahua yinhang in Mandarin), see Dahua yinhang, Daye Huanian (The United Overseas Bank: Great Enterprise and Sparkling Years) (Singapore, United Overseas Bank Group, 1985), pp. 11–97. 128 See Rosalind Chew, op. cit., pp. 61–62.

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Teochew banker.129 The group also had a wide range of financial and business activities.130 Although Chinese business in Singapore has not been obstructed by racially-oriented hostile legislations, it nevertheless had to compete fiercely with foreign companies and the government-owned establishments. As export-driven industrialization was to lift Singapore’s economic performance, the Government increasingly looked to foreign conglomerates, principally U.S. and Japan for the rapid development. With their huge capital, advanced technology and management expertise, plus ready markets, the foreign companies in Singapore had held the competitive edge over Chinese companies.131 In addition, the Government of Singapore also directly participated in the economy, establishing wholly-owned or partly owned companies. Many government’s companies began as extensions of activities of various government ministries, and some were formed on the basis of statutory boards which came into existence in 1969.132 All government’s companies, though supposed to compete fairly in the markets, enjoyed patronage and reputation that private Chinese business did not have. There were complaints aired in the Chinese business communities of the unfair competition by the government companies in a wide range of business. The competitions posed by the foreign and government-owned companies had made Chinese business more organized, more efficient and prepared to modernize in order to grow and prosper.

129

For the founding of the Overseas Union Bank (OUB) in 1949 by Lien Ying Chow (Lian Yingzhou), see Lien Ying Chow with Louis Kraar, From Chinese Villager to Singapore Tycoon: My Life Story (Singapore, Times Books International, 1992), pp. 89–90. 130 See Rosalind Chew, op. cit., p. 63. 131 See Cheng Siok Hwa, “Economic Change and Industrialization”, in Ernest C.T. Chew & Edwin Lee (eds.), A History of Singapore (Singapore, Oxford University Press, 1991), p. 208. 132 Ibid., p. 213.

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Chapter 11

Chinese Business in Indonesia

Entrepot Trade and Chinese Business Chinese had been trading with the natives of the Indonesian Archipelago long before the arrival of the Europeans in the early 16th century. Chinese traders from ports of southern provinces of Guangdong and Fujian brought along valuable Chinese commodities in exchange for archipelago produce. The trade was carried out by junks which set sails for the islands with the southwest monsoon and returned to China with the northeast monsoon, and the volume of trade was not huge but the profit was enormous.1 Chinese business with the natives of the Indonesian archipelago flourished during the Song and Yuan Dynasties (10th to 14th centuries) because of government’s encouragement in foreign trade.2 The lucrative trade continued to flourish in the 15th century despite a new restrictive policy adopted by early Ming rulers. Two types of Chinese settled in the islands engaging actively in business: those who had 1

See Chen Xiyu, Zhongguo fanchuan yu haiwai maoyu (China’s Junks and Overseas Trade) (Xiamen, Xiamen daxue chubanshe, April, 1991), pp. 1–90. 2 For flourishing trade between China and Indonesian Archipelago, see Chen Gaohua & Wu Tai, Song Yuan shiqi de haiwai maoyi (China’s Overseas Trade during the Song Yuan Periods) (Tianjin, Tianjin renmin chubanshe, 1981), pp. 29–34; for a more thorough examination of the foreign trade of Yuan dynasty, see Yu Changshen, Yuandai haiwai maoyi (The Overseas Trade of the Yuan Dynasty) (Xian, Xibei daxue chubanshe, 1994). For Song government’s encouragement of foreign trade by consolidating the system of Inspectorate of Commerce (Shibosi), see Fujita Toyohachi, “Songdai Shibosi ji shibo tiaoli” (Inspectorate of Commerce and Inspectorate’s Rules and Regulations of the Song Dynasty), in Fujita Toyohachi (translated by He Jianmin), Zhongguo nanhai gudai jiaotong congkao (Studies on Ancient Chinese Relations with Southeast Asia) (Shanghai, Shangwu yinshuguan, 1936), pp. 239–341. 341

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established business networks in the region and were induced to settle with their families for economic reasons; merchant-pirates who were against the ban on private trade imposed by the Chinese government. Ma Huan who accompanied Admiral Zheng He to Southeast Asia in 1413 confirmed the existence of a Chinese town near Tuban on the island of Java where more than a thousand Chinese families resided. The headman of the town was from Guangdong province, and the Chinese residents there were actively involved in trade with natives from various places.3 Obviously, these Chinese settlers did business with the natives selling them imported Chinese goods and collecting local produce for export. Business was conducted in a peaceful manner, and both parties benefited from the trade. However, the Chinese merchant-pirates who settled in the Archipelago were much more forceful in conducting their trade. Organized and armed, they defied Ming’s prohibition and continued their trade with the islands. Government’s suppression led them to flee China and occupied port Palembang at the end of the 14th century. They monopolized the coastal trade of the region or were sometimes involved in piracy.4 Six state trading expeditions to Southeast Asia and Indian Ocean during the Yong-le emperor of early Ming helped to raise the curtain of 3 See Ma Huan, annotated by Feng Chengzhun, Yingyai shenlan jiaozhu (Beijing, Zhonghuashuju, 1955), pp. 8–9. 4 Principal merchant-pirates among them were Liang Daoming and Chen Zuyi. A native of Nanhai of Guangdong province, Liang occupied part of Palembang with thousands of his followers and monopolized the trade in the region. More notorious was Chen Zuyi, a native of Chaozhou of Guangdong province, who fled China to Palembang with his followers during the reign of Hongwu emperor (late 14th century) and were involved in plundering of trading ships. See “Sanfuqi zhuan” (A History of Sri Vijaya), in Ming Shi (A History of Ming), Vol. 321.; Ma Huan, annotated by Feng Chengzhun, ibid., pp. 16–17. For the interpretation of Liang and Chen as anti-dynastic private merchants, see Zhu Jieqin, Dongnanya huaqiaoshi (A History of the Overseas Chinese in Southeast Asia) (Beijing, Gaodeng jiaoyu chubanshe, 1990), pp. 24–25. See also Zhu Jieqin, Dongnanya huaqiaoshi (A History of Overseas Chinese in Southeast Asia) Wai yizhong (A revised and reissued edition) (Beijing, Zhong Hua shuju, 2008), p. 20.

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the ‘Age of Commerce’ in Southeast Asia, and greatly boosted the consumption of island produce in China’s markets.5 But much of the China trade was done through official channels between Southeast Asian countries and the Ming Court. However, the entrepot trade in Southeast Asia continued to grow in the 15th century. This was made possible by the weakening of the enforcement of the embargo by Ming officials and the circumventing of the ban by the Ryukyo (Liuqiu) port which served as a crucial trade link between southeast and northeast Asian regions.6 The arrival of the Europeans at the beginning of the 16th century altered the landscape of trade in Southeast Asia. European success in breaking Arab monopoly of Asian trade opened up a new vast market for Southeast Asian produce, and directly stimulated entrepot trading activities. But the Portuguese conquest of Malacca, the foremost international entrepot in the region, and its harsh policy forced many entrepot traders to shift their base to Banten, a rising entrepot on the West coast of Java. Originally a port of little significance on West Java, Banten came under the rule of the Sultan of Demak in 1527, and was developed into an international entrepot. The installation of a new regime in 1568 under Hassan Udin, a vassal of the Sultan of Demak, injected new dynamism in the promotion of international trade.7 This development coincided with the abolition of Ming’s trade embargo in 1567;8 and as a result, many Chinese traders were attracted to Banten for international business.

5

See Anthony Reid, Southeast Asia in the Age of Commerce, 1450–1680, Volume Two: Expansion and Crisis (New Haven and London, Yale University Press, 1993), p. 12. see also T’ien Ju-kang, “Cheng Ho’s Voyages and the Distribution of Pepper in China”, in Journal of Royal Asiatic Society, (1981), pp. 186–197. 6 Anthony Reid, op. cit., pp. 15–16. 7 See J.C. van Leur, Indonesian Trade and Society: Essays in Asian Social and Economic History (The Hague, W. van Hoeve Ltd., 1955), p. 137; Wen Guangyi & Cai Renlong et al., Yindu nixiya huaqiaoshi (A History of the Chinese in Indonesia), (Beijing, Haiyang chubanshe, 1985), p. 77. 8 For the lifting of the prohibition in 1567, see Zhang Weihua, Mingdai haiwai maoyi jianlun (An Introduction to the Study of Overseas Trade of the Ming Dynasty) (Shanghai, 1955); Li Jinming, Mingdai haiwai maoyishi (A History of Overseas Trade of Ming Dynasty) (Beijing, Zhongguo shehui kexue chubanshe, 1990), p. 109.

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The manner in which the Chinese conducted their entrepot trade in Banten was no different from other ports in Southeast Asia. They carried with them shiploads of silks, porcelains, copperware , iron pots and linen to Banten; and returned with pepper, Moluccan spices, sandalwood, camphor, nutmeg and cloves, ivory and tortoise- shell.9 The entrepot trade was conducted at two different levels: whole sale and retail. The former was conducted in an international market place on the east of the city outside the gates; while the latter was carried out both at the square of the palace and the China town.10 With substantial Chinese population in the port and a vast China market back home, the Chinese entrepot traders occupied dominant position among international traders in Banten. In addition, they held two triumph cards over other foreign competitors in the trade: substantial control over supply of pepper in Banten; and a control over supply of an exchange medium — picis (a kind of lead and copper alloy coin manufactured in coastal Fujian and Guangdong).11 The supply of pepper came from two sources: local supply from hinterland of Banten; and external supply from pepper growers in Jambi and other ports of eastern Sumatra. Chinese control local pepper through direct purchase from native producers and participation in its cultivation. Chinese traders climbed the hills, bought the produce directly, and advanced credit to the growers who repaid their debts in next year’s crop.12 The control over the supply of Picis gave Chinese entrepot traders additional edge over foreign 9

See a study on early Chinese merchants and sojourners in East and Southeast Asia by James Chin Kong titled “Merchants and Their Sojourners: The Hokkiens Overseas, 1570–1760” (Ph.D, thesis, Department of History, University of Hong Kong, October 1998), pp. 142–143. 10 J.C. van Leur, op. cit., p. 140; Wen Guangyi & Cai Renlong et al., op. cit., p. 78.; Zhang Xie, Dongxiyang kao (A Study of the Eastern and Western Oceans) (Beijing, Zhonghuashuju, 1981), p. 48. 11 For the origins of the picis, see Leonard Blusse, “Trojan Horse of Lead: The Picis in Early 17th century Java”, in Leonard Blusse, Strange Company: Chinese Settlers, Mestizo Women and the Dutch in VOC Batavia (Dordrecht, Holland, Foris Publications, 1986), pp. 36–38. 12 Ibid., p. 39.; Wen Guangyi & Cai Renlong et al., op. cit., p. 80.

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competitors for imported pepper. They jacked up the price of pepper by withholding the supply of Picis which lifted the exchange rate of Picis in relation to European silver reals.13 The upper hand that Chinese traders enjoyed in Banten unwittingly led to their eventual downfall; for the Dutch traders who were determined to gain a lion share and future monopoly of pepper trade in the Indonesian Archipelago were forced out of Banten, but founded the rival port in Batavia. Batavia was entirely a Dutch creation. Failing to control pepper trade at Banten and facing increasing competition from the British, the Dutch had to do something extra-ordinary if their goal of monopolizing spice trade in Indonesian archipelago was to be realized. They were to found a new trading port on West Java to compete with Banten and eventually to replace it as the leading international entrepot. This gigantic task was undertaken by a young ambitious Dutchman, Jan Peetersz Coen who became the founder of Batavia and its first Governor. Coen was an empire builder with foresight, astuteness, drive and aggressiveness. His single-mindedness and highhanded approach were the ingredients of his success in building the Dutch commercial outpost in the Indonesian archipelago. The key to his success rested with his ability to induce, coerce and control Chinese for his purpose. He used Chinese labor and contractors to build infrastructure of the new port; he induced and forced Chinese traders from Banten to shift their operation to Batavia; and he even went to the extent of kidnapping immigrants along China coast to Batavia for encouraging Chinese migration.14 His highhanded approach bore excellent results — the new city was practically turned into a Chinese city under Dutch protection. What underpinned the success of Batavia as a trading port was the merging of Dutch and Chinese commercial interests. With its warehouse facilities, Batavia emerged as the ‘keystone’ of Dutch trading posts all over 13

Leonard Blusse, op. cit., pp. 40–42, See Leonard Blusse, “Batavia, 1619–1740: The Rise and Fall of a Chinese Colonial Town”, in C.F. Yong (ed.), Special Issue on Ethnic Chinese in Southeast Asia, as an independent issue of Journal of Southeast Asian Studies, Vol. 12, No. 1 (March, 1981), p. 166. 14

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Asia, and at the same time, it also operated as the ‘cornerstone’ of Chinese trading networks in Southeast Asia.15 The control mechanism with which the Dutch rulers in Batavia applied to the local Chinese population was the ‘Captain’ (Kapitan) system, a system that was tried by the Portuguese in Malacca.16 Deriving his authority from the Dutch, the Chinese Captain, though unpaid, had exercised effective control over his compatriots in the new port. His self-interest was identical with those of the Dutch, and he thus was extremely loyal to the Dutch masters and to promote Dutch trading interests in the region. The man chosen by Governor-General Coen to fill the position of Chinese Captain was none other than Bencon (known in Chinese as Su Minggang ) who was one of the two Chinese contractors responsible for the construction of the port.

The Rise of Modern Chinese Business and Businessmen Against the changing economic environments in East and Southeast Asia in the second half of the 19th century, modern Chinese business in Dutch East Indies emerged. Rapid development of international trade on the China coast as a result of opening of China after 1842 stimulated trading activities with Southeast Asian region. Coincided with the opening of China were the introduction of steamship in East and Southeast Asia and the opening of Suez Canal which had revolutionized the transport system in the region.17 The implication of this 15

Ibid., p. 160; see also the same article published in Leonard Blusse, Strange Company: Chinese Settlers, Mestizo Women and the Dutch in VOC Batavia, p. 74. 16 In Singapore and Malaya, the ‘Captain’ system was known as ‘Kapitan’ system. For a detailed study of the Chinese Kapitans in early Malaya and Singapore, see C.S. Wong, A Gallery of Chinese Kapitans (Singapore, Ministry of Culture, 1963). 17 For the introduction of steamship in East and Southeat Asian region, see Kwangching Liu, Anglo-American Steamship Rivalry in China, 1862–1874 (Cambridge, Massachusetts, Harvard University Press, 1962). C.D. Cowan (ed.), The Economic Development of Southeast Asia (London, 1964); for the opening of the Suez Canal in 1869 and its impact on the trade in Singapore, see George Bogaars, “The Effect of the Opening of the Suez Canal on the Trade and Development of Singapore”, in

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development was that goods and passengers were moved faster and safer at reduced cost. In contrast with coastal mainland Southeast Asia and the Straits Settlements, the Indonesian archipelago provided a broader scope for business activities, but distance and scattering of islands took longer time to penetrate and consolidate. However, the existence of the regional trade centers such as Batavia, Semarang, Surabaya, Deli and Riau islands where the majority of Chinese traders congregated facilitated the development of modern Chinese business. What characterized the rise of modern Chinese business in the Dutch East Indies was the shift of entrepot trade to a diverse business comprising revenue farming, manufacturing, shipping and banking. The maturing of the European colonial administration on the one hand and its inability to provide full administrative service on the other gave rise to revenue farming. The formula was that the Colonial governments in Southeast Asia contracted out the right of revenue collection to private business by public auction. Higher bidder received the right and backing of the government to collect the revenue. Principal revenue farms consisted of spirit farm, opium farm, gambling farm, and pork and pawn farms. The privatization of revenue collection endowed the government with a stable income without excessive administrative costs. On the other hand, farming system also provided excellent opportunity for Chinese businessmen to make money. With the accumulated capital, the knowledge of the market, and the influence wielded within the local Chinese communities, wealthy Chinese businessmen who were concurrently the community leaders, were suited to undertake this enterprise.18 During this period, Indies Chinese businessmen were actively involved in large, medium-sized and small industries. Large industry

Journal of the Malayan Branch of the Royal Asiatic Society, Vol. 28, Pt. 1 (March, 1955), pp. 99–143. 18 For the system and the operation of revenue farming in Southeast Asia, see John Butcher & Howard Dick (eds.), The Rise and Fall of Revenue Farming: Business Elites and the Emergence of the Modern States in Southeast Asia (Basingstake, Macmillan, 1993).

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concentrated in sugar production, particularly operating sugar mills in central and east Java. For several decades in the second half of the 19th century, at least 40 Chinese sugar mills existed, of which Oei Tiong Ham’s sugar production was the largest. By 1922, 14 large Chinese sugar mills still remained.19 Chinese businessmen were actively engaged in reprocessing agricultural products such as Chinese cassava, ketchup, kapok, and copra oil. In addition, they were also deeply involved in manufacturing activities producing consumer goods for Chinese and indigenous markets such as fireworks (in Semarang, Batavia, Cheribon and elsewhere), soap, cigars and cigarettes, mineral water and lemonade etc. But they also extended their activities into traditional indigenous domains such as batik works and mat-weaving, and it was the batik making that the Chinese had achieved dominance.20 Due to a series of economic and technical changes in the second half of the 19th century, including the introduction of copper stamp and synthetic dyes, the Chinese entrepreneurs were able to make inroad into batik making, a traditional indigenous industry. With their easy access to capital and the control over the trade of batik ingredients, they managed to obtain a commanding position in this traditional Javanese village industry. By the early 1890s, it was reported that the Chinese had dominated the industry, and by 1909 the batik industry in Batavia was said to be completely in Chinese hands.21 The rise of cash crop industry in Southeast Asia in the second half of the 19th century opened a new economic frontier for Ethnic Chinese business. Responding to a growing demand in the world market, cash crop industry in Southeast Asia grew steadily. The demand for sugar, pepper and gambier, coffee and rubber increased as a result of growth of population and expanding industrial

19

See Writser Jans Cator, The Economic Position of the Chinese in the Netherlands Indies (Oxford, Basil Blackwell, 1936), p. 114. 20 Ibid., pp. 114–115. 21 See Christine Dobbin, Asian Entrepreneurial Minorities: Conjoint Communities In the Making of the World-Economy, 1570–1940 (Richmond, Surrey, Curzon Press Ltd., 1996), pp. 173–176.

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revolutions in Europe and North America. European merchants provided capital and technology and controlled the international markets, but they were unable to control the recruitment and management of labor. This provided room for Chinese businessmen to find their niche in the production of cash crops. With the control over the supply of Chinese laborers, they possessed a bargaining power with their European counterparts in the industry: they could provide labor for European planters, or partner with them, or as competitors. They could also move into light manufacturing industry based on semi-processing of cash crop produce.22 At the same time, increased trade and business activity called for introduction of modern banks and shipping lines which would further facilitate business activities

Case Studies: Oei Tiong Ham and Zhang (Tjong) Brothers Typifying the rise of modern Chinese business in Dutch East Indies was the emergence of the Oei Tiong Ham Concern (Huang Zhonghan gongsi), the first business empire of Southeast Asia.23 The forerunner of the Oei Tiong Ham Concern was Oei Tjie Sien (Huang Zhixin), a Chinese immigrant born in 1835 in Tong An district of Southern Fujian province.24 Fleeing from Manchu apprehension, Oei Tjie Sien arrived in Semarang in 1858 at the age of 23. Within five years, he rose rapidly from a peddler to a reputable wholesale merchant founding the famous company, Kian Gwan (Jianyuan in 22

For a thorough investigation into the activities of Chinese cash crop planters in Singapore and Malaya, See James C. Jackson, Planters and Speculators: Chinese and European Agricultural Enterprise in Malaya, 1786–1921 (Singapore, University of Malaya Press, 1968). 23 This is the term used by Professor Yoshihara Kunio of Kyoto University to describe the importance of the Oei Tiong Ham Concern which became the title of his edited book. See Yoshihara Kunio, Oei Tiong Ham Concern: The First Business Empire of Southeast Asia (Kyoto, The Center for Southeast Asian Studies, Kyoto University, 1989). 24 For a short biographical sketch of Oei Tjie Sien, see Chapter 4, “The Rise of Modern Ethnic Chinese Business Enterprise”.

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Mandarin) in 1863. He possessed all the necessary ingredients of a successful immigrant. He was literate, hard working, thrifty, and possessed business acumen.25 Apart from these personal attributes, the business environment in Semarang favored aspiring and hard-working immigrants. At the time of Tjie Sien’s arrival, Semarang was the biggest harbor and trading center of Java, surpassing the importance of Batavia.26 Being able to read, Tjie Sien had a competitive edge over other Chinese immigrants in business dealings. His literacy must also have earned some respect and acceptance into the local Peranakan Chinese society which had commanded influence in business. The founding of Kian Gwan Company in 1863 transformed Oei Tjie Sien into a respectable wholesale merchant. It was an important landmark in the history of Oei Tiong Ham Concern. The acquisition of a wholesale merchant status lifted Tjie Sien’s credit standing and facilitated his business activities. His business acumen was reflected in his ability to take advantage of the rise of new economic opportunity as a result of the demise of the Cultivation system in 1870 in Dutch East Indies.27 He traded in Chinese commodities and exported local 25

Oei Tjie Sien’s grand-daughter, Oei Hui Lan, recalled the hard and thrifty life of her grandparents in building up business as “They both shared a will to survive and a determination to succeed... They lived frugally on tea and rice. Night after night, as Tjie Sien worked late on his accounts, he pulled out the desk drawer and leaned his flat stomach against it to ease the hunger pains. His wife, worn-out from keeping shop and tending the wants of her growing family, rose swiftly from pallet bed whenever the baby cried, lest its wails disturb her husband’s calculations. To and fro she walked, rocking the child in her arms, often falling asleep as she stood, her tired back propped against the wall”. See Oei Hui Lan, “Reminiscences”, in Yoshihara Kunio (ed.), Oei Tiong Ham Concern: The First Business Empire of Southeast Asia, p. 24. 26 See Onghokham, “Chinese Capitalism in Dutch Java”, in Yoshihara Kunio (ed.), Oei Tiong Ham Concern: The First Business Empire of Southeast Asia, p. 60. 27 For the meaning and contents of the Cultivation System, See Cornelis Fasseur (tranlated by R.E. Elson), The Politics of Colonial Exploitation: Java, The Dutch and the Cultivation System (Ithaca, Southeast Asia Program, Cornell University, 1992), pp. 26–55; for the introduction and the impact of the Cultivation System, see R.E. Elson, Javanese Peasants and the Colonial Sugar Industry: Impact and Change in an East Java Residency, 1830–1940 (Singapore, Oxford University Press, 1984), pp. 31–101.

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agricultural produce such as sugar, rice, tobacco and gambier, and made Kian Gwan a very successful trading company.28 By the 1880s, Oei Tjie Sien emerged as a very wealthy merchant controlling a large trading company and some prime properties. But he was conservative and lacked of innovative spirit. However, Kian Gwan had laid the solid foundation for the future expansion of Oei Tiong Ham Concern. Oei Tiong Ham (Huang Zhonghan), son of Oei Tjie Sien, was a man of different cut. Unlike his father who was conservative and cautious, he was innovative and risk-taking. His father was basically a Chinese who was comfortable to live in a Chinese world, putting on Chinese style of clothes and eating Chinese food; while Tiong Ham was Westernized with European dress and a Dutch styled mansion.29 Being married into an established family, Tiong Ham was accepted more readily than his father by the Peranakan elites who controlled political and economic powers of the Semarang Chinese community. His appointment to the position of Luitenant, a junior but coveted office, in 1886 at the age of 20 was a remarkable achievement.30 10 years later, his appointment by the Dutch authorities to the highest position of Chinese Majoor in Semarang signified the rise of his political power and his superior economic status.31 This political connection with the Dutch was most useful for the expansion of his business empire.

28

See J. Panglaykim & I. Palmer, “Study of Entrepreneurship in Developing Countries: The Development of One Chinese Concern in Indonesia”, in Journal of Southeast Asian Studies, Vol. 1, No. 1 (Singapore, March, 1970), p. 86; Onghokham, “Chinese Capitalism in Dutch Java”, in Yoshihara Kunio (ed.), op. cit., p. 61. 29 Onghokham, ibid., p. 63. 30 James R. Rush, Opium To Java: Revenue Farming and Chinese Enterprise in Colonial Indonesia, 1860–1910 (Ithaca and London, Cornell University Press, 1990), p. 249; Liem Thain Joe (translated by Li Xuemin et al.), Sanbaolong lishi: zi Sanbao shidai zhi huaren gongguan de chexiao (A History of Semarang: From the Era of Zheng He to the Abolishment of the Chinese Associations) (Guangzhou, Institute of Overseas Chinese Studies, Jinan University, 1984), p. 180. 31 Onghokham, “Chinese Capitalism in Dutch Java”, in Yoshihara Kunio (ed.), op. cit., p. 63.

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Tiong Ham proved to be the master of political connections. He was well aware of the importance of political ties for his business activities. Disadvantaged by having no solid backing of the Chinese government, any ambitious Chinese businessman would have to cultivate political connections with the Colonial government under whose administration he prospered. Tiong Ham was of no exception. His skill of political networking by using his unlimited economic resources earned him the offices of Chinese Lieutenent and Majoor in Semarang. He was always careful in dealing with the Dutch, and was cautious not to offend any Dutch officials. It was claimed that his horse carriage never overtook the carriages of Dutch officials.32 Oei Tiong Ham was also a master of personal connections (guanxi). Brought up in a web of complex personal relationships, he knew well how to cultivate the type of connection which would benefit him and his business. These connections were forged beyond the Chinese community of Semarang, extending to the entire Dutch East Indies and the Ethnic Chinese communities in Southeast Asia. Tiong Ham was said to be fond of making friends with the famous and the powerful, including two powerful Zhang brothers (Tjong brothers), Zhang Yunan and Zhang Hongnan of Deli (Medan), Sumatra. Both Zhangs were wealthy businessmen, well-connected politically with the Dutch and the Qing governments.33 How far 32

Ibid. Tjong A Fie or known as Tjong Yiauw Hian (Zhang Yaoxian in Mandarin) was the younger brother of Tjong Jong Hian (Zhang Yongxian in Mandarin) or better known in Chinese government circles as Zhang Yunan (Chang Yu-nan). Both were Hakka born in Mei district of Guangdong province. Tjong Jong Hian came to Jakarta as emigrant when he was young. In 1880 at the age of 26, he went to Deli port where he laid the foundation for his prosperous business. He befriended the Dutch and was made the Chinese Luitenant of Medan. He was later promoted to the position of Kapitein and Majoor. He was a wealthy property owner, banker and later the founder of the famous Chaochow Railway in 1906. His brother Tjong A Fie came from China and joined his brother in 1880. In 1888, he was also made Luitenant, and like his brother, was promoted to Kapitein and Majoor. For a short biography of Tjong brothers, see Leo Suryadinata, “Chinese Economic Elites in Indonesia: A Preliminary Study”, in Jennifer Cushman and Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese since World War II (Hong Kong, 33

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Tiong Ham had utilized the connections with the Zhangs is yet to be investigated. He was also well-connected in the local Chinese community in Semarang. Being a Dutch appointed Chinese officer, he was well-respected in the community and his influence was cultivated by other aspiring Chinese merchants. But this influence was on decline due to the rise of Siang Hwee (Shang Hui, Chinese Chamber of Commerce) in the Dutch East Indies in the first decade of the 20th century.34 Tiong Ham was shrewd to see the growing power of the Siang Hwee in the Chinese community, and was actively involved in it. He had no hesitation to take advantage of this connections. He used his influence in Siang Hwee to hit a Dutch competitor of Kian Gwan in 1908, and in 1912 to avoid a local anti-Japanese boycott that would have damaged Kian Gwan’s trade with Japan.35 Hong Kong University Press, 1988), pp. 263–264; for Tjong Jong Hian’s (Zhang Yunan) involvement in the founding of the Chaochow Railway, see Yen Chinghwang, “Chang Yu-nan and the Chaochow Railway (1904–1908): A Case Study of Overseas Chinese Involvement in China’s Modern Enterprise”, in Modern Asian Studies (Cambridge, Cambridge University Press), Vol. 18, No.1 (1984), pp. 119– 135, see also in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 177–195. 34 For the origins and activities of Siang Hwee in Dutch East Indies, see Lea E. Williams, Overseas Chinese Nationalism: The Genesis of the Pan-Chinese Movement in Indonesia, 1900–1916 (Glencoe, The Free Press, 1960), pp. 95–103; for the founding of the Chinese Chamber of Commerce of Batavia in December 1906 (11th moon of 32nd year of Guangxu emperor) and the election of Li Xing-lian and Qiu Luanxing as Zong-li (Chairman) and Xieli (Deputy Chairman) respectively, see the original Qing document entitled “Memorial from the Ministry of Commerce to the Court for the Granting of Official Credential to the Chinese Chamber of Commerce of Batavia dated 14th July 1907 (5th day of 6th moon of the 33rd year of Guangxu)”, in Shangwu guanbao (The Gazettes of Commercial Affairs), Peking, the Ministry of Commerce, original, 1906–1910, ding-wei year (1907), Vol. 14, pp. 5–6; for the use of Siang Hwee as a mechanism for Qing political control and economic influence over Overseas Chinese, see Yen Ching-hwang, “Ch’ing China and the Singapore Chinese Chamber of Commerce, 1906–1911”, in Leo Suryadinata (ed.), Southeast Asian Chinese and China: The Politico-Economic Dimension (Singapore, Times Academic Press, 1995), pp. 133–160. 35 Lea E. Williams, op. cit., pp. 102–103.

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The careers of the Zhang brothers, Zhang Yunan and Zhang Hongnan (or they were also popularly known as Tjong brothers, Tjong Jong Hian and Tjong A Fie) provide another illustration of the rise and development of modern Chinese business enterprises in the Dutch East Indies. Unlike Oei Tiong Ham, the Zhang brothers were of Hakka stock, a minority group in South China. They were born in their native Mei district, Jiaying prefecture on the eastern part of Guangdong. Zhang Yunan (or Romanized as Chang Yu-nan, and his courtesy name Zhang Yongxian), the elder brother, was born in 1851, received few years of traditional education, and left China at the age of 17 for Java in search for a better life.36 He started working with Zhang Bishi’s company in Batavia and was gradually being promoted to a senior position.37 Combining the knowledge of doing business and ambition, Zhang Yunan soon started his own business, a Chinese grocery shop. His thrift and diligence saw the business growing. However, his ambition and foresight led him to choose northern Sumatra as the center for building his future business empire. In 1878, he partnered with his former boss, Zhang Bishi, to develop cash crop plantations in the Deli (Medan) area. Their company, the Li Wang Company was involved in the plantating of tobacco, coffee, coconut, tea and rubber. Several rubber estates were developed, and a mill to process the tea was also established.38 Located on the northeast coast of Sumatra, Deli benefited from its geographical position of being on the western part of the Straits of Malacca which saw booming business activities during the second half of the 19th century. The dynamic Chinese commercial activities in Penang, Malacca and Singapore radiated immense business vibration to neighboring regions. At the same time, the Dutch colonial expansion in north

36

See Wen Guangyi, “Zhang Yunan, Zhang Hongnan”, in Wen Guangyi (ed.), Guangdong ji huaqiao mingren zhuan (Who’s Who of the Overseas Chinese from Guangdong Province) (Guangzhou, Guangdong renmin chubanshe, 1988), p. 69. 37 Ibid. 38 Ibid.

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Sumatra after 1865 created enormous opportunities for businessmen to exploit.39 The success in cash crop venture brought colossal wealth to Zhang Yunan and made him a reputable Chinese businessman in Southeast Asia. Like many other modern Ethnic Chinese entrepreneurs, he expanded his business empire into other lines of business such as banking, trading and shipping. He together with Zhang Bishi founded the Deli bank and two shipping lines; and he was later involved in the construction of the first Chinese commercial railroad in Guangdong, the Chaozhou (Chaochow) Railway.40 The diversification met his desire for rapid expansion and reduced commercial risk. By the late 1880s and early 1890s, Zhang Yunan emerged as the wealthiest and most powerful Chinese businessman in Sumatra. His influence extended far beyond the island. The rapid rise of Zhang Yunan in business was largely due to his ability to utilize an extensive international business network covering Southeast Asia and coastal China. The foundation of this network was built on kinship and common dialect and geographical ties. His younger brother, Zhang Hongnan (known as Zhang Yaoxian or popularly known as Tjong A Fie) who was 10 years younger in age, joined him in 1880 when his business in Sumatra was about to takeoff. Hongnan, at the age of 18, was trained by his brother as administrator and accountant.41 He became the most trusted and 39

See Antony Reid, “Early Chinese Migration into North Sumatra”, in Jerome Ch’en & Nicholas Tarling (eds.), Studies in the Social History of China and Southeast Asia (Cambridge, Cambridge University Press, 1970), pp. 290–292; for the rise of a plantation society and plantation industry in Deli, see Jan Breman, Taming the Coolie Beast: Plantation Society and the Global Order in Southeast Asia (Delhi, Oxford University Press, 1990), pp. 13–130. 40 For details of Zhang Yunan’s active involvement in the construction of the Chaochow Railway, see Yen Ching-hwang, “Chang Yu-nan and the Chaochow Railway (1904–1908): A Case Study of Overseas Chinese Involvement in China’s Modern Enterprise”, in Modern Asian Studies, Vol. 18, No. 1 (1984), pp. 119–135; see also Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 177–195. 41 See Queenie Chang (Daughter of Zhang Hongnan), Memoirs of a Nyonya (Singapore, Eastern Universities Press, 1981), pp. 17–18.

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indispensable deputy of Zhang Yunan in the running of his vast business empire. Apart from this kinship ties, the dialect and geographical ties were most useful for the construction of Zhang Yunan business network. His relationship with Zhang Bishi was proved to be livelong and was most crucial to the success of his business career. Being a Jiaying Hakka, Zhang Yunan spoke a slightly different dialect from Zhang Bishi who was a Dapu Hakka. Although they were not cousins, their common surname of Zhang gave them extra closeness because of a prevailing belief that a common surname shared a distant common ancestor in Chinese history.42 In addition, Zhang Yunan worked for Zhang Bishi before he came out to start his own business. This old employer-employee relationship further consolidated the bond between these two business giants. Being 10 years older and had established his business earlier, Zhang Bishi must have identified Yunan as a promising young entrepreneur and a potential future business partner. He must also have been impressed by Yunan’s business acumen, diligence and trustworthiness. On the other hand, Zhang Yunan was grateful for Bishi’s patronage and had enormous admiration and respect for his mentor. This strong relationship proved to be everlasting and extremely beneficial to Zhang Yunan’s career. Zhang Bishi not only chose Zhang Yunan as his partner for new ventures in Sumatra, but later also appointed Yunan as the manager of his vast business interests in Southeast Asia holding his power of attorney when he was busy in 42

Michael Godley identified Chang Yu-nan (Zhang Yunan) and Chang Pi-shih (Zhang Bishi) as cousins. I hold a different view, and suggest that though both of them shared a common surname, but they were not cousins. See Michael Godley, “Chang Pi-shih and Nanyang Chinese Involvement in South China’s Railroads, 1896–1911”, in Journal of Southeast Asian Studies, Vol. 4, No. 1 (1973), p. 21; Michael Godley, The Mandarin-capitalists from Nanyang: Overseas Chinese Enterprise in the Modernization of China, 1893–1911 (Cambridge, Cambridge University Press, 1981), p. 150; Yen Ching-hwang, “Chang Yu-nan and the Chaochow Railway (1904–1908): A Case Study of Overseas Chinese Involvement in China’s Modern Enterprise”, in Modern Asian Studies, Vol. 18, No. 1 (1984), pp. 125–126, note 32; also in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 191–192, note 32.

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China.43 Being the partner and later Zhang Bishi’s confidant, Zhang Yunan was able to utilize fully Bishi’s reputation and business networks in Southeast Asia for his own benefits. Apart from his close connection with Zhang Bishi, Zhang Yunan’s business also benefited greatly from Bishi’s vast political network. Political networking for the benefit of business was a common practice among Ethnic Chinese entrepreneurs in the past and present. What determines the success of political networking are the possession of wealth, the skill to exploit the relationship between politics and business, the right connections, and personal aspiration. Judging from these criteria, Zhang Yunan’s success in establishing an international political network for the benefit of his business was certain. He possessed admirable wealth after his initial success in plantation estates in Deli area. The need of support from the Dutch authority for continuous prosperity prompted him to acquire the status within the Dutch political structure. He was made Chinese Luitenant in 1884 and in the 1890s was promoted to Kapitein and eventually the Chinese Majoor.44 The acquisition of these positions within the Dutch colonial power structure confirmed his status as the leader of the local Chinese community, and indirectly benefited his business; for the Dutch official positions enabled him to gain licences, land concessions from the government, and his enhanced social status in the Chinese community made easier for him to acquire loans as well as marketing his agricultural products. Zhang Yunan’s close relationship with Zhang Bishi proved to be the right connection for his political networking. Bishi was the most prominent Ethnic Chinese leader in late Qing China. He was first

43

See Michael R. Godley, “Thio Thiau Siat’s Newwork” (Thio Thiau Siat was another name of Zhang Bishi), in John Butcher and Howard Dick(eds.), The Rise and Fall of Revenue Farming: Business Elites and the Emergence of the Modern State in Southeast Asia (New York, St. Martin’s Press, 1993), p. 264. 44 Ibid., Leo Suryadinata, “Chinese Economic Elites in Indonesia: A Preliminary Study”, in Jennifer Cushman and Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II (Hong Kong, Hong Kong University Press, 1988), p. 264.

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appointed Chinese Vice-Consul of Penang in March 1893;45 in the decade from 1895 to 1905, he climbed up the Qing official ladder rapidly. He was made the Acting Chinese Consul-General of the Straits Settlements in 1895, and then in 1903, was granted an audience by the Empress Dowager. At the height of his political career, Zhang Bishi was appointed by the Court as the Imperial Commissioner for Promoting Commerce in Southeast Asia, one of the few highest offices ever held by an Ethnic Chinese during the late Qing period.46 Zhang Bishi’s political influence benefited Zhang Yunan directly. In 1895 the latter was appointed to the position of Chinese Vice-Consul of Penang to succeed the former who was promoted to the position of the Chinese Acting Consul-General of the Straits Settlements.47 Zhang Yunan’s new appointment in Penang was crucial for his future political networking. It provided him with a base in the Straits Settlements from which he could extend his business networks to British Malaya — the largest concentration of Chinese in Southeast Asia. At the same time, the appointment also served as a springboard for his future political activities in coastal China. Zhang Yunan also learned well from Zhang Bishi how to use wealth for political purpose, and in turn to use that political influence for economic gains. The skill of exploiting close relationship between business and politics was polished and perfected. Realizing the lowly position of the Vice-Consulship in Qing bureaucracy,48 he shrewdly 45

He was appointed to that position by the then Chinese Minister to Britain, France, Italy and Belgium, Xue Fucheng. See “Despatch to the Tsungli Yamen relating to the appointment of the Vice-Consul of Penang dated 20th day of 1st moon of 19th year of Guangxu (8 March, 1893)”, in Xue Fucheng, Chushi gongdu (Correspondence of My Diplomatic Mission ), Vol. 2 (Taipei, n.d.), pp. 25a–25b. 46 For a detailed discussion of Zhang Bishi’s political career, see Michael M.Godley, The Mandarin-capitalist From Nanyang, especially chapter 4. 47 See Kuang Guoxiang, Bingcheng sanji (An Anecdotal History of Penang) (Hong Kong, Shijie shuji, 1958), p. 90. 48 The Vice-Consulate in Penang was a very small establishment. It consisted of the Vice Consul and two other staff — a secretary and an interpreter. All, including the Vice-Consul were unpaid, and their voluntary services were compensated with award of titles. See “Zongli geguo shiwu yamen qingdang” (Tsungli Yamen Archives, Clean File), the mission of Li Jingfang in the 2nd year of Xuantong (1910); “Zongli geguo

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utilized his wealth to advance his political interests. From 1895 to 1901, he made several general contributions to various relief funds in China,49 and succeeded to acquire a brevet 4th rank with the right to wear 2nd rank feather.50 In 1902, he moved closer to the seat of power in Qing politics by making a substantial contribution of 80,000 taels to the funds for establishing a new high school in Canton. He was awarded a position of Expectant 4th Rank Metropolitan Official (Sipin jingtang houbu);51 and in 1903, he was given an audience by the Empress Dowager Cixi, a special honor given to promising new officials and talents.52 The most ambitious offensive taken by Zhang Yunan in his advancement of his political and economic interests in China was his active involvement in the construction of Chaozhou Railway, the first Chinese constructed railway and the first railway that used primarily the Ethnic Chinese capital.53

shiwu yamen qingdang” (Tsungli Yamen Archives, Clean File), the mission of Liu Yulin in the 3rd year of Xuantong (1911). 49 In a dialogue with the Empress Dowager Cixi when he was given an audience in 1903, Zhang Yunan mentioned that he had contributed to various relief funds in China. This dialogue was published in Thien Nan Shin Pao (Tiannan xinbao), 22/12/1903. 50 See “Memorial of Tao Mo, Governor-General of Guangdong and Guangxi to the Court recommending awards to Zhang Yunan and Zhou Yongyao”, in Yuji huicun (Collected Records of Imperial Decrees and Memorials) (Taipei, reprint, 1967), Vol. 43, 6th moon of 28th year of Guangxu (July 1902), pp. 17a–17b; Yen Ching-hwang, translated by Chang Ching-chiang (Zhang Qingjiang) “Qingchao yuguan zhidu yu Xing Ma huazu lingdaochen, 1877–1912” (Ch’ing’s Sale of Honours and the Chinese Leadership in Singapore and Malaya, 1877–1912), Appendix 1, in Yen Ching-hwang, Haiwai huarenshi yanjiu (Studies in Overseas Chinese History) (Singapore, Singapore Society of Asian Studies, 1992), p. 28. 51 “Memorial of Tao Mo, Governor-General of Guangdong and Guangxi to the Court recommending awards to Zhang Yunan and Zhou Yongyao”, ibid. 52 See Thien Nan Shin Pao, 22/12/1903; Lat Pau (Le Bao), 21/12/1903. 53 See Yen Ching-hwang, “Chang Yu-nan and the Chaochow Railway (1904–1908): A Case Study of Overseas Chinese Involvement in China’s Modern Enterprise”, in Modern Asian Studies (Cambridge, Cambridge University Press, 1984), Vol. 18, No. 1, pp. 119–135; See also the same article in Yen Ching-hwang, Studies In Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 177–195.

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Chinese Business in Transition (1907–1965) For the convenience of discussion of changes in Chinese business in Dutch East Indies during this period, it is divided into two phrases: the late colonial phrase between 1907 and 1941; and the early republican phrase between 1942 to 1964 with an interlude of Japanese occupation (1942–1945). The twilight of Dutch colonial rule saw a loosening of control over Chinese economic activities. Some unfavorable restrictions on the movement and trading activities of the Chinese were removed, and the expansion of Chinese economic activities was tolerated. This period saw rapid political and economic changes in the Indies and China, and their impact on the Chinese business. The collapse of the Manchu government and the founding of the Chinese Republic in early 1912 brought both uncertainty and hope to the Indies Chinese. Would War I helped to speed up the process of modernization and industrialization in the Dutch colony providing fresh opportunities for Chinese business to expand. The Great Depression in late 1920s and early 1930s brought both crisis and opportunities to the Chinese communities. The Dutch colonial economic system was weakened, so was the economic position of the Chinese communities. What was perceived to be the opportunities for the Chinese businessmen was the weakening of the Dutch control over the Chinese business. A new generation of Chinese businessmen of different socio-linguistic background emerged. What can be clearly discerned is the growth of large Chinese business and the broadening of scope of business activity. A 1909 study identified 50 prominent Chinese businessmen in Java and Sumatra, and the majority of them were involved in import-export trade, real estate, revenue farming, provision-contracting, shipping, plantation estates and manufacturing.54 But the large Chinese business in the modern sense of the word was probably confined to Oei Tiong 54

See A. Wright, Twentieth Century Impressions of Netherlands India (London, Lloyd’s Greater Britain Publishing Company, 1909), pp. 473–588; see also Leo Suryadinata, “Chinese Economic Elites in Indonesia: A Preliminary Study”, in Jennifer Cushman and Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II, p. 262.

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Ham Concern and the business empire of the Zhang brothers (Tjong brothers). However, a modern study on the Chinese business in 1940 reveals that there were at least 22 major Chinese companies in Java and Sumatra commanding capital of more than one million guilders or more. These companies included the famous Oei Tiong Ham Concern which had an estimated capital of 40 million guilders.55 They retained trading and agricultural business, but also expanded into manufacturing industry, banking and insurance, and commerce.56 What were missing from the list of Chinese business in 1940, in contrast with the previous period, were revenue farming, provisioncontracting and shipping. Perhaps these were the result of the change of the nature of the Indies economy and the impact of the politics during this phrase. Another characteristic of the Chinese business during the late Colonial era was its better organization. Spontaneous and uncoordinated growth of the previous period gave way to better coordinated development. What instrumental in this change was the establishment of the Chinese Chamber of Commerce (CCC), which was a part of a larger movement in China to stimulate the growth of Chinese business and industry. A belated discovery of the strength of merchant class by late Qing diplomats and bureaucrats prompted them to take initiatives to found a series of CCC in coastal China and the Chinese communities in Southeast Asia.57 The man who was commissioned to carry out this task in Southeast Asia was none other than the famous Zhang Bishi who founded the Singapore Chinese Chamber of Commerce on 16th March 1906, the first of its kind in Southeast 55

See Twang Peck Yang, The Chinese Business Elite in Indonesia and the Transition to Independence, 1940–1950 (Kuala Lumpur, Oxford University Press, 1998), pp. 34–36, Table 2.2. 56 Ibid. 57 For an enquiry into the motives and movement of the founding of the Chinese Chambers of Commerce during late Qing period, see Yen Ching-hwang, “Ch’ing China and Singapore Chinese Chamber of Commerce”, in Leo Suryadinata (ed.), Southeast Asian Chinese and China: The Politico-Economic Dimension (Singapore, Times Academic Press, 1995), pp. 135–136.

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Asia.58 With his extensive business connections in Dutch Indies, Zhang’s influence over the establishment of various CCC in Java, Sumatra was eminent. This together with the effort of an visiting Chinese diplomat, Qian Xun, several CCC were founded in Batavia, Surabaya, Semarang, Solo and Pontianak in 1907 with the substantial support of local Chinese businessmen.59 The efforts of the Qing government to promote Chinese business in Southeast Asia were continued by the Republican government despite its uncertain future. The Nanjing government since 1927 further encouraged the development of Ethnic Chinese education and commerce. In relation to the Indies Chinese, this was mainly carried out by the Chinese Consul-General in Batavia. Whatever the political motives that Chinese governments might have, CCC served as an effective institution to bring the Chinese businessmen in the Indies together, and to help co-ordinate their commercial activities. Competition and rivalry among Chinese businessmen were internalized, and positive elements in the Chinese business were mobilized

58

For the official document recording the founding of the Singapore Chinese Camber of Commerce, see “Xinjiapo Zhonghua shangwu zonghui yishibu”(Minutes of Committee Meetings of the Singapore Chinese Chamber of Commerce) (manuscript), Vol. 1, 1906–1909, pp. 1–2. For a correction of a common error of placing the founding date of the Singapore Chinese Chamber of Commerce on 15th March 1906 instead of 16th March 1906, see Yen Ching-hwang, ibid., p. 138. 59 For details of the founding of various Chinese Chambers of Commerce in Dutch Indies, see the original Qing documents published by Qing Ministry of Agriculture, Industry and Commerce, especially see “Memorial of the Ministry of Agriculture, Industry and Commerce to the Court relating to the granting of an official seal to the Chinese Chamber of Commerce of Batavia and approved by the Court on 19th day of 5th moon of 33rd year of Guangxu (29 June, 1907), in Shangwu guanbao (The Gazette of Commercial Affairs), 1907, Vol. 14, gongdu (Official Correspondences), pp. 5b–6a; “Memorial of the Ministry of Agriculture, Industry and Commerce to the Court relating to the granting of an official seal to the Chinese Chamber of Commerce of Semarang, Java and approved by the Court on the 4th day of 9th moon of 33 year of Guangxu (10 October, 1907)”, in Shangwu guanbao, 1907, Vol. 25, gongdu, pp. 4b–5a. See also Yen Ching-hwang, Coolies and Mandarins: China’s Protection of Overseas Chinese during the Late Ch’ing Period, 1851–1911 (Singapore, Singapore University Press, 1985), p. 191.

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and channelled towards a common goal. More importantly, the unity of the Chinese business community enhanced its bargaining power with the local Dutch authorities, and advanced its common interests. At the same time, the unity also provided a voice in dealing with Chinese governments, especially in relation to Indies Chinese investment and business activities in their home provinces in China. Yoshihara Kunio’s concept of Ersatz capitalism to describe the nature of Chinese capital in Southeast Asia that was characterized by rent-seeking and speculating,60 does not do justice to the Ethnic Chinese capitalism. Some of the Chinese capitalists in Dutch East Indies, like many other Chinese capitalists in other parts of Southeast Asia, were in search of maximum profit to feed their unquenchable growth, and they plunged into the most profitable area of business — trading. Peter Post in his study of Kwit Hoo Tong (KHT) Trading Society of Semarang, has demonstrated that KHT had accumulated large amount of liquid capital, and had favored trading of Java sugar over manufacturing and production in the Indies, because sugar trading was most profitable in pre-war Dutch East Indies.61 The end of the Dutch colonial rule and the Japanese occupation of the Indies devastated the entire economy, including those of the Chinese.62 The Chinese who were suspected of supporting China’s anti-Japanese resistance movement were severely punished, and their business destroyed. However, Chinese business managed to recover and restructure during the post World War II period, but soon they faced political uncertainty in the struggle between Indonesian nationalists and the Dutch colonial authorities. The final victory of the nationalists changed the entire political and economic landscapes in 60

For the definition of the term ‘rent-seeking’, see Yoshihara Kunia, The Rise of Ersatz Capitalism in Southeast Asia (Singapore, Oxford University Press, 1988), p. 68. 61 See Peter Post, “The Kwik Hoo Tong Trading Society of Semarang, Java: A Chinese Business Network In Late Colonial Asia”, in Journal of Southeast Asian Studies, Vol. 33, No. 2 (Cambridge, Cambridge University Press, June 2002), pp. 279–296. 62 For the impact of Japanese occupation on the Chinese business in Indonesia, see Twang Peck Yang, The Chinese Business Elite in Indonesia and the Transition to Independence 1940–1950, pp. 70–116.

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Indonesia where the Chinese were required to make great adjustment. Economic nationalism shaped the republican government’s attitude and policy towards Chinese business. Close economic relationship between the Chinese and the Dutch colonial authorities prejudiced the new government’s stance against the Indies Chinese. Chinese business was perceived widely by Indonesian nationalists as an integral part of the Dutch colonial economic system — a system based on exploitation and degradation of the natives; and the Chinese business was partly responsible for the poverty and misery of the indigenous Indonesians. Further, the anger and hatred against the Dutch were partly discharged on the Chinese because they still remained in Indonesia after the retreat of the Dutch colonial government. The aspirations of the nationalists were met by the promulgation of a series of anti-Chinese policies adopted by the Sukarno government in the 1950s. The main thrust of the anti-Chinese policies was the indigenization of business in Indonesia. It was designed to crush alien stranglehold on business, and to create an indigenous business class. It was obviously targeted at the Chinese who in the 1950s were considered to have dominated retail trade, many spheres of wholesale trade, industry, transport services and finance.63 The introduction of the so-called ‘Benteng system’ by the Republican government in early 1950 served as the initial push. Benteng means ‘Fortress’, and the ‘Benteng system’ in Indonesian history was known as a strategy of recapturing the lost territories occupied by strong enemies.64 What the term meant to

63

See J.A.C. Mackie & Charles A. Copper, “A Preliminary Survey”, in J.A.C. Mackie (ed.), The Chinese in Indonesia (Honolulu, The University Press of Hawaii & The Australian Institute of International Affairs, 1976), p. 13. 64 According to this ‘Fortress’ strategy, a circle of fortresses was built around the territory held by the enemies superior in strength. As time passed, the circle would be tightened and became smaller, and eventually troops of the fortresses would be able to annihilate the enemies. See Leo Suryadinata, Pribumi Indonesians, the Chinese Minority and China (Kuala Lumpur, Heinemann Educational Books (Asia) Ltd., 1978), p. 131.

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Indonesian nationalists was to recover the lost territories in Indonesian economy to foreigners.65 Under the operation of this system, indigenous importers were given special privileges in acquiring licenses, credit to import certain foreign goods nominated by the government. With guaranteed markets and profits, they were able to expand their business. This would result in the growth of an indigenous entrepreneurial class.66 The indigenization of business was speeded up in 1954 with the introduction of new regulations for the control of rice-milling. The ricemilling industry which was hitherto controlled by Chinese businessmen was under attack. No new licences were issued to aliens (mainly Chinese), and the alien ownership of the existing rice mills were to be transferred to the Indonesian citizens.67 The same year also saw the attempt of indigenization of harbor facilities, but they did not seem to have been successful. The expulsion of the Dutch in 1957–58 created the right mood for the climax of crushing Chinese business in rural areas. In May 1959, the Minister for Trade issued the ban on alien retail trade in rural areas, and required the aliens (mostly Chinese) to transfer their businesses to Indonesian citizens by September 30. On November 16th 1959, the new cabinet under direct control of President Sukarno promulgated a decree known as President Decree No.10 to reinforce the ban. Aliens were prohibited by law to engage in retail trade and were ordered by the government to transfer their businesses to Indonesian nationals no later than January 1st 1960.68 In the height of this anti-Chinese business sentiment, some regional commanders went to the extreme to ban the residence of Chinese in the rural areas as a measure to uproot Chinese business. Residence bans were announced in South Sulawesi on August 7th and in West Java on the 28th of the same month.69

65

Ibid. Ibid., p. 130. 67 Ibid., p. 132. 68 Ibid., pp. 134 –135. 69 See J.A.C. Mackie, “Anti-Chinese Outbreaks in Indonesia, 1959–68”, in J.A.C. Mackie (ed.), The Chinese in Indonesia, p. 86. 66

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The response of the Chinese to the indigenization thrust proved the resilience of the Chinese businessmen. Their survival instinct and adaptability helped them to weather the storm. For instance, in response to the introduction of the “Benteng system”, many Chinese businessmen were prepared to work harder at reduced profits; and collaborated with Indonesian partners who by virtue of being indigenous persons were able to obtain new licences to operate importing business. However, the indigenous Indonesians had neither capital nor expertise, and they wanted a cut in this joint business. This expedient collaboration between indigenous licence-holders and Chinese businessmen was known as ‘Ali Baba system’ (Ali the front man while Baba was the real business operator). This system, though condemned by some Indonesian nationalists, continued to operate even after 1965 into the New Order with a slightly different form.70 However, not all Chinese businessmen were capable to adapt and survive the rapidly changing political and economic environments. Some were psychologically more prepared and were better suited; but some were less adaptable and failed to cope with the change. Those who had failed to adapt left the country for China or Hong Kong in early 1960s with a belief that there was no future for themselves and their children in Indonesia. But those who were proven to be resilient stayed and prospered under the New Order inaugurated after 1966.

The Rise of Chinese Business Conglomerates The rise of Chinese business conglomerates in Indonesia was not a historical inevitability, but the result of an interplay of various forces which were beyond the control of the Chinese. The onslaught on Chinese business in the late 1950s removed its traditional bases in rural Indonesia, and left many Chinese businesses devastated. The closure of the Oei Tiong Ham Concern in the early 1960s was perceived by many Chinese businessmen as more than just a casualty of the policy of nationalization, but also a last warning shot from a hostile republican government. By this time, the Chinese business 70

Leo Suryadinata, Pribumi Indonesians, the Chinese Minority and China, p. 132.

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appeared to be heading towards total destruction. The 1965 Coup came like a thunder-bolt which caught many Chinese businessmen unprepared, and led them into an uncharted course of action. The retreat of Dutch capitalism and the relatively weak indigenous bourgeoisie created excellent opportunity for the Chinese business. But the political struggle between the pro-Communist and anti-Communist forces in Indonesia created a dilemma for the Indonesian Chinese. Their professed apolitical and non-partisan stand did not protect them in the aftermath of the 1965 coup. Many suspected Chinese sympathizers were purged, and Chinese business was thwarted for a short period. The coup also ended the transitional period of the Chinese business in the region. The 1965 Coup, in retrospect, not only terminated a left-wing government led by President Sukarno and his Communist ally, but also ended a nationalistic regime with its economic designs. The new Suharto regime changed the direction of the nation by focusing on economic development with an aim to lift standard of living of Indonesian people. The shift to economic development created a favorable environment for the rise of Chinese conglomerates. The new policy led the government first to tackle the problem of capital shortage. Domestic capital was limited and was incapable of performing the task of rapid economic development; it had to be linked and integrated with international capital. The government in 1967 promulgated the foreign capital investment law, and signed an investment agreement with the United States in order to entice foreign capitalists to invest in Indonesia.71 In search of more capital for rapid economic development, the government also turned to Indonesian Chinese for help. Since the shift of focus from political struggle to economic growth, the prejudice against Ethnic Chinese eased; and their capital, technical know-how and entrepreneurship were considered valuable for economic development. With his close relationship with some Chinese businessmen such as Liem Sioe Liong before the Coup, President Suharto realized the potential of domestic Chinese capital 71

Ibid., p. 139.

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and the aspirations of Chinese businessmen; and was eager to mobilize Chinese capital for the service of his regime. This enthusiasm of utilizing Chinese capital was instrumental in the founding of a semi-official ‘Indonesia Business Centre’ (IBC) on June 6th 1968 in Jakarta with high ranking officials and leaders of Chinese business in charge. Two Chinese businessmen who held Indonesian citizenship, Hamid (Ong Ah Lok) and Sulindro (Ma Shiling) were included in the presidium of the IBC.72 Under the instruction of the president of the IBC, Major-General Suhardiman, Ong and Ma formed the National Development Corporation (NDC) to mobilize domestic Chinese capital for supporting the government programmes. Ong and Ma together with a small group of their business friends monopolized the leadership and controlled the organization. Because of its pro-Taiwan political stand, it excluded those pro-Beijing Chinese businessmen, and had a limited success in its objectives.73 In discussing characteristics and development of Chinese business conglomerates, it should be borne in mind that not all Chinese in Indonesia are doing business, nor are they all rich. They cannot be conveniently lumped together as belonging to ‘commercial bourgeoisie’ for class analysis.74 However, as what Jamie Mackie has observed, the Chinese business in the two decades from 1966 to 1986 under the New Order had undergone dramatic structural change. There was a general lifting of socio-economic status of 4 million Chinese, and relatively few of them were involved in unskilled labor and farming occupations in which they were numerous during the 1920s–30s period.75 Apart from several key sectors monopolized by state corporations such as oil and minerals, the Chinese were actively involved in trade and commerce, finance and real estate, manufacturing and 72

Ibid., p. 140. Ibid. 74 See J.A.C. Mackie, “Changing Economic Roles and Ethnic Identities of the Southeast Asian Chinese: A Comparison of Indonesia and Thailand”, in Jennifer Cushman & Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II, p. 233. 75 Ibid., p. 243. 73

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processing industries, and transportation. They dominated most sectors in trade and commerce in partnership with trans-national companies. Capital intensive and high-tech trade were mostly in their hands. Several Chinese commercial banks emerged to challenge both state own banks and foreign banks, and real estate was dominated by the Chinese. Most sectors in manufacturing and processing industries were controlled by Chinese in joint partnership with foreign firms. Chinese shipping companies also consolidated their dominant positions, and Chinese bus and trucking companies flourished during this period.76 This fundamental change of Chinese business under the New Order gave rise to a group of Chinese business conglomerates which had never been witnessed before. At least 40 large Chinese business conglomerates can be identified in 1986.77 Prominent among them were Liem Sioe Liong’s Salim group, Tjia Kian Lion’s (William Soerjadjaja) Astra group, Tan Siong Kie’s (Hanafi) Roda Mas group, 76

Ibid., pp. 240–242, Table II: “Occupational Roles of Indonesian Chinese, 1930–1986”. 77 Richard Robison identified 40 major Chinese business groups in his book. See Richard Robison, Indonesia: The Rise of Capital (North Sydney, Allen & Unwin, 1988, Fourth impression), pp. 278–288, “Table 9.1: Major Chinese-owned Business Groups”. Cai Renrong, a leading China’s expert on Indonesian studies based in Xiamen University, identified 31 large commercial groups in 1995, see Cai Renlong, “Yindu nixiya de huaren qiye jituan” (The Ethnic Chinese Business Groups in Indonesia), in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (Study of Ethnic Chinese Business Groups in Southeast Asia) (Xiamen, Xiamen daxue chubanshe, 1995), pp. 32–33. Professor Cai Renlong in his later work (October, 2004) identified 12 Chinese mega business groups out of the 31 large commercial groups in Indonesia that he had named before, see Cai Renlong, Yinni huaren qiye jituan yanjiu (The Study of Chinese Business Conglomerates in Indonesia) (Hong Kong, Hong Kong Social Sciences Press Pte Ltd. 2004), pp. 1–504. Another Chinese scholar based at Jinan University in Guangzhou, Zheng Renliang identified 15 largest Chinese business groups in 1990, see Zheng Renliang, “Lun dangdai Yinni huaren caituan” (On the Chinese Conglomerates in Indonesia), in Guo Liang (Li Guoliang), et al. (eds.), Zhanhou haiwai huaren bianhua guoji xueshu yantaohui lunwenji (The Post-war Transformation of Overseas Chinese: Collected Papers of an International Symposium, Papers presented In Chinese and English) (Beijing, Zhongguo huaqiao chuban gongsi, 1990), pp. 86–87.

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The Kian Siang’s (Bob Hasan) group and Mochtar Riady’s Lippo group.78 It is interesting to note that at least half of the founders of these conglomerates were Totoks, and most of them had accumulated their capital after World War II.79 Not only were they born in China, but they also received some forms of Chinese education before immigrating to Indonesia. Chinese tradition and Confucian values shaped their outlooks. Overseas environment provided them with opportunities to absorb Western and indigenous values and produced a mixed pragmatic business philosophy. The intertwining of Confucian values, indigenous values and Western business practices helped them to succeed in Chinese big business. A clear break with old Chinese capital in the pre-war period showed that the founders of these conglomerates were highly motivated Chinese immigrants. Their business acumen, foresight, courage and resilience proved to be essential in coping with drastic political and economic changes during the early republican period. They belonged to a generation of new breed capable of riding political and economic storms. A principal characteristic of the Chinese business conglomerates in Indonesia is the rise of the Cukong system. ‘Cukong’ is a term pronounced in Hokkien dialect for ‘master’. This refers to a system of collaboration and mutual benefits between Chinese capitalists and indigenous power elite.80 In one perspective, the rise of the Cukong system was a evolution of the ‘Ali Baba system’ practised in 1950s. Under the latter, Chinese businessmen collaborated with indigenous license-holder regardless of the person’s power and influence. But the Cukong system enabled Chinese capitalists to choose indigenous power elite, principally the military elite who possessed enormous military and political power under the New Order. Under the operation of the Cukong system, a Chinese capitalist takes an indigenous business partner who was usually a military man. The Cukong 78

Ibid. See Cai Renlong, op. cit., in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu, pp. 42–78. 80 See Leo Suryadinata, Pribumi Indonesians, the Chinese Minority and China, p. 141. 79

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provided skill and sometimes capital, while his indigenous partner provided political protection and acquired various facilities through his influence.81 The system operated well for both partners: indigenous partner gained financial benefit as well as business experience which was particularly useful if he was planning to start his own business enterprise; while the Cukong received political protection and economic favors. However, as what Leo Suryadinata has pointed out, the Cukong concept gave rise to a wrong impression that Chinese businessmen prospered mainly because of the facilities and protection given by the government. In fact, some Cukongs had already established their solid business enterprise before taking indigenous partners.82 This system of business collaboration between Chinese businessmen and indigenous power-holders is not unique in Indonesia; it exists in other parts of Southeast Asia such as Thailand, Malaysia and the Philippines where Chinese are in the minority and are politically weak. These Chinese businessmen and their indigenous business partners are, to a certain extent, the so-called ‘rent-seekers’ identified by a Japanese economist Yoshihara Kunio. They are the capitalists who try to exploit government connections for business advantage; and they become the recipients of the rent that the government can confer by disposing of its resources, offering protection or issuing authorization for certain types of economic activities.83 ‘Rent’ in this context is defined as the difference between the market value of a government’s ‘favor’ and what the recipient pays to the government and privately to his benefactors in the government.84 Whether these so-called ‘rentseekers’ are mainly responsible for the rise of ‘Ersatz Capitalism’ — an imitative and inferior type of capitalism in Southeast Asia as what Yashihara Kunio has termed it — or not is a matter of controversy. 81

See Leo Suryadinata, “Chinese Economic Elites in Indonesia”, in Jennifer A.Cushman & Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II, p. 266. 82 Ibid., p. 269. 83 See Yoshihara Kunio, The Rise of Ersatz Capitalism in Southeast Asia (Singapore, Oxford University Press, 1988), p. 68. 84 Ibid.

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But what is certain is that the Chinese Cukong capitalists have contributed, to a great extent, to the rapid economic development in Indonesia since 1966.85

Case Study: Liem Sioe Liong and His Salim Group of Companies The story of Liem Sioe Liong (Lin Shaoliang), the foremost Chinese Cukong capitalist, is the best case study to illustrate the rise and development of Chinese big business in Indonesia. Born in a peasant family in September 1917 in Niu Zhai village, Fuqing district, northern part of Fujian province,86 Liem received traditional education in a village school with exposure to Confucian Classics.87 Political turmoil and devastated economy in Fujian in the 1920s forced many Fujianese to go to Southeast Asia in search for a better life. It was under this 85

This can be measured from the colossal turn-overs of the Chinese conglomerates such as Salim, Astra, Lippo, Sinar Mas, Gudang Garam and Bob Hasan. See Hal Hill, The Indonesian Economy Since 1966 (Melbourne, Cambridge University Press, 1996), pp. 110–111. 86 Most English sources claim that Liem Sioe Liong was born in 1916 without mentioning the date of his birth. See Leo Suryadinata, “Chinese Economic Elites in Indonesia”, in Jennifer Cushman & Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II, p. 270; Richard Robison, Indonesia: The Rise of Capital, p. 296. However, Chinese sources claim that he was born in 1917. A biography of Liem in Chinese written by a Hong Kong scholar, Sung Chek Mei (Song Zhemei), claims he was born on the 27th day of 7th moon of Ding Yi year in lunar calendar (September 7th, 1917). A prominent Chinese scholar specializing in Indonesian Chinese studies, Professor Cai Renlong of Xiamen (Amoy) University also suggests that Liem was born on September 7th, 1917. See Sung Chek Mei (Song Zhemei), Lin Shaoliang zhuan (The Career of Mr. Liem Sioe Liong: A Prominent Entrepreneur in Contemporary Indonesia) (Hong Kong, Southeast Asia Research Institute, 1988), p. 1.; Cai Renlong, Yinni huaren qiye jituan yanjiu (A Study of the Chinese Business Conglomerates In Indonesia), pp. 1–2. 87 Sung Chek Mei, op. cit., p. 1; Cai Renlong believed that Liem had received higher level of Confucian education. After eight years of learning of Confucian basics, Liem learnt from a village scholar named Zhang Chaoheng Confucian Classics of Si Shu (the Four Books), Shi Jing (Book of Poetry), Youxue Qinglin and Zuo Zhuan (Tradition of Zuo). See Cai Renlong, op. cit., pp. 1–2.

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circumstance that Liem Sioe Liong’s eldest brother, Liem Sioe Hie, left China for Java in 1927.88 There was nothing much to do in the village for Liem Sioe Liong when he was a teenager; except operating a noodle shop in the village at the age of 16.89 In 1936, as the Japanese aggression of China was looming, Liem left his homeland to join his eldest brother in Kudus, a small town in central Java. He worked as an apprentice in his brother small trading firm dealing in clove and peanut oil. After having saved some capital and learned the fundamentals of doing business, he started his own business by selling coffee powder. His hard work and perseverance paved the way for his rise in business.90 There was nothing spectacular about Liem’s early career. Like tens of thousands of other Chinese immigrants, he was trying to find a way to build up a business. But whether this ambition became a dream or reality depended on his foresight, courage as well as opportunity. The early republican period was a turning point in Liem’s career. His own business and his brother’s firm were destroyed during the Japanese occupation. He started afresh a small trading firm dealing in Chinese groceries, peanut oil etc., but soon traded in a large quantity of clove to supply local cigarette factories in Kudus for the production of a popular type of cigarette known as ‘Kretek’. For the convenience of the transport of clove, he got to know a group of Indonesian middle ranking military officials in central Java with whom he also supplied the army with provisions. It was under this circumstance that he befriended with a young Colonel Suharto who later became the President of Indonesia.91 It was this relationship with President 88

Sung Chek Mei, op. cit., p. 2.; other sources claim Liem Sioe Hie left China in 1925, see for instance, Leo Suryadinata, “Chinese Economic Elites in Indonesia”, p. 270. 89 Leo Suryadinata, Ibid. 90 Sung Chek Mei, op. cit., p. 3. 91 Cai Renlong, “Shilun Lin Shaoliang jituan de xingcheng, fazhan yu qianjing” (On the Formation, Development and Future of the Liem Sioe Liong’s Salim Group), in Wang Muhan (ed.), Dongnanya huaren jingji (The Chinese Economy in Southeast Asia) (Fuzhou, Fujian renmin chubanshe, 1989), p. 131; Cai Renlong, Yinni huaren qiye jituan yanjiu (A Study of the Chinese Business Conglomerates In Indonesia), pp. 3–4.

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Suharto that helped Liem Sioe Liong to build up a vast trans-national business empire in the 1970s and 1980s. In 1952, Liem left Kudus for Jakarta to expand his business. His decision to move to Jakarta demonstrated his foresight and business acumen. Jakarta was the capital, the seat of political and economic powers. The future of his business lay in his ability to grasp the changing political situation and economic needs and took advantage of them. He targeted manufacturing industry, banking and international trade as a strategic move for his business expansion.92 Since 1954, he set up soap, textile, nails and bicycle parts factories; in 1957, he purchased the Bank Central Asia which became the largest private bank in Indonesia. Through the Ethnic Chinese networks in Southeast and East Asia, he succeeded to establish trading links with Singapore, Thailand and Hong Kong. He also obtained strong support from the Bangkok Banking group to help finance his business expansion.93 In one and a half decades from 1952 to 1966, Liem Sioe Liong succeeded to lay a solid foundation for further expansion of his transnational business empire in Southeast and East Asia. All these seemed to have been achieved without Suharto’s patronage. It was the result of a combination of Liem’s personal attributes such as business acumen, foresight and courage; together with his ability to exploit new political and economic situations to his advantage, and his ability to make full use of the existing Ethnic Chinese social and business networks. The rise of Suharto’s regime in 1966 in the wake of the 1965 Coup marked a new era in the history of Indonesia. It changed a new direction for the Republic which undertook an ambitious programme of rapid industrialization. It was also a major turning point in the history of Liem Sioe Liong’s business empire. It would be an oversimplified view that his success of building a vast business empire was 92

Ibid., p. 132. See Cai Renlong, “Yindu nixiya de huaren qiye jituan” (The Chinese Business Conglomerates in Indonesia), in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (Study on the Chinese Business Conglomerates in Southeast Asia) (Xiamen, Xiamen University Press, 1995), pp. 43–44. 93

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due entirely to his connection with President Suharto. Undoubtedly his close relationship with the President gave him competitive advantage over his competitors. But without this connection, Liem still would have emerged as a business tycoon because of his personal attributes as well as changing national and international economic environments. The difference is that this connection speeded up the process of his empire building, and increased the size of that empire. Undoubtedly, the Suharto connection gave Liem many advantages: monopoly rights to certain business, access to government credits, and preferential treatment in acquiring licences and information. This connection also provided him with political protection under which his business prospered. In about two and a half decades from 1967 to 1990, Liem’s Salim Group of companies emerged as a major international conglomerate; and Liem became one of the foremost Ethnic Chinese business tycoons. By 1990, the revenue of the Salim Group was estimated to have reached US$8–9 billion with about 60% deriving from its Indonesian operation. The group embraced some 300 different companies and employed about 135,000 Indonesians. It is the largest private company in Indonesia dominating several branches of manufacturing industry, international trade, finance and property. He is considered to be single largest player in private banking, cement and several key commodities.94 The initial thrust of Liem Sioe Liong’s business take-off under the New Order was in the area of trading. His two trading companies — Waringin and Waringin Kencana in partnership with an associate of Suharto family — were the mechanism for his expansion into international trade. With generous government credits and special export licence, Waringin developed rapidly in the export of coffee and rubber. In 1968, Liem’s another company, P.T. Mega, was chosen by the 94

See Yuri Sato, “The Salim Group in Indonesia: The Development and Behavior of the Largest Conglomerate In Southeast Asia”, in R. Ampalavanar Brown (ed.), Chinese Business Enterprise, Volume 1 (London & New York, 1996), pp. 260; Adam Schwarz, A Nation in Waiting: Indonesia in the 1990s (St. Leonards, NSW., Australia, Allen & Unwin, 1994), p. 110.

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government as one of the two monopoly companies for importing cloves to supply the kretek cigarette companies. The volume of clove trade was huge and profit was substantial. As country was more consumer-oriented, the sole distributorship for imported cars became very profitable. Liem’s company was able to secure a fair share of the market as sole agent and assembler for some foreign automobiles including Hino , Mazda, Suzuki, and Volvo.95 In the area of manufacturing industry, Liem made great advances on this front. The government’s import-substitution policy and his connection with the President gave him excellent opportunity to grab a lion share of the manufacturing industry. The foundation in textile manufacturing laid in the 1950s proved to be useful for his further development in this industry. But it was in the area of flour milling and cement production that he achieved dominance. In 1983, his company — P.T. Bogasari, one of the two monopoly companies chosen by the government in 1969 — controlled the US$400 million per year market in Indonesia.96 The cement industry grew under the state protection; and the demand for cement escalated because of the speed of industrialization. Liem founded the P.T. Distinct Indonesia Cement Enterprise in 1973, one of the largest cement plants in the world. By the middle of the 1980s, it produced 38% of Indonesian cement.97 In the area of banking and finance, Liem also achieved remarkable success. His banking activity in the 1950s facilitated later expansion. In the late 1960s, he re-organized and expanded his flagship — the Bank Central Asia which was acquired in 1957 — to include his business partner, Mochtar Riady (Li Wen-cheng) who was made the General-Manager of the bank. It also included representatives of military and political interests on its board, and emerged as the largest private bank in the Republic. The expansion of the Bank Central Asia was important, for it helped finance the business operation of the Liem’s group; and 95

See Richard Robison, Indonesia: The Rise of Capital, pp. 301–302. Ibid., p. 303. 97 Ibid., Sung Chek Mei (Song Zhemei), Lin Shaoliang zhuan (A Biography of Liem Sioe Liong), pp. 45–48. 96

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established important financial and business linkages with the Ethnic Chinese communities in Southeast and East Asia.98 There is no single factor responsible for the rise of Liem Sioe Liong’s Salim group. The success is the result of interplay of various factors: Liem’s personal attributes, domestic political and economic changes, international economic environment, political connection and Liem’s management style. Liem’s quality as an entrepreneur such as business acumen, foresight, courage and determination certainly played an important role. So did the new political and economic situation in Indonesia, the arrival of the New Order, the new spirit of economic development, and new economic policies of import substitution, export-driven industrialization. The rise of the Four Asian Little Dragons (Taiwan, South Korea, Hong Kong and Singapore) in the 1970s undoubtedly produced chain influence on the attitude and policies of the Suharto regime; and inspired it to catch up with other countries in Southeast and East Asia. Liem’s close connection with President Suharto was undoubtedly an important factor. Equally important was Liem’s management style. His management of human resource was a mixture of Confucian values and Western business practices. His exposure to Confucian Classics during his young age imbued him with principles such as propriety, benevolence, golden means, reciprocity and paternalism. These values when integrated with Western business practices of meritocracy and customeroriented service constituted important ingredients of Liem’s success.99 98

Richard Robison, Indonesia: The Rise of Capital, pp. 306–307; Cai Renlong, “Shilun Lin Shaoliang jituan de xingcheng , fazhan yu qianjing” (On the Formation, Development and Future of the Liem Sioe Liong’s Business Conglomerates), in Wang Muhan (ed.), Dongnanya huaren jingji (The Economy of the Chinese In Southeast Asia), pp. 138–140; Cai Renlong, Yinni Huaren qiye jituan yanjiu (A Study of the Chinese Business Conglomerates in Indonesia), p. 36. 99 For a discussion of the influence of Confucian values on Ethnic Chinese business, see Yen Ching-hwang, “Modern Overseas Chinese Business Enterprise: A Preliminary Study”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 238– 247; Yen Ching-hwang, “Tan Kah Kee and Overseas Chinese Entrepreneurship” , In Yen Ching-hwang, The Ethnic Chinese in East and Southeast Asia: Business, Culture and Politics (Singapore, Times Academic Press, 2002), pp. 130–131.

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Liem realized that the transformation of his business from a familybased to a trans-national conglomerate rested partly on his ability to utilize the talents: to choose the right persons for the right jobs. Obviously he was conditioned by his education and his social environment that led him to trust his relatives and fellow dialect speakers from northern Fujian province. But he did not fall into this traditional pitfall in confining to the use of that pool of talents. Instead, he broadened it to include many outsiders who had the expertise. His invitation of Mochtar Riady to join the Bank Central Asia and to take over the helm of running that organization testified to his ability to utilize talents other than his own relatives and fellow district folks.100 It is claimed that the two principles adopted by Liem to use the talents are: ‘Liangcai renzhi” (To use the talents in the appropriate way) and ‘Yongren buyi’ (To trust whole-heartedly the subordinates you have chosen). In the application of the first principle, he emphasized the virtues of both integrity and ability of the person, but he would not use those who have ability without integrity. In the application of the second principle, once he has trusted his subordinates, he would have trusted them whole-heartedly without harboring any suspicion. These were the traditional Chinese principles adopted by many successful leaders.101

100

See Cai Renlong, “Shih lun Lin Shaoliang qiye jituan de xingcheng, fazhan yu qianjing”, op. cit., p. 145; Cai Renlong, Yinni Huaren qiye jituan yanjiu (A Study of the Chinese Business Conglomerates in Indonesia), pp. 80–81. 101 See Sung Chek Mei, op. cit., pp. 79–80.

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Chapter 12

Chinese Business in the Philippines

International Trade and Chinese Business Early Chinese trade relations with the Philippines The Song dynasty (960–1279) was a great period in China’s maritime expansion. Technological advancements in ship building and navigation, together with the invention of block printing left documentary records of Chinese trading activities in Asia. This included ports of the modern Philippines. The year of 982 A.D. provided the earliest documentary record of Sino–Filipino trade that ‘traders of Moyi state carrying valuable commodities to the coast of Guangzhou’.1 Moyi has been identified by scholars as name of the island of Mindoro of modern Philippines.2 China’s trade with Southeast Asia grew substantially during the second part of the Song dynasty known as Southern Song Dynasty (1128–1279). The loss of North China forced the Song ruler to move the capital to Lin An (modern day Hang Zhou of Zhejiang province) in the southeast of China. 1

Original record can be found in ‘Du Po Chuan’ (A Short Note on Du Po) of the Song Shi (Dynastic History of Song), Vol. 489, or in Ma Duanlin’s Wenxian tongkao (A General Investigation of Chinese Cultural Sources) complied in 1317–1319. 2 For identifying the state of Moyi in Song records, see Freidrich Hirth & W.W. Rockhill (eds.), Chau Ju-Kua: His Work on the Chinese and Arab Trade in the Twelfth and Thirteenth Centuries (Amsterdam, Oriental Press, 1966, 2nd edition), p. 160, Note 1; Wu Ching-Hong, “A Study of References to the Philippines in Chinese Sources from Earliest Times to the Ming Dynasty”, in Philippine Social Sciences and Humanities Review, Vol. 24 (Jan–June, 1959), p. 95. 379

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The loss of major source of revenue from the north led the Southern Song rulers to develop foreign trade, and commerce became the lifeline of the empire.3 The business-oriented Southern Song government improved administrative structure and opened more ports in the south for trade.4 The result of this development was the rise of a vibrant foreign trade centered at Guangzhou and Quanzhou.5 What can be established from documentary evidence is that Sino-Filipino trade was on a firm and regular basis. Chinese traders visited several parts of the Philippine islands.6 Chinese traders brought with them porcelain ware, black satin, colored silk fabrics, iron tripod vessels, black lead, variegated glass-beads etc. in exchange for local products such as yellow wax, cotton, pearls, tortoise-shells, medicinal betel-nuts and uta cloth.7 3

It was claimed that in the latter part of the dynasty in the main street of the capital Linan, there was not a single person who was not in trade. See Wu Zimo, Meng Lianglu, p. 239, cited in Colin Jeffcott, “Government and the Distribution System in Sung Cities”, in Papers on Far Eastern History, No. 2 (Canberra, Department of Far Eastern History, A.N.U., 1970), p. 119. 4 The Song government established separate inspectorate of commerce (Shi Po Si) in four major coastal ports in the south: Guangzhou, Quanzhou, Ningpo and Linan (Hangzhou). For details of the study of Song Inspectorate of Commerce, see Fujita Toyohachi, “Songdai shipo si zhi tiaoli” (Rules and Regulations of the Inspectorate of Commerce of Song Period), in Fujita Toyohachi, Zhongguo nanhai gudai jiaotong congkao (Studies on the Ancient Chinese Relations with South Seas) (Shanghai, Shangwu yinshuguan, 1936) (Chinese translation by He Jianmin), pp. 239–341. 5 For the trade centered at Guangzhou, see Chuan Hansheng, “Songdai Guangzhou de guoneiwai maoyi” (Domestic and International Trade at Guangzhou during the Song Period), in Chuan Hansheng, Zhongguo jingji shi yanjiu (Studies on Economic History of China), (Hong Kong, Xinya Yanjiuso chuban), Vol. 2, pp. 85–158. 6 Zhao Jugua (Chau Ju-kua), the author of the book — Zhu Fan Zhi (Records of Foreign Nations) published in 1225, had in his work mentioned several places which had been identified as ports or countries of Philippine islands. For original Chinese text, see Zhao Jugua, Zhu Fan Zhi jiaozhu by Feng Chengjun (Chau Ju-kua, annotated by Feng Chengjun, Records of Foreign Nations) (Beijing, Zhonghua shuju, 1956), pp. 80–83; Friedrich Hirth & W.W. Rockhill (eds.), op. cit., pp. 159–162. 7 Zhao Jugua, Zhu Fan Zhi jiaozhu, pp. 81–82; Friedrich Hirth & W.W. Rockhill (eds.), Ibid., pp. 160–161; a better translation of this section from Chinese original is provided by Wu Ching-hong in his “References to the Philippines in Chinese Sources”, see Wu Ching-hong, op. cit., pp. 92–94.

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The mode of trading activities was primitive, there were neither bazaar nor regular fair where proper exchange of goods could be conducted. Zhu Fan Zhi (Records of Foreign Nations) compiled in 1225 by Zhao Rugua, has a vivid description of this early SinoFilipino trade. The main form of transaction was bartering which was carried out on board of junks. When Chinese junks laden with goods arrived at the islands, they anchored at certain places and beat the drums to announce their arrivals. Native traders carrying local produce rushed on board for exchanging goods they needed. They carried away Chinese goods in bamboo baskets. Some of them even took away goods without exchanging goods, and as a rule, they returned in eight or nine months’ time using what goods they obtained to repay the Chinese traders. If the bartering had difficulty to agree on, the native head trader will have to come on board to negotiate. Chinese traders will have to present him with silk umbrellas, porcelain ware and ratten baskets. In the course of negotiation, one or two natives were retained on board as hostages. After all business had been settled, the hostages would be released. Chinese junks stopped only for three or four days, and set sails for other markets.8 The obvious contradiction between the earliest record of SinoFilipino trade (982 A.D.) and the record in the Zhu Fan Zhi (1225 A.D.) is the level of sophistication of trade. The former conveys an impression that the Moyi state must have achieved a reasonable level of civilization which enabled its traders to carry valuable goods to sell in the China market. The later, however, conveys an impression that the Philippine islands were still inhabited by relatively uncivilized tribes, and the mode of Sino-Filipino trade was rather primitive. One acceptable explanation is that the Sino-Filipino trade was carried out at two different levels: one was the form of tributary or semi-tributary, and the traders or officials of the Moyi state went to Guangzhou and conducted trade there. On the other hand, Chinese junk trade was conducted in the Philippine islands primarily with local natives in the form of bartering.9 In slightly more than three hundred years 8 9

Zhao Jugua, Zhu Fan Zhi jiaozhu, pp. 80–82; Wu Ching-hong, Ibid. For the duality nature of Sino-Filipino trade during the Song period, See Huang

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from 1225 to 1560 through the Yuan and early Ming dynasties, the Sino–Filipino trade did not grow and change substantially. The description of the mode of the Chinese junk trade with the Philippine islands contained in Yuan and early Ming records did not differ greatly from those of Zhu Fan Zhi. Bartering was still the main form of business transactions, and the goods exchanged were quite similar except the range of goods increased. On the side of Chinese goods, cauldrons, ivory, copper beads, gold and un-pure silver were added; while the native produce also included musk, sandal wood, leather, laka wood and Sulu pearls.10 The increased range of goods in the Sino–Filipino trade during this period reflects the increase of number of consumers and the widening of the markets in both China and the Philippines. The adding of goods like ivory, gold and un-pure silver on Chinese list may be interpreted as growing demands for luxurious goods among the aristocrats in the Philippines. Further, as China did not produce any ivory, Chinese traders must have obtained this item either from Thailand or in the Malacca market, and their trade in ivory was partly to satisfy the local demands, but at the same time, it must have fetched a notable profit.

International silver trade and the Chinese business Sino–Filipino trade turned a new chapter after the middle of the 16th century. China’s lifting of its maritime ban in 1567 encouraged a large Zisheng & He Siping, Feilipin huaqiao shi (A History of the Chinese in the Philippines) (Guangzhou, Guangdong gaodeng jiaoyu chubanshe, 1987), pp. 5–6. 10 These were recorded in Wang Dayuan’s Daoyi zhilue (1349) of Yuan dynasty, and the work of Fei Xin (1436) who accompanied Admiral Zheng He’s missions to Southeast Asia in early 15th century. For Chinese original, see Wang Dayuan, annotated by Su Jiqing, Daoyi zhilue jiaozhu (A Summary of the Records Regarding the Barbarians of the Islands, Annotated) (Beijing, Zhonghua shuju, 1981), pp. 23–38, 178–181; for English translation of Wang’s work on the Philippines, see Wu Chinghong, op. cit., pp. 107–111. For the Chinese original work of Fei Xin, see Fei Xin, annotated by Feng Chengjun, Xing Zha shenglan jiaozhu (Beijing, Zhonghua shuju, 1954), Vol. 2, pp. 9–11, 15–16.

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number of traders to go overseas for lucrative trade. Since the arrival of Europeans in Southeast and East Asia in the early 16th century, trading opportunities arose in some European enclaves in the region: Malacca, Timor, Anbun and the Spice islands. China’s ending of its seafaring prohibition coincided with the Spanish advancement into the Philippine islands. Having conquered Mexico in 1519, the Spanish turned to the East in search for the alternative route to the legendary Spice islands in an attempt to break the Portuguese monopoly of spice trade. When the Spaniards arrived in the Philippines, they were disappointed to find the islands lacked of natural resources, but soon they discovered that the geographical proximity of the Philippines to China could be turned into a great advantage for trade. It can be developed into a transhipment center between China and Latin America, and into an entrepot for the trans-continental trade between Asia and Americas.11 To understand the role of Chinese traders in this robust international trade, a broader picture needs to be painted. The monetized metal that dominated the world trade during the 16th and 17th centuries was silver. On the supply side, Spanish America (Mexico and Peru) was the major source of this supply. According to one estimate, the new world (Americas) produced 102,000 tons of silver from 1493 to 1800, accounting for 85% of the entire world production.12 Japan was the second largest producer of silver after the Americans during the same period. On the demand side, China was the largest consumer of this precious metal. It had been used both as a monetary 11

See Chuan Han-sheng, “Trade between China, the Philippines and the Americas during the Sixteenth and Seventeeth Centuries”, in Proceedings of the International Conference of Sinology: Section on History and Archaeology (Taipei, Academia Sinica, 1981), p. 849; see also the same article reprinted in Dennis O. Flynn & Arturo Giraldez (eds.), Metals and Monies in an Emerging Global Economy (Aldershot, Hampshire, Great Britain, Variorum, Ashgate Publishing Limited, 1997), pp. 281–283. 12 The entire world production of silver was estimated at 120,000 tons in that period. See Ward Barrett, “World Bullion Flows, 1450–1800”, Table 7.1, in James D. Tracy (ed.), The Rise of Merchant Empire: Long Distance Trade in Early Modern World, 1350–1750 (Cambridge, Cambridge University Press, 1990), p. 225.

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medium and as a store of wealth since the dawn of imperial China.13 By the 15th century during the middle of Ming dynasty, the demand for silver increased enormously as a result of abandonment of paper money. The domestic production of silver in China failed to keep pace with the demand which resulted in the huge increase in value of the metal.14 China’s shortage of silver in the first half of the 16th century was eased by the import of large quantity of silver from Western Japan, especially in the period between the 1530s and 1570s.15 The bulk of this silver trade between China and Japan in the 1540s was carried out illicitly by the Chinese traders of Zhejiang, Fujian and Guangdong, and later joined by the Portuguese traders in Macao. They exchanged Chinese goods, principally silk, for Japanese silver in southern Japanese ports, and the trade proved to be an extremely lucrative one.16 Japan’s dominant position in silver trade was weakened and replaced by the Spanish America which emerged in 13

See Brian Moloughney and Xia Weizhong, “Silver and the Fall of the Ming: A Reassessment”, in Denis O. Flynn & Arturo Giraldex (eds.), op. cit., p. 167. 14 See Chuan Hang-sheng (should be Chuan Han-sheng), “Trade Between China, the Philippines and the Americas during the Sixteenth and Seventeenth Centuries”, in Dennis O. Flynn and Arturo Giraldez (eds.), op. cit, p. 850; Chuan Hansheng (Chuan Han-sheng), “Luelun xinhanglu faxian hou de Zhongguo haiwai maoyi” (On China’s Foreign Trade after the Discovery of the New Sea Route to the New World), in Zhang Pincun & Liu Shihji (eds.), Zhongguo haiyang fazhanshi lunwenji, diwuji (Collected Essays on the Chinese Maritime History), Vol. 5 (Nan Kang, Taipei, Academia Sinica, 1993), p. 2. For the domestic silver production during the Ming period, see Chuan Hansheng, “Mingdai de yinke yu yin chane” (Silver Production and Silver Taxes during the Ming Period), and Chuan Hansheng, “Ming Qing shidai Yunnan de yinke yu yin chane” (Silver Production and Silver Taxes of Yunnan Province during the Ming and Qing Periods), in Chuan Hansheng, Zhongguo jingji shih yanjiu, zhongce (Studies in Chinese Economic History, Vol. 2) (Hong Kong, Xinya yanjiuso, no date), pp. 209–260. 15 See William S. Atwell, “International Bullion Flows and the Chinese Economy, circa 1530–1650”, in Dennis O. Flynn & Arturo Giraldez (eds.), Metals and Monies in an Emerging Global Economy, p. 141. 16 Ibid., p. 142.; for an estimate of this Sino-Japanese silver trade in 1540s which may amount to 530,000 ounces or 19,875 kilograms, see Evelyn Sakakida Rawski, Agricultural Change and the Peasant Economy of South China (Cambridge, Massachusetts, Harvard University Press, 1972), p. 76.

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the mid 16th century as the largest silver producer in the world. The rise of Manila as an international transhipment center in the 1570s facilitated such flow of silver from the new world to China. In this flow of colossal amount of silver from the New World to China in the second half of the 16th century, two groups of traders dominated this lucrative international trade: the Spanish traders dominated the trade from New World to the Philippines, while the Chinese traders controlled the leg from the Philippines to South China. The Spanish traders who crossed the Pacific ocean from Acapulco on the west coast of modern Mexico to Manila carrying shiploads of silver was popularly known as the Spanish Galleon trade. In return, they shipped Chinese products such as silk and porcelain and sold them in American markets. In 1573, for instance, two galleons sailing from the Philippines to Acapulco carried large cargoes which included 712 pieces of Chinese silk and 22,300 pieces of fine gilt china and other porcelain ware.17 On the leg between Manila and South China, principally port Quanzhou and Guangzhou, the silver trade appeared to be in the hands of Hokkien traders. Before the lifting of the ban in 1567, the Hokkien merchants who were actively involved in foreign trade had already organized and armed themselves into gangs under certain powerful leaders.18 Their organized illicit trade in silver helped to end the maritime prohibition. The lifting of the ban encouraged more private traders to participate in the lucrative foreign trade, but also consolidated the position of the organized gangs. What is not sure is whether there was a close link between the silver traders with Japan 17

See William L. Schurz, The Manila Galleon (New York, Dutton, 1939), p. 27. Some notable leaders of Overseas Trading gangs were Hong Haijen, Zhang Wei, Xu Xichi, Xie He and Wang Qingxi, See Xiamen daxue lishi yanjiusuo & Zhongguo shehui jingjishi yanjiushi (eds.), Fujian jingji fazhan jianshi (A Short History of Economic Development of Fujian) (Xiamen, Xiamen daxue chubanshe, 1989), p. 317; Xu Jianzhu, “Yue Gang haishang zai kaifang haijin douzheng zhong de zuoyong (The Role of the Overseas Traders of Yue Gang in the Struggle against the Maritime Prohibition), in Zhongguo Lungxi diwei xuanchuanbu & Fujiansheng lishi xuehui Xiamen fenhui (eds.), Yue Gang yanjiu lunwenji (Collected Essays on the Study of Yue Gang (The Moon Port), (Xiamen, 1983), pp. 110–112. 18

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and those who traded with the Spanish. The harassment of the South China coast by Japanese pirates from the 1550s to 1570s disrupted the existing silver trade with Japan,19 and helped switch that trade to Manila. What underpinned the successful operation of silver trade between Quanzhou and Manila was the rise of the Chinese community in Manila. This community comprised primarily of merchants who were known in early Spanish accounts as ‘Sangleys’. The majority of them came from Quanzhou and Zhangzhou prefectures of Southern Fujian, and the term ‘Sangleys’ is likely a colloquial Hokkien term for ‘businessman’ (Sangley Lang).20 There were at least two types of Chinese merchants in Manila: short-term traders travelling between China and the Philippines; and long-term settlers who were involved in marketing Chinese products on a large-scale. The former were floating population of which about two thousands of them coming in 20 junks in 1588, and they usually arrived in November by monsoon and returned to China in May. They brought with them Chinese merchandise such as silk and porcelain ware and provisions, and returned with Spanish silver. While the latter were the settler merchants who were about 700 in number in the 1580s. The majority of 19

See Wang Gungwu, “Merchants without Empire: the Hokkien Sojourning Communities”, in Wang Gungwu, China and the Chinese Overseas (Singapore, Times Academic Press, 1991), p. 89. 20 Quanzhou merchants consisted mainly of those from Jinjiang, Yongchun, Nanan, Anxi and Anhai; while the Zhangzhou merchants were derived mainly from Haicheng, Longxi and Zhangpu. See James Chin Kong, “Merchants and Other Sojourners: The Hokkiens Overseas, 1570–1760” (Ph.D. thesis, Department of History, the University of Hong Kong, October, 1998), pp. 25–26. The term ‘Sangley’ was used by the Hokkien merchants to identify themselves. ‘Sangley’ literally means ‘business’ in Hokkien. ‘Cho Sangley’ means to do business, an expression commonly found among Hokkien businessmen. Professor Wu Ching-hong in his work explains that ‘Sangley’ derived from hiang (xiang) and “ley” meaning a travelling merchant. I believe my explanation is probably closer to the truth. See Wu Ching-hong, “References on the Chinese in the Philippines During the Spanish Period found in Blair and Robertson, The Philippine Islands”, in Nanyang Yanjiu, diyizhuan (The Bulletin of Institute of Southeast Asia, Vol. 1) (Singapore, Nanyang daxue nanyang yanjiushi, 1959), p. F4.

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them were dealing with Chinese silk for export and formed into a silk market which consisted of 150 shops. These settler merchants were married and many of them were Christians.21 Chinese merchants in the Philippines as a group thus played an important middlemen’s role in the trans-continental trade between Americas and Asia. In a sense, they were in partnership with the Spaniards in Manila to make this trade prosperous and sustainable. Having no means to control the China trade, the Spanish merchants in Manila had to satisfy themselves with half of this lucrative international trade. Yearly monsoon brought Chinese luxurious goods, principally silk, to Manila to be transhipped to American markets on the Manila galleons. An informal partnership with Chinese merchants was established.22 This informal partnership, though mutually dependent and mutually beneficial, was an unequal one. The Chinese merchants, though economically powerful, had no political power. Their commercial activities were not backed up or protected by their home government and they were described by Professor Wang Gungwu as ‘merchants without empire’.23 On the other hand, the Spanish merchants were the princes of a newly-merged business empire, the masters of Manila, and had strong political and military backing of the home government. This unequal partnership was proven to be fragile. By 1603, the massacre of a large number of Philippine Chinese almost wrecked the lucrative international trade. 21

This was an early Spanish account collected in the Blair and Robertson’s The Philippine Islands, See Wu Ching-hong, Ibid., p. F7; Chen Ching-ho, Shiliu shiji zhi Feilibin huaqiao (The Overseas Chinese in the Philippine During the Sixteenth Century) (Hong Kong, Southeast Asia Studies Section, New Asia Research Institute, 1963), pp. 66–67. 22 For the middlemen’s role of the Chinese merchants in this international trade, see Edgar Wickberg, The Chinese in Philippine Life, 1850–1898 (New Haven and London, Yale University Press, 1965), p. 4; Christine Dobbin, Asian Entrepreneurial Minorities: Conjoint Communities in the Making of the World Economy, 1570–1940 (Richmond, Surrey, Curzon Press, 1996), pp. 21–22. 23 See Wang Gungwu, “Merchants without Empire: the Hokkien Sojourning Communities”, in James D. Tracy (ed.), The Rise of Merchant Empire: Long- Distance Trade in the Early Modern World, 1350–1750, pp. 400–421; the same article was reprinted in Wang Gungwu, China and the Chinese Overseas, pp. 79–101.

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The growth of Chinese business before 1820 Changes in the international environment in the second half of the 18th and early 19th centuries caused rapid economic change in the Philippines and transformed the nature of Chinese business there. By the middle of the 18th century, the lucrative international silver trade had long passed its peak and was on decline. The demise of the Manila galleon trade in 1815 and the end of the private entrepot trade between Manila and Mexico in 1820 signalled the end of a long era of the trans-Pacific trade. The prosperity of more than two and a half centuries left Manila only in good memory. The Spanish government was forced to re-examine the economy of its jewel in the Far East.24 The demise of the eastern sector of this trans-Pacific trade removed the major source of Philippine revenue. Further, the independence of Mexico from Spain in 1821 cut off the Philippines from its source of subsidies.25 The Philippine government had no choice but to critically reassess its financial and fiscal positions. About the same time, the Philippines also experienced the decline of Chinese junk trade. The change of economic policies was also brought about by the political change in the Pacific. The wave of independence of Spanish colonies in Latin America in the 1820s not only deprived Spain of a vast maritime empire, but also created new political and social problems. It created a sizeable unemployed Spaniards who sought new opportunities in the remaining colonies of Cuba, Puerto Rico and the Philippines. The failure of resolving the unemployment problem could further threaten the survival of the empire.26 The end of the royal monopoly trading system and realization of the restrictive commercial laws created a new environment for entrepreneurial activities. The monopolistic Royal Philippine Company, chartered in 1785, was dissolved in 1834. While the removal of legal 24

For the decline of Manila galleon trade, see William L. Schurz, The Manila Galleon; W.E. Cheong, “The Decline of Manila as the Spanish Entrepot in the Far East, 1785–1826”, in Journal of Southeast Asian Studies, Vol. 2, No.2 (Singapore, Sept. 1971), pp. 142–158. 25 Edgar Wickberg, Chinese in Philippine Life, p. 46. 26 Ibid.

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restriction on trading destinations — such as with some selected Asian countries, Spanish America and Spain — widened the scope of new trading activities. But the most important entrepreneurial impetus was provided by the entry of non-Spanish European firms in Manila’s trading system. In 1809, a British firm was allowed to establish in Manila, the first of its kind in the Philippine history. This was accompanied by the relaxation of legal restrictions on trading activities of foreign firms. Foreign enterprises played a key role in the transformation of the Philippine economy. They imported Western manufactured goods and machinery and exported Philippine products. They also provided credits and capital that speeded up the process of development of cash crops such as sugar, Manila hemp and coffee.27 The result of the development of this export-oriented cash crop industry was the lifting of Philippine economy, and the enhancement of revenue for the Philippine government. As part of the grand plan of transforming Philippine economy, the Spanish Colonial government reversed its hostile policy towards Chinese immigration. In place was a new policy of encouraging Chinese immigrants and settlements. Chinese immigrants were seen to be valuable assets for rejuvenating the economy.

Evolution of Modern Chinese Business Economic change in the Philippines and the growth of modern Chinese communities The half century from the 1820s to 1870s saw a fundamental transformation of the Philippine economy. The transhipment economy declined and was replaced by an vibrant export crop economy. In these 50 years, the Philippines developed a sound cash crop economy based on sugar and hemp feeding the expanding world market. At the same time, European manufactured goods found their ways into the Philippine market. Instrumental in this transformation was the non-Spanish European merchant firms. Their arrival marked the end 27

Ibid., pp. 46–47.

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of Spanish restriction on non-Spaniard European commercial activities in the colony. The opening of Manila for European ships in 1789 sent the first signal of welcome. Two decades later (1809), a British business firm was established in Manila. By 1834, the last hurdle of restriction was removed with a decree which allowed any foreigners to trade and reside in Manila.28 The rise of the sugar industry in the Philippines since 1836 marked the beginning of this economic transformation.29 In the next 80 years, sugar industry dominated the Philippine economy. This was reflected in the rapid rise of export of sugar from 1836 to 1916. In 1836, Philippine sugar export was merely 15,097 metric tons, but this figure increased dramatically to 337,490 metric tons in 1916, a rise of some 2,135%.30 The rise was closely linked with foreign markets and foreign merchants. The ever-increasing demand from the industrial nations in the West stimulated Philippine sugar production, and it was further sustained by the markets in China and Japan.31 At the same time, British and American trading firms, principally Ker and Company; Smith, Bell and Company; Warner, Barnes and Company; Russell, Sturgis and Company; and Peele, Hubbell and Company were active in the Philippine sugar trade.32 It was the British, American and Chinese trading firms that dominated this trade throughout the period.33 The fundamental structural change of the Philippine economy called for a change in the government’s policy towards Chinese. Spanish authorities began to abandon its traditional hostile stand and to view Chinese immigrants as valuable assets. The policy was changed from restriction to widespread encouragement. The Chinese were given further concession of choosing their place of residence and

28

Ibid., p. 47. See John A. Larkin, Sugar and the Origins of Modern Philippine Society (Berkeley, University of California Press, 1993), p. 46. 30 Ibid., pp. 47–48. 31 Ibid., p. 48. 32 Ibid. 33 Ibid., p. 50. 29

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occupation, a privilege denied them before 1839.34 As a result of this change, the Chinese population grew rapidly from about 6,000 in 1847 (in a total population of about 3.5 million) to some 90,000 by 1880s (in a total population of 6 million). The expansion of the Chinese population saw the penetration of Chinese business into the provinces of the islands.35 Underlining the rapid growth of the Chinese population in the Philippines during this period was an active immigration program. Responding to the new economic opportunities in the Philippines, Chinese immigrants were brought to the islands under two different forms: the kinship-based system and the Coolie immigration. Like the Chinese immigration to other parts of Southeast Asia,36 the kinshipbased was the most popular form of immigration. When a Philippine Chinese established himself in business and needed more hands, he either sent for or returned to his home village to bring back his sons or male relatives. They were trained first as apprentices and later worked in the shop as clerks and assistants, or be used as agents or operators in branch stores.37 Coolie immigration became important in the Philippines after 1870 in response to the demand of foreign business houses, and was facilitated by the development of regular steamship service between Manila and coastal China ports of Amoy and Hong Kong. Most of the shipment of the Coolie immigrants was handled by three European firms based in Hong Kong: Butterfield and Swire’s China Navigation Company, Jardine Matheson’s Indo-China Steam Navigation Company, and Russell and Company’s China-Manila 34

See Christine Dobbin, Asian Entrepreneural Minorities: Conjoint Communities in the Making of the World Economy, 1570–1940, pp. 164–165. 35 Edgar Wickberg, op. cit., p. 147. 36 For the case of Chinese kinship-based immigration to Malaya and Singapore, See Yen Ching-hwang, A Social History of the Chinese in Singapore and Malaya, 1800– 1911, p. 4; for the impact of kinship and dialect ties on Chinese immigration to Sarawak, see Tien Ju-kang, The Chinese in Sarawak: A Study of Social Structure (London, Department of Anthropology, The London School of Economics and Political Science,1953) , pp. 4–5. 37 Edgar Wickberg, op. cit., p. 172.

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Steamship Company, which operated regular fortnightly service. In addition, there were a few Spaniard, Mestizo and Chinese businessmen who occasionally sent steamers to the China coast to fetch Coolie immigrants. After 1891, a Japanese shipping line also entered into this business of Coolie trade.38 Instrumental in the carrying of the Coolie immigrants to the Philippines was a group of Chinese Coolie brokers known as ‘Ketou’ (Kheh Tau in Hokkien dialect).39 Once the Coolie immigrants arrived at Manila, they were turned over to a Cabecilla (‘Towkey’ roughly) who needed laborers to develop his business. The Cabecilla paid for the passage that immigrants owed and was responsible for housing and feeding the Coolies as well. In return, the Coolie immigrants worked for a period for the Cabecilla. They might work as part of the labor gangs or as Corredors (houseto-house vendors); the latter provided a better hope for improving immigrants’ economic status. For a Corredor could often save enough money over a few years enabling him to start a small business of his own or in partnership with an ex-Corredor.40 The Chinese immigrants from the villages of Fujian and Guangdong thrown together in an urban setting like Manila or other provincial centers underwent changes in their inner world. Shaking off their peasant habits from their home villages, they gradually acquired new habits and values of urban business life. Although Philippine Chinese communities were predominated by Hokkiens (southern Fujianese speakers) derived mainly from four Southern Fujian counties of Jinjiang (Chin-chiang), Tongan (T’ung-an), Nanan (Nan-an) and Longxi (Long-ch’i), there were other minority dialect groups that migrated to the islands. The Cantonese, the immigrants from Canton and adjacent counties, whose distinctive dialect was unintelligible to the Hokkiens, were prominent among the minority

38

Ibid., p. 170. For a detailed discussion of the Chinese Coolie brokers’ activities in South China coast, see Yen Ching-hwang, Coolies and Mandarins: China’s Protection of Overseas Chinese during the Late Ch’ing Period, 1850–1912 (Singapore, Singapore University Press, 1985), pp. 36–41. 40 Edgar Wickberg, op. cit., p. 171. 39

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Chinese. By the end of the 19th century, the Cantonese population on the islands was estimated at 3,000, but this figure only accounted for a 5% of the total Chinese population in the Philippines.41 Most Cantonese were chefs, artisans and restaurateurs; while the majority of the Hokkiens were involved in business. Dialect and occupational barriers set Hokkiens and Cantonese apart, and they harbored suspicion and distrust with each other (the Cantonese regarded Hokkiens as crafty and untrustworthy; while the Hokkiens considered Cantonese frivolous and unstable). This divisiveness of the Chinese community was aggravated by the frustration generated from the imbalance of sex ratio. In 1870 official records showed 193 women in a Chinese population of some 23,000, a ratio of 8 females per 1,000 males. 16 years later, this ratio declined further to 3 females per 1,000 males, registering 194 women in a total Chinese population of 66,000.42 The poor sex ratio destabalized the Philippine Chinese community in two ways. Firstly, it frustrated Chinese men and gave rise to social problems such as gambling, prostitution and fights. Secondly, the lack of Chinese females undermined the cohesion of the Chinese community, and prevented the rise of a more permanent Chinese community based on a healthy family structure.

The role of Chinese in the new Philippine export economy The Chinese primarily played the role of a business agent in the new Philippine export economy. They acted as an intermediary between the advanced Western Capitalist economy and the resource-producing colonial economy of the Philippines. Chinese businessmen served the Western agency houses as wholesalers taking over the imported manufactured goods, and through their sophisticated retailing networks, distributed the goods widely among the Chinese and native consumers. On the other hand, they acted as purchasing agents for 41 42

Ibid., p. 177. Ibid., p. 174.

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foreign companies, collecting cash crops and other native products for export. Nothing extraordinary for the Philippine Chinese to take on this new role as the middlemen in a booming export economy. In a historical context, the Chinese in Manila in the 16th century did play that intermediary role well between China and Latin America, selling Chinese silk and porcelain for the transhipment to Mexico, and in return, they exported substantial quantity of Mexican silver to the Chinese market. It could be a historical continuity for some Chinese business families in the Philippines in that role, but the new role in the export economy was a result of Chinese pragmatic response to the economic changes on the islands. From another perspective, Chinese businessmen in the Philippines were not different from their counterparts in other parts of Southeast Asia. The Chinese businessmen in the Straits Settlements, Indochina and island Indonesia played the similar role admirably well.43 The importance of the Chinese middlemen’s role in Southeast Asian modern economies has been undervalued in the past, partly for ideological reason, and partly due to political consideration. Ardent Southeast Asian nationalists tended to condemn Chinese middlemen as an integral part of the Western imperialist exploitative system; and the Chinese were blamed for part of the misery suffered by the indigenous people in the region. The emphasis on the negative aspects of Chinese business activities provided justifications for the indigenous nationalists to adopt anti-Chinese laws. However, the contributions of the Chinese businessmen in the rise of the modern Southeast Asian economies cannot be ignored. Without their middlemen’s role, the transformation of Southeast Asia from a subsistent agrarian to a cashcrop export economy could not have been achieved. Without their painstaking efforts in mobilizing native produce for export, a modern market economy could not have arisen in the region. 43

For a discussion of Chinese middlemen’s role in Singapore, see Chiang Hai Ding, “Sino-British Mercantile Relations in Singapore’s Entrepot Trade, 1870–1915”, in Jerome Ch’en & Nicholas Tarling (eds.), Studies in the Social History of China & Southeast Asia (Cambridge, Cambridge University Press, 1970), pp. 247–266.

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It was more than a coincidence that the Chinese had successfully played the middlemen’s role in the new Philippine export economy. The Chinese were culturally more sophisticated than the natives, and were prepared to fit in that intermediary role. Traditional Chinese values of diligence and thrift together with the impact of overpopulation made Chinese immigrants more determined to achieve economic success. At the same time, it was in business that promised a future for acquiring wealth and a short cut to social mobility. In addition, Chinese kinship and dialect ties provided a ready-made network which could be exploited for commercial purpose. But as what Edgar Wickberg has pointed out, one of the most important factors for the success of Chinese business in the second half of the 19th century in the Philippines was Chinese economic organization.44 What characterized Chinese economic organization was the ‘Cabecilla system’. Cabecilla, a term roughly equivalent to another popular term of ‘Towkay’ (owner of a business) used in other parts of Southeast Asia, was usually a large wholesaler of imported goods and export produce. The seat of his business establishment was usually located in Manila where he dealt directly with foreign business houses. He normally had in the provinces several agents who ran stores as retail agents for the imported goods, and at the same time purchased local crops for the Cabecilla. The Cabecilla assisted his agents by extending them lines of credit which varied from short-term to long-term. The credit relations appeared to be close, but the agents maintained a fairly independent existence.45 This Cabecilla-agent system worked remarkably well, and appeared to have benefited all parties involved: the foreign business houses, the Cabecilla and the country agents. The system also benefited vast native consumers and producers. Chinese agent’s store, a kind of general merchandise store, which was known popularly as ‘sari-sari’ store, was located in convenient locations of market towns. Unlike the native periodic markets held in these towns once or twice a week, the Chinese sari-sari store was opened all the time. Country consumers 44 45

Edgar Wickberg, op. cit., p. 72. Ibid.

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had easy access to imported goods they needed. Further, the Chinese store keeper was ready to extend credit to consumers/producers as well as prepared to take local produce in exchange for the goods the producers needed.46 Not less important than the Cabecilla system in the success of the Chinese middlemen business was the Chinese strategy of ‘constant indebtedness’. For a Chinese middleman, the ability to use credit to his maximum advantage was a key to success. With the desire to distribute their imported goods as quickly as possible, foreign business houses were prepared to extend credits to Chinese dealers. When a Chinese dealer received a modest amount of goods on credit of three to six months, he made a token payment to reinforce creditor’s confidence in him. Then he asked for a larger advance. Again, only part of this debt was repaid, and additional credit secured. The process continued in this way, and some of the Chinese dealers were constantly in debt to foreign business houses.47 Similar strategy was also adopted by other Chinese middlemen in other parts of Southeast Asia. For instance, Tien Ju-k’ang has reported that Chinese middlemen in Sarawak had frequently used this strategy to maximize their advantage.48 The advantage of this ‘constant indebtedness’ was to bind the creditor to him and ensured future availability of credit. Without the unpaid debt, the creditor would have freer choice to give the goods to other dealers. From the point of view of the Western business houses, the system was still useful because they had to get their goods distributed as soon as possible. Certain bad debt was acceptable.49 Through their extensive retailing networks and correct business strategy, the Chinese businessmen were able to control 46

Ibid, pp. 73–74. Ibid., p. 70; for a detailed analysis of Chinese middlemen’s role in domestic Philippine economy, see Wong Kwok-Chu, The Chinese in the Philippine Economy, 1898–1941 (Quezon city, Ateneo de Manila University Press, 1999), pp. 149–173. 48 See T’ien Ju-k’ang, The Chinese of Sarawak: A Study of Social Structure (London, Department of Anthropology, London School of Economics and Political Science, 1953), 65n. 49 Edgar Wickberg, op. cit., p. 71. 47

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the distribution of imported goods as well as the collection of local produce. Chinese sari-sari store keepers were willing to accept local produce in lieu of cash, and were able to collect substantial amount of abaca (Manila hemp), sugar and tobacco products. Combining retailing and collecting functions, the Chinese businessmen were able to maximize their advantages and beat the indigenous or Mestizo competitors in the countryside, and made themselves complementary to European (principally British) merchant houses from whom they received textiles and to whom they sold their export goods.50 In a competitive perspective, the Chinese businessmen had another edge — inexpensive semi-skilled labor force. For instance, most of the Chinese immigrants in Kabikolan were not independent businessmen, but employees of small Chinese business establishments. For every shopkeeper, there were three to eight male staff working under him. Being unmarried, these Chinese clerks lived in an extraordinary low level of subsistence. Some of them were reportedly paid only their food, their clothing and the cost of their head tax. This reservoir of cheap skilled mercantile labor enabled the complex Chinese marketing network to maintain its competitive efficiency.51

Chinese business under the American rule American colonialism was not very different from its European counterparts in terms of economic interests. The Americans were searching for overseas markets for their surplus manufactured products; at the same time, American manufacturers also needed cheap raw materials. The growing population in the Philippines satisfied the former, while Philippine cash crops such as sugar, abaca and tobacco were to help feed the American urban population. This economic interests together with Protestant religious zeal, national pride and strategic 50

See Norman G. Owen, Prosperity Without Progress: Manila Hemp and Material Life in the Colonial Philippines (Berkeley, University of California Press, 1984), p. 69. 51 Ibid., p. 186.

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consideration, constituted the basic sentiments that underpinned American attitude towards the Philippines.52 The best indicator of American growing economic interests in the Philippines was trade. Philippine foreign trade was closely tied to the United States. The U.S. was the largest market for Philippine cash-crop products, and in return, the colony also took substantial U.S. manufactured goods. The trade with the U.S. had grown from $34 million in 1899 (first year of American rule) to over 251 million in 1940, an increase of more than 7 folds. The substantial increase is not just measured in terms of the volume, but is also in its weighting in the Philippine total trade. In the same period, it increased from 16% to 75%.53 American economic interests in the Philippines was part of the larger economic expansion in East Asia. Behind this expansion was a group of industrial and commercial capitalists who regarded the Philippines as launching pad for economic expansion into the vast China market. This expansionist sentiment was articulated by Senator Albert J. Beveride of Indiana who introduced a joint congressional resolution on January 4, 1900 to establish permanent U.S. sovereignty over the Philippines.54 Echoing this sentiment in the colony was the American business community. It attempted to influence the formation of the Philippine policy back home. It began to form in Manila the American

52

See a discussion of this issue in John A. Larkin, The Pampangans: Colonial Society in a Philippine Province (Berkeley, University of California Press, 1972), pp. 130–135. 53 See Shirley Jenkins, American Economic Policy toward the Philippines (Ann Arbor, University Microfilms International, 1978), p. 38. 54 In introducing the resolution, Senator Albert J. Beveride declared that “The Philippines are ours forever... And just beyond the Philippines are China’s illimitable markets... Our largest trade henceforth must be with Asia. The Pacific is our ocean. More and more Europe will manufacture the most it needs, secure from its colonies the most it consumes. Where shall we turn for consumers of our surplus? Geography answers the question, China is our natural customer... The Philippines give us a base at the door of all the East.” see Senator Albert J. Beveride’s speech, in Congressional Record, 56th Congress, 1st session, January 9, 1900, p. 704, cited in Shirley Jenkins, Ibid., p. 31.

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Chamber of Commerce which acted as a strong political pressure group to protect its commercial interests in the colony.55 American attitude towards the Chinese in the Philippines, in a historical perspective, was no better than the Spanish colonial government. Despite its political and moral rhetoric, the record of American treatment of the Chinese in the United States was less than honorable. Towards the end of the 19th and the beginning of 20th centuries, a wave of anti-Chinese movements swept through the political landscape of the nation and it was enshrined into the infamous Exclusion Law against Chinese immigrants.56 America fired its first shot at the Philippine Chinese before officially taking over the Philippines in December 1898. As a result of a speedy victory over the Spanish for the control of the Philippines, the American military commander, General Otis, issued the order prohibiting Chinese immigration to the islands. Despite the effort in fighting against this military order by Wu Ting-fang, the Chinese ambassador to the United States, the Congress sustained Otis’s position and passed the Exclusion Law in April 1902 which was extended to cover her island territories (including Hawaii and the Philippines).57 Throughout its 48 years rule of the Philippines, the American government passed several laws directly or indirectly restricting Chinese business activities. Exemplifying this hostile policy was the introduction of the Book-keeping Act of 1921. The Act required every merchant to keep accounts of his business in English, Spanish 55

See Frank H. Golay, “Manila Americans and Philippine Policy: The Voice of American Business”, in Norman Owen (ed.), The Philippine Economy and the United States: Studies in Past and Present Interactions (Ann Arbor, The University of Michigan, Center for South and Southeast Asian Studies, 1983), pp. 8–30. 56 For a detailed study of the background leading to the introduction of the Exclusion Law of 1902 and 1904, See Delber L. McKee, Chinese Exclusion Versus the Open Door Policy, 1900–1906: Clashes over China Policy in the Roosevelt Era (Detroit, Wayne State University Press, 1977), pp. 28–65, 84–102. 57 For a discussion of Wu Ting-fang’s effort in fighting against the United States’ Exclusion of Chinese immigrants to the Philippines, see Yen Ching-hwang, Coolies and Mandarins: China’s Protection of Overseas Chinese during the Late Ch’ing Period, 1851–1911 (Singapore, Singapore University Press, 1985), pp. 298–300.

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or a local dialect.58 It was designed to stop the fraud of Chinese business practices as well as to break Chinese grip on retailing business. With strong opposition of the Chinese business community which took the issue to the high court of the United States, the Act was declared to be unconstitutional. The victory delayed the implementation of the Act on the islands. Against all odds, the Chinese business in the Philippines showed considerable resilience, and managed to maintain its predominant position in retailing and wholesaling trade, and developed into new branches of industry such as rice-milling, timber-milling, banking and insurance. In the 1930s, it was claimed that 90% of the rice trade in the Philippines was in the hands of Chinese who had efficient networks of distribution with their head offices located in Manila.59 It was also claimed that 75% of 2,500 rice-mills in pre-war Philippines were owned by the Chinese.60 The success of the Chinese in ricemilling business was mainly due to their adoption of traditional Chinese business strategy of ‘low profit margin and high turn-over’ (Boli Duoxiao). One study claims that the Filipino farmers received the average 87% of the wholesale price of rice in Manila, while the Chinese rice merchant only received a margin of 13%. Out of this margin, 4% went to milling cost, and 3.9% on railway freight, 2.1% represented marketing costs, only 3% went to the miller or wholesaler.61 The result of this strategy was not just to maintain Chinese predominance in rice-milling, but also the real benefits spread to the vast native producers. The finger-pointing at Chinese exploitation of 58

See Victor Purcell, The Chinese in Southeast Asia (London, Oxford University Press, 1965, second edition), p. 543. 59 See the survey conducted by the Japanese, contained in a book titled Sanshi niandai Feilibin huaqiao shangren (The Chinese Businessmen of the Philippines in 1930s), edited by Yang Jiancheng and translated from Japanese into Chinese by Su Wenlang (Taipei, Zhonghua xueshuyuan Nanyang yanjiusuo, 1984), pp. 77–78. 60 See Huang Zisheng & He Sibing, Feilibin huaqiao shi (Guangzhou, Guangdong gaodeng jiaoyu chubanshe, 1987), p. 328. 61 See H.H. Miller, Principles of Economics Applied to the Philippines (Boston, 1932), pp. 198–199, cited in Victor Purcell, The Chinese in Southeast Asia, p. 547.

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Filipino producers was designed for political gains by indigenous nationalists who targeted Chinese business as a political whipping boy. In addition to this business strategy, the success of the Chinese in rice-milling was also due to their control of distribution networks with headquarters located in Manila; and the formation of The Federation of Chinese Rice-traders Association (Zhonghua mishang shanghui) in 1921. The association was to set common rules and to regulate supply and demand so as to benefit the members. The support of the Zhongxing Bank (China Bank Corporation), the first Chinese commercial bank in the Philippines, was also important.62 The facility and assistance provided by the bank greatly benefited the Chinese rice-millers and rice-traders who had not hitherto fully utilized the facility provided by European banks in the Philippines because of language barrier or other reasons. Chinese advancement into timber industry was the result of a practical response to the demand of the international markets. The American free trade policy, the global shortage of primary resources and the demand for timber during World War I and the post-war period, provided excellent opportunity for the Chinese timber industry to grow. Led by a far-sighted leader like Dee C. Chuan (Li Qingquan), the Chinese businessmen increased their share in sawmilling, and expanded into logging, timber processing and export. This expansion was clearly reflected in the growth of Chinese share in the industry. In 1901, the Chinese owned 21 out of 46 sawmills in the Philippines, the rest were owned by indigenous Filipinos, Spaniards and Americans. By 1935, among the 204 sawmills in the Philippines, the Chinese owned and operated 148 of them, and the combined capital reached 2.68 million peso which accounted for 88% of the total investment in the timber industry.63 Dee C. Chuan’s successful story epitomized Chinese expansion in the timber industry. Dee, a native of Quanzhou, the traditional 62

Huang Zisheng & He Sibing, op. cit., p. 329. See Eufronio M. Alip, Ten Centuries of Philippine-Chinese Relations (Manila, Alip and Sons Inc., 1959), cited in Huang Zisheng & He Sibing, Feilibin huaqiiao shi, pp. 329–330. 63

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international port in Southern Fujian, was born in 1889 in an Overseas Chinese family. Both his grandfather and father were successful merchants in the Philippines. In 1906 at the age of 17, he arrived in the Philippines assisting his father in the timber business. With business acumen, foresight, and family’s finance, Dee was able to expand his timber business into a modern enterprise. He adopted a strategy of vertical integration by controlling the plantation, production and marketing of timber in both domestic and international markets. He had a substantial share in the emerging timber industry in the Philippines, and his important contribution was recognized by the Chinese community with a nickname of ‘King of Timber’.64 The growth of Chinese banking and financial sector was also important during the American rule. Like other parts of Southeast Asia, the Chinese in the Philippines lacked modern banking institutions until the founding of the China Bank Corporation in July 1920. Traditional Chinese bank, Qianzhuang, was seldom found in the Chinese communities in Southeast Asia. However, the remittance agency, Huidui xinju, was a popular form of intermediary between the Philippine Chinese and their home districts in South China. Regular remittance to support close relatives in China was a top priority for many Philippine Chinese in their expenditure; and to meet this need, many remittance agencies came into existence in Manila and other provincial centers. In the late 1930s, there were at least 83 remittance agencies alone in the city of Manila.65 The rise of modern Chinese commercial banking in the 1920s was a most significant development in the history of Chinese finance on the islands. The founding of the China Bank Corporation in 1920 was a giant step taken by the Chinese business community in the Philippines. Led by Dee C. Chuan who was the president of the Chinese Chamber of 64

See Xu Guodong “Aiguo qiaoling Li Qingquan chuan” (Patriotic Overseas Chinese Leader — Dee C. Chuan), in Xu Guodong et al. (eds.), Aiguo qiaoling Li Qingquan he ta de guxiang Shi Zhen (Patriotic Overseas Chinese Leader Dee C. Chuan and His Home Village — Shi Zhen) (Xiamen, Xiamen daxue lishixi & Jinjiang Shizhen cunweihui, 1988), pp. 1–3. 65 See Yang Jiancheng (ed.) and translated by Su Wenlang, Sanshi niandai Feilibin huaqiao shangren (The Chinese Businessmen in the Philippines), pp. 95–99.

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Commerce of the Philippines, the Chinese fulfilled a long-cherished need of having a modern commercial bank which would help smooth the cash flow and facilitate Chinese business expansion. In December 1919, Dee convened a meeting of some leading Chinese merchants in Southeast Asia and solicited their views on the founding of a proposed commercial bank in the Philippines. The idea received warm support from some Overseas Chinese leaders, especially from a wealthy Chinese businessman in Dutch East Indies, Huang Yizhu who was prepared to invest one million peso. The proposed commercial bank, The China Bank Corporation (Zhongxing Yinhang) was founded on July 20th, 1920 with a capital of 10 million peso. It was not only the first Chinese bank, but also the first commercial bank in the Philippines. Its shareholders included Chinese as well as Filipino, American and British investors. Prominent Chinese merchants in Manila such as Xie Minlao were among major shareholders, and Dee C. Chuan was elected general manager of the bank.66 The China Bank Corporation possessed all the features of a modern bank. In addition to accepting deposits and making loans, the bank also offered other moneyhandling services including drafts, overdrafts, transaction of credits etc.67 Apart from the China Bank Corporation, the Mercantile Bank of China (Huaxing yinhang) was founded in January 1924 with capital of 2 million peso (1 million paid up capital), and it had agencies set up in Peking, Shanghai, Hong Kong, Xiamen, Java, India, Europe and America. But it was badly hit by the Great Depression in the late 1920s and early 1930s, and it was incorporated into the China Bank Corporation. Another Chinese commercial bank, the Minxing yinhang which was founded in the 1920s, collapsed during the Great Depression.68 However, in August 1939, The Philippine Bank of 66

See Xu Guodong, op. cit., p. 8; Wong Kwok-Chu, The Chinese in the Philippine Econonmy, 1898–1941, pp. 132–133. 67 See Yang Jiancheng (ed.) and translated by Su Wenlang, Sanshi niandai Feilibin huaqiao shangren, pp. 92–93. 68 Huang Zisheng & He Sibing, Feilibin huaqiao shi, p. 337.

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Communication, Trade and Commerce — another Chinese controlled commercial bank, came into being with 2 million peso capital. In addition to commercial transactions, it started savings accounts for Chinese legal tender, Fapi. Insurance was a modern branch of financial sector. It facilitated and stimulated economic activities. As domestic and international trade grew, Chinese businessmen in the Philippines needed this modern institution to provide useful services. In the 1930s, there were at least 7 modern insurance companies founded by the Chinese, and the majority were located in Manila. Far Eastern Surety & Insurance Company (Dadong baoxian youxian gongsi), Zhongguo Insurance Company Ltd. (Zhongguo baoxian gufen youxian gongsi), and China Insurance & Surety Company (Zhonghua baoxian youxian gongsi), all located in Manila were among top insurance companies founded on the islands at that time.69

Economic Change and the Rise of Chinese Business Conglomerates Economic development and strategies of the new Republic The Philippines shared with other newly independent states in Southeast Asia the common aims of rapid economic growth and social equity. Social equity can only be acquired through equitable distribution of wealth which called for the intervention by the state. Economic nationalism was embraced by Filipino leaders as a means to achieve these twin aims. Economic nationalism, as one scholar has put it, “that emphasises, not the nation state defined by physical boundaries but the national society with its emphasis on membership, which may or may not be conferred upon particular groups within the resident population. This dimension of economic nationalism is reflected in the use of powers and institutions of the state to transfer the sources of wealth and income, and control over the 69

Yang Jiancheng (ed.) and translated by Su Wenlang, op. cit., pp. 100–101.

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national economy, to the members of the politically dominant national society”.70 In the case of the Philippines, it entailed the implementation of a discriminatory policy against an alien minority, the Chinese. The anti-Chinese economic policies received strong support from Filipino traders and financiers who wished to eliminate business competitors; as well from Filipino officials and frontmen who welcomed the opportunity to squeeze the Chinese more.71 Economic nationalism also entailed the adoption by the Republican government of an early developmental strategy — ‘import substitution’ for industrialization. It was an effective means to promote domestic industry and to conserve scarce foreign currency resources. Through its use of tariffs and quotas, it developed its own manufacturing industry in a most effective way. However, the ‘import substitution’ strategy would not automatically guarantee its success which, to a great extent, depended on the acceptance of domestic products by the local consumers. A sense of loyalty to the country and a pride in domestic products helped the strategy to succeed. The 1950s was the period that the strategy of ‘import substitution’ was put in place in the Philippines. Much of the industries created in this period was in the consumer goods such as processed foods, textiles, footwear and clothing, beverages, tobacco, rubber goods, and petroleum products, etc. In many of the industrial undertakings especially in food, beverages and tobacco, this ‘import-substitution’ strategy had been a successful one.72 In 1956, manufactures of food, beverages and tobacco accounted for more than two-fifths of the value added manufactured products, while textiles, clothing, and footwear accounted for about 10%.73 70

See Frank H. Golay et al., Underdevelopment and Economic Nationalism in Southeast Asia (Ithaca and London, Cornell University Press, 1969), pp. 7–8. 71 See Norman Owen, “Economic and Social Change”, in Nicholas Tarling (ed.), The Cambridge History of Southeast Asia, Vol. 2: The Nineteenth and Twentieth Centuries (Cambridge, Cambridge University Press, 1992), p. 477. 72 Gerardo P. Sicat, Economic Policy and Philippine Development (Manila, University of the Philippines Press, 1972), pp. 337–338. 73 See Frank H.Golay, The Philippines: Public Policy and National Economic Development, p. 50.

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However, a major weakness of this policy is that some of these industries such as textiles were highly dependent on imported raw materials.74 In addition, due to the trade agreement with the United States, U.S. imported manufactured goods enjoyed preferential treatment which handicapped to some extent the performance of the newly established industries in the Philippines.75 Like other developing countries in East and Southeast Asia, this strategy had initial benefits of laying a foundation for further industrialization, but it could not lead to a sustainable growth. Soon the domestic market was saturated though the quality of local products improved. The exhaustion of domestic market forced the policy makers of the Philippines to adopt a new ‘export-oriented’ strategy which would guarantee certain period of sustainable growth. It has three important functions, as pointed out by an economist. Firstly, it permits countries to take better advantage of the technology available to them. Secondly, it prevents them from making some of the costly mistakes associated with domestic-oriented and restrictive practices. Thirdly, it forces certain requirements upon governments which could lead to better performance of the private sector.76 However, exportoriented industrialization required massive injection of capital which was necessary for setting up factories, purchasing of capital goods and paying salary. Apart from attracting foreign capital, the domestic capital had to be encouraged to invest in these new industries. However, the policy of Filipinization of commerce and industry enforced during the post-war period countered the requirement of domestic capital investment. A large section of domestic capital was in the hands of Ethnic Chinese who because of the discrimination, were hesitant to undertake these ventures. A change in government’s attitude and policy was needed if the export-oriented strategy was to succeed.

74

Ibid., p. 17. Ibid., pp. 334–335. 76 See Anne O. Krueger, “The Experience and Lessons of Asia’s Super Exporters”, in Vittorio Corbo et al. (eds.), Export-Oriented Development Strategies: The Success of Five Newly Industrialised Countries (Boulder & London, West-view Press, 1985), p. 197. 75

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Challenge and growth of the Chinese business From a broad historical perspective, the Chinese in the Philippines went through a period of rough ride caused by the introduction of a series of hostile bills against them after the World War II. Yet, Chinese business achieved rapid growth during these difficult years, and it succeeded to undergo transformation from a domestic and trade-based economy to an industrial and international-oriented economy. This paradox not just illustrates the resilience of the Chinese business, but also elucidates the strength of Chinese culture and social organization on which the Chinese business operated. Independence in 1946 brought joy and celebrations to millions of Filipinos, but it brought hardship to the Ethnic Chinese minority in the Philippines. It was just the beginning of this misery. In next two decades, Philippine parliament passed a host of bills targeted at the Chinese minority who were perceived to have controlled Philippine economy. This was a political ploy, as pointed out by a Chinese scholar, which the colonial masters used to cover their exploitation, and made the Chinese as the scapegoat. They fed the Filipino masses and elites with unsubstantiated claims that Ethnic Chinese had controlled 70% to 80% of retail business as well as finance and banking before 1932.77 But this political ploy became a political reality. In the two decades following the independence, many laws were passed to promote economic interests of the Filipinos, covering wide range of economic activities such as import and export, retailing, food processing, banking and manufacturing. Using legislation as a means, the government not only encouraged Filipinos to participate actively in

77

Chinese scholar from mainland, Huang Zisheng of Jinan University, Guangzhou cited the unsubstantiated claims made by Joseph Hayden, former Vice Governor of the Philipppines. See Huang Zisheng, “Zhanhou Filibin huaqiao zhengce yanbian pouxi” (Analysis of the Philippine Overseas Chinese Policy after World War II), in Guo Liang (Li Guoliang) et al. (eds.), Zhanhou haiwai huaren bianhua guoji xueshu yantaohui lunwenji (The Post-war Transformation of Overseas Chinese: Collected Papers of an International Symposium (Beijing, Zhongguo huaqiao chuban gongsi, 1990), pp. 105–106.

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economic activities, but also discriminated against minority groups such as Chinese though it had not spelt it out in the Acts. Since Ethnic Chinese were strong in trade and commerce, the laws were especially harsh in these areas. Three Acts which affected the Chinese most were the Import Control Act of 1950, the Retail Trade Nationalisation Act of 1954 and the Rice and Corn Trade Nationalisation Act of 1960. The Import Control Act which formed a part of the Filipinization program, gave a marked preference to Filipinos in the allocation of foreign exchange. The Act expired in 1953, but exchange control remained in place until the early 1960s.78 Under this Act, Chinese importers were to be squeezed out of their business in progression by the increase of quotas allocated to Filipino and American importers. For instance, in 1956, two bills proposed that 75% of foreign exchange allocations would be reserved for Filipino importers. But the actual percentage reserved for Filipino (and American) importers was increased from 75% to 90% after it was known that the quotas had already exceeded 75% of the available foreign exchange.79 The Act dealt a severe blow to Chinese importers. This was clearly reflected in the decline of their share in the total import trade. In 1948, two years before the introduction of the Act, Chinese importers had 438 million peso turn-over which accounted for 39% of the total value of imports (1136 million peso). But the percentage of their share declined sharply from 27% in 1951 down to 7% in 1960 and 3.6% in 1965.80 A more severe blow to the Chinese business during this period was the introduction of the Retail Trade Nationalization Act in June 1954. Clamoring for nationalization of retail trade had begun soon after the independence in 1946. In the first and second congresses from 1946 to 1950, several bills to this effect were submitted, but were consistently rejected by Presidents Roxas and Quirino. By 1954, 78

See Yoshihara Kunio, Philippine Industrialization: Foreign and Domestic Capital (Quezon City, Ateneo de Manila University Press; Singapore, Oxford University Press, 1985), p. 85. 79 See Frank H. Golay, “The Philippines”, in Frank H. Golay et al. (eds.), Underdevelopment and Economic Nationalism in Southeast Asia (Ithaca & London, Cornell University Press, 1969), p. 61. 80 See Table 2. “Imports by nationality of trader’, Ibid., p. 62.

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both domestic and international conditions had changed to facilitate its introduction. The Magsaysay landslide victory in 1953 put the Nationalists in power, and they had controlled both the executive and legislative arms of the government. The Nationalists had less scruple in pursuing more radical policies in line of rising Filipino nationalist sentiment. Further, various subsidization policies introduced in the past to enhance Filipinos’ competitiveness in retail trade were proven to be unsuccessful, and there was a feeling of urgency to introduce something more radical.81 Internationally, the deepening of the fight of the United States against Communism in Southeast Asia also provided Filipino politicians greater freedom to pursue Filipinization. In the congressional session of 1954, the Retail Trade Nationalization Bill was introduced, and it was approved by President Magsaysay despite strong protest from the Chinese community and the Chinese diplomats representing the Nationalist government in Taiwan. It was issued under the Republic Act No. 1180.82 Under the operation of this Act, no Chinese can start a new retail business. For those Chinese who were born in the Philippines and had owned a retail business before May 15, 1954, could continue their 81

See Frank H. Golay, The Philippines: Public Policy and National Economic Development, p. 324. 82 Section 1 of the Act states: “No person who is not a citizen of the Philippines, and no association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly and indirectly in the retail business: provided, that a person who is not a citizen of the Philippines, or an association, partnership, or corporation not wholly owned by citizens of the Philippines which is actually engaged in the said business on May 15, 1954, shall be entitled to continue to engage therein, unless its license is forfeited in accordance herewith, until his death or voluntary retirement from said business in the case of a natural person, and for a period of ten years from the date of the approval of this Act or until the expiration of the term of the association or partnership or of the corporate existence of the corporation, whichever event comes first, in the case of juridical persons....The licence of any person who is not a citizen of the Philippines and of any association, partnership, or corporation not wholly owned by citizens of the Philippines to engage in retail business, shall be forfeited for any violation of any provision of laws on nationalisation, economic control, weights and measures, and labour and other laws relating to trade, commerce and industry....” Ibid., p. 325.

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trade until death or retirement; and those Chinese owners who were born outside the Philippines, the Act only allowed them 10 years grace to wind up their retailing business. By the year of 1964, the Act hoped to achieve complete Filipinization of the retail trade. Given the fact that retailing trade was the bastion of the Ethnic Chinese business in the Philippines, the new Act had cracked the backbone of the Chinese community and devastated Chinese business. The number of Chinese owned retailing stores decreased sharply from 17,429 in 1951 to 11,044 in 1961.83 The introduction of the Rice and Corn Nationalization Act on August 2, 1960 was less significant in terms of its impact on the Chinese business compared with the Retail Trade Nationalization Act. The Act prohibited non Philippine citizens to be involved in rice and corn industry. Aliens who had engaged in retailing and wholesaling in rice and corn were allowed two years to wind up their business starting from January 1, 1961; while those aliens engaged in milling and warehousing were allowed three years to prepare their liquidation. To enable the Filipinos to take over the alien business, a revolving loan fund of 100 million peso was contributed by both the Philippine National Bank and the Development Bank of the Philippines.84 Clearly, this Act again was aimed at the elimination of Chinese hold on rice and corn trade, milling and warehousing. The effect of this Act, though not as severe as the impact of the Retail Trade Nationalization Act, had driven out many Chinese businessmen from rural areas, and deprived their opportunity of earning a living. The Chinese businessmen in Iloilo who had handled all large-scale commerce in agricultural products, were acutely affected.85 The introduction of these anti-Chinese laws constituted the most serious challenge to the Philippine Chinese community in the 20th century. Chinese business would have been wiped out if appropriate 83 See Frank H. Goley, “The Philippines”, in Frank H. Golay et al. (eds.), Underdevelopment and Economic Nationalism in Southeast Asia, p. 64. 84 See Frank H. Golay, The Philippines: Public Policy and National Economic Development, p. 337. 85 See John T. Omohundro, Chinese Merchant Families in Iloilo: Commerce and Kin in a Central Philippine City (Athens, Ohio, The Ohio University Press, 1981), p. 35.

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measures had not been taken. To cope with this challenge, Chinese cultural values proved to be a major source of strength. Traditional Chinese strategies to cope with extreme adversity were ‘nilai shunshou’ (to take the storm calmly) and ‘suiji yingbian’ (to change according to the changing circumstances). To take the storm calmly required a great deal of patience and courage, while to change according to the changing circumstances required the ability to overcome conservative outlook and subjective effort to change. Chinese culture further provided them with optimism and patience to cope with adversity. Because of the longevity of Chinese history, Chinese possess a long view of time which enabled them to see adversity in a different perspective. The problems they faced in the Philippines were perceived as short and temporary, and their patience to cope with hardship would see them through in a not too distant future. The Chinese also drew strength from their social organizations. Traditional Chinese clan and dialect organisations served partly as political lobby groups. But more influential and effective were those umbrella organizations which represented the voice of the Chinese community. The Chinese Chambers of Commerce which traditionally protected and promoted Chinese business interests emerged as the umbrella organization taking additional social and charitable role of the community.86 It also acted as a political lobby group attempting to curtail anti-Chinese laws and settle extraordinary claims from unscrupulous government officials.87 The formation of the Federation of Filipino-Chinese Chambers of Commerce and Industry in 1954 as the leading organization representing the entire Chinese community in the Philippines was timely. Since its inception, most of its attention was focused on lobbying against the passing of nationalization bills in Philippine Congress between 1954 and 1965. in 1960, the Federation was confronted with the government’s attempts to nationalize the lumber, coconut, corn, tobacco, sugar and rice and a host of other 86

Ibid., pp. 92–93. See Chinbin See, “Chinese Organization and Ethnic Identity in the Philippines”, in Jennifer Cushman & Wang Gungwu (eds.), Changing Identities of the Southeast Asian Chinese Since World War II (Hong Kong, Hong University Press, 1988), p. 324. 87

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industries in which Chinese predominated. Despite its heavy lobbying, it failed to prevent the passage of these bills.88 Nevertheless, these Chinese organizations served as useful defence line for the protection of Chinese interests on the islands. One survival strategy adopted by the Chinese was the acquisition of Philippine citizenship. The Nationalization Acts did not spell out Chinese for discrimination, and the Chinese were discriminated because they were not Philippine citizens. This left some rooms for the Chinese to manoeuvre. Many Chinese businessmen applied for naturalization and those who succeeded to obtain the citizenship continued to engage in trading. Not all members of a family could be naturalized, but the most qualified one did so, and the trading was continued under his name. Naturalization was a complex and difficult process; it required many qualifications and it was expensive. There were only 300 successful applications per year from independence till the late 1960s. Naturalization was not the only way to get around the nationalization legislation. Many Chinese business families also resorted to the use of Filipino wives as their ‘dummies’ for legal purpose.89 Perhaps the best strategy to meet the challenge and growth was the transformation of the Chinese economy from a trade-based to a manufacture-based. Philippine government’s new industrial strategies of ‘import substitution’ and ‘export-oriented industrialization’ provided excellent opportunities for the Chinese to exploit. Yoshihara Kunio, a noted Japanese economist, has pointed out that close to 90% of the 80 Filipino Chinese companies in his sample had entered into post-war manufacturing sector with pre-war trading 88

For the history and formation of the Federation of Filipino-Chinese Chambers of Commerce and Industry in 1954, see Theresa Chong Carino, Chinese Big Business in The Philippines: Political Leadership and Change (Singapore, Times Academic Press, 1998), pp. 23–28. For the failure of the Federation in its attempt to prevent passage of various anti-Chinese business bills, see Theresa Chong Carino, “Leadership and Organization among the Chinese in the Philippines: Continuity and Change”, in Guo Liang (Li Guoliang) et al. (eds.), op. cit., English Section, p. 374. 89 See Yoshihara Kunio, Philippine Industrializtion: Foreign and Domestic Capital, pp. 85–86.

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background. The bulk of their capital were accumulated from trading, and then invested during the import substitution stage.90 The Chinese entry into manufacturing was cautious but firm. Given the government’s new industrialization policy and the emerging consumerism during the post-war period, the manufacturing offered a bright future for the Chinese business. The majority of the Chinese manufacturers did not take high risk of getting into unfamiliar areas. Instead, they started with manufacturing goods which used to be handled by them as traders. By so doing, they were ensured to have maintained a competitive advantage. They were involved in producing food and beverages, tobacco, textiles, pulp and paper products, chemicals, rubber and hardware products.91 With guaranteed domestic markets under the operation of the import-substitution policy, their risk of transforming from trading to manufacturing was reduced to minimum.

The rise of Chinese business conglomerates The rise of Chinese business conglomerates in the Philippines in the 1970s and 1980s was the result of interplay of domestic and international forces. It was a complex phenomenon involving political, economic and social factors. What contributed most to the rise of the Chinese business conglomerates was the government’s new policy towards Chinese and the role of Chinese business in the Philippine economy. Ironically, the man who made such dramatic change towards the Chinese was President Ferdinand E. Marcos. Despite his tarnished image as an authoritarian ruler, Marcos appeared to be an ardent nationalist who seemed to have the welfare of his people at heart.92 In 1975 and 1976, Marcos issued his instructions to relax the control over the naturalization process, and lowered the requirement 90

Ibid., pp. 90–91. Ibid., p. 88. 92 See two books written by Marcos titled Today’s Revolution: Democracy (Manila ? 1971) and Notes on the New Society of the Philippines (Manila ? Marcos Foundation, Inc. 1973). 91

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of language and financial qualification. As a result of this relaxation, 160,000 Chinese obtained Philippine citizenship.93 Relaxation of naturalization gave the Chinese business a big boost. Chinese businessmen who had formerly been denied a citizenship felt relieved and had a new sense of security in planning and expanding their business activities. They had no longer need to find legal loopholes to protect their business. What prompted Marcos to take this action was a combination of several considerations. Firstly, Philippine economic development had been stalled partly by Marcos’s imposition of martial law in 1972 and partly by the oil crisis of 1973. Relaxing naturalization law would boost domestic investment by the Chinese. Secondly, with the desire to break the stranglehold on Philippine economy by the Filipino oligarchy — the landed elite which controlled agricultural exports and later expanded into finance and real estate — Marcos intended to counter the influence of the Filipino rich by raising the economic positions of the Chinese.94 Thirdly, the changes taking place in the wider East Asian world called for a reappraisal of Philippine foreign policy, especially in relations with mainland China. The replacement of Taipei with Peking in the seat of Security Council of the United Nations at the end of 1971, and the President Nixon’s visit to China in February 1972 altered Marcos’s perception of the power structure in East Asia, and changed his mainland China policy. To switch diplomatic recognition of China from Taipei to Peking was beneficial to the Philippines on a long-term basis, and it was required to send a friendly message to Peking before this diplomatic recognition taking place. Further, relaxation of naturalization law would retain Chinese loyalty towards the Philippines, and prevent them to look to mainland China.95 Fourthly, the end of the Vietnam 93

See Yoshihara Kunio, The Nation and Economic Growth: The Philippines and Thailand (Kuala Lumpur, Oxford University press, 1994), p. 31. 94 See Gary Howes, “Marcos, His Cronies, and the Philippines’ Failure to Develop”, in Ruth McVey (ed.), Southeast Asian Capitalists (Ithaca, New York, Southeast Asian Program, Cornell University, 1992), p. 145; Yoshihara Kunio, The Nation and Economic Growth: The Philippines and Thailand, p. 22. 95 See Huang Zisheng, “Zhanhou Filibin huaqiao zhengce yanbian pouxi” (Analysis

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war in 1975 and the withdrawal of American troops from Southeast Asia would de-stabalize the region, and activate the Communist activities. A softly softly approach towards the problem of Overseas Chinese would prevent the Chinese to become the so-called ‘Fifth Columnists’ of mainland China.96 Apart from Marcos’s new naturalization policy, Chinese business grew and developed rapidly under Marcos’s rule (1966–1986). Economic policies during this period, particularly on investment, were generally more liberal than those during the 1950s and 1960s. The Chinese were more prepared to take advantage of new policies such as export-driven industrialization. Despite the political and economic crises during 1983–1985, Chinese-Filipino entrepreneurs invested heavily in the Philippines, and had a great confidence in Philippine future. This perhaps sprang partly from their culture and traditional belief that any crisis also contains elements of opportunity. The Chinese term of crisis, ‘Weiji’, is the combination of both danger (wei) and opportunity (ji). It was observed that in the 1980s when the crises struck, many indigenous Filipinos and Spanish-mestizos businessmen and professionals fled to the United States and Canada; while Chinese-Filipinos mostly remained at home and expanded their business.97 According to a study by Ellen H. Palanca, 354 of the top 1,000 corporations in the Philippines in 1990 were owned by Chinese-Filipinos, 35% of the total. She found that Chinese-Filipino share of the corporations remained steady, a slight increase of 2% from the sample of 1980 (33%). By contrast, the share of indigenous Filipinos and Spanish-mestizos declined from 50% in 1980 to 34% in 1990.98 of the Changes of the Philippine policies towards Overseas Chinese during the Post-war period), in Guo Liang (Li Guoliang) et al. (eds.), op. cit., p. 109. 96 Ibid. 97 See Ellen H. Palanca, “Chinese Business Families in the Philippines Since the 1890s”, in Rajeswary A. Brown (ed.), Chinese Business Enterprise in Asia (London and New York, Routledge, 1995), p. 207. 98 In Theresa Chong Carino’s article, she mentioned Chinese-Filipinos’ and non Chinese-Filipinos’ shares of corporations, but her figures do not make up to 100% (such as Chinese 33% and non Chinese-Filipinos 50% for 1980, while in 1990,

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Like other Chinese business conglomerates in East and Southeast Asia, the Chinese-Filipino conglomerates are characterized by strong family ownership and family control, and a high degree of diversification; some of them have also been globalized. The Lucio Tan group of companies is owned and controlled by Lucio Tan and his family; J.G. Summit Holdings group of companies is controlled by John Gokongwei’s family; Alfonso Yuchengco’s group is controlled by Alfonso Yuchengco and his family; Metropolitan Bank & Trust Co. (Metrobank) group is controlled by George Ty and his family; and SM (Shoe Mart) group of companies is owned and controlled by Henry Sy and his family.99 All of these Chinese-Filipino conglomerates controlled many subsidiaries. Ownership and control tend to merge. Close relatives are placed in key management positions of the flagship of the conglomerate and its subsidiaries. Even if some of the companies are listed public companies, the Chinese-Filipinos, like many other Ethnic Chinese entrepreneurs, ensured family control of the majority of the stocks. These Chinese-Filipino conglomerates have a high degree of diversification. They are either based on trading or manufacturing or banking, and then diversify into other branches of business. Diversification is a strategy of spreading risk, but also a strategy for fast growth. The success of diversification resulted in rapid expansion of the conglomerates. Lucio Tan started with manufacturing which became the core of his business, and then diversified into banking, real estate, hotel and air transport; John Gokongwei also started with manufacturing in the 1950s, and expanded into tourism, banking and Chinese -Filipinos 35% and non Chinese-Filipinos 34%). Therefore this so-called nonChinese-Filipinos figure must be referred to as indigenous Filipinos and Spanishmestizos) See Theresa Chong Carino, “The Ethnic Chinese, The Philippine Economy and China”, in Leo Suryadinata (ed.), Southeast Asian Chinese and China: The Politico-Economic Dimension (Singapore, Times Academic Press, 1995), p. 218. 99 See Jiang Xiding, “Filibin de Huaren qiye jituan” (The Ethnic Chinese Business Groups in the Philippines), in Wang Muhan (ed.), Dongnanya huaren qiye jituan yanjiu (A Study of the Ethnic Chinese Business Groups in Southeast Asia) Xiamen, Xiamen daxue chubanshe, 1995), pp. 163–164.; Geoff Hiscock, Asia’s Wealth Club (St. Leonards, NSW., Australia, Allen & Unwin, 1997), pp. 216, 236–237, 242.

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insurance, real estate and telecommunication; Henry Sy started with Shoe Mart trading business, and expanded into department stores and shopping malls, and then diversified into banking and financial services, real estate, tourism, and building materials.100

Case Studies: Lucio Tan Group and Yuchengco Group of Companies Two of the Chinese-Filipino business conglomerates, Lucio Tan group of companies and Yuchengco group of companies, deserve further study. Not only because they are two out of the top six singled out by President Ramos in 1993 to help in the infrastructure development of the Philippines, but also they illustrate some of the themes discussed above. Lucio Tan (Chen Yongcai in Mandarin) was born in Southern Fujian in 1934. At the age of 11, he accompanied his uncle to Sibu where he worked in a cigarette factory as a child labor. With work and study, Lucio Tan managed to get through secondary and tertiary educations with a degree in chemical engineering. In 1959 at the age of 25, he started a small factory and partnered with friends in trading chemical materials. It was not until 1965 that Tan had a breakthrough in his business. With the help of relatives and kinsmen in Hong Kong, he raised a capital of H.K.$700,000 and founded a cigarette factory in Manila named Fortune Tobacco Corporation. With meagre capital, his factory was not well-equipped with modern machinery. Much of the production were done by human labor. Lucio Tan had to participate in the factory floor production as well as taking up the task of management. He produced medium-priced cigarettes to suit average consumers. His low cost and reasonable quality cigarettes were welcome by local consumers with a rapidly increased market share. His company’s share in the Philippine market was increased from 44% in 1985 to 64% in 1991. By 1992, his company

100

Jiang Xiding, op. cit., pp. 166–182; Geoff Hiscock, op. cit., pp. 236–237; Ellen H. Palanca, “Chinese Business Families in the Philippines Since the 1890s”, in Rajeswary A. Brown, Chinese Business enterprise in Asia, pp. 207–209.

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had an annual turn-over of U.S.$424 million with a net profit of U.S.$30 million. The company employed a work force of 6,000. In the late 1960s when Lucio Tan’s Fortune Tobacco Corporation took off, he began to diversify into pig farming. A large piece of land with modern equipments, his pig farm at its peak produced 12,000 pigs to supply both domestic and Hong Kong markets. Presumably Tan’s diversification strategy was designed to spread the risks of his investment, but it was also a means of rapid expansion of his business. He then expanded into other manufacturing such as coconut oil milling, soap making and electronic industry etc. He further diversified into construction and real estate. In the 1970s, Lucio Tan also advanced into banking and finance. In 1976, he partnered with friends to take over the General Bank and renamed it the Allied Banking Corporation of which he became chairman of the board. He recruited a group of financial experts into his management team and increased the paid-up capital. By 1993, the total assets of the bank reached U.S.$1.1 billion which ranked third among the Chinese-Filipino owned commercial banks. He also founded insurance and investment companies. Since 1989, Lucio Tan expanded his business into hotel and air transport. He acquired the Century Park Sheraton Hotel with U.S$8.5 million and two other hotels. In 1992 and 1993, he invested 5.1 billion peso to acquire 33.5% shares of Philippine Airlines, and became the deputy chairman of its board. Since the 1980s, Lucio Tan also expanded his business empire overseas. He founded Fortune Trading company and a financial service company in Hong Kong; then in 1981 he opened the Oceanic Bank and a real estate company in the United States; he set up tourist resorts and department stores in Guam islands; developed tobacco plantation, cattle stations in Papua New Guinea; set up carpet companies and drug stores in Canada. He further invested heavily in Hong Kong real estate, and used Hong Kong as the base for his investment in the vast China market. To coincide with China’s rapid economic development, Tan invested in real estate in Xiamen (Amoy) in 1992. In 1993, he set up Xiamen Commercial Bank, and proceeded to acquire several breweries, including the Shanghai

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Brewery. In 1997, the net worth of his wealth was estimated at U.S.$1.7 billion.101 The success story of Lucio Tan illustrates several characteristics of the Chinese big business in Southeast Asia in general and in the Philippines in particular. He is a self-made Ethnic Chinese tycoon, achieving the dream of becoming a billionaire in his lifetime. His diligence, thrift and the desire for acquiring education laid the foundation of his success. His foresight and business acumen led him to found the Fortune Tobacco Corporation in 1966. Like many other Chinese entrepreneurs in Southeast Asia, he realised the important links between politics and business. This was why he cultivated cordial relationship with President Marcos, and became one of Marcos’ cronies. It is alleged that Marcos was behind his move of taking-over of the financially troubled General Banking and Trust in 1977, the first important step of Tan’s expansion into banking and finance.102 Diversification and globalization were two strategies taken by Lucio Tan for spreading his risks as well as means for rapid expansion of his business empire. The strategy of holding to the core — manufacturing, but diversifying into other important branches of business such as banking and finance, breweries, tourism and air-transport apparently worked well, and speeded up the process of building an assorted and integrated business empire. His globalization strategy was to adhere to the old saying of ‘not putting all eggs into one basket’, and minimized the risks of collapse of his empire based entirely in the Philippines. His expansion to Hong Kong and mainland China was probably not motivated by politics, rather by economic and nostalgic considerations. The story of Alfonso Yuchengco (Yang Yinglin in Mandarin)illustrates different themes of Chinese big business in the Philippines. Unlike Lucio Tan, Alfonso Yuchengco was a local-born ChineseFilipino. He was born in 1923 in Manila in a wealthy business family. 101

See Jiang Xiding, op. cit., pp. 166–171; Yoshihara Kunio, The Rise of Ersatz Capitalism in Southeast Asia (Singapore, Oxford University Press, 1988), pp. 188–189; Geoff Hiscock, Asia’s Wealth Club, pp. 242–243. 102 See Yoshihara Kunio, The Rise of Ersatz Capitalism in Southeast Asia, p. 189; Yoshihara Kunio, The Nation and Economic Growth: The Philippines and Thailand, p. 23.

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His grandfather, Yang Shaoji, was an immigrant from Nanan district of Southern Fujian. Shaoji was a successful immigrant leaving his marks on timber and real estate business. His father, Enrique Yuchengco (Yang Zhongqing in Mandarin) inherited the business and diversified into construction, tobacco trading and insurance. At the time when Alfonso was born, the Yuchengco family was already a leading business family in the Chinese community in Manila. Born with a silver spoon, Alfonso received the best education available. He obtained a commerce degree from a famous local university in 1949, and then proceeded to the United States to study at the University of Columbia graduating with a MBA degree. After his return to the Philippines, he was in charge of the China Insurance and Surety Company in 1953 — the flagship of his father’s business establishments. With the solid foundation laid by his grandfather and father, Alfonso Yuchengco was able to build his business empire both domestically and internationally. He expanded and consolidated the core of his insurance business. A batch of new insurance companies were established in the Philippines; and he also partnered with large insurance combines to found various insurance companies in Malaya and Hong Kong, and later in America, Europe and Latin America. In 1990, the estimated assets of the China Insurance and Surety Company and its four branches were 2.94 billion peso (about U.S.$ 112 million). With the insurance business as its core, Alfonso Yuchengco expanded his business empire into banking and finance in the 1960s. In 1960, he partnered with Japanese Sanwa Bank to found the Rizal Commercial Banking Corporation of which he held 75% shares. By 1990, the bank was ranked fifth among the commercial banks in the Philippines. In 1991, the Rizal Commercial Banking Corporation controlled six large financial service companies. Together with 150 domestic and overseas branches, the bank employed more than 2,000 staff. In 1997, Rizal Commercial Banking Corporation was the eighth largest in the Philippines with assets of U.S.$ 2.5 billion. Since the 1970s, Alfonso Yuchengco also diversified into telecommunication, investment, mining and cash crop business. He acquired a monopoly of communication projects with the Philippine Long Distance

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Company. In 1986 when President Aquino took office, Alfonso Yuchengco was appointed ambassador to China. In 1997, his estimated net worth was U.S.$1 billion.103 Alfonso Yuchengco’s story provides a different pattern of the Ethnic Chinese tycoons in Southeast Asia. He was a local-born Chinese with a solid financial foundation laid down by his grandfather and father. He also married a daughter of another wealthy Chinese family, the Xie (Sy Cip) family. With strong financial foundation and well-connected relations in the Chinese commercial world, Alfonso was in a better position to build up his business empire than Lucio Tan. Alfonso’s overseas study perhaps broadened his horizon in business venture, and he was prepared to partner with foreign companies in his international expansion. In this aspect, Lucio Tan seemed to be lacking. However, Lucio Tan had to try to cultivate political relations to advance his business interests, while Yuchengco did not seem to have keenly cultivated that kind of relations though he was appointed ambassador to China by President Aquino. However, both Lucio Tan and Alfonso Yuchengco had not lost sight of the strategies of diversification and globalization, whether these strategies were designed to minimize the risks or not, they nevertheless contributed to the rapid growth of their business empires.

103

See Jiang Xiding, op. cit., pp. 182–186; Geoff Hiscock, Asia’s Wealth Club, pp. 276–277; Ellen H. Palanca, “Chinese Business Families in the Philippines Since the 1890s”, in Rajeswary A. Brown (ed.), Chinese Business Enterprise in Asia, p. 208.

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Chapter 13

Chinese Business in Hong Kong

Trade and the Chinese Business British occupation of Hong Kong as a result of its victory over China in the Opium War was motivated by lucrative China trade.1 The colony was to serve as a British outpost in the Far East protecting British business interests in the region. The making of Hong Kong as a major entrepot in the Far East was due to geographical, economic and political factors. Geographically, Hong Kong occupied an excellent location in the southern coast of China with vast hinterland, and was on the traditional trade route between East and Southeast Asia. Economically, early British policy of free trade attracted both Western and Chinese traders to the new colony, and developed it into the center of their business activities. The linkage of Hong Kong northwards with the newly opened treaty ports on the east coast of China, and southwards with the ports in Southeast Asia, made Hong Kong the center of inter-regional trade between East and Southeast Asia.2 At the same time, rapid political change in China after its opening in

1

For analysis of British economic interests in the Opium War, see Michael Greenberg, British Trade and the Opening of China, 1800–42 (Cambridge, Cambridge University Press, 1951). For a critical study of the Opium War, see Hsin-pao Chang, Commissioner Lin and the Opium War (Cambridge, Massachusetts, Harvard University Press, 1964). For a critical evaluation of the Opium war, see Tan Chung, “The Opium War (1840–42) and Sino-British Contradictions”, in Tan Chung, Triton and Dragon: Studies on Nineteenth-Century China and Imperialism (Delhi, Gian Publishing House, 1986), pp. 113–150. 2 See Jung-Fang Tsai, Hong Kong in Chinese History: Community and Social Unrest in the British Colony, 1842–1913 (New York, Columbia University Press, 1993), pp. 62–64. 423

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1842 benefited the colony greatly. The impact of the Taiping rebellion starting in the middle of the 19th century saw the exodus of many wealthy Chinese landlords to the colony, and they had been transformed into businessmen engaged in property speculation or other business activities.3 The entrepot trade in Hong Kong was basically a pyramid structure shared by European and Chinese traders. At the top of the pyramid was the European companies dominated principally by the British, and they had controlled the colony’s and China’s international trade; in the middle rung was a group of Chinese entrepot traders who had a lion share of the inter-regional trade between East and Southeast Asia; while at the bottom of the structure was a vast number of Chinese shopkeepers, food peddlers who were involved in local trade catering for domestic market. The European trading companies led by the British trading giant, Jardine, Matheson and Company, had monopolized Hong Kong and China’s international trade in tea, silk, porcelain, opium and textile products which accounted for the major items of Sino-Western trade in the 19th century. This international trade was large in volume and its profit was huge, and it grew rapidly despite political turmoils in the south and southeast coasts of China. With the support of modern banking and financial institutions, these European trading companies in Hong Kong reaped enormous profit from the international trade, and had jealously guarded their preserve.4 What the Chinese managed to carve out a large piece of cake from the entrepot trade of Hong Kong was due to the efforts of a group of early Chinese entrepreneurs. They came from diverse backgrounds from the neighboring provinces of Guangdong and Fujian. They 3

Ibid., pp. 22–23; Carl T. Smith, Chinese Christians: Elites, Middlemen, and the Church in Hong Kong (Hong Kong, Oxford University Press, 1985), pp. 117–119. 4 For the history of founding of the Hong Kong and Shanghai Banking Corporation in 1865, see Maurice Collis, Wayfoong: The Hong Kong and Shanghai Banking Corporation (London, Faber & Faber, 1965). For the development and various aspects of the bank, see Frank H.H. King (ed.), Eastern Banking: Essays in the History of Hong Kong and Shanghai Banking Corporation (London, The Athlone Press, 1983).

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spoke different dialects of Cantonese, Teochew and Hokkien, and had different socio-economic backgrounds. Some of them were fresh emigrants from China, some were established traders in their home provinces or in other Ethnic Chinese communities in Southeast Asia. But all of them shared the belief and inspiration that Hong Kong was one of the best ports which would offer them tremendous opportunity to thrive and grow. The majority of this group were early Chinese emigrants from Chaozhou in the Eastern part of Guangdong province, and they spoke a distinctive dialect different from Cantonese speakers. They shared a strong geographical and kinship ties which strengthened their business bonds. The stories of Gao Manhua (or Romanized in Cantonese as Ko Man Wah) and Chen Huanrong which we have dealt with in Chapter 4 illustrated the efforts and success of these early Chinese entrepot traders.5 But there were other success stories of Choa Chee Bee (Cai Ziwei in Mandarin, 1836–1902), Goh Li Hing (Wu Liqing in Mandarin, 1833–1914) and Chan Pek Chun (Chen Bicun). Choa was a Hokkien merchant from Malacca and worked as a comprador for an European sugar refinery. Seizing the opportunity offered by the opening of Hong Kong, he moved to the colony and became actively involved in sugar trade with Dutch East Indies. Goh was another merchant of Hokkien origin, and he emigrated from Fujian to Hong Kong in 1878 for new trading opportunity. His firm imported 5

See Chen Jinghuai, “Shilun Xianggang Chaoshang jingji fazhan de lishi guocheng” (A Preliminary Study of the Historical Development of Teochew Business in Hong Kong), in Tay Lian Soo (Zheng Liangshu) & Chang Chak-yan (Zheng Chiyan) (eds.), Chaozhouxue guoji yantaohui lunwenji (Collections of Essays from the First International Conference on Teochew Studies) (Guangzhou, Jinan daxue chubanshe, 1994), Vol. 2, pp. 608–609; Zhang Yingqiu, “Taiguo huaqiao Gao Chuxiang yu Chen Hongli jiazu de yeji” (The Records of Family Enterprise of Gao Chuxiang and Chen Hongli, the Two Prominent Overseas Chinese in Thailand), in Yang Fangsheng et al. (eds.), Haiwai Chaoren shiliao zhuanji (Special Issue on the History of Overseas Teochews) (Swatow, Zhongguo renmin zhengzhi xueshang huiyi Guangdongsheng Shantoushi weiyuanhui, Wenshi ziliao weiyuanhui, 1990), pp. 27–29; Wang Mienchang, “Chen Hongli jiazu ziben de lishi” (History of Capital Accumulation of the Ch’en H’ung-li Family), in Yang Fangsheng et al. (eds.), Haiwai chaoren shiliao zhuanji, pp. 2–6.

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rice and sugar from Southeast Asia, and exported marine edibles. It commanded a large export trade to the Straits Settlements, Java, Philippine islands and South China. Unlike Choa and Goh, Chan Pek Chun was a Cantonese merchant emigrating to Hong Kong from Canton (Guangzhou). His trading firm also dealt in rice and sugar and acted as a general commission agent.6 Despite different dialect and socio-economic backgrounds, these early Chinese entrepot traders shared a common aim of establishing a foothold in Hong Kong. Using Hong Kong’s superb geographical position, they developed inter-regional trade between China and Southeast Asia, linking China’s coastal ports with the trading ports in Southeast Asia. This was known as ‘South-North Trade’, and their firms were termed as ‘Firms for South-North Trade’ (Nan Bei Hang or in Cantonese as Nam Pak Hong).7 Unlike the European trading companies which aimed at larger international market, their prime consumers were the Chinese in coastal China and in the Ethnic Chinese communities in Southeast Asia. They used regional and kinship ties to construct their business networks, and achieved effective control over these trading networks.8 The main items of this SouthNorth trade concentrating in Hong Kong were rice, sugar, coconut and vegetable oil, and beans. In addition, there were salt, timber, Chinese medicine, fur, salted fish, pepper and gambier, porcelain, silk, copperware and other sea products. The largest trade item was rice which was imported primarily from Siam (Thailand), Burma and Annam (Vietnam) and distributed locally and in China. Sugar was imported from Java, coconut oil from the Philippines, vegetable oil from Siam and beans from northern part of China.9 Most of these trade items were to meet basic daily needs of ordinary Chinese households. With growing population and declining agricultural

6

See Jung-Fang Ts’ai, Hong Kong in Chinese History: Community and Social Unrest in the British Colony, 1842–1913, pp. 27–30. 7 Chen Jinghuai, op. cit., in Tay Lian Soo & Chang Chak-yan (eds.), Chaozhouxue guoji yantaohui lunwenchi, Volume 2, pp. 608–609. 8 Zhang Yingqiu, op. cit., in Haiwai Chaoren shiliao zhuanji, pp. 26–29. 9 Jung-Fang Ts’ai, op. cit., p. 27.

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production in South China as result of political turmoils, the demand for these commodities was ever increasing. The rise of Coolie trade in the middle of the 19th century and the spread of free Chinese emigrants to North America and the Australia in the second half of the 19th century opened up new trade opportunity for the Chinese traders in Hong Kong.10 This trade was to link Hong Kong with San Francisco on the West coast of the United States, and Melbourne and Sydney of Australia into a trading network known as “The Gold Mountain Trade” (Kam Shan Chung).11 This was because San Francisco was popularly known to Chinese as Old Gold Mountain, while Melbourne was nicknamed New Gold Mountain.12 As most Chinese immigrants in foreign land still preserved their Chinese customs and eating habits, a demand for Chinese foodstuffs and things Chinese was generated. This growing market was transformed into a lucrative trade which was involved in exporting large quantity of rice, Chinese groceries and delicacies from Hong Kong, and importing local produce from United States and Australia such as dried shrimps and American ginsengs from the U.S., and sea cucumbers, sharks fins and dried abalone from Australia. Many of those who were involved in this trade also made handsome profit. This had attracted a number of Chinese firms to specialize in this trade. By 1915, an estimated 239 out of 1,700 Chinese firms were involved in this trade.13

10

For a study of the rise of Coolie trade in the middle of 19th century, see Yen Chinghwang, Coolies and Mandarins: China’s Protection of Overseas Chinese in the Late Ch’ing Period, 1851–1911 (Singapore, Singapore University Press, 1985), pp. 32–71. For a study of the spread of free Chinese immigrants to U.S. and Australia, see Sing-wu Wang, The Organization of Chinese Emigration 1848–1888 (San Francisco, Chinese Materials Center, INC., 1978), pp. 105–118. 11 There were at least two hundred Chinese firms in Hong Kong trading with America in 1905. In 1915, 239 Chinese firms (exporters and importers) trading with San Francisco, Honolulu, Sydney and Melbourne were listed. See Jung-Fang Tsai, op. cit., pp. 31, 198. 12 For a study of the Chinese in Sydney and Melbourne in late 19th and early 20th centuries, see C.F. Yong, The New Gold Mountain: Chinese in Australia 1901–21 (Adelaide, Raphael Arts Pty. Ltd., 1977). 13 Jung-Fang Tsai, op. cit., p. 31.

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The Rise of Modern Chinese Enterprise in Hong Kong The single most important factor accounting for the rise of modern Ethnic Chinese enterprise in Hong Kong was Sino-Western commercial interactions. Hong Kong was a predominant Chinese port city under the rule of a Western government. The Chinese businessmen who had personal experience to live under a foreign administration, were exposed to a greater foreign influence than their compatriots living in Treaty ports on coastal China. They were psychologically more prepared to accept Western things and Western business practices. At the same time, there arose a middle class of Western educated Chinese who had developed a taste for Westernstyle consumer goods, and hence created a ready market for the rise of modern Ethnic Chinese enterprise. One major sector of modern enterprise that arose in response to the local needs was the modern department store. The old Chinese-style stores selling different types of commodities tended to be small in size and dispersed in a vast area, and this created inconvenience for middle class shoppers who had little time to spend. The idea of a modern department store which brought a great variety of goods under one roof would appeal to the growing wealthy middle class Chinese. Ironically, the modern Western department stores in Hong Kong were not founded by the local Chinese businessmen, rather, they were initiated by a group of returned Ethnic Chinese from Sydney, Australia.14 They founded the famous four leading department stores in Hong Kong and China: the Sincere Company (Xianshi gongsi),15 the Wing On Company (Yongan gongsi), the Sun Sun Company (Xin Xin gongsi) and Da Xin

14

For this Australian Chinese connection, see C.F. Yong, op. cit., pp. 56–58. For the history of Sincere Company, see Anonymous, “Xianshi gongsi ershiwu nian jingguoshi” (A History of the Founding of the Sincere Company), in Zheng Tianjian (ed.), Xianshi gongsi ershiwu zhounian jiniance (The Sincere Company Limited: Twenty Fifth Anniversary 1900–1924) (Hong Kong, Shangwu yinshuguan, “Jizai” column), pp. 1–5. 15

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Company.16 In the heydays of their business, these stores had a string of branches throughout major ports in south and eastern coasts of China, and became the household names in China. Two of the four, the Sincere and Wing On still survive and prosper in Hong Kong. It was more than a coincidence that the founders of these four modern department stores in Hong Kong came from the same district, the Xiangshan (later known as Zhungshan) in the southern part of Guangdong, a neighboring district of the Portuguese colony of Macao. They were all involved in business in Sydney, and were related through regional and dialect ties. Their social and business interaction together with their roots in Hong Kong and southern Guangdong perhaps accounted for the main reasons why they all started their modern department stores in this British colony.17 The first of the modern Chinese department store in Hong Kong was the Sincere Company founded by Ma Yingbiao. Ma, a native of Xiangshan, worked as a small importer–exporter in Sydney during the 1890s. He was influenced by the success of one of his Australian customers who in 30 years had risen from a mere peddler to the owner of a large department store with thousands of employees.18 Ma studied its organization and was very impressed by the idea of bringing a variety of goods under one roof and giving easy access to customers. In 1894, Ma returned to Hong Kong and began to solicit support among his friends and fellow district folks. It was not until 1899 that he received sufficient support to plan for the realization of his first 16 For the founding of Sun Sun Company (Xin Xin Gongsi) in 1926, see Li Chengji’s autobiography titled Di Er Guxiang (My Second Homeland) (Hong Kong, Huizhen wenhua shiye gongsi, 1997). 17 See Yen Ching-hwang, “The Wing On Company of Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Proceedings of Conference on Eighty Years’ History of the Republic of China 1912–1991 (Taipei, Chin-tai Chung-kuo ch’’u-pan she, 1991), Vol. 4 (English Section), pp. 77–117.; see also in Yen Ching-hwang, Studies in Modern Overseas Chinese History (Singapore, Times Academic Press, 1995), pp. 198–202. 18 See Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firm and Its Modern Reform”, in Business History Review: Special Issue on East Asian Business History, Vol. LVI, No. 2 (Summer 1982), p. 229; C.F. Yong, op. cit., p. 56.

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modern Chinese department store. On January 8th, 1900, the Sincere Company came into being with Ma as the first general manager.19 It had 11 other partners, 4 Chinese merchants from Hong Kong, 6 from Australia and 1 from the United States. The Company opened for business in a rented three-story building in the central business district of Hong Kong island with 25 staff. It adopted the Western practice of one-price policy, all items of goods were marked with fixed price which was a big contrast with Chinese style of retailing. It also followed Western practice of attracting customers by lavish interior decorations and goods displays in glass windows. Ma employed 25 young men and girls selected from his home district for on-job training which projected an impression of a young and fresh new enterprise full of vitality. Like Western business practice, the Company emphasized courtesy and service to the satisfaction of customers. Despite its initial teething problems, the new enterprise was a success.20 In 1907, the partnership was changed into a public liability company. This allowed injection of new capital for expansion from other Ethnic Chinese in Australia. The new capital was proved to be most useful and timely. Ma decided to build a new store with fresh design on the outskirts of the business district in Hong Kong, and by the time of opening for business in 1908, the area became commercially active. Profits for the company doubled, tripled and 5 folds increase in each of the succeeding years. In the beginning of the second decade of its existence, the Company expanded rapidly and began to diversify into other branches of business. The Company built a completely new five-story emporium with most up-to-date design with a Chinese taste. It had a garden and entertainment park on the rooftop. It also introduced new departments 19

See Anonymous, “Xianshi gongsi ershiwu nian jingguoshi” (A History of the Founding of the Sincere Company), in Zheng Tianjian (ed.), Xianshi gongsi ershiwu zhounian jiniance (The Sincere Company Limited: Twenty Fifth Anniversary 1900– 1924), p. 1. 20 For initial problems facing the Sincere Company such as difficulty in sales and the loss of confidence of some of Ma’s supporters in the Company, see Ma Yingbiao, “Zhixu” (Preface to the Souvenir Magazine), in Zheng Tianjian (ed.), ibid., “Forward” column.

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into the store: a Chinese tea house, a bar, a restaurant, a photo studio, a cinema, and a Western-style barber shop. It established branches in Canton, Shanghai and other major cities in Overseas Chinese communities. In addition, it diversified into other emerging enterprise such as insurance and investment. In 1915 an insurance and investment company was established, and a life insurance company was formed in 1923. By the time the Sincere Company celebrated its founding for 25 years in 1925, it was a large and diversified modern Ethnic Chinese enterprise with $7,000,000 paid-up capital, 3,000 shareholders, over 2,000 employees and several thousand factory workers.21 The success story of the Sincere Company was matched by another modern Chinese department store in Hong Kong, the Wing On Company. The founders of the Wing On were Kwok Lock (or known as James Gocklock, in Mandarin as Guo Le) and Kwok Chin (or known as Philip Gockchin, in Mandarin as Guo Quan) brothers who also came from the Xiangshan district of southern Guangdong province.22 The path to success that Kwok brothers went through was similar to that of Ma Yingbiao. The brothers were also involved in small business in Sydney gaining some business experience, and were also influenced by Western business practice they had seen in Australia.23 Perhaps the success of the Sincere Company inspired them to follow suit. Like Ma Yingbiao, the Kwoks also gathered a small sum 21

See Anonymous, “Xianshi gongsi ershihwu nian jingguoshi”, in Zheng Tianjian, ibid., “Jizai” column, p. 5. 22 For a biography of one of the Wing On founders, Kwok Lock, see Zhu Longkan, “Shuaixian yinjin qiaozi de Guo Le” (Kwok Lock — The Entrepreneur Who had used Ethnic Chinese Capital), in Xu Tixin (ed.), Zhongguo qiyejia liezhuan (Biographies of Chinese Entrepreneurs) (Beijing, Jingji Ribao, 1988), Vol. 2, pp. 208–215. For the autobiography of another Wing On founder, Kwok Chin (Guo Quan), see Kwok Chin, Yongan jingshen zhi faren ji qi zhangcheng shilue (The Origins of the Wing On Spirit and a Brief History of Its Growth) (Hong Kong, 1961). 23 Yen Ching-hwang, “The Wing On Company of Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Yen Ching-hwang, Studies in Modern Overseas Chinese History, pp. 200–202; C.F. Yong, The New Gold Mountain: The Chinese in Australia 1901–1921, pp. 56–57; C.F. Yong, “The Banana Trade and the Chinese in New South Wales and Victoria, 1901–1921”, in ANU Historical Journal, 1965–1966, Vol. 1, No. 2, pp. 28–35.

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of capital among friends and relatives in both Sydney and Hong Kong to found the Wing On Department Store in 1907, 7 years after the founding of the Sincere Company. Like the Sincere, the Wing On started with a partnership which restricted the development and growth of the Company in its early stage. It was changed to a public liability company in 1916.24 Having experienced initial teething problem, the Company after a few years began to make profit, and grew rapidly into a formidable rival of Sincere Company. It began to expand in Hong Kong, and then to Canton, Shanghai and other major Chinese cities in South China and Overseas Chinese communities. It also diversified into other branches of industry such as insurance, banking and textile industry.25 Wing On and the Sincere together with the Sun Sun Company and Da Xin Company, were the four largest modern Chinese emporiums in Hong Kong and China. The success of these Ethnic Chinese department stores was not just due to their adoption of certain Western business practice, but also their ability to combine Western and Chinese values in their managements. For instance, the structure of the Sincere Company was basically centralized and top-down. At the top of the company structure was a board of directors who were elected among shareholders. The top managerial position was the Manager (or known at that time as Jiandu, or being translated as Superintendent), and under the manager were associate managers and assistant managers, Chinese and English secretaries, treasurer, and departmental heads. Ma Yingbiao assumed the role of both the chairman of the board as well as the manager. This combined position gave him extraordinary power in the running of the company and the planning for its future. Each department within the store was given

24

Yen Ching-hwang, ibid., p. 207. Ibid., pp. 210–24; Liu Tianren, “Ben gongsi ershiwu zhounian zhi jingguo (The Historical Records of Wing On in the Last Twenty Five Years), in Xianggang Yongan youxian gongsi nianwu zhounian jinianlu (The Wing On Company Limited, Hong Kong: In Commemoration of 25th Anniversary, 1907–1932) (Hong Kong, Tian Xing Press, 1932), “Shilue” (Concise History) column, pp. 7–12. 25

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certain independent power but was responsible for the sale of the goods. To tighten the control over these department heads, Ma also appointed several inspectors to check the progress of their works. The inspectors were to serve as eyes and ears of the Manager. This was similar to the role of ‘censors’ in the imperial Chinese bureaucracy.26 But the most distinctive feature of these modern Ethnic Chinese business enterprise in Hong Kong was their successful integration of some traditional Chinese values with Western business practice. Confucian values of reciprocity, hierarchy and paternalism were most clearly reflected in the staff-management relationship in the Wing On Company. The Kwok brothers’ attitude towards staff was fundamentally paternalistic and moralistic. They treated the company like a big family, and they themselves assumed the role of the head of the family, while the employees of Wing On were members of a large extended family. They were morally obligated to look after the interests of the employees, while the employees were to reciprocate this benevolence by working hard and paying loyalty to the company.27 The Kwok brothers also believed in character moulding of their employees. They believed a strong prosperous business organization must be sustained by morally correct staff who should be injected with traditional Chinese values of hard work, thrift, loyalty, sincerity, uprightness and trustworthiness.28 This was why they organized for employees regular lectures expounding moral education.29

26

See Wellington K.K. Chan, “The Organizational Structure of the Traditional Chinese Firm and Its Modern Reform”, in Business History Review: Special Issue on East Asian Business History, Vol. LVI, No. 2 (Summer 1982), p. 232. 27 See Yen Ching-hwang, “The Wing On Company of Hong Kong and Shanghai: A Case Study of Modern Overseas Chinese Enterprise, 1907–1949”, in Yen Chinghwang, op. cit., p. 209. 28 See Kwok Chin, Yongan jingshen zhi fazhan ji qi zhangcheng shilue (The Origins of the Wing On Spirit and a Brief History of Its Growth), pp. 27–28. 29 See Liu Tianren, op. cit., p. 5.

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The Rise of the Chinese Textile Industry During the Post-war Era The shift of focus of the Hong Kong economy from entrepot trade to light industry and finance took place after the Second World War. It was the result of two major forces at work. The fall of China to Communism in 1949 drove many Chinese from mainland to Hong Kong to take refuge, and this was clearly reflected in the sharp rise of population which was increased from 600,000 in mid 1945 (at the end of the Second World War) to 2.26 millions in mid 1950, an increase of almost 4 folds in 5 years.30 The flood of large number of refugees provided technical expertise in industry and a huge amount of fresh capital (estimated at HK$30 billion) as well as endless source of supply of cheap labor for industrialization. The other factor was the imposition of embargo on China by the United Nations led by the United States as a result of China’s active participation in the Korean War in 1950. The embargo deprived Hong Kong of its most valuable economic hinterland and crippled its entrepot trade. In response to this adverse economic situation, Hong Kong government and the business community had to find a way out of this dilemma.31 The selection of textile as the first item on the agenda of Hong Kong’s industrialization was based on both economic and social considerations. The term ‘textile industry’ is a broad term which embraced cotton spinning, weaving, dyeing and finishing, as well as garment-making. But what the Hong Kong government and the business community concentrated in the 1950s was the cotton spinning industry. It was most basic and had laid the foundation for the development of other textile related industries. Because of its labor intensive nature, the industry provided many jobs for refugees and helped to solve the urgent unemployment problem as well as easing unemployment-related social problems.32 More importantly, it was 30

See D. Podmore, “The Population of Hong Kong”, in K. Hopkins (ed.), Hong Kong: The Industrial Colony (Hong Kong, Oxford University Press, 1971), p. 26. 31 Wong Siu-Lun, Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong (Hong Kong, Oxford University Press, 1988), p. 3. 32 Ibid., pp. 8–9.

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chosen because there existed in the colony a group of business refugees who had expertise in setting up and managing spinning mills. They were the business entrepreneurs from the city of Shanghai, who spoke a distinctive Shanghaiese dialect. They were the successful industrialists who had well-established themselves in this largest Chinese city on the east coast of China, and had ample knowledge and experience to get the cotton spinning industry off the ground in Hong Kong. In fact, before the Communist takeover of the mainland in October 1949, some of them had already started moving their plants to the colony in anticipation of a Communist rule in China. The unsuccessful trial of setting up a textile mill in Thailand convinced many of them that Hong Kong was probably the most ideal for the preservation and continuation of their industry outside China, for the colony was under British protective wing and had ample source of Chinese cheap labor.33 They were a tight-knit group. Common geographical origins and a common dialect served as the foundation for group solidarity which was reinforced by inter-marriage. Their exile mentality made them more cohesive and enterprising and were prepared to devote their entire energy to the new undertaking. Their success in creating a new industry that triggered off the industrial revolution in Hong Kong was largely due their ability to adapt to the new political and economic environments, and to enmesh their knowledge, skill and capital with other resources available in the colony.34 The second group of Chinese refugee-entrepreneurs that arrived in Hong Kong during the post-war period consisted mainly of Cantonese and other southern Chinese such as Teochews and Hokkiens. Like the members of the Shanghaiese group, they brought with them knowledge, business experience and capital to the colony in the hope of continuing their business activities. Their exile mentality provided them with extra energy for hardwork and the drive for success. Many of them seized the opportunity to be involved in the development of the new industry. 33 34

Ibid., pp. 16–22. Ibid., pp. 26–78.

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The Transformation of Hong Kong’s Economy and the Chinese Business (1950–1990) In the four decades from 1950 to 1990, Hong Kong experienced the fastest economic growth in its history with average annual growth rate of 13.8%. Its Gross National Products (GNP) rose from HK$31.5 billion in 1950 to HK$633 billion in 1991, a 20 fold increase, and its per capita income also reached HK$110,000 (U.S.$14,102) which had surpassed the per capita income of many developed countries in the West. During these four decades, Hong Kong also experienced drastic structural change from the old entrepot economy to a dynamic economy based on manufacturing, tourism and service industry. It emerged as an important center for global finance, transport and information. However, the take-off of the Hong Kong economy occurred in the 1960s. It was led by manufacturing and other light industries which included textiles, clothing (garment-making), plastics (mainly plastic flowers and toys), metal products (mainly watches) and electronics. This was reflected in the sharp increase in the number of factories and the employment figure. In 1959, the number of workers registered to be employed in various types of industry was 189,000, but this figure increased sharply to 357,000 in 1965; and by the early 1970s, it increased to 510,000.35 The number of factories also increased from mere 972 in 1947 to a phenomenal figure of 37,568 in 1977. Electronic industry, for instance, was a negligible industry in 1961 with 10 factories in existence, but towards the end of the 1960s, its number was increased to more than 200, an increase of 20 folds.36 What accounted for the take-off of the Hong Kong’s economy was the result of a combination of several factors. Apart from the factors such as ample and endless supply of cheap labor, migration of the refugee-entrepreneurs, and the inflow of capital from mainland China 35

See K.R. Chou, The Hong Kong Economy: A Miracle of Growth (Hong Kong, Academic Publications), p. 26; Cui Shixin and Kuang Yuqi, Yazhou si xiaolong: feiye diping xian (Four Little Dragons of Asia) (Beijing, Zhongguo guoji guangbo chubanshe, October, 1993) p. 62. 36 Cui Shixin and Kuang Yuqi, ibid., pp. 61–62.

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which laid the foundation of industry in Hong Kong, there were other factors that contributed directly to the rapid economic growth. These included opening up of world markets for Hong Kong manufactured goods, foreign investment,37 the inflow of foreign technology,38 the role of the Hong Kong government, and the role of Ethnic Chinese entrepreneurship. The rise of foreign markets for Hong Kong manufactured goods was of crucial importance to Hong Kong’s industrialization.39 The demand was created in Southeast Asia and some advanced industrialized countries such as the U.S., Japan and Germany. Southeast Asia in the 1950s and 1960s did not witness any remarkable economy growth, mainly because of the preoccupation of various Southeast Asian governments in solving political and military problems. The Vietnam War was still in progress, Malaysia was involved in solving the problem of merger and the Confrontation with Indonesia. Much of the energy and resources were devoted to military rather than economic development.40 But the demand for consumer goods was ever increasing as the population grew rapidly in the region. Although Japanese manufactured products met part of the demand in this growing market, they failed to expand partly because of the laden anti-Japanese feeling among the Ethnic Chinese in Southeast Asia, and partly because they had not yet established their fine reputation.41 At the same time, China was engrossed in a fierce 37

Foreign direct investment in manufacturing industry in Hong Kong became important in 1970s. See C.L. Hung, “Foreign Investment”, in David Lethbridge (ed.), The Business Environment in Hong Kong (Hong Kong, Oxford University Press, 1993), p. 186. 38 See Edward K.Y. Chen, Hyper-growth in Asian Economies: A Comparative Study of Hong Kong, Japan, Korea, Singapore and Taiwan (London, The Macmillan Press Ltd., 1979), p. 106. 39 See A.J. Youngson, Hong Kong Economic Growth and Policy (Hong Kong, Oxford University Press, 1982), p. 25. 40 See C.M. Turnbull, “Regionalism and Nationalism”, in Nicholas Tarling (ed.), Cambridge History of Southeast Asia, Volume Two: The Nineteenth and Twentieth Centuries (Cambridge, Cambridge University Press, 1992), pp. 606–614. 41 Present author was brought up in Malaya and Singapore in 1950s. His personal experience and observation of Chinese attitude towards Japanese goods can be used as indirect evidence of this point.

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political struggle that failed to make China as an industrial power. This left a vacuum in the growing Southeast Asian market for Hong Kong manufactured goods to fill. Apart from the Southeast Asian market, new markets also emerged in the industrialized countries of U.S., Japan and West German for cheap but reasonable-quality consumer goods.42 The rising production costs of these countries made their own products uncompetitive in their home markets. The rising costs of production combined with problems of industrial relations in the West drove some manufacturers from U.S., Britain and Japan to invest directly in Hong Kong.43 They set up factories, employed local Chinese staff and workers and sold products back to their home countries. This direct foreign investment not only increased the capital inflow into the manufacturing sector, but also brought in new technology which assured foreign markets for Hong Kong products. Our view of Hong Kong’s industrialization would be lopsided if the role of the Hong Kong government is not examined in this process. The Hong Kong government which was colonial in nature was mainly to safeguard Britain’s interests in the Far East. This objective was entirely compatible with the aim of industrialization of Hong Kong. In fact, any rapid economic growth of Hong Kong would mean direct or indirect benefits for British-owned companies in the colony. Although the Hong Kong government was not democratically elected, its political system had been stable,44 and it attempted to build consensus from below through appointed legislative and executive councillors, especially the view of the business community.45 It also provided an efficient bureaucracy. The cornerstone 42

See C.P. Lo, Hong Kong (London, Belhaven Press, 1992), p. 60. See K.R. Chou, op. cit., pp. 77–78. 44 See Hsin-chi Kuan, “Political Stability and Change in Hong Kong”, in Tzong-biau Lin, Rance P. L. Lee & Udo-Ernst Simonis (eds.), Hong Kong: Economics, Social and Political Studies in Development (New York, M.E. Sharpe, Inc., 1979), pp. 143–166, especially pp. 145–146. 45 In the 1980s, there had been more incorporation of economic elites into government decision-making process. See Ian Scott, Political Change and The Crisis of Legitimacy in Hong Kong (Hong Kong, Oxford University Press, 1989), p. 248. 43

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of the government’s economic polices was laissez-faire which emphasized the superiority of ‘free markets’.46 There was no high tariff wall, nor import-substitution policy pursued by many other Asian newly industrialized states. The government believed that the interests of Hong Kong would be better served without the protection of local markets, and it was only under that highly competitive conditions that Hong Kong’s industry will grow and prosper so as to compete successfully in the international market. However, the government had taken appropriate measures to promote industries. It used the public funds to develop many areas as industrial estates, and made available cheaper land for some targeted industries which employed large number of workers.47 It also actively helped promote Hong Kong products overseas by setting up trade offices overseas or sending out special trade missions. In a society like Hong Kong where Chinese constituted 98% of the total population, an important role played by Ethnic Chinese entrepreneurship in the take-off of the economy is beyond doubt. Two types of Ethnic Chinese entrepreneurs can be discerned: old and new entrepreneurs. The former consists of the early entrepot traders and founders of the modern Ethnic Chinese enterprise in late 19th and early 20th centuries, and the ex-compradors who turned into entrepreneurs;48 the latter comprises mainly of refugee-entrepreneurs from the mainland 46

For a discussion of the laissez-faire policies adopted by the Hong Kong government in economics, social and educational areas, see A.J. Youngson, op. cit., pp. 119–136. However, the term laisser-faire was considered to be inadequate to describe the policy pursued by the Hong Kong government. Sir Philip Haddon-Cave, the Financial Secretary of the Hong Kong government preferred to use a term ‘positive noninterventionism’ in his preface for a book, The Business Environment in Hong Kong, published in 1980. See David Lethbridge (ed.), The Business Environment in Hong Kong (Hong Kong, Oxford University Press, 1993), p. xiv. 47 See Edward K.Y. Chen, “The Economic Setting”, in David Lethbridge (ed.), op. cit., p. 37. 48 For instance, Sir Robert Ho Tung, a famous Comprador of Jardine, Matheson and Company in 19th century Hong Kong, was also an important Chinese merchant and entrepreneur. See a short biography of Sir Robert Ho Tung, in He Wenxiang, Xianggang jiazu shi (A History of Prominent Chinese Families in Hong Kong) (Hong Kong, Capital Communications Corporation Limited, 1989), pp. 9–29.

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after World War II, and the new immigrants who arrived in the colony in the 1950s or 1960s. The structural change of the Hong Kong economy since the 1950s provided excellent opportunity for the new arrivals to try their luck. Those who had possessed business acumen, courage and resourcefulness were able to take advantage of the new opportunity arising in the colony. The descendants of the old entrepreneurs who had already established themselves in the old business, were psychologically conservative and were less capable of coping with change. While the refugee entrepreneurs or new immigrants who had not yet found a foot-hold in the business world, were prepared to take risks; and the greater risks they took would bring them greater rewards. Prominent Chinese businessmen such as Li Ka-shing, Sir Yue-kong Pao (Bao Yugang) and Zeng Xianzi belonged to this category.49 Li Ka-shing and Sir Yue-kong shared the same refugee background, while Zeng was a new immigrant arriving in Hong Kong in 1963. Li’s father escaped from Japanese occupation of his home prefecture of Chaozhou and came to Hong Kong in 1940,50 while Pao was a refugee from Shanghai after Communist take-over of the mainland. All of them started their business from scratch and through their hardwork and entrepreneurship, they succeeded to build up business empires in Hong Kong, China, Southeast Asia and North America. Pao emerged as a shipping tycoon commanding the largest commercial fleet in the world (about 210 ships with more than 20 million metric tons (DWT)) and was nicknamed ‘The Shipping King of the World’;51 while Li was 49

For biographies of Li Ka-shing, see Chen Yanzhun, Huaxia jiaozi Li Jiacheng (The Outstanding Chinese — Li Ka-shing) (Hong Kong, Tiandi tushu youxian gongsi, 1993); Xia Ping, Li Jiacheng zhuan (A Biography of Li Ka-sheng) (Beijing, Zuojia chubanshe, 1993). For a short biography of Sir Yue-kong Pao, see http://en.wikipedia. org/wiki/Yue-Kong_Pao, for a biography of Sir Yue-Kong Pao in Chinese, See Leng Xia, Bao Yugang zhuan (A Biography of Yue-Kong Pao) (Hong Kong, Tiandi tushu youxian gongsi, 1995). For a biography of Zeng Xianzi, see Xia Ping, Zeng Xianzi zhuan (A Biography of Zeng Xianzi) (Beijing, Zuojia chubanshe, 1995). 50 Chen Yanzhun, Huaxia jiaozi Li Jiacheng, p. 15.; Xia Ping, Li Jiacheng zhuan, pp. 17–18. 51 See http://en.wikipedia.org/wiki/Yue-Kong_Pao, p. 1; Leng Xia, op. cit., p. 4; http://baike.baidu.com/view/46849.htm, p. 2.

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recognized as the richest Chinese business tycoon in Hong Kong and Asia, and Zeng made his name as a leading Chinese manufacturer in Hong Kong, China and Southeast Asia specializing in making men’s wear, and his Gold Lion neck-tie is a household brand in the region.52

Sino-Western Business Relations in Hong Kong Throughout the history of Hong Kong, Sino-Western business relationship had been harmonious and complementary. It was towards the end of the 1970s and 1980s that rivalry and conflict emerged because of changing power relationship between the two groups. In a century from the founding of the settlement in the mid 1840s to the end of World War II in the mid 1940s, Western business constituted the main stream of Hong Kong business. With political patronage from the Hong Kong government and strong support of modern financial institutions, Western companies, especially British companies (or popularly known as British Hongs), used the colony as the springboard for the control of China’s foreign trade, and had a lion share of the trade of Hong Kong.53 The Ethnic Chinese business was either subordinate or complementary to the Western business, but was allowed to build up its own momentum in certain regional trade. During that time, rivalry and conflict did not arise because the Western business ruled supreme in the colony. 52

See Xia Ping, Zeng Xianzi zhuan, pp. 265–284. Two British companies which had dominated China’s foreign trade and the trade in East Asia were Jardine Matheson and Company, and the Hong Kong and Shanghai Banking Corporation. For a detailed study of history and commercial activities of Jardine Matheson and Company, see W.E. Cheong, Mandarins and Merchants: Jardine Matheson & Company, A China Agency of the Early Nineteenth Century (London, Curzon Press, 1979). For an authoritative study of the history of Hong Kong and Shanghai Banking Corporation, see Frank H.H. King, The History of the Hong Kong and Shanghai Banking Corporation, Volume One: The Hong Kong Bank in Late Imperial China, 1864–1902 (Cambridge, Cambridge University Press, 1987); Volume Two: The Hong Kong Bank in the Period of Imperialism and War, 1895–1918 (Cambridge, Cambridge University Press, 1988). 53

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The post-war situation in Hong Kong changed the Sino-Western business relationship. The flood of refugees, the arrival of large number of Chinese entrepreneurs, and the inflow of capital into the colony from the mainland and Southeast Asia strengthened the position of Chinese business community. At the same time, the status of Western business in Hong Kong was weakened because of the loss of substantial trade with mainland China. However, with the political patronage of the government and the strong foundation they had laid in the past, Western business still enjoyed a dominant position in Hong Kong’s economy. A study carried out in 1976 showed that the four well-established British Trading Houses (The Hongs): Jardine and Matheson; Swire, Hutchison and Wheelock Marden; together with Kadoorie family and the Hong Kong and Shanghai Banking Corporation, still had a substantial share of the colony’s business, especially in the colony’s infrastructure, media and transport. They controlled one of the two English newspapers, two power companies, two of the three container ports, the only Hong Kong airlines (Cathay Pacific) and related aircraft maintenance companies, the telephone company, the Peak tram, Hong Kong Tramway, most of the properties in the central financial district, as well as other businesses such as dockyards, wharfs, hotels and supermarkets.54 At this time, Chinese business in Hong Kong grew rapidly as result of the industrialization. It controlled a large section of the manufacturing industry and the construction and property development in the colony. The rise of Chinese business power gave rise to rivalry and conflict and altered the Sino-Western business relations. The battles were fought in the stock exchange in the form of takeover of rivalling companies. For instance, the Cheung Kong group of companies under Li Ka-shing succeeded to take over the control of the Hutchison group of companies. Li’s group made further inroads 54

See Richard Hughes, Borrowed Place, Borrowed Time: Hong Kong and Its Many Faces (Hong Kong, Andre Deutsch, 1976), cited in Gilbert Wong, “Business Groups in a Dynamic Environment: Hong Kong 1976–1986”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia (Hong Kong, Centre of Asian Studies, University of Hong Kong, 1991), p. 136.

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by acquiring other British companies such as Green Island Cement and Hong Kong Electrics. Almost about the same time, Sir Yue-kong Pao also waged a bid for take-over of some of the established Western businesses. His World Maritime Bahamas LTD succeeded to acquire the control of Hong Kong and Kowloon Wharf in 1980, and in 1984, his company controlled Wheelock Marden group of companies, and by 1988, controlled the British Standard Chartered Bank.55 Other Chinese business groups took similar action to acquire the control of some Western companies through the stock exchange. As the political future for the British companies in the colony was doomed after the signing of Sino-British Agreement at the end of 1984, this trend continued in favor of Chinese business. More and more Western companies either sold out, or shifted their centers of activity away from Hong Kong to Southeast Asia or other foreign countries.

Case Studies: Li Ka-shing and Henry Fok Ying Tung The story of Chinese business in Hong Kong would never be fully told without mentioning Li Ka-sheng and his business activities. Li Ka-shing (Romanized in Pinyin as Li Jiacheng) was ranked by Forbes in March 2012 as the 9th richest billionaire in the world with a net worth of US$25.5 billion. He is the richest man in Hong Kong, and Asian richest person for the first time since 2004. He is chairman of Cheung Kong Holdings, Hutchison Whampoa and Li Ka Shing Foundation. His businesses employ 270,000 people around the world in 53 countries.56 Li’s success story epitomizes the role of the new Chinese entrepreneurs in the take-off of Hong Kong economy. Li Ka-shing was born in Chao An district of Guangdong province on 29th July, 1928 (13th day of 6th moon of lunar calendar). He was born in a declining 55

Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, pp. 142–144. 56 See http://www.forbes.com/profile/ka-shing-li/; http://en.wikipedia.org/wiki/ Li_Ka-shing.

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learned family (shuxiang shijia). His grandfather, Li Xiaofan, was a xiucai (imperial first degree holder) of late Qing period. Both of his uncles were petty officer and teachers. His father, Li Yunjing, was a local primary school teacher and headmaster.57 Because of family background and tradition, he was groomed to be a learned person. It is claimed that at the age of 3, he was able to recite ‘Trimetrical Classic’ (San Zi Jing) and ‘A Thousand-Word Treatise’ (Qian Zi Wen); and at the age of 5, he was sent to local primary school — Guanhai shi school — to study. With good discipline at the school and home education, he had learned a great deal from the Confucian Classics such as ‘Four Books’ (Si Shu) and ‘Five Classics’ (Wu Jing), and classical novels such as ‘Romance of the Three Kingdoms’ (San Guo yanyi) and ‘The Monkey King’ (Xi You Ji).58 He finished his primary education at the local school before his family moved to Hong Kong. The most important assets deriving from his home and primary educations in China were his reading habit and the spirit of continuing learning. These had long-lasting bearing on his future business career in Hong Kong. The reading habit acquired through home education that enabled him to sit down quietly to read a book and absorb its contents, was developed into his unquenchable love for reading. It is claimed that he still reads book, magazine or information materials before he goes to bed.59 The spirit of continuing learning that equipped him with new and rich knowledge enabled him to compete successfully in a highly competitive world. His decisionmaking was not based on luck or religious belief, but rather on his knowledge and business acumen. Once he was asked by a journalist about the secret of his success in building up a vast business empire, he answered affirmatively that it was the ‘knowledge’. He also

57

See Chen Yanzhun, Huaxia jiaozi Li Jiacheng (The Outstanding Chinese — Li Ka-shing), p. 14; Lu Minzhu, Li Jia Cheng: Shaonian yu Qingnian chengzhang jingli (Li Ka-shing: Adolescent and Youth Days) (Beijing, Jincheng chubanshe, January, 2002), pp. 11–12. 58 Lu Minzhu, ibid., pp. 35–36. 59 Ibid., p. 44.

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advised young business aspirants that ‘knowledge determines one’s destiny’.60 Escaping from the scourge of Japanese aggression, the Li family took refuge in Hong Kong in 1940 with the help of Li Ka-shing’s maternal uncle who ran a business on the island. Li Ka-shing was sent to continue his schooling in a local middle school. In 1943, the early death of his father deprived him any chance of completing his secondary education. At the age of 15, he had to shoulder the burden of taking care of his family. He began to work as an apprentice in his uncle’s shop, and later became a factory worker, and a salesman of a plastic factory. It was in this small plastic factory that he was promoted to the position of sales manager, and learned his trade of making and distributing plastics products. With diligence and thrift, he saved up some capital for starting his own factory named ‘Cheung Kong’ (Changjiang in Mandarin, the Yangtze River) in the early 1950s. His factory produced a variety of plastic products for household use, but the new industry took sometimes to get off the ground. Up to 1957, his small factory only managed to survive. It was not until 1957 when he decided to produce on a large-scale of ‘plastic flowers’ for the North American market that marked the beginning of his success story. He went to Italy to learn how to make plastic flowers and introduced new technology into the plastic industry. The growing demand for plastic flowers for decoration throughout the Western world ensured a new-found gold mine for Li Ka-shing. His factory was expanded and company restructured, and he specialized in making plastic flowers and toys for export. By the end of the 1960s, Li emerged as a formidable manufacturer with a nickname of ‘The King of Plastic Flowers’.61 With his success in plastic industry, Li diversified in many types of business, especially in land and property development.

60

Ibid., pp. 43–44. See Chen Yanzhun, Huaxia jiaozi Li Jiacheng (The Outstanding Chinese — Li Ka-shing), pp. 18–20; Xia Ping, Li Jiacheng zhuan (A Biography of Li Ka-sheng), pp. 58–62.

61

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One of the most important decisions Li Ka-shing had made to build his vast business empire was the decision of getting into land and property development. The idea of getting into this highly volatile business can be traced back to 1958 when he was bothered by the hike of rent for his plastic flower factory. The owner of the factory was unwilling to sign a longer lease and took advantage of Li’s booming business. Li Ka-shing decided to build a twelve-story industrial building in North Point, partly for his own use, and the rest were let out to industrial tenants.62 After having taken the first crucial step, he continued to expand in property development. His strategy was to build more industrial buildings and factories in the outer areas of Hong Kong island and Kowloon peninsula where lands were relatively cheaper. Of course this property development was part of his larger strategy of diversification while maintaining his manufacturing base. This was mainly to reduce the risks of the sudden collapse of his manufacturing business, and it was popularly adopted by many other Ethnic Chinese business tycoons in other parts of Asia. The 1960s was a decade of opportunity and crisis — the cycle of boom and bust. The beginning of the 1960s witnessed the rapid increase of population, the inflow of capital and skilled labor from the mainland and Southeast Asia, active involvement of banks in real estate, and the loosening of control over property development by the government. These combined factors gave rise to a booming property market, but attracted a number of speculators. Beneath the booming market was the danger of oversupply and a financial crisis. In February 1965, the financial crisis exploded that led to the closure of some bank branches, and even the powerful Hang Sang bank was also badly affected.63 The result of this crisis was that property prices plummeted. Worst to come was in May 1967 that an anti-British riot broke out in Hong Kong as the result of spill-over from the Red Guard movement in China. The riot shocked many of Hong Kong property owners who were prepared to clear their stocks cheaply and migrated overseas. 62 63

See Xia Ping, Li Jiacheng zhuan (A Biography of Li Ka-sheng), p. 64. Ibid., pp. 66–67.

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In handling this property crisis, Li Ka-shing had demonstrated the superiority of his reading habit and his spirit of continuing learning. His knowledge of the Hong Kong economy and China politics convinced him the political problems related to the Cultural Revolution was temporary, and its impact on Hong Kong economy would be over after a few years, and the confidence in Hong Kong’s future would be restored. This judgement together with his business acumen and resoluteness prompted him to act. He bought and accumulated a large number of lands and properties at low prices. By 1971, Li Ka-shing consolidated his lands and properties and established a real estate company, Cheung Kong Holdings (Chang Jiang Shiye). He continuously used the name of ‘Cheung Kong’ (the Cantonese pronunciation of the Yangtze River) which symbolized the longevity of his businesses that would last as long as the Yangtze River. The Cheung Kong Holdings was listed in Hong Kong Stock Exchange on 1st November, 1972, and emerged as a formidable real estate company challenging Hong Kong Land, the Jardines-owned developer, as the premier property developing company in Hong Kong.64 It is one of the two flag-ship companies of Li Ka-shing’s business empire. In September 1979, Li Ka-shing succeeded in acquiring the control of Hutchison Whampoa Limited (Heji Huapu youxian gongsi). His Cheung Kong Holdings successfully purchased 90 million shares of Hutchison Whampoa at HK$7.1 per share from the Hong Kong and Shanghai Banking Corporation, accounting for about 22.4% of the total shares of the Hutchison Whampoa. The Hutchison was one of the oldest British Hongs in Hong Kong founded in 1860. In 1965, it formed into Hutchison Whampoa Limited. In 1973, due to the impact of the world oil crisis and the plummeting of stock market in Hong Kong, the company sold 33.65% of its shares to Hong Kong and Shanghai Banking Corporation which became the largest share-holder.65 The Hutchison Whampoa was one of the largest British conglomerates in Hong Kong covering a wide range of business: ports 64

Ibid., pp. 69–72; Chen Yanzhun, Huaxia jiaozi Li Jiacheng (The Outstanding Chinese — Li Ka-shing), pp. 21–23. 65 See Xia Ping, Li Jiacheng zhuan (A Biography of Li Ka-sheng), pp. 96–97.

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and relating services, property and hotels, retail, infrastructure, energy and telecommunications. In November 1980, through a gradual build-up of shares, Cheung Kong Holdings succeeded to control 40% of the total shares of Hutchison Whampoa and became the largest share-holder of the conglomerate. On 1st January, 1981, Li Ka-shing, as the Chairman of the Board and the Managing Director of the Cheung Kong Holders, was elected as the Chairman of the Board of Hutchison Whampoa.66 He became the first Chinese tycoon to hold the chairmanship of a top British Hong in the British colony. From then onwards, Hutchison Whampoa became the flag-ship of Li Ka-shing’s business empire, and the biggest jewel on his crown. The Hutchison Whampoa also became the vehicle for globalization of Li Ka-shing’s business empire. For instance, his Hutchison Port Holdings in 2012 handles about 13% of the world’s container. The story of Li Ka-shing typifies the success story of Chinese refugee-turn-entrepreneurs, and their great contributions to the success of the Chinese business and the economy of Hong Kong. Henry Fok Ying Tung (Huo Yingdong in Pinyin) represents a different type of Hong Kong Chinese business tycoon who was local born, but of lower socio-economic background, and who through untiring struggle and business acumen, managed to climb to the top in the competitive business world. He had close ties with the governments in China. Henry Fok was born in Hong Kong on 10th May, 1923. He was born in a small boat among the boat people — “Tanka” (Cantonese pronunciation, Dan Jia in Pinyin), and was considered to be of “Tanka” descent.67 ‘Tanka’ (boat people of Guangdong and Fujian) together with Duomin (descendants of criminals in Zhejiang province) and ‘Gaihu’ (beggars of Henan province) were condemned as belonging to lowest classes in imperial China whose descendants were not allowed to participate in the imperial examinations.68 66

Ibid., p. 98; Chen Yanzhun, Huaxia jiaozi Li Jiacheng (The Outstanding Chinese — Li Ka-shing), p. 48. 67 See http://en.wikipedia.org/wiki/Henry_Fok. 68 See Leng Xia, Huo Yingdong Zhuan (A Biography of Henry Fok Ying Tung) (Guangzhou, Guangdong jingji chubanshe, November, 1997), Vol. 1, pp. 19–20.

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Henry Fok’s ancestors came from Namsha of Panyu district (now part of Guangzhou) of Guangdong province. His grandfather started a boating business between Guangzhou and Hong Kong. His father, Fok Yau Yung, settled in Hong Kong earning a living as a boatman. Henry ranked 4th among 5 children in the family. At a young age, his father sent him to a traditional Chinese school — Sishu — to learn some Chinese. Like millions of other Chinese children, he learned the ‘Trimetrical Classic’ (San Zi Jing) and ‘A Thousand-Word Treatise’ (Qian Zi Wen), ‘Four Books’ (Si Shu) and ‘Five Classics’ (Wu Jing) by heart without much understanding.69 In 1930 at an age of 7, the early death of his father in a boat accident deprived him of further education and plunged the family into crisis. His mother had to shoulder the responsibility of looking after the family. With the help of a good Samaritan, Lin Zi Feng — a wealthy businessman, the family managed to tide over the crisis. His mother sent him to a local primary school which was exclusively for the children of boat people. Later, he was transferred to another Chinese primary school in Wan Chai named ‘Dun Mui Primary School’.70 Henry Fok showed his capacity for learning, and scored excellent result in the Dun Mui primary school. In 1936 at the age of 13, he was admitted into Queen’s College (Huang Ren shuyuan), the famous English-medium college in Hong Kong. The college was founded in 1862, one of the famous English secondary institutions on the island with a fine tradition. Many famous persons in modern Chinese history such as Dr. Sun Yat-sen, Wu Ting-fang, Tang Shao-yi, Ho Kai and Ho Tung, had received part of their education there. His five and a half years’ education at the college was significant. Not only had it laid a good educational grounding for him, but also made him a bilingual businessman later. His good command of the English language opened windows for him in the business world. In December 1941, when Henry Fok was preparing for his secondary final examination, the beginning of the Pacific War as the result of Japanese attack on the Pearl Harbour dashed his hope of having an university

69 70

Ibid., p. 31. Ibid., pp. 29–34, 37–39.

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education. The college was closed during the ensuing Japanese occupation of Hong Kong.71 During the Japanese Occupation, Henry Fok had been a laborer, a coolie, a grocery store keeper and an ocean-ship assistant. After the World War II, Hong Kong was restored to British rule. Henry saw excellent business opportunities in opening up on the island: the rapid increase of population as a result of a flood of refugees from the mainland and Southeast Asia, the inflow of capital, and the shortage of consumer goods and services. He saw an excellent opportunity for transport business, and he helped transform his mother’s small boating service business into a modern transport company. He also started a small shipyard for boat repairs and cleaning. The golden opportunity arising from the horizon was the Korean War starting in 1950. Henry Fok was able to grab the opportunity and took full advantage of it. Due to China’s entry into the war in support of North Korea, the United Nations led by the United States imposed an embargo on China, banning imports of all arms and ammunition and strategic materials into China. Combining the patriotic feeling for China and inducement of profits, Henry risked violating the sanctions by smuggling steel and rubber as well as other materials into the mainland, though he denied weapons trafficking.72 The risk rewarded him with handsome profits which laid a solid foundation for the creation of his business empire. Henry Fok Ying Tung’s business empire was built mainly on real estate business which was started in 1953. His decision to get into this potentially profitable business was probably based on two considerations. First, the eminent ending of the Korean War in early 1953 would affect his trans-border business. Second, the shortage of

71

Ibid., pp. 39–44. See http://en.wikipedia.org/wiki/Henry_Fok, p. 2.; Leng Xia, Huo Yingdong Zhuan (A Biography of Henry Fok Ying Tung), Vol. 1, pp. 94–99; Fang Meng, “Jianku chuangye aiguo aixiang de Huo Yingdong” (The Patriotic Fok Ying Tung Who Founded His Business Enterprise Through Hard Struggle), in Xu Dixin (Chief Editor), Zhongguo Qiyejia liezhuan (Biographies of Chinese Entrepreneurs), Vol. 3 (Beijing, Jingji ribao chubanshe, May 1989), p. 273. 72

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accommodation in an ever-crowding Hong Kong would offer a great opportunity to make money. In June 1953, he founded his first real estate company named ‘Huo Xing Ye Tang Real Estate Company’ with a registered capital of HK$4.65 million, an enormous sum of money at that time. In 1953, Henry Fok purchased his first piece of valuable real estate — the Embassy Building (Shiguan daxia) — with HK$2.3 million in cash.73 The building was let out to foreign embassies for collecting rent. What made Henry Fok a big name in Hong Kong real estate was the construction of his Square Street Building (Si Fang Jie daxia) in Yau Ma Tei. At the end of 1953, he purchased a large block of land at Square Street of 100,000 square feet which he developed into a housing estate. The demand for housing was enormous, and the price was escalating. To develop this housing estate required a huge amount of capital, and the selling of the entire building after its completion also posed a major problem. To solve these problems, he invented a new idea of selling the apartments by individual unit with several instalments which was nicknamed ‘Mai Lou Hua’ (literarily meant selling property flowers). The prospective buyers were given flyers listing the location of the building, the unit price and the method of payment by instalments. They had to make a down-payment of 50% of the price as deposit. When the building progressed to the second stage, they were required to pay another 10% of the price, and they continued paying 10% until the building was completed, and the units would be handed-over to them.74 This new method of marketing was designed by Henry Fok to kill two birds with one stone — to solve both capital and marketing problems. By selling apartments individually, he would reach more potential buyers with less capital, while selling them by instalments would release his burden of finding adequate capital. This opened the floodgate for ordinary buyers and small investors who, worried about the depreciation of money, could purchase a couple of apartments for 73

See Leng Xia, Huo Yingdong Zhuan (A Biography of Henry Fok Ying Tung), Vol. 1, pp. 118–121. 74 Ibid., p. 130.

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investment. The appreciation of property value would compensate their loss in inflation. This new method revolutionized the marketing of properties in Hong Kong, and it was followed by other developers. The boom in property market was also helped by the government’s lifting of its restriction on high-rise properties. The restriction of maximum five-storey building that was introduced in 1903 was removed in 1955, and the height of each floor was reduced from 3.66 meter to 2.74 meter. This allowed the construction of multi-story buildings with reduced costs. It resulted in the spread of high-rise buildings covering the landscapes of Hong Kong and Kowloon peninsula, which was estimated at not less than 1,000 in the 6 years’ period from 1954 to 1960.75 This new method of marketing property — ‘Mai Lou Hua’ — was taken by Henry Fok proudly as his own creation, and was considered to be his important contribution to Hong Kong’s property development. Of course, it also rewarded him with massive wealth, and made him one of the top Chinese business tycoons in Hong Kong. The story of Henry Fok Ying Tung’s later business career was very much connected with the opening of China and China’s rise as an economic power. The signing of Sino-British agreement on Hong Kong in 1984 sealed the destiny of the island. Hong Kong was to return to China after July 1st, 1997, and it was to remain as a capitalist economy for another 50 years. The return of Hong Kong to China scared a number of wealthy Chinese who saw their future and the future of their children as doomed, and many of them started migrating to the West. However, the return of Hong Kong to its motherland, in the eyes of Henry Fok, offered an opportunity to expand his business to the mainland. In the late 1970s and early 1980s, combining his patriotism and business acumen, he together with a business partner, built the first modern hotel — the Panyu Hotel (Panyu binguan) — in his ancestral home — Panyu city — in 1978. In 1980, another modern hotel — the Chung Sun Hot-spring Hotel (Zhongshan wenquan binguan) — was built in the Zhongshan district — the hometown of Dr. Sun Yat-sen — with a golf course. 75

Ibid., p. 145.

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Both hotels were the pioneers of modern hotel development in the Guangdong province.76 However, his more important hotel development in the province was the construction of the famous ‘White Swan Hotel’ (Bai TianE binguan) which was the first 5-star hotel ever built in China. It became the landmark for China’s development in tourism, and was partly used for receiving foreign dignitaries to showcase China’s success. In April 1979, he signed a contract with the Tourist Bureau of Guangdong to build the White Swan Hotel with estimated cost of HK$200 million. From then onwards till the opening of the hotel on February 7th, 1983, Henry Fok was actively involved in the construction of the hotel. He announced his ‘Three Selfs’ principle: self-design, self-construction and self-management to build this international hotel. He was confronted with many problems and difficulties, but he had solved them one by one. In July 1985, the White Swan Hotel was accepted as the first 5-Star hotel in China by the International Tourist Organization.77 Henry Fok’s Chinese management style of the White Swan Hotel was a great success, and he was credited as the creator of ‘White Swan’s Management Model’ (Bai Tian-E moshi).78 Apart from hotel and tourism development, Henry Fok was invited by the Chinese government in 1986 to help develop Hainan Island as China’s largest Economic Zone; and in 1987–1988, he was actively involved in undertaking a large development project — the Nansha Island project — in Panyu, his ancestral homeland. Nansha Island is located south of Panyu city, and due to its geographical position, had great potential to be developed into a new multi-functional 76

See Leng Xia, Huo Yingdong Zhuan (A Biography of Henry Fok Ying Tung), Vol. 2, pp. 382–406. 77 See Fok Ying Tung, “Cong Bai Tian-E Binguan kan guojia de gaige, kaifang, gaohuo zhengce” (From the success of White Swan Hotel to see China’s Reform and Opening), a speech delivered on February 7th, 1987 by Fok Ying Tung at the Conferring Ceremony of an Honorary Doctorate by the Sun Yat-sen University, Guangzhou. This speech was republished as appendix 5 of Leng Xia’s Huo Yingdong Zhuan, Vol. 2, pp. 624–631. 78 See Leng Xia, Huo Yingdong Zhuan (A Biography of Henry Fok Ying Tung), Vol. 2, p. 429.

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city with a deep-water harbor, processing industry and tourism. In August 1988, a grand plan for the development of the Nansha was announced. Under this plan, the new port city will be completed in 15 years in three stages with an estimated investment of HK$10 billion, and the beautiful city would accommodate 360,000 population.79 In short, Henry Fok Ying Tung’s business development in the mainland was in tandem with China’s economic development after its opening. He had close ties with both Guangdong and the Central governments, and wielded considerable political influence in China.

79

Ibid., pp. 571–572; Fang Meng, “Jianku chuangye aiguo aixiang de Huo Yingdong” (The Patriotic Fok Ying Tung Who Founded His Business Enterprise Through Hard Struggle), in Xu Dixin (Chief Editor), Zhongguo Qiyejia liezhuan (Biographies of Chinese Entrepreneurs), Vol. 3, p. 276.

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Chapter 14

Chinese Business in Taiwan

Chinese Business in Taiwan Before 1895 The early history of Chinese business in Taiwan was closely connected with the Chinese settlement on the island. Geographically, Taiwan is an island off the southern coast of China’s mainland, separated from Fujian province with a narrow Taiwan Straits. Geographical proximity led to early colonization of Taiwan by Fujianese emigrants. The year 1160 A.D. during the late Northern Song dynasty recorded the earliest Fujianese settlement. Members of the Su family from Dehua district, Southern Fujian arrived and settled on the island.1 But the first wave of Fujianese settlers did not arrive until the early 17th century. Over 3,000 of them moved to the island in search of new economic opportunity as a result of extreme poverty and the ban on rice trade in the late Ming period.2 However, before the permanent settlement of the Chinese on the island, Taiwan and its Penghu islands were frequented by Chinese fishermen, seamen, traders and pirates, and was gradually incorporated into the southern Fujianese trading network. Around the 1340s, Chinese seamen from Fujian and Zhejiang sailed to Taiwan to barter with the natives.3 Early Ming restrictive 1

This fact is established by the genealogical records of Su Clan. See Zhuang Weiji & Wang Lianmao (eds.), Min Tai guanxi zupu ziliao xuanpian (Selections of the Genealogical Materials of Chinese Clans on the Fujian-Taiwan Relationship) (Fuzhou, Fujian renmin chubanshe, 1985), p. 2. 2 Ibid., p. 5; Li Jinming, Mingdai haiwai maoyishi (A History of Overseas Trade of Ming Dynasty) (Beijing, Zhongguo shehui kexue chubanshe, 1990), pp. 179–180. 3 See Wen-Hsiung Hsu, “From Aboriginal Island to Chinese Frontier: The Development of Taiwan before 1683”, in Ronald G. Knapp (ed.), China’s Island Frontier: Studies in the Historical Geography of Taiwan (Honolulu, The University of Hawaii Press, 1980), p. 8. 455

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sea-fearing policy since 1368 did not kill off the prosperous trade on South China coast. The Fujianese traders who continued their trade with Japan stayed clear of the mainland coast by sailing closer to Taiwan and the Ryukyu (Liuqiu) islands in the mid 16th century; while other Fujianese traders who had conducted their lucrative business with Southeast Asia began to take the Eastern Sea Route (Dongyang zhenlu) to the Philippines and Borneo, passing by southwestern and southern Taiwan. Some of these traders stayed temporarily on the island to barter with the natives.4 In addition to seamen and traders, Chinese pirates also used Taiwan and Penghu islands as their bases in the second half of the 16th century. Prominent among them were Lin Daoqian and Lin Feng. Lin Daoqian, a notorious Teochew pirate of Chaozhou prefecture, Guangdong, infested the Southeastern coast of China, Thailand, Taiwan and the Philippines. After being driven out from Fujian by Ming naval force, he moved to Beigang in southwestern Taiwan around 1563. He built a fort in the Penghu islands, but he ravaged the mainland again in 1567. Lin Feng, another notorious Teochew pirate from Chaozhou, moved his forces from Penghu to Taiwan in November 1574. After disembarking at Wanggang (on Taiwan’s Southwest coast ?), his forces were attacked by the aborigines, and he had to sail back to Penghu islands.5 Although these seamen, traders and pirates had frequented Taiwan, their presence was of transient nature. They had no desire to settle in Taiwan, nor did they have any plans to develop trade and economy. Their impact on Taiwan was minimum. The first half of the 17th century saw great changes in Taiwan’s political and economic landscapes. The founding of a Dutch base, Fort Orange, near modern day Tainan in 1624 marked the beginning 4

Ibid., p. 9. Ibid., pp. 9–10; Stephen Chang Tseng-hsin (Zhang Zengxin), Mingji dongnan Zhongguo de haishang huodong (Maritime Activities on the Southeast Coast of China in the Latter Part of Ming Dynasty), Vol. 1 (Taipei, China Committee for Publication Aid and Prize Awards, 1988), pp. 79–114; Hsu Yun-ts’iao (Xu Yunqiao), “Lin Daoqian”, in Hsu Yun-ts’iao (Xu Yunqiao), Beidanian shi (A History of Pattani) (Singapore, Nanyang bienyisuo, 1946), pp. 111–121.

5

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of European settlement on the island. Based in Batavia in the western part of Java, the Dutch East India Company had the ambition of creating a vast commercial empire in the Southeast and East Asia. As a Dutch outpost in the Far East, the southern Taiwan settlement (Fort Orange and later named Zeelandia) was used as the stepping stone for developing trade with China and Japan, as well as a base to compete in commerce, war and missionary works with the rival Spanish and Portuguese.6 Reacting to Dutch threat to its commercial and missionary interests, the Spanish authorities in the Philippines in May 1626 sent a fleet of 14 vessels to occupy northern Taiwan. After reaching Keelung (Jilong), they built a castle and claimed the land in the name of the Spanish king. The Spaniards further occupied Tamsui (Danshui) in 1628 by constructing a fort, and began their colonization of Taiwan from the North. But their advancements were halted and eventually ousted by the Dutch in 1642.7 The Dutch were skillful commercial empire builders; they knew how to consolidate their control over their commercial outposts, and exploited the local resources for the benefit of trade. During their almost four decades of occupation of Taiwan, they attracted large number of Chinese immigrants to develop agriculture and trade. They encouraged poverty-stricken immigrants from southern Fujian to come and settle by providing occasional free passage; they even brought in Su Minggang, the Chinese Kapitein of Batavia of Southern Fujianese origin, to help recruit the immigrants.8 The immigrants were used to reclaim land and develop agriculture, and to gather deerskins for export. The Dutch commercial strategy was to maximize the exploitation of agricultural resource of Taiwan and to profit from Taiwan’s transhipment trade. The Dutch exported Taiwan’s dried venison, sugar and rattan to China; in return, it imported porcelain,

6

See Thomas B. Gold, State and Society in the Taiwan Miracle (Armonk, New York, M.E. Sharpe, Inc., 1986), p. 23. 7 Wen-Hsiung Hsu, op. cit., pp. 13–14; George B. Beckmann, “Brief Episodes — Dutch and Spanish Rule”, in Paul K.T. Sih (ed.), Taiwan in Modern Times (New York, St. Johns University Press, 1973), pp. 42–45. 8 Wen-Hsiung Hsu, ibid., p. 16.

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silk and gold, and then shipped them to Japanese and European markets for high profits. At the same time, it also exported deerskins and sugar to Japan. Between 1634 and 1661, Taiwan was estimated to have produced 68,000 deerskins, and 50,000 of which were sold in the Japanese market. The Dutch Company in Taiwan also imported marine products such as sea cucumbers. spices, amber, lead, tin and opium from Batavia and sold them in the markets of South China.9 Taiwan’s early economic foundation laid by the Dutch was consolidated by the Zheng’s rule. The rule of the Zheng family is referred to as Zheng Chenggong, his son Zheng Jing and grandson Zheng Keshuang, and their combined rule of 21 years over Taiwan from February 1662 to July 1683. Zheng Chenggong, best known to the West as Koxinga, was a modern Chinese patriot who drove out the Dutch from Taiwan in February 1662.10 Zheng occupied Taiwan as his base to continue his life-long struggle against the Manchus after he had retreated from the mainland following a series of military setbacks. The military nature of the Zhengs determined their economic and trade policies. Although Zheng Chenggong died few months after his conquest of Taiwan, his policies were carried out by his son and grandson. In order to continue military action on the mainland and to feed a large number of soldiers in arms, the Zheng regime continued to encourage immigration from southern Fujian to settle and to develop agriculture. Despite early Qing’s stringent sea-faring policy, many peasants and artisans from Southern Fujian and Guangdong broke through the prohibition and emigrated to Taiwan during this period. The population during this period was estimated to reach 100,000 which doubled the population under the Dutch rule.11 Apart from the introduction of a military colonization system (Tuntian) in which soldiers were involved in farming as well as

9

Ibid., p. 14. For a discussion of Zheng Chenggong as a modern Chinese patriot and his impact on modern Chinese history, see Ralph C. Crozier, Koxinga and Chinese Nationalism: History, Myth and the Hero (Cambridge, Massachusetts, Harvard University Press, 1977). 11 Wen-Hsiung Hsu, op. cit., p. 23. 10

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military service, the new immigrants were encouraged to reclaim land, to grow rice and sugar cane, and to process sugar.12 Similar to the Dutch, the Zhengs also encouraged international trade with Japan, Korea and Southeast Asia. Foreign trade was an important source of revenue which was much needed for supporting military action as well as for the development of Taiwan. The enormous profit borne by foreign trade was well known to Zheng Chenggong long before his conquest of the island. His father, Zheng Zhilong was a notorious pirate-merchant who had built up his vast trading empire in the Far East. Since his occupation of Amoy and Quemoy after 1650, Zheng Chenggong had developed a coherent foreign trade policy with an emphasis on Japanese trade, and had reaped colossal profit.13 During this period, Zheng also established trading networks in East and Southeast Asia in competition with European commercial empires such as Dutch, Spanish and Portuguese. But his trading activities were thwarted in Southeast Asia by the Dutch who retaliated against the Zhengs for their military actions in Taiwan. The Zheng regime continued to trade with Japan, Korea and Southeast Asia despite new difficulties. It attempted to drive a wedge between foreign rivalling powers by strengthening friendship with 12

For a discussion of the land tenure system and the development of agriculture during Zheng’s regime, see Lin Qingyuan, “Zheng Chenggong fu Tai hou Taiwan tudi de kaifa ji qi li-shi he yi-yi” (The Development of the Land in Taiwan and Its Meaning after Zheng Chenggong’s Recovery of Taiwan), in Zheng Chenggong yanjiu xueshu taolunhui xueshuzu (ed.), Zheng Chenggong Yanjiu lunwenji (Collection of Essays on the Study of Zheng Chenggong) Vol. 2 (Fuzhou, Fujian renmin chubanshe, 1984), pp. 250–264. 13 A detailed study of Zheng Chenggong’s foreign trade policy and the pattern and structure of the trade is rendered by Professor Han Zhenhua of Xiamen University in his two articles titled “1650–1662 nian Zheng Chenggong shidai de haiwai maoyi he haiwai maoyi shang de xingzhi” (Foreign Trade and the Nature of Foreign Traders during the Zheng Chenggong Era, 1650–1662) and “Zailun Zheng Chenggong yu haiwai maoyi de guanxi” (Further Discussion of the Relationship between Zheng Chenggong and Foreign Trade), in Xiamen daxue lishixi (ed.), Zheng Chenggong yanjiu lunwenji (Collection of Essays on the Study of Zheng Chenggong), Vol. 1 (Foochow, Fujian renmin chubanshe, 1982), pp. 136–187; and in Zheng Chenggong yanjiu xueshu taolunhui xueshuzu (ed.), op. cit., pp. 206–220.

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Britain, an emerging commercial power in Asia. It led the British to maintain a commercial factory at Tainan between 1673 and 1683, in order to facilitate Taiwan’s foreign trade as well as to acquire Western ammunition.14 Qing’s conquest of Taiwan in June 1683 marked the beginning of a new chapter in Taiwan’s business history. The island was integrated into the political and economic systems of the Qing empire. Political stability following the conquest created favorable conditions for the development of Taiwan’s domestic and foreign trade. Two stages of development can be discerned. In the first stage from 1683 to 1842, Taiwan’s domestic and foreign trade grew rapidly, especially trade between central Taiwan and Southern Fujian. During this period, Taiwan became a major trade partner with Southern Fujian, and the trading system was largely traditional. In the second stage from 1842 to 1895, Taiwan’s domestic and foreign trade continued to grow. Due to the opening of its ports after the Opium War, foreign penetration stimulated Taiwan’s international trade, but at the same time undermined the traditional Taiwan-Fujian trade. Political integration of Taiwan with Fujian province,15 together with Qing’s lifting of its ban on overseas trade created excellent conditions for immigration and business activities in the Taiwan Straits.16 The first half of the 18th century saw the boom of trade between Taiwan and Southern China. The trade was principally concentrated

14

Wen-Hsiung Hsu, op. cit., pp. 26–27. After its conquest of Taiwan, the Qing government set up a Taiwan Prefecture (Taiwanfu) in May 1684 on the island. It was placed under the control of Fujian provincial government. See Ting-yee Kuo, “The Internal Development and Modernization of Taiwan, 1683–1891”, in Paul K.T. Sih (ed.), Taiwan in Modern Times, p. 173. 16 For the Qing’s imposition of the ban on overseas trade in an attempt to weaken Zheng Chenggong’s strength and the lifting of the ban after 1683, see Yen Chinghwang, Coolies and Mandarins: China’s Protection of Overseas Chinese during the Late Ch’ing Period, 1851–1911 (Singapore, Singapore University Press, 1985), p. 20; Zhuang Guotu, Zhongguo fengjian zhengfu de huaqiao zhengce (China’s Overseas Chinese Policy during Its Feudal Period) (Xiamen, Xiamen University Press, 1989), pp. 61–68. 15

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on rice and sugar — two major export items of Taiwan; while in return, the island imported timber and manufactured goods from the mainland. The shortage of rice in the province made Fujian increasingly dependent on the supply of rice from Taiwan. One estimate places Taiwan’s annual rice export to Fujian around one million shih in the early 18th century.17 On the export of sugar, South and East China became the main market for Taiwan’s product. In the 1720s, Taiwan was estimated to have produced more than one hundred million catties of sugar annually, and the bulk of it was for export. Almost all of the second-grade sugar was shipped to Soochow, while the lower-grade product went to Shanghai, Ningpo and Zhenjiang.18 The boom of Taiwan and China trade coincided with the rise of Amoy and Lugang as the new trading ports in the region. The new political and economic conditions after 1683 together with the foundation laid by Zheng Chenggong during his occupation accounted mainly for the rise of Amoy as a new trading port in south China. A sophisticated network of coastal trade was established centering at Amoy and radiating to neighboring regions.19 Located in the Changhua plain in central Taiwan, Lugang (Lu-kang) was an excellent port for conducting trade with southern Fujian, and it was also the shortest passage to the mainland. In 1731, it was declared by the Fujian provincial government as a port legally for trade along the Taiwan coast with a minor officer supervising the trade.20 Apart from Lugang, ports on the south and north of the island also conducted brisk trade with Fujian and other parts of southern China. The trading system that prevailed during the first stage was traditional Chinese. Merchants and traders in Taiwan were formed into commercial organizations named ‘Jiao’, similar to a kind of commercial guild named ‘Hang’ (Hong) prevailing in China and Hong Kong 17

See Ng Chin Keong, Trade and Society: The Amoy Network on the China Coast 1683–1735 (Singapore, Singapore University Press, 1983), p. 131. 18 Ibid., p. 133. 19 Ibid., pp. 42–94. 20 See Donald R. Deglopper, “Lu-kang: A City and Its Trading System”, in Ronald G. Knapp (ed.), China’s Island Frontier: Studies in the Historical Geography of Taiwan, p. 150.

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in the 19th century. ‘Two types of ‘Jiao’ can be further classified. The first type was based on trading routes; while the second was based on the nature of the commodity. Those firms that traded with Northern China ports and joined together to form into a ‘Bei Jiao’ (Northern Commercial Guild); while firms trading with South China ports formed a ‘Nan Jiao’ (Southern Commercial Guild). For instance, in 1725, there were three principal commercial guilds in Tainan port. The ‘Northern Commercial Guild’ which consisted of more than 20 firms and headed by Chop Su Wan Li traded with ports in lower Yangtze and North China such as Shanghai, Ningpo, Tianjin, Yantai and Niuzhuang;, the ‘Southern Commercial Guild’ headed by Chop Jin Yong Shun and comprised of more than 30 firms carried out commercial transactions with ports in Fujian and Guangdong such as Amoy (Xiamen), Quemoy (Jinmen), Zhangzhou, Quanzhou and Swatow; while more than 50 firms trading with local ports on Taiwan island and headed by Chop Li Sheng Xing established their ‘Port Commercial Guild’ (Gang Jiao).21 The second type of ‘Jiao’ was organized on the basis of the commodity that the firms had specialized in such as rice, sugar, cloth, fish, silk, porcelain, and tea etc.22 All of these commercial guilds were to protect the common interests of the trading firms. They reduced competition and internal friction by setting prices and mediating disputes; they set the standard and maintained the reputation of the firms. They achieved monopoly in the distribution and marketing of the commodities. The opening of China after the Opium War in 1842 marked the beginning of the second stage of development of Chinese business in Taiwan under the Qing rule. The opening of four treaty ports, Hu-wei (Tamsui), Keelung, An-p’ing and Ta-kou (Kaohsiung) between 1862 and 1864 following the defeat of China in the Second Anglo-Chinese war ensured foreign control of Taiwan’s foreign trade. Western 21

See Shih Chuansheng (ed.), Taiwan jingji fazhan de lishi yu xianzhuang (The History and Present Situation of the Economic Development of Taiwan) (Nanjing, Dongnan daxue chubanshe, 1992), pp. 212–222. 22 Ibid.

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penetration, like the mainland, reduced Taiwan economically to a semi-colonial status: as markets for foreign goods and source of supply of raw materials. The penetration was pioneered by some powerful foreign firms headed by the mighty Jardine, Matheson and Company, the flagship of British companies in the Far East. Predominant British interests lay in the control of Taiwan’s foreign trade; 12 out of 21 foreign companies were British.23 Britain was also the first and the only foreign power to set up a consulate on the island to deal with growing business, and the British Consul also acted on behalf of other foreign powers to deal with matters relating to business and their respective nationals. It was not until 1890 that a German consulate was established to represent the German interests.24 The foreign penetration brought profound changes to Taiwan’s trade and economy. It integrated Taiwan into the world trading system. The foreign companies imported large volume of opium and cotton and woollen textile products, tobacco and metal products to Taiwanese market, and exported large quantity of sugar, camphor and later tea to feed the ever-expanding world market. The foreign trade of Taiwan achieved rapid growth after it was integrated into the orbit of world trading system. In about three decades from 1865 to 1893, the import of foreign goods through Tamsui and Ta-kou (Kaohsiung) ports grew from 1,409,484 h’aikuan taels to 4,839,493 h’ai-kuan taels, an increase of about 3 and a half folds; while the export of Taiwanese products increased even more phenomenally; it increased from 928,822 h’ai-kuan taels to 9,452,055 h’ai-kuan taels — an increase of more than 10 times in that three decades.25 Under the stimulus of growing foreign trade, Taiwanese produce, especially sugar, tea and camphor captured an increasing larger share of the world market, and modernized their organizations and 23

Apart from 12 British companies, 7 German companies ranked second, American had only 1 company. Ibid., pp. 24–26. 24 Ibid., p. 26. 25 Ibid., p. 25.

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methods of production. The development of tea planting and production in Taiwan is the best example. In 1865, three years after the opening of Taiwanese ports, John Dodd, a British national, founded the first foreign company — Dodd and company (Pao Shun yangh’ang as known in Chinese) — undertaking to plant and develop Taiwanese tea for the international market. Four years later, the company sold two ship-loads of Taiwanese tea — the Wu-long green tea — in the American market and achieved tremendous success.26 The success of Dodd & Company was soon followed by other foreign firms. By 1872, at least 4 other foreign firms joined the rank to export Taiwanese tea, they included Tait & Co., Elles & Co, Brown & Co., and Boyd & Co.27 Under the stimulus of robust demand in the international market, Taiwanese tea export rose rapidly from about 180,000 pounds in 1866 to 7,850,000 pounds in 1876, and by 1894 it had achieved a gigantic figure of 20,000,000 pounds.28 The foreign companies with the support of powerful foreign banks were able to control the production, distribution and marketing of Taiwanese tea. The pattern of foreign penetration and its control of Taiwanese tea took the following processes: foreign trading firms in Taiwan acquired cheap loans from powerful Western banks such as the Hong Kong and Shanghai Banking Corporation, and then provided loans with higher interest rate to Chinese tea brokerage firms known as ‘Merchant House’ (Ma-chen kuan); the brokerage firms in turn provided loans to Chinese tea-making companies known as ‘Ch’akuan’ from which Chinese tea producers received their advances to carry out planting. In return, the producers were obligated to sell their crops to the tea-making companies at agreed price. From then upward, the tea-making companies were obliged to sell their 26

See Tsu-yu Chen (Chen Ciyu), Jindai Zhongguo chaye de fazhan yu shijie shichang (The Development of Chinese Tea Trade in the Modern World Market) (Monography 6 of the Institute of Economics, Academia Sinica) (Nankang, Taipei, Academia Sinica, 1982), p. 188. 27 Ibid., p. 189. 28 See Chen Bisheng, Taiwan difang shi (The Local History of Taiwan) (Beijing, Zhongguo shehui kexue chubanshe, 1982), p. 165.

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products to foreign firms through the ‘Merchant Houses’ at fixed prices.29 The crucial link between the foreign firms and Chinese tea producers and makers was the Chinese tea brokers of the ‘Merchant Houses’ of which at least 20 of them existed in 1880. These brokers were mostly Cantonese, Southern Fujianese and Teochew from the mainland; they spoke a foreign language and had close contacts with foreigners in Amoy, Swatow, Hong Kong and Taiwan, and they also possessed some capital which enabled them to start their respective brokerage agencies.30 They were both financial brokers and tea merchants. Although they were entrusted by foreign firms to acquire Taiwanese tea product, they had no obligation to sell all of their merchandise to one or two firms at the fixed prices, and there was still room to manoeuvre for higher profit. The conflict of interests between foreign firms and Chinese ‘Merchant Houses’ caused the decline of this system, and eventually foreign firms by-passed Chinese tea brokers and employed directly Chinese compradors (Mai-pan) who were allowed to a certain extent to conduct their business like their counterparts on the mainland.31 Although they were allowed to trade tea in certain markets, they would not become formidable competitors with the foreign firms in the international market.32 The foreign penetration also produced some negative results in the Chinese business. It caused the decline of the Taiwan-mainland trade which predominated in the previous period. Ports in Southern China no longer received the bulk of Taiwanese produce; instead, the major items of Taiwanese produce such as tea, sugar and camphor were exported directly to the world market. The contents of the 29

For a detailed discussion of this process, see Tsu-yu Chen, op. cit., pp. 191–194. Ibid., pp. 192–193; Chen Bisheng, op. cit., p. 166; Shi Chuansheng, op. cit., p. 39. 31 For an excellent discussion of the Comprador system and its functions in China in the 19th century, see Yen-P’ing Hao, The Comprador in Nineteenth Century China: Bridge between East and West (Cambridge, Massachusetts, Harvard University Press, 1970). 32 For the rise of the compradors in Taiwanese tea trade, especially the case of Li Chunsheng, a Southern Fujianese comprador from Xiamen who was recruited by the Dodd and Company, see Tsu-yu Chen, op. cit., p. 190. 30

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Taiwan’s foreign trade also changed dramatically. Opium and Western textiles dominated Taiwan’s import items, while tea replaced rice to become the top item for export, and the market for Taiwanese rice in South China was wiped out by cheaper import of rice from Southeast Asian countries. By early 1880, rice stopped to become an item of Taiwan’s export.33 Together with the change of foreign trade pattern and contents was the decline of the traditional trade organization, the commercial guilds (Jiao). The change in foreign trade caused the collapse of some of the firms which traditionally held sway over certain trade items. The traditional and feudal practices of the guilds were no longer capable to cope with the drastic change of the time and lost grip over the existing members, and were replaced by other forms of commercial organizations.

Chinese Business under the Japanese Rule and the Post World War II Period Taiwan became the Japanese first colony in Asia since April 1895 after China’s defeat by Japan in the First Sino-Japanese War (1894–95). The Treaty of Shimonoseki signed on April 17th, 1895 ceded Taiwan and the Penghu islands to Japan. This began a period of a half-century of the Japanese rule. As part of the grand imperial design, Taiwan, like Korea later, was to be integrated into the Japanese Far Eastern empire to serve Japan’s growing industrial might. Thus, Taiwan under Japanese rule possessed all the essential characteristics of a colonial economy. It was to be a major market to absorb surplus of industrial products in Japan; and it was to be developed as a main supplier of raw materials to support Japanese on-going industrialization. The exploitation of agriculture-rich Taiwan was also to help increase Japan’s wealth and power in its quest for great power status. To gear Taiwan to Japanese economic needs, a coherent strategy was adopted by Kodama Gentaro, the fourth Governor-General, and his civil administrator, Goto Shimpei between 1898 and 1906. The Kodama-Goto government moved quickly to integrate Taiwan’s economy with Japan. It 33

See Shi Chuansheng (ed.), op. cit., p. 33.

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standardized weights, measures and currency systems; developed infrastructure such as roads, bridges, railways, telegraph lines and ports.34 At the time of Japanese take-over in 1895, Taiwan’s business was to a large extent in the hands of foreign trading firms which had a lion share of the foreign trade, while Taiwan-mainland trade was in the hands of Chinese traders. To reverse this situation, the Kodama-Goto government expelled foreign trading houses, re-directed mainland China trade to Japan by imposing tariff, and developed Keelung and Kaohsiung ports to facilitate trade with Japan. The government also established monopolies over the sale of camphor, salt, tobacco, opium and liqor.35 It also restructured contents of foreign trade to meet the needs of industrialized Japan. Due to shortage of rice and sugar in Japan, Taiwan was to become a major supplier. The Japanese strain of rice which was more palatable to Japanese consumers was widely planted and exported to the Japanese market. Japanese control of production and marketing of rice and sugar was realized mainly through the participation of Japanese business corporations such as Mitsui and others. They were highly centralized and monopolistic. With their huge capital and distribution networks, they were able to extract enormous profits from rice and sugar trade. In response to new business opportunities in Taiwan, Japanese capitalists founded sugar companies to extract this important produce. In 1900, the Formosa Sugar Company (also known as Taiwan Sugar Corporation) was founded with a capital of 1,000,000 yen, and among the principal investors were Prince Mori, the Mitsui family and the imperial household. The company built the first modern sugar mill along the railway between Tainan and Kaohsiung and began its production in the following year.36 In 1909, under the auspices of the government, the Sugar Industry Association of Taiwan was established which had in effect become the giant trust that controlled the 34

See Thomas B. Gold, State and Society in the Taiwan Miracle, p. 36. Ibid. 36 See Jack F. Williams, “Sugar: The Sweetener in Taiwan’s Development”, in Ronald G. Knapp (ed.), China’s Island Frontier: Studies in the Historical Geography in Taiwan, pp. 229–231. 35

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sugar industry. It set prices and production quota to cane farmers, controlled the supply of cane to mills and the marketing of the finished product.37 Centralized control of production and distribution meant monopoly and elimination of weak competitors. The small Chinese sugar mills which had a lion share of the industry at the turn of the 20th century had almost disappeared by 1920, and their business were taken over by modern Japanese firms. By 1940, the industry was dominated by four large Japanese corporations — the Formosa Sugar Company, the Meiji Sugar Company, the Nitto Kogyo Sugar Company and Enshuiko Sugar Company.38 In addition to rice and sugar, the government also encouraged cultivation of other agricultural produce for export. These included banana, pineapple, sweet potato, peanut, wheat and cotton etc.39 The export mainly went to Japan to meet increasing needs for a variety of agricultural produce. Tropical fruits like banana and pineapple fetched a big market in Japan. However, the production, pricing and marketing of these produce were largely controlled by Japanese interests. The cultivation of banana exemplifies this economic trend of the time. Banana growing was introduced from China during the Ming-Qing period, but large-scale plantation for export began with the Japanese rule. Throughout the Japanese period, 60% of Taiwan’s banana product was for export, and over 90% of the export went to the Japanese market.40 Although producers intended to improve income for their products by forming into co-operatives and later producers associations, they still fell victims to the monopoly of Japanese importers in Japan; and the producers associations in Taiwan were dominated by government’s nominees whose interests might not be fully attuned with those of the farmers.41 37

Ibid., p. 231. Ibid. 39 See Shi Chuansheng (ed.), op. cit., p. 117. 40 See Tsu-yu Chen, “Taiwan xiangjiao de chanxiao jiegou, 1912–1972” (The Structure of Production and Marketing of Taiwanese Bananas, 1912–1972), in Zhonghua minguo jianguo bashi nian xueshu taolunji, di si ce, shehui jingji shi zu (Proceedings of Conference on Eighty Years History of the Republic of China, 1912–1991), Vol. 4, Social and Economic History, (Taipei, Jindai Zhongguo chubanshe, 1991), p. 473. 41 Ibid., pp. 474–478. 38

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Despite Japanese monopoly and control, there was still room for private Chinese traders in Taiwan’s foreign trade during this period. Private Chinese traders, particularly those Ethnic Chinese from Japan, were able to carve a niche out of the trade. In 1982, the unearthing of a well-kept trading record of Shop Tai Yi, a Chinese trading company of Nagasaki, threw lights on the Chinese trading activities between Japan and Taiwan.42 The Tai Yi commercial record covers the period of more than half of a century from 1901 to 1959, and is probably the most well-kept Ethnic Chinese commercial record that ever comes to light.43 The record reveals that Shop Tai Yi carried out active trade with at least 10 Chinese wholesalers in port Keelung, and had business with other 77 Chinese trading firms in the same port.44 The major items of trade were sea products, rice and sugar. Shop Tai Yi exported large quantity of Japanese sea produce such as dried fish, salted fish, dried shrimps, can abalone, sea cucumbers and scallops etc., while imported large quantity of rice and sugar from Taiwan, especially during the period between 1901 and 1911.45 The export of rice and sugar by a group of Chinese wholesaling firms suggests that the export of these two agricultural products from Taiwan was not 42

See Chu Teh-lan (Zhu Delan), “Ri ju shiqi Changqi huashang Taiyi hao yu Jilong pifa hang zhijian de maoyi” (The Trade between Overseas Chinese Traders of Nagasaki, Shop Tai Yi and the Chinese Wholesalers in Port Keelung during the Japanese Rule), in Pin-Tsun Chang (Zhang Pincun) & Shih-Chi Liu (Liu Shiji) (eds.), Zhongguo haiyang fazhanshi lunwenji (Essays in Chinese Maritime History), Vol. 5 (Nangang, Taipei, Sun Yat-sen Institute for Social Sciences and Philosophy, Academia Sinica, 1993), p. 427. 43 Shop Tai Yi was founded by Chen Guoliang and his son Chen Shiwang. The Chen family immigrated to Hiroshima, Japan from Quemoy (Jinmen), Fujian province around 1850. The Chens were involved in trade in the Asia-Pacific region, and had gained unblemished reputation and status in the community. The trading records survived the bombing of Nagasaki in 1945, and in 1982, the Chen family presented its valuable records to the Nagasaki Museum. Since then a group of Japanese and Chinese scholars are studying these records, and produced some valuable works. Ms Chu Teh-lan is one of the leading Chinese scholars in Taiwan to scrutinize these records. Ibid. 44 Ibid., pp. 439–444. 45 Ibid., p. 446.

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entirely monopolized by the Japanese companies as formerly advocated by Chinese scholars;46 it also indicates that there was a process of change from relatively relaxed policy in the early stage to a more strict control over the export of rice and sugar to Japan. The introduction of the law over the transaction of rice by the Japanese colonial government in 1919 perhaps served as the dividing line between these two stages.47 In short, the five decades of the Japanese rule in Taiwan laid the foundation for the development of modern Chinese business on the island. The standardization of weights, measures and currency, the guarantee of private property rights, the construction of modern infrastructure, the availability of capital investment, the development of human resources, all of these helped to create favorable conditions or to stimulate the development of modern Chinese business.48 However, the creation of a structure of dependent capitalism in Taiwan which was fundamentally to serve the interests of mother Japan distorted its healthy development. There was a lack of development of a modern business class under Japanese rule, except some established Chinese families who were selected by the Japanese Colonial governments as collaborators. This small Chinese elite group consisted of five major families, and the Lins of Pan-ch’iao (near Taipei) and the Lins of Wu-feng (near Taichung) were among them. Derived from land-owning class, these powerful families were rewarded for their loyalty and collaboration with the authorities, and they were allowed to branch out into various types of business activities such as finance, trade and sugar refining. Some of them were rewarded with monopoly privileges and invested their capital in profitable sugar milling, land development, retailing and mining.49 The reverting of Taiwan’s sovereignty to China after Japan’s defeat in World War II in August 1945 marked the beginning of another stage in Taiwan’s business history. The five decades of peaceful economic 46

Ibid., p. 457. Ibid., p. 447. 48 See Thomas B. Gold, State and Society in the Taiwan Miracle, pp. 44–45. 49 Ibid., pp. 39–40. 47

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growth, in contrast with the political and economic turmoils on the mainland, came to an end. The Chinese in Taiwan began to share the agony of political instability with their compatriots on the mainland. The economic conditions of Taiwan in the immediate post-war period were of no cause of optimism. Being an integral part of Japanese Colonial empire supporting Japan’s war efforts in Asia,50 Taiwan suffered the same fate like Japan of Allied intensive bombing. The bombing not only crippled Taiwan’s supportive war industry, but also ruined Taiwan’s roads, railway lines, ports, factories and farms. The slum in agricultural and industrial products meant less surplus for exchange and export, and the devastation of the transport system meant more difficulties for goods to be moved around even within the island. The Nationalist administration in immediate post-war Taiwan was not an happy episode in the history of Taiwan. Given the expectations of both sides, the clash between the provincial government and the local Chinese in Taiwan appeared to be inevitable. On the one hand, the government under Governor Chen Yi was to re-orientate local Chinese towards China and to dispose of Japan’s imperialistic economic organizations; on the other hand, many Taiwanese Chinese expected that the end of Japanese colonialism would end their inferior complex which they suffered under Japanese rule, and would improve their economic well-being under a Chinese administration, an administration that consisted of Mandarins from the mainland where their ancestral homes were located and their culture was rooted.51 Chen Yi, 50

See Samuel Pao-San Ho, “Colonialism and Development: Korea, Taiwan and Kwantung”, in Ramon H. Myers and Mark R. Peattie (eds.), The Japanese Colonial Empire, 1895–1945 (Princeton, Princeton University Press, 1984), pp. 350–352; William C. Kirby, “The Retrocession of Taiwan to the Republic of China: National Planning and the Provincial Economy”, in Proceedings of Centennial Symposium on Sun Yat-sen’s Founding of the Kuomintang for Revolution, Vol. 4: Republic of China on Taiwan (1950–1993) (Taipei, Jindai Zhongguo ch’ubanshe, 1995), pp. 8–9 (English Section). 51 For a discussion of this rather idealized expectation on the part of Taiwanese Chinese before the take-over, see Lai Tse-han, Ramon H. Myers and Wei Wou, A Tragic Beginning: The Taiwan Uprising of February 28, 1947 (Stanford, Stanford University Press, 1991), pp. 47–48.

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a military graduate of a Japanese military academy and a former Governor of Fujian, was a man of Spartan discipline and dedication to his job. His firm belief in Sun Yat-sen’s Three People’s Principles and in integrating Taiwan into a strong China led him to adopt a highhanded approach to Taiwan’s politics. His suppression of local sentiment combined with his toleration of corruptive practices of his subordinates led to the outbreak of Taiwanese Chinese revolt on February 28th, 1947.52 The crackdown on the uprising further divided the Nationalist government and the local Chinese, and left a permanent political scar on the Mainlanders-Taiwanese relationship in the later period. However, this division and a sense of victimization on the part of Taiwanese Chinese perhaps helped to stimulate more of them to go into business. The main plank of the government’s economic policy was the rehabilitation of the economy and nationalization of former Japanese industry. Under both governorship of Chen Yi and Wei Tao-ming, the government rehabilitated the economy by standardizing currency, controlling rampant inflation, restoring transport system and industry, and promoting agricultural activities. Whatever criticism one might have of Chen Yi’s harsh treatment of Taiwanese Chinese, his achievements in the economic sphere should be affirmed. The control of rampant inflation and standardization of currency were two of the early tasks that he had undertaken. The confusion created by the circulation of multiple currencies (including Japanese currency),53 52

For a detailed analysis of the background and the event, see ibid., pp. 50–140; see also Lai Tse-han (Lai Zehan), “Chen Yi yu Min Tai Zhe sansheng shengzheng, 1926–1949” (Cheng Yi and His Administrations of Fujian, Taiwan and Zhejiang provinces), in Proceedings of Conference on Eighty Years History of the Republic of China, 1912–1991, Vol. 4: Social and Economic History (Taipei, Jindai Zhongguo chubanshe, 1991), pp. 232–356. 53 At the end of World War II, currency circulated in Taiwan consisted of currency notes issued by the Bank of Taiwan, currency notes of Bank of Japan and auxiliary and fractional currency issued by the Bank of Japan. See Kenneth S. Lin & Tsongmin Wu, “Taiwan’s Big Inflation: 1946–1949”, in Yung-san Lee & Ts’ui-jung Liu (eds.), China’s Market Economy in Transition (Taipei, Academia Sinica, 1990), p. 543.

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together with the dwindling of reserve and the shortage of supply of consumer goods aggravated the worsening inflation. The government in early November 1945 froze the circulation of existing currencies, and replaced them with the Taiwan currency (Tai-bi) issued by the Bank of Taiwan.54 In tackling the fiscal and inflation problems, Chen sealed off the island from the mainland financially by issuing Taiwan dollar (Tai-bi), instead of using the fa-bi currency which was the legal tender of the Nationalist China.55 Despite strong objections from his Nationalist colleagues on the mainland, this measure indicated his determination to act in the interests of Taiwan. The rehabilitation of Taiwan’s transport system, port facilities, industry and agriculture was also rapid. It was through the functions of state enterprises. As a firm believer of central planning and central control of economy, Governor Chen Yi used maximum state power to rehabilitate the economy. He set up state firms which soon controlled 70% of all industrial and agricultural enterprises. In addition, a new Monopoly Bureau was also established to control the supply and marketing of some basic consumer goods such as salt, camphor, opium, matches, liqor and tobacco.56 The speed of recovery of the industry under the Nationalist government in the immediate post-war period is best illustrated by the case of the sugar industry. At the time of Nationalist take-over in late 1945, the assets of the confiscated Japanese sugar corporations consisted of 42 modern sugar factories with a total daily grinding capacity of 65,000 metric tons. The sugar production was resumed on ad hoc basis with government personnel assigned to run former Japanese mills and to repair damaged facilities. The government moved quickly to speed up sugar production. In May 1946, the Taiwan Sugar Corporation (TSC, no relation to the former Japanese 54

The standardization of currency did not solve the inflation problem until the Tai-pi was replaced by the New Taiwan currency (Shin Tai-pi) on the monetary reform of June 15th, 1949 with the conversion rate of OT$40,000 to one dollar Shin Tai-pi. Ibid., p. 544. 55 See Lai Tse-han, Ramon H. Myers & Wei Wou, A Tragic Beginning: The Taiwan Uprising of February 28, 1947, p. 89. 56 Ibid., p. 85.

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sugar corporation carrying the same name) was created out of the combined Japanese assets. This corporation was financed with government’s capital. The four former Japanese sugar corporations were converted to the status of four branches of TSC which had its headquarters located in Taipei. The government-owned TSC became the monopoly to handle growing, harvesting, milling and marketing of the sugar.57 The state monopoly of industry and agricultural enterprises deprived the opportunity of entrepreneurs, and inhibited the growth of private business on the island. In retrospect, the retreat of Chiang Kai-shek and over a million of his troops and followers to Taiwan in 1949 had a profound impact on the development of business in Taiwan. The arrival of a large number of former bureaucrats, merchants and intellectuals strengthened the base of business activities. It was partly from this pool of well-educated elites that a business class with a modern outlook emerged. Although there was a lack of an official policy of transforming former bureaucratic and intellectual elites into a class of modern entrepreneurs as what the Meiji government did to the Samurais,58 nevertheless, these educated elites from the mainland were under intense pressure to find a new living on the island. Doing business was probably an answer to many of them who dared to take risk and prepared to take a new direction in life. However, how many of them succeeded in this transformation is difficult to assess, but many of them were involved in this self-transformation process is beyond doubt. With education and modern knowledge, and perhaps also with some necessary connections with the mainlander-dominated bureaucracy in Taiwan, some made themselves successful entrepreneurs, and staffed the corporate boardrooms and led the way for the making of an economic miracle in Taiwan. 57

See Jack F. Williams, “Sugar: The Sweeterner in Taiwan’s Development”, in Ronal G. Knapp (ed.), China’s Island Frontier: Studies in the Historical Geography of Taiwan, pp. 231–232. 58 For a detailed discussion of this transformation, see Johannes Hirschmeir, The Origins of Entrepreneurship in Meiji Japan (Cambridge, Massachusetts, Harvard University Press, 1964); Johannes Hirschmeir & Tsunehiko Yui, The Development of Japanese Business, 1600–1973 (London, George Allen & Unwin Ltd., 1975), pp. 70–144.

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The Rise of Taiwan as an Economic Power Taiwan was the first country among the Four Little Dragons to achieve economic breakthrough. This was clearly demonstrated in its fast pace of economic growth. In the three decades from 1953 to 1982, Taiwan achieved an average 8.7% growth rate of GNP (Gross National Products) with a peak average of 10.8% in the decade between 1963–1972. The performance of the industry was even more spectacular, achieving an average growth rate of 13.3% in the three decades from 1953 to 1982. The economy as a whole underwent drastic structural change. It was changed from agriculture- based to industry- based. The industry was also changed from light industry such as food-processing and textile to electronics, machinery, petrochemical and high-tech. Taiwan’s computer industry has emerged as a formidable competitor in the international market, outperforming some of its American and European competitors. Trade surplus occurred every year since 1970, particular in relation to the United States. Huge trade surplus ranked Taiwan as an emerging trading nation. Because of huge trade surplus, Taiwan accumulated enormous foreign reserve amounting to U.S.$7 billion in 1980 to U.S$15.7 billion in August 1984, and this figure grew larger and larger every year, and it was estimated to have reached a figure of U.S$ 80 billion. The foundation of a rapid self-sustaining economic growth was laid mainly in the 1950s. Land reform, import substitution manufacturing and foreign aid played the principal roles in the laying of a solid foundation for rapid growth. Motivated by political gain and general support of the rural population, land reform was undertaken by the Nationalist government in Taiwan soon after its retreat to the island.59 As a trusted protege of Chiang Kai-shek, Chen Cheng, the governor of Taiwan, carried out the reform with great success. The land problem in Taiwan, not unlike land problems of other Asian countries, was 59

Chen Cheng, Governor of Taiwan and the architect of the land reform program in Taiwan explained that the need to safeguard Taiwan as a base for recovering the mainland was the main motivation for the undertaking of land reform at that time. See Chen Cheng, Land Reform in Taiwan (Taiwan, China Publishing Company, 1961), p. x.

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hinged on the decline of land-population ratio under increased population growth and landlords’ exploitation. The exploitation of landlords took the form of excessive rents and insecure tenancy.60 Unlike Communist land reform on the mainland in the early 1950s which was characterized by violent overthrow of the landlord class,61 the reform in Taiwan was carried out in a peaceful and planned manner. It went through three different stages: rent reduction, sale of government-owned land, and the buying out land from landlords and distributing land to tenant-farmers. The whole process took about four years to complete. A rent reduction program was introduced by the government in April 1949. Rent was restricted to 37.5% of the main crop. All farm leases must be in writing and the duration should not be shorter than 6 years. The interests of both tenants and landlords were protected in the program.62 The sale of public farm land in 1951 was a relatively easier exercise. More than 100,000 hectares of farmland taken over by the state from Japanese companies and nationals after 1945 were mostly tilled by tenants. The sale was mainly confined to those tenants who were to be converted into owner-farmers, and safeguards were built into the program for preventing abuse.63 The introduction of the ‘land-to-the-tillers’ program — the final stage of the reform in 1953 — was most crucial and probably hardest for the government to implement. A general survey of land ownership and classification was completed before the adoption of the Act of Land to the Tillers in January 1953. The targeted landlords were persuaded to sell their land to the government, and in return, they were compensated with government land bonds (70%) and government 60

According to Sidney Klein, in 1945 through 1947, rents of 60% and 70% became common in the more fertile and densely populated areas in Taiwan. See Sidney Klein, The Pattern of Land Tenure Reform in East Asia (New York, Bookman Associates, 1958), pp. 53–54. 61 For land reform in China, see John Wong, Land Reform in the People’s Republic of China (New York, Praeger, 1973). 62 Under the contract, the tenants had to pay rents on time, and the landlord could terminate the contract if rents were 2 years in arrear. See Chen Cheng, Land Reform in Taiwan, p. 23. 63 Ibid., pp. 57–62.

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enterprise shares (30%). The purchased land were resold to tenants farmers at a reasonable price with a loan paying 4% interest. The purchase payment together with other costs of the land would not exceed 37.5% that the tenant-farmers had paid as rents. By December 1953, more than 140,000 hectares of land were purchased and resold, and the exercise had benefited about 195,000 farming families.64 The land reform eased the tension and conflict among rural population, unleashed energy and positive forces in rural Taiwan. Psychologically, the new owner-farmers, the beneficiaries of the reform, were prepared to work harder to improve their economic well-being; while the exlandlords who had hitherto considered land as the most profitable form of their investment, were guided to invest in emerging new industries. In economic terms, the land reform stimulated general economic activity. The higher level of rural productivity increased the demand for industrial products such as fertilizers and insecticide as well as consumer goods for rural households.65 Import substitution strategy, common to all developing countries, was intended to replace foreign imported goods with domestic industrial products. The promulgation of the first Four-Year Plan in 1953 inaugurated the adoption of this new strategy. It was designed to conserve foreign exchange and to enhance capital for re-investment. Textile and fertilizer industries which required relatively small capital, led the push towards industrialization. In addition, food-processing, plastic, cement, glass and other related industries were added to the list.66 The combination of measures such as exchange controls, import licensing, protective tariffs and multiple exchange rates etc ensured the success of the strategy.67 It laid a solid foundation for further industrialization. It reduced capital outflow, increased the supply of 64

Ibid., pp. 68–78; Kuo-ting Li, The Evolution of Policy Behind Taiwan’s Development Success (Singapore, World Scientific Publishing Company, 1995), pp. 70–71. 65 See Anthony Y.C. Koo, The Role of Land Reform in Economic Development: A Case Study of Taiwan (New York, Frederick A. Praeger, 1968), p. 124. 66 See Shi Chuansheng, op. cit., p. 201. 67 See Gustav Ranis, “Industrial Development”, in Walter Galenson (ed.), Economic Growth and Structural Change in Taiwan: The Post-war Experience of the Republic of China (Ithaca, Cornell University Press, 1979), p. 212.

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consumer goods and stimulated domestic industry; it also created employment and stabilized government budget.68 Taiwan benefited greatly from foreign capital in the various stages of its economic development. American capital played an important role in helping to lay the foundation for rapid growth. It came to the island in the form of foreign aid. Over U.S.$4 billion was provided for the Nationalist government in the form of grants, loans and military equipment between 1951 and 1965. Although the bulk of the American aid went to Taiwan’s defence, the non-military U.S.$1.42 billion aid was crucial in helping Taiwan’s leap in industrialization. It financed some 40% of investment and imports between 1951 and 1965,69 and provided Taiwan with industrial goods, plants and equipment which amounted to 10% of Taiwan’s gross national product in 1951. The percentage declined to about 2% in 1965. Its overall performance was to help finance foreign exchange deficits, to stabilize prices, and to provide investment funds as well as technical assistance.70 The most important factor accounting for the rise of Taiwan as an economic power was its strong government and leadership. When Chiang Kai-shek and his followers retreated from the mainland to Taiwan in 1949, the political situation was conducive to building a strong government. The local opposition to the Kuomintang rule had been crushed in February 1947 before Chiang’s arrival.71 Not only the island was much smaller in terms of size which meant easier to govern, but also Chiang had brought to the island a more unified leadership group. On the mainland, Chiang’s leadership was constantly undermined by his political opponents and the warlords. His retreat to the island with his followers and troops freed him from warlord politics. He had achieved absolute control over the party, the

68

See M.C. McDermott, Taiwan’s Industry in World Markets: Target Europe (London, The Economic Intelligence Unit, 1991), p. 14; Kuo-ting Li, op. cit., p. 74. 69 Kuo-ting Li, ibid., p. 61. 70 Ibid., p. 64. 71 See Lai Tse-han, Ramon H. Myers & Wei Wou, A Tragic Beginning: The Taiwan Uprising of February 28, 1947, especially pp. 141–167.

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army and the government. After the death of Chiang Kai-shek in April 1975, his eldest son, Chiang Ching-kuo, was chosen to succeed him first as the Premier and then the President of the Republic of China and the head of the ruling Kuomintang. Perceiving the change in the world, Chiang Ching-kuo was more flexible than his father, and possessed a better vision for the Republic. Unlike his father who had all along possessed the dream of recovering mainland China by force, Ching-kuo was a more pragmatic politician. The Kuomintang under his leadership undertook more drastic reforms, and downgraded its goal of recovering the mainland.72 He realized the might of his tiny island regime could not match with the Communists who were so entrenched in their power. He turned his attention and energy to building an economic miracle for Taiwan. The sense of threat from the Communists provided the Chiang father and son the convenient justification to suspend democracy on the island. The Nationalist government in Taiwan had achieved absolute control over the population. There was absence of democratic election, many of the parliamentarians were elected in 1947 on the mainland, but continued to occupy the positions in the parliament till the early 1990s;73 and there was no opposition party in existence. Taiwan was in fact a one party state. The loss of the seat in the United Nation to Communist China at the end of 1971 proved to be a blessing in disguise. The Nationalist government which had hitherto spent a great deal of time and energy to play international politics, could concentrate its attention on economic development and was better prepared to adjust to a new emerging world order in which economic power played a major part.74 The strong government though auto72

See Bruce J. Dickson, “The Kuomintang before Democratization: Organizational Change and the Role of Elections”, in Hung-mao Tien (ed.), Taiwan’s Electoral Politics and Democratic Transition: Riding the Third Wave (Armonk, New York, M.E. Sharpe, 1996), p. 49. 73 See Hung-mao Tien,”Taiwan’s Evolution toward Democracy: A Historical Perspective”, in Denis Fred Simon & Michael Y.M. Kau (eds.), Taiwan: Beyond the Economic Miracle (Armonk, New York, M.E. Sharpe, Inc.,. 1992), p. 7. 74 See Donald W. Klein, “The Political Economy of Taiwan’s International Commercial Links”, in Denis Fred Simon & Michael Y.M. Kau (eds.), ibid., p. 260.

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cratic, enabled the two Chiangs to mobilize available resources to achieve common national goals. The state was the locomotive of Taiwan’s economic miracle. In the drive for rapid economic development, it was responsible for recruiting talents, for establishing various central economic agencies, for establishing a high-power modern technocrat group, for initiating economic planning, and for implementing suitable economic strategies.75 In a one party state like the Nationalist government in Taiwan, final decisions on economic policies were in the hands of the standing committee of the Central Committee of the Kuomintang. But the Nationalist leaders well recognized that economic policies required economic and technical expertise. The Committee was willing to delegate its power to a group of well-educated and well-qualified talents to handle economic affairs. Two of the outstanding architects of the early industrialization were K.Y. Yin and K.T. Li (Kuo-ting Li). Yin, a trained engineer, while Li, trained in physics, served as heads of various central economic agencies. Li was recruited into the cabinet as the Minister for Economic Affairs from 1965 to 1969; as Minister of Finance from 1969 to 1976; and as a Minister without Portfolio from 1976 till 1989. Li’s influence on the economic development of Taiwan was enormous.76 Both Yin and Li realized that ambitious economic policies could not be effectively formulated without a group of highly-educated economic bureaucrats. Among the top 44 economic planners in the 1950s and 1960s, 43 of them were university graduates; 61% of them possessed higher degrees from the United States and Europe. In addition, the government also engaged prominent Chinese academics in U.S. universities as economic advisers (such as Liu Ta-chung and Tsiang Sho-chieh of Cornell, John Fei of Yale and Gregory Chow of Princeton). They visited Taiwan frequently and offered valuable advice to the government.77

75

For details of government’s role in planning and executing the economic policies, see Kuo-ting Li, The Evolution of Policy Behind Taiwan’s Development Success, especially chapters 2, 3, 5, 6 and 7. 76 Kuo-ting Li, “Preface”, ibid., p. ix. 77 See Ezra F. Vogel, The Four Little Dragons: The Spread of Industrialization in East Asia (Cambridge, Massachusetts, Harvard University Press, 1991), p. 27.

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In addition, various economic planning agencies were established in the central government structure with immense power in determining the direction and planning. Principal among them were the Economic Stabilization Board (ESB) created in 1953, and the Council of International Economic Cooperation and Development (CIECD) which came into existence in the mid 1960s. They were responsible for producing several Four or Six Year Plans from 1953 to 1993 to guide the economic development of Taiwan. With economic talents, planning commissions and economic bureaucracy in place, the government was able to produce the right economic strategies — strategies which were suitable for the domestic conditions in Taiwan and were able to benefit greatly from the changing economic environment worldwide.78 One of the early economic strategies was the export-driven industrialization implemented in the period between 1958 and 1973. It was intended to stimulate the growth of the light industry. The domestic market was never large enough to absorb all surplus products in the light industrial front. By producing goods for export, the industrialists could turn out large volume of products at a reduced cost. At the same time, the foreign exchange earned would stimulate the growth of economic activities in Taiwan. Several measures were taken to facilitate export: unify the exchange rate, devalue the currency and remove many of the restrictive rules. Special tax concessions were also offered to encourage investment in export industry. In the 1960s, as a further step to stimulate export, the government established Export Processing Zones. The Kaohsiung EPZ established in December 1966 was the first of its kind in the world.79 In these zones, export facilities were improved by creating new 78

For government’s right economic strategies such as fiscal policy, monetary reform, population and manpower policies, science and technology policy, see ibid., pp. 73–158, 169–184; Li Guoding (Kuo-ting Li), Taiwan de renli ziyuan yu renkou wenti (Taiwan’s Problems of Human Resource and Population) (Nanjing, Dong Nan daxue chubanshe, June 1994); Li Guoding (Kuo-ting Li), Taiwan jingji fazhan zhong de keji yu rencai (Science and Technology and Talents in the Development of Taiwan’s Economy) (Nanjing, Dong Nan daxue chubanshe, September, 1994). 79 See Thomas Gold, State and Society in the Taiwan Miracle, pp. 79, 80. For the nature, development and significance of the Export Processing Zones, see Kuo-ting Li, The Evolution of Policy Behind Taiwan’s Development Success, pp. 160–168.

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wharves and upgrading transport system. An industrial park combined with a modern harbor and a centralized administration made the export more efficient. Domestic and foreign investors were induced into export industry by tax incentives. The result of the adoption of this strategy was an extraordinary export boom. Huge volume of light industrial products such as textiles, foot-wears, toys, clothing, light electrical machinery, radio and television, and electronic components were exported to the United States, Southeast Asia and other parts of the world. In the decade from 1963 to 1973, the value of export rose from U.S.$136 million to U.S.$3,794 million. During the two oil shocks period between 1973 and 1979, the government tightly controlled the inflation to ensure escalating oil cost would not destroy the existing industrial base. It also deepened the industrial base by undertaking large-scale infrastructure construction. Ten major infrastructure projects were completed during this period. They included North-South Expressway, Kaohsiung Shipyard, Taipei airport and East Coast Railway. The completion of these projects laid the solid foundation for the development of the heavy industry, stimulated economic growth, and stabilized the labor market. To sustain the fast economic growth and to catch up with the industrialized West and Japan, the Government decided to move into high-tech industry. In 1978, a national science and technology policy was promulgated by Kuo-ting Li, the architect of modern Taiwan economy. A Science and Technology Advisory Group (STAG) was established to oversee the operation. The areas of high technology were identified: the technologies in energy, automation, information and materials. Bio-technology, electro-optics technology, medical and food technology, environmental science and technology, disaster prevention technology, synchronton radiation and ocean technology were especially targeted. The government also funded research institutions such as the Industrial Technology Research Institute (ITRI) and the Institute for Information Industry (III), and encouraged close co-operation between the government, industry and research/academic institutions.80 80

For the development of science and technology policy during this period, see Kuoting Li, ibid., pp. 169–181.

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To facilitate technology transfer from advanced countries, especially from the United States, the government took steps to attract American large corporations to set up branches or subsidiaries in Taiwan, and induced a number of highly-qualified Chinese graduates back from the United States. The founding of the industrial park in Hsinchu in 1981 was another step to spur high-tech development. Special incentives such as exemptions from business taxes and import duties, tax credits and low rentals were offered to attract high-tech companies to the park. National Tsinghua and National Chiaotung universities together with the Industrial Technology Research Institute were assigned to support this famous project. Within two years of its existence, the project attracted many high-tech firms producing computer components, telecommunication equipment and carbon fibre. In 1983, electronics and electrical manufactured products replaced textiles as Taiwan’s largest category of export. By 1990, Taiwan became the sixth largest producer of computer hardware in the world. By 1993, Taiwan emerged as the largest exporter of color monitors, keyboards, mouses and image scanners.

Entrepreneurship, Confucian Values and Taiwan’s Business The role of state was decisive in Taiwan’s drive for economic development. But the role of entrepreneurs and Confucian values cannot be ignored. In contrast with South Korea where chaebols (large corporations) dominated the private sector, 90% of Taiwan’s industry consisted of small and medium-sized firms. The number of small business enterprises increased rapidly in the 1960s and 1970s. In a decade from 1961 to 1971, the number of small and medium-sized enterprises with less than 500 employees tripled; while the number of their employees more than tripled from 184,000 to 654,000.81 By 1993, over 800,000 enterprises were estimated to have existed in Taiwan, and 99% of them were small and medium-sized companies.82 The 81

See Ezra F. Vogel, op. cit., p. 35. This estimate was made by Hsin Chang (Zhang Xin), a Chinese economist working with an American univerity in 1993 when he, together with a group of Chinese 82

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existence of a large number of small and medium-sized enterprises was the result of both historical and political factors. When Chiang retreated to the island of Taiwan, he did not bring along any big capitalists. Top bureaucratic capitalists closely related to the Nationalist regime in China preferred to keep their money in the United States; while some large textile manufacturers opted for international cities like Hong Kong when they retreated from the mainland;83 only a number of small textile manufacturers from Shanghai and the Shandong area came to Taiwan. They formed part of the backbone of Taiwan’s early industrialists. In the early 1950s when importsubstitution industrialization started, the government began to promote private enterprises in certain key sectors such as cotton textiles and flour milling. Those who seized the opportunity were mostly mainland entrepreneurs from Shanghai and Shandong. They received government subsidies and guaranteed markets for their products.84 Major players in textile industry such as Tai-yuen Textile, Far Eastern Textile and Chung-hsing Textile got their enterprises started in this manner. With their base in cotton textile manufacturing, they expanded to man-made fibres with additional state assistance.85 Apart from these mainlander entrepreneurs, local-born Chinese who had business background back in the Japanese occupation period constituted another group of entrepreneurs. They were either derived from former landlords or urban small businessmen, who were well represented by the founders of Tainan Textile, H’ou Yu-li & Wu Hsiu-ch’i, and Wang Yung-ch’ing of Formosa Plastics. Apart from this historical economists, was visiting Taiwan. See Hsin Chang (Zhang Xin), “Cong zhongxiao qiye jingji jiegou kan Taiwan jingyan” (The Taiwan Experience: from the Perspective of the Scale Structure of Small and Medium-sized Firms), in Gang Yi & Xiaonian Xu (eds.), Taiwan jingyan yu dalu jingji gaige (The Taiwan Experience and Its Implications for the Economic Reforms of Mainland China) (Beijing, Zhongguo jingji chubanshe, 1994), p. 156. 83 For the retreat of large textile manufacturers from the mainland to Hong Kong in the late 1940s, see Wong Siu-Lun, Emigrant Entrepreneurs : Shanghai Industrialists in Hong Kong (Hong Kong, Oxford University Press, 1988), especially pp. 16–41. 84 See Thomas B. Gold, State and Society in the Taiwan Miracle, p. 70. 85 Ibid.

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reason, the Nationalist government in its early industrial drive had no intention to create large corporations like what the Park’s regime had done in South Korea. Perhaps the Nationalist leaders had learned the lessons on the mainland that any attempt to create large corporations would be seen as the repetition of their policy of creating bureaucratic capitalism, and would alienate popular support. In addition, a bitter rivalry between mainlanders and local-born Chinese in the society would have been politically suicidal. These small and medium-sized enterprises were mostly family run, a mixture of family labor and outside employees. Most of them were involved in producing consumer goods ranging from toys, textiles to high-tech computer. Specialization and co-operation in production made these firms viable.86 In economic terms, these firms had a simple structure with low management costs. Low production cost together with quick decision-making made them competitive and highly adaptable to change, and they survived well in the competitive international markets. However, their small capital and simple structure prevented them from undertaking large-scale capital-intensive enterprises, and inhibited them from growth and expansion.87 In terms of management, most of these small and medium-sized firms were family-based and were characterized by the overlapping of ownership with management. It was the family that became the focus for raising capital, for staffing, and for loss or gains of the enterprise. It fitted in well with the model of a Chinese family firm as what Siu-lun Wong and Gordon Redding have described.88 The firm was seen as an extension of the family, and it was run by father-entrepreneur who had absolute control over the business operation as he saw fit. Decision-making power was highly centralized in the hands of fatherentrepreneur who was a busy man carrying the entire business on his

86

See Hsin Chang (Zhang Xin), op. cit., in Gang Yi & Xiaonian Xu (eds.), Taiwan jingyan yu dalu jingji gaige, p. 156. 87 Ibid., pp. 157–159. 88 See Siu-lun Wong, “The Chinese Family Firm: A Model”, in British Journal of Sociology, Vol. 36 (1985), pp. 58–72; S. Gordon Redding, The Spirit of Chinese Capitalism (Berlin, New York, Walter de Gruyter, 1990), pp. 153–173.

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shoulders.89 The management style was paternalistic. The ownermanager made most of the decisions without consultations with his staff, but he felt obligated to look after the welfare of his employees.90 Less than 1% of over 800,000 enterprises in Taiwan can be classified as modern conglomerates employing more than 500 workers. Though their percentage is small, they still number in the hundreds. Except for a few of them, the size of Taiwan’s business conglomerates cannot match with the Chaebols found in South Korea. Many of these conglomerates developed from small urban business and former landlord class. Most of the Taiwan’s conglomerates have their origins tracing back to the 1950s, and some of them typified the stories from rags to riches.91 Most of Taiwan’s conglomerates are owned and controlled by the founding families with their founders and close relatives at the helm. Like many Ethnic Chinese conglomerates in Southeast Asia, the overlapping of ownership and management is a feature of Taiwanese conglomerates. The management style is still very Chinese and traditional, with concentration of decision-making at the top and the process of management operation is top-down rather than bottom-up.92 The first generation of father-entrepreneurs was very united and coherent, but this internal unity is undermined by the expansion of size of the family unit and the process of distancing the relatives. For instance, after the death of the founder, Chua Ban Chun, the Cathay Conglomerate split into five, controlled separately by Chua cousins.93 However, some Taiwanese business conglomerates display a different pattern of management style. It integrates kinship relations with individual merit. Appointment of senior staff and promotion are not based purely on kinship distance with the founders and the General Managers, but also taking into account of personal

89

Siu-lun Wong, ibid., p. 63. See S.Gordon Redding, op. cit., pp. 156–157. 91 See Duan Chengpu, Zhanhou Taiwan jingji (Economy of Post-War Taiwan) (Beijing, Zhongguo shehui kexue chubanshe, 1989), p. 231. 92 Ibid., p. 234. 93 Ibid., p. 235. 90

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attributes such as qualifications and ability. This management style perhaps accounts for the relative cohesion and unity of the conglomerate and contributes to its continuous growth. Tainanbang, a business conglomerate based on the southern city of Taiwan, Tainan, is a good example. An excellent study on the Tainanbang reveals that the two founding families, the Hou and Wu families, had displayed tremendous resilience and capacity to growth, and the adoption of mixed kinship and meritocracy in its management was partly responsible for the growth.94 The role of Confucian ideology in Taiwan’s development experience cannot be overemphasized, but it cannot be ignored either. One would assume that Taiwan would have preserved more Confucian values than the Ethnic Chinese communities in Southeast Asia, and the Confucian values would have greater impact on the operation of Chinese business in Taiwan. Given the fact that Taiwan has been the defender of traditional Chinese cultural values, particularly during the havoc of the Cultural Revolution on the mainland during the late 1960s and early 1970s, this assumption appears to be vindicated. Confucian values which served as the cement or mortar in the building of a house, did play an important role in the rapid economic modernization of Taiwan. Confucian values of hierarchy and paternalism, harmony and reciprocity which have influenced Ethnic Chinese business enterprises in general, have influenced the state-business relationship and the management of enterprises. In more than three decades before the 1980s, Taiwan was under an authoritarian state which was paternalistic and interventionist. The Confucian idea of state is that it has comprehensive responsibility to provide for, to enrich and to educate the people, and this concept has been well incorporated into Sun Yat-sen’s Doctrine of the People’s Livelihood.95 94

For an excellent study of the Tainanbang by Hsieh Kuo-hsing (Xue Guoxing) of the Institute of Modern History, Academia Sinica, see Hsieh Kuo-hsing (Xue Guoxing), Qiye fazhan yu Taiwan jingyan: Tainanbang de gean yanjiu (Corporation Development and the Taiwan Experience: A Case Study of Tainan Group) (Nangang, Taipei, Institute of Modern History, Academic Sinica, 1994), pp. 223–238. 95 See Ambrose Y.C. King (Jin Yaoji), “State Confucianism and Its Transformation: The Restructuring of the State-Society Relation in Taiwan”, in Tu Wei-ming (ed.),

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Confucian paternalism led the Nationalist government in the early 1950s to initiate state enterprises and to guide private businesses towards the goal of rapid industrialization. During this period, the state-business relation was hierarchical and paternalistic. The state monopolized the power of decision-making on economic policies, allocated resources to public and private enterprises. In short, the business elite in Taiwan was on the fringe of Nationalist government’s power structure, and they were not organized as a effective pressure group, but were recruited individually by the state through party or personal connections.96 In this sense, state is omnipotent and is above any sectarian interests. Business interests, in the eye of the state, is subordinate to the interests of the nation as a whole, and is part and parcel of the state. Any sectarian interests deemed to be deviating from the interests of the state cannot be tolerated. In the West, state is regarded as a referee and non-interventional, sectarian interests representing business and labor have legitimate role in the decisionmaking process, i.e., they influence government’s policies through chambers of commerce and trade unions as pressure groups. Final decision is determined by the degree of lobbying and the distance between the sector and the government. In this model, state-business relationship is not a hierarchical relationship, business has a legitimate role in the decision-making process, and business elites have important inputs in the state’s economic policies. In contrast, the statebusiness relationship in Taiwan in the decades between the 1950s and 1970s was structured hierarchically and rigidly. Individual businessmen were not allowed to express their views and lobby through the Kuomintang party structure. But since the 1980s, as the authoritarian state structure was gradually liberalized, and democratic process was

Confucian Traditions in East Asian Modernity: Moral Education and Economic Culture in Japan and the Four Mini-Dragons (Cambridge, Massachusetts, Harvard University Press, 1996), p. 235. 96 For a good discussion of state-business relationship in Taiwan during this period, see Yun-han Chu, “The Realignment of Business-Government Relations and Regime Transition in Taiwan”, in Andrew Macintyre (ed.), Business and Government in Industrialising Asia (Sydney, Allen & Unwin, 1994), pp. 115–121.

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introduced into Taiwan’s political system, the power and influence of the business correspondingly increased.97 Confucianism appears to have influenced the structure and management of Taiwan’s enterprises regardless of size. Confucian core values of propriety (Li) and benevolence (Ren or Jen) and their extended values of paternalism, harmony, reciprocity, loyalty, filial piety and respect for authority are present in one form or another in Taiwan’s enterprises. The majority of these enterprises, small, medium-sized or large, are organized around the family, and they are essentially controlled and managed by members of the family. In these family firms, initial capital came from members of immediate family, distant relatives or friends.98 They are usually organized hierarchically under the control of the founders. This ‘father-figure’ style leadership, though increasingly attracts criticism, is still considered to be effective in the operation of Taiwan’s enterprises.99 In those small and medium-sized enterprises, the hierarchical structure and paternalism provided the management with bigger authority to run the enterprises. Paternalism also deter the owners to exploit the workers to the extreme. But the owner-managers have to work hard to gain their trust.100 Paternalism, harmony, reciprocity, loyalty and diligence are nurtured and developed, and they are expressed invariably in company’s mottoes, company songs and business culture.101 The concept of reciprocity which binds employers and employees together enables Taiwan’s enterprises to enjoy relatively peaceful industrial relations, and has contributed partly to its rapid economic growth. 97

Ibid., p. 113. See Lin Pao-an, “The Social Sources of Capital Investment in Taiwan’s Industrialization”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia (Hong Kong, Centre of Asian Studies, University of Hong Kong, 1991), p. 96. 99 See Tu I-ching, “Family Enterprises in Taiwan”, in Gary Hamilton (ed.), Business Networks and Economic Development in East and Southeast Asia, pp. 121, 122. 100 Ibid., p. 122. 101 See Teh Eng Ber (Zheng Yinmo), Heishou qijia: Taiwan zhongxiao qiye chenggong zhuanqi (The Black Hands: The Successful Stories of the Small amd Medium-sized Industries of Taiwan) (Kuala Lumpur, Action AAA Sdn. Bhd., 1995), pp. 76–155. 98

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Case Studies: Wang Yung-ching and Chang Yung-fa Before his death in 2008, Wang Yung-ching was ranked by Forbes as the 178th richest person in the world with an estimated net worth of U.S.$5.5 billion. He was the richest man in Taiwan, and he served as the chairman of the board of Formosa Plastics Corporation until 2006 when he stepped down at the age of 89. He remained as chairman of the boards of Nan Ya Plastics Corporation, Formosa Chemistry & Fibre Corporation, and Cyma Plywood & Lumber Co. Ltd.102 Wang Yung-ching (Wang Yongqing in pinyin) was born in Hisn Tien (Xindian) county, Taipei district (Taibei xian) on January 17th, 1917 under Japanese rule. Wang’s story was not very different from stories of ‘rags to riches’ that characterized many of the Ethnic Chinese business tycoons. He was brought up in a poor village where most of the few hundred households depended on a meagre income of toil. His grandfather who was a poor village teacher and had difficulty in earning a living, disallowed his son to receive any form of education. His father, Wang Chang-keng (Wang Changgeng in pinyin) was a petty tea trader who collected tea products from the hill and sold them to the market, and managed to eke out a living. He was luckier than his father that he was sent to a local Chinese primary school to receive elementary education. He was not fond of study, and scored poor results.103 In 1931 after having completed his primary education at the age of 15, his father sent him to Chia-i (Jiayi), a township in central Taiwan, to be an apprentice in a rice shop. Chia-i was a thriving town under Japanese rule, and it was a hub for rice trading and lumber businesses. Wang Yung-ching was eager in learning business skills and observed how rice as a valuable commodity was traded. After a year’s apprenticeship at the age of 16, with $200 capital raised by his father, he started a small rice shop which

102

See http://en.wikepedia.org/wiki/Wang_Yung-ching. See Guo Tai, Wang Yongqing (Wang Yung-ching) fendou chuanqi (The Legend of Wang Yung-ching’s Striving to Success) (Taipei, Yan Liu chuban shiye gufen youxian gongsi, October, 2008), pp. 30–39.

103

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marked the beginning of his business career. Like many other small businessmen, his initial problem was how to get his foot into a highly competitive business. The shortage of capital and the lack of regular customers were the twin problems confronting him. To solve these problems, he developed a customer-centered strategy in which he approached them directly and provided them with excellent service. With the help of his two young brothers, he delivered rice to customers’ homes without extra charge. He even helped them to clean their ‘rice pots’ and ensured their sufficient supply. This customer-centered service earned him a number of fixed customers and his rice business grew in leaps and bounds.104 In doing this rice business, Wang Yung-ching showed his business acumen by taking the step of vertical integration of his business. He purchased some equipment for setting up a small rice mill to process rice which would increase his profits. To compete with larger rice mills for business, he together with his brothers and employees worked longer hours to increase productivity. In 1941, as a result of introduction of a new rice production system by the Japanese colonial government, Wang Yung-ching’s rice mill was forced to close down and he terminated his rice business after 9 year’s existence.105 In 1943 at the age of 27 (Chinese age), Wang Yung-ching started his lumber business which allowed him to accumulate substantial capital for other major undertakings in business. It was during the last couple of years of Japanese rule that the demand for timber increased in the Japanese market. After the Japanese surrendered in August 1945 and the reverting of sovereignty of Taiwan to China, the reconstruction of Taiwan which suffered intensive American bombing during the war created further demand for timber. With his customer-centered service and his honesty and trustworthiness, he was making headway in lumber business. By 1946 at the age of 30, he had already accumulated $50 million (Taiwan currency),106 which

104

Ibid., pp. 47–50. Ibid., pp. 52–56. 106 Ibid., pp. 58–62. 105

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was a substantial sum of capital that could be re-invested in other major business projects. The founding of “Formosa Plastics Corporation” (Taiwan Zhuojiao Gongye gufen youxian gongsi) in March 1954 was the landmark for the creation of Wang Yung-ching’s business empire. It was a coincidence rather than a planned move. In 1953 in planning for rapid economic development and taking advantage of American financial assistance, the government decided to build materials industries such as glass, textile, artificial fiber, plastic and cement which would lead to the development of other related industries. Mr. Ho I who headed a chemical industry in Taiwan was chosen for the task of starting a plastic industry, but Ho had turned it down after an investigation that the new industry was not profitable and the risk was high. The government chose Wang Yung-ching who was relatively unknown in the industry circle and was applying to develop the tyre industry.107 The license for developing plastic industry came like a god-send. The risk of developing this new industry was high, but its reward was also substantial. Wang Yung-ching did not know the plastic industry well, but he had read something about it, and believed that its potential was considerable. Despite all odds, he decided to take up the challenge by establishing the “Formosa Plastics Corporation” in March 1954 with U.S.$500,000 of his own capital, together with an American grant of U.S.$670,000. In March 1957, after three years’ planning and construction, the factory of producing PVC resin was in operation. His factory produced about 100 tonnes of raw PVC resin a month, and was the smallest plastic factory in the world.108 It was a life-changing experience for Wang Yung-ching, but it also propelled him on a path to become one of the highest risk entrepreneurs on the island. The biggest problem facing Formosa Plastic was sales. The demand for raw PVC resin in Taiwan was low, which was estimated at 15 tonnes a month, and the unsold raw PVC had to be stockpiled which led to cash flow problem. Saddled with debts caused by the 107

Ibid., p. 68. Ibid., pp. 69, 70; http://news.investors.com/management-leader-in-success/ 092010–547794-wang-yun. 108

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unsold PVC, Wang took twin strategies to resolve the problems. First, to develop overseas markets by lowering the costs of production. Second, a forward vertical integration was adopted. To compete in the foreign markets, especially with Japanese plastics, he first increased its production from 100 to 210 tonnes per month, and later to 1,200 tonnes per month. This strategy greatly reduced the costs of production and lowered the price of its products. This enabled it to compete successfully in overseas markets. The forward vertical integration strategy was put into practice in 1958 by creating a PVC processing and sales company named “Nan Ya Plastics Company”, and in 1960 setting up “Ka Lin Company” and “Sin Tung Company” to produce consumer’s goods. A surge in sales of plastic consumer’s products had a flow-on effect on the sales of raw PVC resin, and pushed his plastic industry to the forefront of the Taiwan’s business.109 In the 1980s, due to new political reform and lifting of economic restrictions, Wang Yung-ching undertook diversification strategy to develop other light industries, and Formosa Plastic Corporation became the largest conglomerate on the island. At the same time, He also expanded his operations overseas in the United States and mainland China, and became one of the world’s top Chinese business tycoons. Wang Yung-ching’s success was due mainly to his hard work and the spirit of learning and investigation, in addition to his foresight, business acumen and the courage to take calculated risks. Hard work (diligence) was regarded as a traditional Chinese virtue, and an valuable working attitude, which he considered as the most important factor in the success of personal endeavors. He incorporated this element together with knowledge and practical experience into one of the three important prerequisites of his management system.110 His 109

See http://news.investors.com/management-leader-in-success/092010– 547794-wang-yun; “The Chronology of Wang Yung-ching” (Wang Yung-ching nianbiao), as appendix in Guo Tai, Wang Yongqing (Wang Yung-ching) fendou chuanqi (The Legend of Wang Yung-ching’s Striving to Success), pp. 280–281. 110 See Wang Yung-ching, “Qiye guanli de san yaojian” (Three Prerequisites of Business Management), in Wang Yung-ching tan Zhongguo shi guanli (Wang Yungching on Chinese Style of Business Management) (Taipei, Yan Liu chuban shiye gufen youxian gongsi, October, 2008, 27th edition), pp. 101–112; see also the same

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emphasis on hard work, together with his untiring quest for knowledge and scientific investigations, and flexible use of practical experience, developed into his Chinese style of management which had considerable impact on the Chinese business in Taiwan as well as the Chinese business worldwide. He was much respected and honored as “The God of Management of Taiwan “ (Taiwan jingying zhi shen).111 Chang Yung-fa (Zhang Yongfa) was another successful story of Chinese entrepreneur in Taiwan. He was born on October 6th, 1927 in Su Ao county, Ilan district of northern Taiwan.112 He was born in an average Chinese family. His father had been a postman, an assistant on a Japanese ship, and a carpenter. In 1934 when Chang Yung-fa was at the age of seven, his family had moved to Keelung, a seaport in northern Taiwan. He was ranked number three among seven children. In a family of nine members, his childhood was spent in a poor environment.113 At the age of 7, Chang Yung-fa was sent to a local Chinese primary school in Keelung to receive elementary education. At that time, Taiwan was still under the Japanese rule. The school was classified as a ‘public primary school’ (gongxiao) which was to provide primary education for Taiwanese children, while local Japanese children received education in a separate Japanese primary school. Starting from primary one, Taiwanese children had to learn both Japanese and Chinese languages of which Chinese was taught in a Taiwanese dialect — Minnan hua (the dialect spoken by Southern Fujianese or known in Southeast Asia as Hokkien dialect). This bilingual training helped lay the foundation for Chang’s future career, and opened windows for absorbing new knowledge through self-education. In the primary school, Japanese education emphasized moral and spiritual education, article published in Wang Yongqing (Wang Yung-ching), Wang Yongqing tan Zhongguo shi jingying guanli (Wang Yung-ching on Chinese Style of Business Management) (Nanchang, Jiangxi renmin chubanshe, January,1998), pp. 85–95. 111 See Guo Tai, “Bianji she baogao” (Editorial Report), in Guo Tai, op. cit., p. 8. 112 See Chang Yung-fa, “The Chronology of Chang Yung-fa” (Chang Yung-fa dajishi), in Chang Yung-fa, Chang Yung-fa huiyi lu (The Memoirs of Chang Yung-fan) (Taipei, Yan Liu chuban shiye gufen youxian gongsi, 1997), Appendix. 113 See The Memoirs of Chang Yung-fa, pp. 4–5.

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imbued students with respect for teachers and authorities, self-discipline and pursuit for learning. After completing primary school education, Chang managed to get admitted into a commercial night class attached to the reputable Taipei Commercial College, and at the same time he was working with a Japanese shipping company.114 All these groundings benefited Chang greatly in his future career. Chang Yung-fa’s business career started with a partnership with two friends to found the ‘Sin Tai Haiyun kongsi’ (The New Taiwan Shipping Company) in June 1961. The company started with a capital of $1.8 million (Taiwanese currency), and Chang only had a savings of $100,000; he had to get a loan of $500,000 from a bank as his contribution to the partnership. The company had purchased two old ships and later added two new ones, and they plied between Taiwan and Japan, principally carrying bananas and timber for the Japanese market. The company was reasonably successful, but due to different opinions on management and future development among the partners, Chang decided to withdraw from the partnership and left the company after four years’ service.115 Chang Yung-fa’s second attempt in partnership took place in 1965, soon after he left the New Taiwan Shipping. He again with two other friends established another shipping company named “Chong Yang Haiyun kongsi” (The Central Shipping Company). He took up the position of chairman of the board. He left the company again due to disharmony among the partners.116 This failure of a second time taught Chang a lesson that he could not do business with other people because of his foresight and his long-term planning. Most of his former partners were interested in short-term gains rather than longterm benefits. He had to come out on his own and to take his own risks. The founding of Evergreen Marine Corporation in September 1968 was momentous in Chang Yung-fa’s business career, and a historic event that fulfilled his dream of building up a vast shipping 114

Ibid., pp. 8–12. Ibid., pp. 34–47. 116 Ibid., pp. 48–60. 115

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empire. On September 1st, 1968, Evergreen Marine Corporation (Chang Yung Haiyun Kongshi) was inaugurated. The name ‘Chang Yung’ (Evergreen) symbolized that the company will forever be energetic, prosperous, and forever green, as beautiful as the island of Taiwan.117 The company started merely with one second-hand 15,000 ton vessel — ‘Central Trust’. Over the next four years, Chang painstakingly built up his fleet to twelve, running them empty sometimes to convince his customers the reliability of the service. Within a year, he had expanded to the Middle East, and within three years, he was dispatching Evergreen ships to the Caribbean.118 The decisive moment in Chang Yung-fa’s business career was his idea of building container ships in September 1972, four years after its inception.119 Containerization was a revolution in sea-transport. It moved goods faster and safer with reduced cost, and would be able to deliver ‘door to door’ service. But the building of a container ship was much more costly, and it could have costed several times more than building an ordinary cargo ship. Chang had in the past read extensively about shipping, and was convinced that containerization was the future of sea transport. Container ships were already built in the West and put into operation in the late 1960s. He strongly believed that the future of his company rested with the introduction of container ships. With his conviction and persistence, he managed to persuade a Japanese ship building company to build four advanced S-type container ships in 1975, and launched his U.S. East coast service. 15 months later, he added the West coast of the United States to his network, and service to Europe followed in 1979.120 Regular container shipping service was relatively new in Taiwan, and to facilitate the growth and expansion of his business, he adopted both forward and backward integration strategies by founding subsidiary companies. To move cargoes faster on land and to load cargoes 117

Ibid., pp. 63–65. Ibid., pp. 109–123; http://en.wikipedia.org/wiki/Chang _Yung-fa. 119 See The Memoirs of Chang Yung-fa, pp. 128–129. 120 Ibid., pp. 129–158; http://en.wikipedia.org/wiki/Chang_Yung-fa, http:// en.wikipedia.org/wiki/Container_ship. 118

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efficiently, he founded ‘Evergreen Transport Corporation’ and ‘Evergreen Container Terminal Corporation’. To reach potential customers in America, Japan and Europe, he founded “Evergreen America Corporation”, “Evergreen Japan Corporation’, ‘Evergreen Deutschland GMBH’ and ‘Evergreen U.K. Limited’. In another important step of diversification, he founded on July 1st, 1991 the EVA Airways Corporation (Chang Yung Hongkong) and other related companies such as ‘Evergreen Airline Services Corporation’, ‘Evergreen Sky Catering Corporation’ and Evergreen Laurel Hotels in Keelung, Taichung in Taiwan, and Evergreen Laurel Hotels in Penang, Bangkok and Paris.121 Chang’s entry into air transport was partly a diversification strategy, and partly motivated by his overall consideration of transport business worldwide. With the competition of air-cargo business, his sea transport business could be affected. Like Wang Yung-ching and many other Chinese business tycoons, the success of Chang Yung-fa in building up his vast business empire was due less to good fortune or luck, but more to his personal attributes of hard work, keen observation and foresight, persistence and perseverance. He developed his “Evergreen Style of Management”, emphasizing ‘harmony, benefit-sharing and co-prosperity’. He also emphasized the use of talents, the training of staff, discipline and democracy.122 All these had one way or another contributed to his success.

121 122

See The Memoirs of Chang Yung-fa, pp. 347, 348. Ibid., pp. 285–318.

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3rd International Conference on Hakkaology (Hakka Studies) 167 13th World Hakka Convention 166–168 1965 Coup 367, 374

Asian Trading company 273, 278 Astra group 369 Ayudhya Banking group 274 Ayudhya kings 234, 235, 250 Ban Chye Ho Club 82 Bangkacha 239 Bangkok Bank group 201, 273, 274, 276, 281, 283, 284 Bangkok Metropolitan Bank group 274 Bangkok Timber company 278 Bank Central Asia 374, 376, 378 Banten on west coast of Java 343 Ban Tuck Bee 316 Barisan National (BN) 200 Batavia 344–348, 350, 353, 354, 362 Beicheng hang (Lu Ban hang) Guild 69 Beigang (south-western Taiwan) 456 ‘Bei Jiao’ (Northern Commercial Guild) 462 “being in the same boat” (tongzhou gongji) 229 Benevolence (Ren or Jen) 101, 489 Benteng system 364, 366 Beveride, Albert J. (Senator) 398

Abu Bakar 302, 303, 319 Acapulco 385 Admiral Zheng He 342 Age of Commerce 343 Alfonso Yuchengco (Yang Yinglin) 416, 419–421 Ali-Babaism 331 Ali Baba system 366, 370 Allied Banking Corporation 418 Alumni relationship 197 American colonialism 397 Analects (Lun Yu) 40, 205, 212 Anbun 383 An-p’ing 462 Anti-Chinese business sentiment 365 An Xi Association of Singapore 166 An Xi International Convention 164 Apprentice system 54, 75–77 Artisans 14, 18, 31 Artisans (Gong) 46

499

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Ethnic Chinese Business in Asia

Boao Asian Economic Forum 172 Bogasari, P.T. 376 “Boli duoxiao” (low profit margin and high turn-over) 400 Boli duoxiao (minimum profit, maximum turn-over) 249 Book-keeping Act of 1921 399 Book of Change (Yi Jing) 40 Book of History (Shu Jing) 40 Book of Poetry (Shi Jing) 40 Book of Rites (Li Ji) 40 Boonchu Lochianasathian (Huang Wenpo) 280, 282 Bowring, John (Sir) 247 Bowring Treaty 247, 248, 250 Boyd & Co 464 British free trade policy 18 British Standard Chartered Bank 443 British Trading Houses (The Hongs) 442 Brown & Co 464 Buddhist and Taoist influence 191 Buddhists 35 Bukit Asaham, Malacca 309 Business elite in Taiwan 488 Business guilds 66, 69, 71–75 Businessmen (Shangren) 47–51, 55, 58, 59, 62–65, 71, 72, 77–84 Businessmen 45, 46, 56, 61 Businessmen’s clubs 79, 81, 82 Butterfield & Swire 51 Cabecilla-agent system 395 Cabecilla system 395, 396 Cabecilla (Towkey) 392, 395, 396 Calder, Kent E. 6 Camphor 463, 465, 467, 473

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Cantillon, Richard 187 Cantonese Associations 25 Canton Trade system 58 ‘Captain’ (Kapitan) 346 Carl Menger 187 Cash crop industry 348 Cathay Conglomerate 486 Centripetal Authority 116, 117, 119–121, 125, 130 Century Park Sheraton Hotel 418 Chaebols 153, 154 Champa (part of modern Vietnam) 12, 237 Chang Pi-shi (Zhang Bishi or Thio Tiauw Siat) 41 Chang Yu-nan (Zhang Yunan, or Tjong Jong Hian) 356 Chang Yung-fa 228 Chang Yung-fa (Zhang Rongfa) 223, 224, 227, 229, 494–497 Chan Pek Chun (Chen Bicun) 425, 426 Chao An district, Guangdong province 302, 443 Chao Phraya (Chainat) dam 234, 270 Chaozhou 238, 241–243, 253 Chaozhou Business group (Chao Shang) 56, 57 Chaozhou prefecture, Guangdong province 456 character moulding 433 Charoen Pokphand (CP) 116, 127 Chartered Bank 312 Cheang Hong Lim (Zhang Fanglin) 301, 304 Chefu 208

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Index

Chen Chengfa 241 Chen Cheng (Governor of Taiwan) 475, 476 Chen Cihong 252–254 Chen Delun (Tan Teck Lun) 72 Chen Hongli company 252, 253, 257 Chen Huanrong (Chen Xuanyi) 91, 252, 425 Chen Limei 254–256 Chen Lunkui 254 Chen Shengli Company 253 Chen Xuanyi 252 Chen Yi (Governor of Taiwan) 471–473 Chen Yuzhong 237 Chen Zigui 277 Cheng Hai district, Guangdong province 196, 288 Cheng Kee Hean Club 82 Cheng Kuan-ying (Zheng Guanying) 50 Cheong Yeok Choy (Zhang Yucai) 313 Cheung Kong (Changjiang, the Yangtze River) 442, 443, 445, 447, 448 Cheung Kong Holdings (Chang Jiang Shiye) 443, 447, 448 Chew Choo Keng 190, 191 Chia Ek Chaw 273 Chia-I (Jiayi, a township in central Taiwan) 490 Chiang Ching-kuo (Jiang Jingguo) 479 Chiang Kai-shek (Jiang Jieshi) 474, 475, 478, 479 Chia Tai Company Limited 273

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501

Chieh Kongsi (Xie Gongsi) 28 China Bank Corporation (Zhongxing Bank, Zhongxing yinhang) 401–403 China Insurance & Surety Company (Zhonghua baoxian youxian gongsi) 404 China Merchants’ Steam Navigation Company 50, 51 China’s international trade 424 China Town (Tangren jie) 11 Chinese Chamber of Commerce (CCC) 361 Chinese Chamber of Commerce of Penang 330 Chinese Chamber of Commerce of Thailand 256, 257, 278 Chinese Commercial Bank Ltd. 158 Chinese export commodities: tea, silk and porcelain 91 Chinese Kapitan of Kuala Lumpur 307 Chinese Kapitans 30, 37 Chinese middlemen’s role 394, 396 Chinese New Year (Chun Jie) 28, 34, 54 Chinese secret societies 30, 31 Chin Sophonpanich (Chin Pik Chin, or Romanized as Chen Bichen) 277–284 Chin Sophonpanich (Chin Pik Chin, or Romanized in pinyin as Chen Bichen) 273 Choa Chee Bee (Cai Ziwei) 425 Chong Wen Ge 291

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“Chong Yang Haiyun kongsi” (The Central Shipping Company) 495 Choon Guan Hock Club 82 Chop Tet Sang (Shop De Sheng) 308 Christianity 98 Chua Ban Chun 486 Chu Chutrakul 273 Chui Huai Lim Club 82 Chung Hwa Biscuit Company 316 Chung Sun Hot-spring Hotel 452 Clan Organizations 26, 28, 30 Classical Management masters’ theory 133 Class structure 31, 32 ‘Clientelism’ 271, 276 Clifton A. Barton 137–140 Coconut tree and lion 327 Commercial Bank of Hong Kong 284 ‘Comparative Advantage’ 5 Complacency 216 Compradors 31, 49, 56 Comprador system 86 Concept of duty 112 Concept of right 118 Confucian Classics 372, 377 Confucian concept of reciprocity 113, 120 Confucian concepts of reciprocity and harmony 230 Confucian elitest philosophy 209 Confucianism 5–7, 14, 32, 38, 47, 97–100, 205, 206, 222 Confucian management 205, 207 Confucian paternalism 488

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Confucian popular textbook 191 Confucian Revival movement 98, 99 Confucian values 47, 80, 97, 370, 377, 483, 487 Confucian values of hierarchy and paternalism, harmony and reciprocity 487 Containerization 496 Container ships 496 Contemporary Ethnic Chinese business management 218, 225 Contractual obligations 113 Coolie barracoons (Zhu Zai Guan) 21, 23 Coolie immigration 391 Coolies (Indentured laborers) 175 Coolie trade 21, 427 Corredors (house-to-house vendors) 392 Council of International Economic Co-operation and Development (CIECD) 481 C.P. (Charoen Pokphand) 273 Craft and business guilds 178 Craft guilds 66–72 Credit-ticket system 19, 20, 23 Cui Ying Shu Yuan (Ts’ui Ying Shu Yuan, or known as The Chinese Free School) 291 Cukong capitalists 372 Cukong system 271, 370 Cyma Plywood & Lumber Co. Ltd. 490 Daduk Hussein Onn 201 Dao (Way) 205, 227 Dapu Hakka 51, 356 David Wu 114

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Index

Da Xin Company (Da Xin gongsi) 428, 432 Dee C. Chuan (Li Qingquan) 401–403 Deerskins 457, 458 Deli bank 355 Deli (modern Medan) 352, 354 Deng Xiaoping 223 Dent & Co. 51 De’ (virtue) 205 Diversification 416, 418, 419, 421 Diversification strategy 493, 497 Doctrine of the People’s Livelihood 487 Dodd & Company 464 Dragon Boat festival (Duan Wu jie) 28, 35, 54 Dr. Yat-sen, Sun 449, 452 Dunlop Holdings 332 Dun Mui Primary School 449 Dutch East Indian Company 457 Dutch East Indies 346, 347, 349, 350, 352–354, 360, 363 Earliest Fujianese settlement 455 Eastern Sea Route (Dongyang zhenlu) 456 Economic Stabilization Board (ESB) 481 Ee Hoe Hean Club (Yi He Xuan) 82, 83 Electronic industry 436 Elles & Co 464 Emperor of Heaven 35 Emperor Yongle 237 Empress Dowager Cixi 359 Enrique Yuchengco (Yang Zhongqing) 420 Enshuiko Sugar Company 468

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503

Entrepot trade 285–289, 293, 334, 335, 341, 343, 344, 347, 424–426, 434, 439 Entrepreneurs 474 Ersatz capitalism 363, 371 Ethnic Chinese (Huaren or Haiwai Huaren) 3–10 Ethnic Chinese business ideology: harmony, reciprocity, hierarchy and paternalism 100 Ethnic Chinese business in ASEAN countries 220 Ethnic Chinese businessmen 63–65, 71, 77–82, 84 Ethnic Chinese business networks 90 Ethnic Chinese education 38, 40–43 Ethnic Chinese entrepreneurs 94, 101–103, 106, 186, 189, 190, 195, 199–204, 210, 214, 224, 228 Ethnic Chinese entrepreneurship 189, 193 Eu Kong Pui 301, 302 Eu Tong Sen (Yu Dongsheng) 301, 302 Eu Yan Sang (Yu Ren Sheng) 302 EVA Airways Corporation 497 Evergreen America Corporation 497 Evergreen Container Terminal Corporation 497 Evergreen group of companies (Chang Rong jituan) 223, 227, 229 Evergreen Laurel Hotels in Penang, Bangkok and Paris 497 Evergreen Japan Corporation 497

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Ethnic Chinese Business in Asia

Evergreen Marine Corporation (Chang Yung Haiyun Kongshi) 496 Evergreen Sky Catering Corporation 497 “Evergreen Style of Management”, emphasizing ‘harmony, benefitsharing and co-prosperity’ 497 Evergreen Transport Corporation 497 Evergreen U.K. Limited 497 Exclusion Law 399 Export Processing Zones (EPZ) 481 External hierarchy 103 “Face” (Mianzi) 184–186 Familism 110, 111, 119–121, 219 Family-based ownership 103 Family Firm 109, 115, 117 “family harmony accounts for its prosperity” (jiahe wanshixing) 228 Far Eastern Surety & Insurance Company (Dadong baoxian youxian gongsi) 404 Federation of Chinese Rice-traders Association (Zhonghua mishang shanghui) 401 Federation of Filipino-Chinese Chambers of Commerce and Industry 411, 412 Feng Shun district 166 Filial piety (xiao) 14, 15, 147 Filipinization 406, 408–410 Filipinos 401, 407–410, 415, 416 Five Classics (Wu Jing) 40, 444, 449

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Five Hokkien clan associations in Penang 27 Five treaty ports (Canton, Amoy, Foochow, Ningpo and Shanghai) 85 Fok Yau Yung (Fok Ying Tung’s father) 449 Fok Ying Tung 443, 448, 450–454 Foo Chee Choon (Hu Zichun) 75, 299 Forbes 443 Formosa Chemistry & Fibre Corporation 490 Formosa Plastics Corporation 484, 490, 492 Formosa Plastics group of companies (Tai Shuo jituan) 224 Formosa Sugar Company (Taiwan Sugar Corporation) 467 Fort Orange (near modern Tainan) 456 Fortune Tobacco Corporation 417–419 Four Asian Little Dragons 334, 377 Four Books (Si Shu) 40, 323, 444, 449 Four Districts (Si Yi or See Yap) 161 Four Little Dragons (or Four Little Asian Dragons) 5–7, 475, 480 Four-Year Plan in 1953 477 Frederick Winslow Taylor 133 Fujianese emigrants 455 Fujianese traders 456 Fuqi (husband and wife) 145, 146

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Index

Fuqing district of Fujian province 372 Fu Shan estate 310 Fuzi (father and son) 146 Gaihu (beggars of Henan province) 448 Gambier planting 294, 295 Gan Clan International Convention 164 Gang Jiao (Port Commercial Guild) 462 Ganqing 119 Gao Manhua (Gao Chuxiang or Gao Tingkai) 90 Gao Manhua (Ko Man Wah) 425 Geert Hofstede 179, 180, 221, 222 General Otis 399 Genting group 126 Genting Highland Berhad 201 Genting Highland resort 201 Ghee Hin (Yixing) 30 Ghee Kiat Huay (Yi Jie Hui) 80 Globalization 419, 421 Globe Biscuits 316 Goddess of Mercy (Guanyin) 37, 192 Goh Li Hing (Wu Liqing) 425 Gokongwei, John 416 Gong 31, 37 Gopeng 302 Gordon Redding 111, 112, 118, 121, 214–216, 221, 230, 485, 486 Goto Shimpei 466 Green Cloud Temple (Cheng Hoon Teng or Qing Yun Ting) 36, 37

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505

Green Island Cement 443 Gregory Chow 480 Gross National Products (GNP) 436 Guandi (God of War and Righteouness) 192 Guang Huo Dian (shops selling goods from Guangzhou) 54 Guangxi Investment Company 166 Guangzhou and Quanzhou 380 Guanxi (Kuan-hsi) 145 Guanyin (Goddess of Mercy) 37, 192 Gugang Zhou Six District Associations of Malaya 160 ‘guilt’ 186 Gulf of Siam 233–235, 237, 238 Hainanese Associations 25 Hainanese International Convention 164 Hainan island (China’s largest Economic Zone) 453 Hai San (Haishan) 30 Haiwai Huaren (Ethnic Chinese) 3 Hai Yang (modern Chao An) 289 Hakka 92 Hakka Associations 25 Hakka International Convention 164 Hand and axe 327 Han Dynasty 47 ‘Hang Chia Tai Chung’ 273 “harmony is most precious” (yi he weigui) 228 “harmony will generate wealth” (heqi shengcai) 228

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Ethnic Chinese Business in Asia

Hean Yuen Guild (Xian Yan Guan) 67 He Bahuan 237 Henry Fok Ying Tung (Huo Yingdong) 443, 448, 450–454 He Yaba 238 Hierarchical order 32 Hofheinz, Roy Jr. 6 Ho Ho Biscuit Company 316 Ho Hong Bank Ltd. (He Feng yinhang) 158 Ho Kai 449 Hokkien Associations 25 Hokkien Bang 80 Hokkien dialect 286, 291 Hokkien speakers 217 Hong Kong airlines (Cathay Pacific) 442 Hong Kong and Kowloon Wharf 443 Hong Kong and Shanghai Banking Corporation 312, 424, 441, 442, 447 Hong Kong Electrics 443 Hong Kong’s industrialization 434, 437, 438 Hong Kong Stock Exchange 447 Hong Kong Tramway 442 Hong Leong Company (Malaysia) Berhad 129, 130, 174 Hong Leong Credit Berhad 129 Hong Leong group 174 Hong Leong Industries Berhad 129, 130 Hong Leong Overseas (Hong Kong) 129 Hongli Zhan Bank 255, 257 Hongli Zhan company 253, 257

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Hong merchants (Hang Shang) 46, 48, 49, 56, 59, 89 Hoo Ah Kay (Hu Yaji, nickname Whampoa) 63, 319 Ho Tung 439, 449 Hou Yu-li 155–157, 484 Hsu, Francis L.K. 186 Huang Shunxiang 241 Huang Yizhu 403 Huaqiao (Overseas Chinese) 4 Huaqiao Zhongxue (Overseas Chinese High School) 43 Huaren (Ethnic Chinese) 3 Hui Dui 255 Hui Yang district of Huizhou prefecture, Guangdong 306 Huizhou Business group (Hui Shang) 56 Huizhou Hakka group 307 Hujing Goldsmith Guild 67 Hume Industries Malaysia 129 Hutchison Port Holdings 448 Hutchison Whampoa Limited (Heji Huapu youxian gongsi) 447 Hu-wei (Tamsui) 462 Hybrid of Eastern and Western cultural values 222 IBM survey of its employees 179 Import Control Act of 1950 408 ‘import substitution’ 405, 412, 413 “Import Substitution Industrialization” (ISI) 199, 270 Indentured laborers (Coolies) 175 Industrial Technology Research Institute (ITRI) 482

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Index

Institute for Information Industry (III) 482 Internal organization of the corporation 105 Islam 98 Jan Peetersz Coen 345 Jaophraya Delta 238 Japanese entrepreneurs 194 Jardine and Matheson 442 Jardine, Matheson and Company 424, 439, 463 J.G. Summit Holdings 416 Jiandu (manager, or superintendent) 432 Jiangsu Business group (Su Shang) 56 Jiao (a commercial guild) 461, 462, 466 Jiaying Hakka 356 Jimei, Tong An district, Fujian province 211 Jinan Incident 83 Jing Huo Dian (shops selling goods from Beijing) 54 Jinjiang (Chin-chiang) 386, 392, 402 John Dodd 464 John Fei 480 John J. Kao 169 Joseph Schumpeter 188 Kabikolan 397 Kadoorie family 442 Kajang, Selangor 309 Kangchu (Lord of the River) Kaohsiung EPZ 481 Kaohsiung Shipyard 482

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320

507

“Kapitein” (Captain) 352, 357 Keelung (Jilong) 457, 462, 467, 469, 494, 497 Kepertjajaan 137 Ker and Company 390 Ketou (Kheh Tau) 392 Khaw dynasty 263, 266 Khaw Joo Ghee 263, 266 Khaw Joo Tok 266, 268 Khaw Sim Bee 261, 263, 266 Khaw Sim Khim 263 Khaw Sim Kong 261, 263, 264 Khaw Sim Tek 261 Khaw Soo Cheang (Xu Shichang) 258, 260, 261, 263, 265 Kheh-taus (Labor brokers) 20 Kheng Leong Huay (Qing Liang Hui) 80 Kheng Teck Whay (Qing De Hui) 79 Khiam Aik (Qian Yi) 96, 324 Khlong Teai Port 270 Khoo Chiang Eng (Qiu Qianrong) 28 Khoo Kay Peng 333 Khoo Kongsi (Qiu Gongsi) 27, 28 Kian Gwan (Jianyuan) 349 Kim Ban Choon Club 82 Kim Seng and Company 291 Kim Seng Land Co. Ltd. 291 Kindersley brothers 309 King Mongkut 244 king Prasat Thong 240 King Taksin 242, 243, 250 kinship-based immigration 391 Kin Tye Lung (Qian Tai Long) 252, 257

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Ethnic Chinese Business in Asia

Kodama Gentaro 466 Kodama-Goto government 466, 467 Koe Guan (Gao Yuan) Company 261, 262, 266, 267, 268 Koh Lay Huan (Che Kay, Chinese Kapitan of Penang) 259, 260, 294 Koh Pen Ting (Xu Pingdeng, Daduk) 330 Koxinga (Zheng Chenggong) 236, 458 Kretek 373, 376 K.T. Li (Kuo-ting Li) 480 Kuala Lumpur-Kepong Berhad 123 Kudus 373, 374 Kuok Brothers’ Clique 328 Kwek brothers of the Hong Leong 116 Kwek Hong Png 174 Kwit Hoo Tong (KHT) 363 Kwok brothers 281, 284 Kwok brothers of the Wing On company of Hong Kong and Shanghai 116 Kwok brothers of Wing On Company 194 Kwok Chin (Guo Quan) 193–195 Kwok Chin (Philip Gockchin, Guo Quan) 431, 433 Kwok Lin-shuang 194 Kwok Lock (James Gocklock, Guo Le) 431 Kwok, M.C. 195 Kwong Yik Banking Company Limited 312 Kwong Yik Banking Corporation of Selangor 313

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Labor brokers (Kheh-taus) 20 Lam Wei Fong 322 Land Reform in Taiwan 475, 476 ‘land-to-the-tillers’ program 476 Lang Suan 261 Large business organizations 55 Larut in the state of Perak 298 Lat Pau 291, 321, 322 Lee Cheng Yan (li Qingyuan) 83, 288 Lee Choon Guan 159 Lee Choon Seng family 131 Lee Kam Hing 202 Lee Kong Chian 125, 131 Lee Kong Chian (Li Guangqian) 158, 159, 217 Lee Kong Chian’s family 215 Lee Kuan Yew 169, 170, 334 Lee Loy Seng (Li Laisheng) 123, 332 Lee Rubbers (Nan Yi ) 217 Lee Seng Wee (Li Chengwei) 158 Lee Wee Lam (li Weinan) 131 Lee Wee Nam 158 Leo Suryadinata 352, 353, 357, 360, 361, 364, 366, 370–373 Leow Chia Heng (Liao Zhengxing) 313 Liem Sioe Liong family 125 Liem Sioe Liong (Sudono Salim) 229, 367, 369, 372–377 Lien Ying Chow (Lian Yingzhou) 338, 339 Life-time employment system 230 Li Ka-shing 125, 227, 440, 442–448 Lim Boon Keng Dr. (Lin Wenqing boshi) 159

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Index

Lim Ho Puah 83 Lim Kongsi (Lin Gongsi) 28 Lim, Linda 220, 221 Limlingan, Victor 220, 221, 225 Lim Mah Hui 157, 158, 160 Lim Peng Siang (Lin Bingxiang) 159, 316 Lin An (modern day Hang Zhou of Zhejiang province) 379 Lin Daoqian (A Teochew pirate leader) 57, 238, 456 Line organization 105, 106 Lin Feng (A Teochew pirate leader) 57, 456 Lins of Pan-ch’iao (near Taipei) 470 Lins of Wu-feng (near Taichung) 470 Lippo group 370 Li (propriety) 147, 205, 209 Li Qingquan (Dee C. Chuan) 401, 402 Liu Chong Hing Bank 284 Liu Renguang 306, 307 Liu Ta-chung 480 Li Wang Company 354 Li Wei-ching (Li Weijing) 36 Li Xiaofan (Li Ka-shing’s grandfather) 444 Li Yunjing (Li Ka-shing’s father) 444 Loke Yew (Lu You) 299 Long Xi district of Zhangzhou prefecture, Fujian 258 Longxi (Long-ch’i) 386, 392 Loyalty (zhong) 101 Loy Hean Heong 123 Luang Rop Rukij 277, 279

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509

Luanli Insurance Company Ltd. 257 Lu Ban 67–69 Lucio Tan Group 416–419, 421 Lu City Guild 67 Lugang (a Taiwanese port) 461 Luitenant 351, 352, 357 Lukut 297, 306, 307 Macao (Macau) 21, 23 Magsaysay 409 Maharaja Abu Bakar 319 Maharajah 303 Mahathir bin Mohamad 170 Mahayana Buddhism 36 Ma Huan 239, 240, 342 “Mai Lou Hua” (selling property by installments) 451, 452 Major China 296, 303 Malacca 382, 383 Malacca Sultanate 234 Malayan Banking Corporation 332 Malayan (Malaysian) Chinese Association (MCA) 327, 332 Malayan Sugar 329 Malayan United Industries (MUI) 333 Malay Peninsula 238, 267 Malaysian Capitalism 200, 201 Malaysian Chinese Association (MCA) 200 Manchus 236 Manila 385–392, 394–405, 408, 413, 417, 419, 420 Manila hemp 389 Margery Wolf 181, 182 Marxists 101, 228 Max Weber 7, 99, 100, 136

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Ethnic Chinese Business in Asia

Ma Yingbiao 281, 429–432 Mazu (Tianhou or Tianfei, Sea-fearing goddess) 29 Meiji Sugar Company 468 Mencius (Meng Zi) 40, 205, 206, 212 Meng Jinhou (Meng Chin-hou) 59–61, 208, 209 Meng Luochuan (Meng Lo-ch’uan) 59–61, 207 Mercantile Bank of China (Huaxing yinhang) 403 Merchant 45 ‘Merchant House’ (Ma-chen kuan) 464 Merchants 46 Merchants without Empire 386, 387 Meritocracy principle 216 Mersing and Segamat 320 Mestizos 33, 392, 397, 415 Metropolitan Bank & Trust Co. 416 Mexico 383, 385, 388, 394 “Mianzi” (Face) 184 Middlemen’s role 287 Military-bureaucratic elite 269, 271, 275, 283 Mindoro island 379 Ming loyalists 236 Ming rulers 235 Mochtar Riady (Li Wen-cheng) 376 Modern Chinese banks 314 Modern Chinese department store 429–431 Modern Chinese emporium 432 Modern Ethnic Chinese management 210, 214, 216

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Mohammad Noah Omar 201 Moon festival (Zhong Qiu jie) 35, 54 Moon Festival 28 Moyi 379, 381 Multi-Purpose Holdings Berhad (MPH) 332 Mutual-aid society 79 Nagasaki 469 Nakhon Ratchasima 138 Nam Pak Hong firm (Nan Bei Hang) 90 Nam Pak Hong (Nan Bei Hang, South-North Trade) 426 ‘Nam Sang Garden’ (Nan Sheng Yuan) 63 Namsha of Panyu district, Guangdong province 449 Nan An district, Fujian province 217 Nanan (Nan-an) 386, 392, 420 ‘Nan Jiao’ (Southern Commercial Guild) 462 Nanjing government 362 Nan Lu Alumni Association 198 Nanyang Khek (Hakka) Community Guild (Nanyang Keshu Zonghui) 167 Nan Ya Plastics Corporation 490 National Computer Center 336 National Development Corporation (NDC) 368 Nationalist administration in Taiwan 471 Nationalist government in Nanjing 42 Nationalist government in Taiwan 475, 479, 480

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Index

National Operations Council (NOC) 329 Natural calamities 16 Naturalization 412–415 Negri Sembilan 175, 297, 298 Neo-Classical economists 5–7 Neo Confucianists 205 Nepotism 216 New Economic Policy (NEP) 329 New Gold Mountain (Melbourne) 427, 431 Ngee Ann Kongsi (Yi An Gongsi) 289 Ngee Ann Kun (Yi An Jun) 289 Ng Shiao Shan (Huang Xiaoshan) 28 Niklas Luhmann 136 Nissin Sugar Manufacturing 329 Nitto Kogyo Sugar Company 468 Noi Na Nakhon 259 North City Guild 67 Northern Lu Guild 67 North-South Expressway 482 Nyonyas 33 OCBC-Sime Darby clique 157, 158 OCBC-Sime Darby group 125, 131 Oei Tiong Ham (Huang Zhonghan) 95, 281, 351 Oei Tiong Ham Concern 349–353, 360, 361, 366 Oei Tjie Sien (Huang Zhixin) 90–92, 94, 349 Old Gold Mountain (San Francisco) 427 Omar, Haniff 201

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511

Omohundro, John T. 198, 199 Opium farm 300–302 Opium War (1839–1842) 17, 85, 91, 244 Oral History Unit, Singapore 197 Overpopulation 16, 17 Oversea-Chinese Banking Corporation (OCBC) 313, 337 Oversea-Chinese Bank Ltd. (Hua Qiao yinhang) 158 Overseas Chinese (Huaqiao) 4, 6, 9, 10 Overseas Chinese Building (Huaqiao daxia) 166 Overseas Chinese High School (Huaqiao Zhongxue) 43 Overseas Chinese National Salvation Movement 83 Overseas Union Bank group (OUB) 338 Palanca, Ellen H. 415, 417, 421 Pan-Malayan Cement Works 333 Panyu city 452, 453 Paternalistic style of management 210, 211, 225 Paterson & Simon 319 Pattani 57, 237–240, 251 Peak tram 442 Peasants (Nong) 46 Peele, Hubbell and Company 390 Pei Men 155 Penghu islands 455, 456, 466 People-Centered 206, 207 People of Tang (Tangren) 11 People-oriented management 120, 121 People’s Action Party (PAP) 334 Phao Sriyanond 279

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Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

Ethnic Chinese Business in Asia

Phibun Songkram rule (1947–1957) 269 Philippine export economy 393, 395 Philippine Long Distance Company 420 Philippine sugar trade 390 ‘Phra Rattanasetthi’ 259 Phraya 234, 243, 259, 261, 270 Phuket 251, 261, 263, 264, 265, 266 Phuket farms 263 Phuket opium farm 263 Picis 344, 345 Ping Tianxia (bringing peace and prosperity to the world) 147 Plastic flowers 436, 445 Pontianak 362 Prasit Kangchanawat (Xu Tunmao) 280, 282 President Aquino 421 President Marcos, Ferdinand E. 413–415, 419 President Nixon 414 President Quirino 408 Presidents Roxas 408 President Sukarno 365, 367 Principles of Economics 188 Professor Redding 185 Professor Wang Gungwu 387 Propriety (Li) 489 Public liability company 430, 432 PVC processing and sales 493 “Qian-ren” system of remuneration 209 Qian Tai Long trading firm 91 Qian Xun (a Qing diplomat) 362

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Qianzhuang (Traditional Chinese bank) 402 Qian Zi Wen (A Thousand-word Treatise) 444, 449 Qijia (regulating the family) 147 Qing Consul-General in Singapore 305 Qingdao 208 Qingming 54 Qingming festival 28, 35 Qing official titles 63, 64 Quanzhou 380, 385, 386, 401 Queen’s College (Huang Ren shuyuan) 449 Raffles College 329 Rama III (King Nang Klao) 245, 246, 248 Rama IV 244 Ramkambaeng 233 Ranong 252, 258–265 Ratanarak’s (Li Muchuan) 274 Reciprocity (mutual responsibility) 113, 120 Reciprocity, hierarchy and paternalism 433 Recruitment system 216, 227 Red Guard movement in China 446 Refugee-entrepreneurs 435, 436, 439 ‘ren’ (benevolence) 147, 205 Republic Act No. 1180 409 Research and Development (R & D) 326 Restaurateurs’ Guild 71, 72 Restrictive sea-fearing policy 455 Revenue farming (tax farming) 300

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Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

7 August 2013 11:39 AM

Index

Riau islands 347 Rice and Corn Nationalization Act 410 Rickshaw pullers 31, 32 Ridley, H.N. 309 Ringgit (Malaysian dollar) 165 Rizal Commercial Banking Corporation 420 Robert H. Silin 137 Robert Kuok Hock Nien (Guo Henian) 328 Roda Mas group 369 Romance of the Three Kingdoms (San Guo yanyi) 444 Rosebeth Moss Kanter (Professor) 204 Royal Chinese (jin-luang) 243 Ruifuxiang (Jui-fu-hsiang) 59–61, 207–209, 211 Russel Kwok (Dr.) 195 Russell, Sturgis and Company 390 Ryukyo (Liuqiu) 343 Sale of honors 64 Salim Group 125, 126, 128, 369, 372, 373, 375, 377 Salt Merchants (Yan Shang) 46, 48, 56 Salt Merchants of Yangzhou (Yangzhou Yan Shang) 48, 56 Sangley lang (businessmen) 386 Sangleys 386 San Zi Jing (Trimetrical Classic) 444, 449 Sarit Thanarat (General) 270 Scholar-gentry 89 Scholars (Shi) 46 Science and Technology Advisory Group (STAG) 482

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513

Scientific Management 133 Seah Cheo Seah 305 Seah Eu Chin (Sia U Chin, or She Youjin) 176, 196, 288–290, 293, 301, 305, 306 Seah Liang Seah 305 Searle, Peter 200, 201 See Yap (Siyi) 318 Selangor Kin Cho Hong 71 Self-Strengthening Movement 50 Semarang 347–350, 351–353, 362, 363 Shame 180, 184, 186, 191 Shang (Merchant) 31 Shanghaiese dialect 435 Shangren (Businessmen) 45, 56 Shanxi Business group (Jin Shang) 56 Sheng Mingli 306, 307 Shi 11, 31 shishi qiushi 223 Shiyi 318 Shop Tai Yi 469 Shulin Yuan Club 82 Siang Hwee (Shang Hui, Chinese Chamber of Commerce) 353 Sia U Chin (Seah Eu Chin, or She Youjin) 288 Sili 104, 105 Silver trade 382, 384–386, 388 Sime Darby group 125, 131 Sincere Company (Xianshi gongsi) 428–432 Singapore Chamber of Commerce 290 Singapore Grocers’ Guild 72, 74, 76, 78 Singapore Piece Goods Traders Guild 71, 72

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514

Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

Ethnic Chinese Business in Asia

Sino-Filipino trade 380, 381 Sino-Western business relationship 441, 442 Sino-Western trade 89 Sin Tai Haiyun kongsi (The New Taiwan Shipping Company) 495 Siri Siriyothin (Colonel) 279 Sishus 39, 40 Siu-lun Wong 109, 115, 117, 136–138, 261, 273, 485, 486 Smith, Adam 187 Smith, Bell and Company 390 Social hierarchy 102 Social milieu 179, 181 Social Mobility 23, 31, 32 Solo 362 Song and Yuan Dynasties 341 Song dynasty (960–1279) 233, 237, 239, 262, 379 Songkla 251 South Korean entrepreneurs 199 South-North Trade (Nanbei hang) 252 South-North Trade (Nan Bei Hang, Nam Pak Hong) 426 Spanish America (Mexico and Peru) 383, 384, 389 Spanish traders 385 Spice islands 383 Spirit of continuing learning 444, 447 “spirit of team work” (hezhong gongji) 229 Spring and Autumn Annals (Chun Qiu) 40 Square Street Building (Si Fang Jie daxia) 451

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State-business relationship in Taiwan 488 Strategy of ‘constant indebtedness’ 396 Strategy of ‘low profit margin and high turn-over’ (Boli duoxiao) 400 S-type container ships 496 Suez Canal 346 Su family from Dehua district, Fujian province 455 Sugar Industry Association of Taiwan 467 Sukhothai 233, 234 Sultan 297, 303, 320 Sultan of Demak 343 Su Minggang 346 Sungei Ujong 175, 306, 307 Sun Ho Lung 316 Sun Sun Company (Xin Xin gongsi) 428, 429, 432 Sun Yat-sen’s “Three People’s Principles” 472 Surabaya 347, 362 Swire, Hutchison 442 Sze Hai Tong Banking Company Limited 312 Tai-bi (Taiwan currency) 473 Tainanbang (Tainan Business Clique) 155, 487 Tainan district 155 Tainan Spinning Company Limited 155–157 Tainan Textile 484 Taipei airport 482 Taiping Rebellion 49 Taishan district, Guangdong province 68, 318

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b1600

Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

7 August 2013 11:39 AM

Index

Tait & Company 464 Taiwan-mainland trade 465, 467 Taiwan’s export goods to China: dried venison, sugar and rattan 457 Taiwan’s foreign trade 460–463, 466, 469 Tai Yi commercial record 469 Ta-kou (Kaohsiung) 462, 463 Takuapa 259 Tan Chay Yan (Chen Qixian) 309 Tan Cheng Lock (Sir) 200 Tan Chin Tuan (Chen Zhenzhuan) 125, 131, 158, 160 Tang City 336 Tangren (People of Tang) 11 Tangren Jie (Chinatown) 11 Tang Shao-yi 449 Tang Tingshu 50 Tan Guan Kong (Chen Yuanguang) 28 Tan Hiok Nee (Chen Xunian) 296, 302, 304, 305 Tan Jiak Kim 83 Tanka (boat people) 448 Tan Kah Kee (Chen Jiageng) 83, 190, 203, 210–213, 310, 311, 315–318, 322–326 Tan Kah Kee (Chen Jiageng) 95, 327 Tan Kee Peck 95, 315, 323 Tan Kee Soon 296, 304 Tan Keng Hean 211, 212, 213 Tan Kim Ching (Chen Jinzhong) 264, 288, 305 Tan Kim Seng (Chen Jinsheng) 288, 290, 291, 292, 293 Tan Kongsi (Chen Gongsi) 28

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515

Tan Koon Swan (Chen Qunchuan) 332 Tan Seng Poh 301, 304, 305 Tan Siak Kew 131, 158 Tan Siong Kie’s (Hanafi) 369 Tan Teck Guan 309 Tan Teck Joon (Chen Derun) 313 Tan Tock Seng Hospital 309 ‘Technological Ladder’ 5 Tejaphaibul’s (Zheng Wulou) 274 Temenggong Ibrahim’s 302 Teochew Associations 25 Teochew community in Singapore 290 Teochew Ghee Hin (Ngee Heng) 304 Teochew International Convention 164 Teochew planters 295 Textile manufacturers from Shanghai 484 Thai peninsula 265 Thai products 245 agila wood 245 cardamom 245 cotton 245, 251 gamboges 245 pepper 238, 245, 251 red wood 245 sappan 245 sappan wood 245 sticklac 245 sugar 245, 246, 251, 269 tin and hides 245 rice 241, 245, 250, 252–257, 270, 279, 280, 284 Thao Thepsunthorn 259, 260

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Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

Ethnic Chinese Business in Asia

The Associated Chinese Chambers of Commerce and Industry of Malaysia 170, 171 The Builders’ Guild of Selangor 71, 72 The Change Masters: Corporate Entrepreneurs at Work 204 The Chinese Free School (Cui Ying Shu Yuan or Ts’ui Ying Shu Yuan) 291, 292 The Eastasia Edge 6 The Four Little Dragons 5, 7 “The God of Management of Taiwan” (Taiwan jingying zhi shen) 494 The Gold Mountain Trade (Kam Shan Chung) 427 The Great 16, 20, 40 The Great Learning (Da Xue) 40 The Grocers’ Guild of Singapore 71 The Kian Siang’s (Bob Hasan) 370 The King of Plastic Flowers 445 The Mean (Zhong Yong) 40 The Monkey King (Xi You Ji) 444 The Protestant Ethic and the Spirit of Capitalism 7 The Restaurateurs’ Guild of Selangor 71, 72 The Selangor Wine and Spirit Dealers’ Association 71, 72 ‘The Shipping King of the World’ 440 The spirit of pragmatism 223 Three guns 327 Three Selfs’ principle: self-design, self-construction and self-management 453 Tiananmen Crackdown 163

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Tianfei (Tianhou or Mazu, Sea-fearing goddess) 29 Tian Fu Gong (Thian Hock Keng) 37 Tianhou (Tianfei or Mazu, Seafearing goddess) 12, 29, 37 Tianhou (Tianfei, Mazu, Goddess of sea-fearers) 192, 193 Tien Ju-k’ang 396 Timor 383 Tjia Kian Lion’s (William Soerjadjaja) 369 Tong An district, Fujian province 190 Tongan (T’ung-an) 392 Tong Bee Finance 333 Tongkah Harbor Dredging Company 268 Tong King-sing (Tang Jingxing) 50 “Tong Nian” relationship 198 “to survive and prosper together” (gongchun gongrong) 229 Traditional Chinese virtues of thrift and diligence 89 ‘Traditional Society’ theorists 99 Trans-Pacific trade 388 Treaty of Ghent 22 Treaty of Nanjing (Nanjing) 21 Tributary trade 236 Trimatrical Classics (Sanzi Jing) 40, 211, 323, 444 Tun Abdul Razak 201, 329, 331 Tungku Abdul Rahman 327 Tu Wei-ming 145, 154, 169 Union Bank of Calcutta 311 United Overseas Bank group (UOB) 338

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Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

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Index

Uthong

239

Vietnam War 437 Vogel, Ezra F. 6, 7 Wang Chang-keng (Wang Yungching’s father) 490 Wang Yung-ching (Wang Yongqing) 112, 125, 224, 484, 490–493, 497 Warner, Barnes and Company 390 Weak Organization and Strong Linkage 112 Wealth of Nation 187 Wee Cho Yaw (Huang Zuyao) 338 Wei Tao-ming 472 Western agency houses 393 Western business practice 214 Wheelock Marden 442, 443 When Giants Learn to Dance: Mastering the Challenges of Strategy, Management, and Careers in the 1990s 204 White Swan Hotel (Bai Tian-E binguan) 453 ‘White Swan’s Management Model’ (Bai Tian-E moshi) 453 William, Skinner G. 234, 235, 237, 238, 240, 241–243, 246, 248, 256, 275 Wing On company of Hong Kong (Xianggang Yong An gongsi) 102, 103, 105 Wing On Company (Yongan gongsi) 428, 429, 431, 432, 433 Wong Ah Fook (Huang Yafu) 312, 318–322

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517

Wong, C.S. 259, 260 Wong Fook Kee (Huang Fuji) 318 Wong Yin Theng (Huang Yaoting) 318 World Chinese Entrepreneurs Convention 168–172 World Feng Shun Investment Company 166 World Maritime Bahamas LTD 443 World trading system 463 Wu Hsiu-ch’i 484 Wu Kedu 155–157 Wu-long green tea (Taiwanese tea) 464 Wulun (Five cardinal principles) 146 Wu Sanlian 155, 156 Wu Ting-fang 399, 449 Xiamen Commercial Bank 418 Xiangshan (Zhongshan) 429, 431 Xiao Dao Hui (Small Dagger Society) 258 Xiao Tao Yuan Club 82 ‘Xie Shi Yan’ (Dinner for Thanking Teachers) 7 Xinyong (Hsin-yung, trust) 119, 135–142 xinyong (trust) 249 Xiongdi (brothers) 146 xiucai (imperial first degree holder) 444 Xiushen (self-cultivation) 147 Xun Zi 205 Xu Pingdeng (Koh Pen Ting, Daduk) 330

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518

Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

Ethnic Chinese Business in Asia

Yang Huo Dian (shops selling goods from overseas) 54 Yangming, Wang 205 Yao, Shun and Yu 206 Yap Ah Loy (Ye Yalai or Ye Delai) 75, 299, 305–308 Yap Kwan Seng (Ye Guansheng) 299, 305–308 Yashang (Commission businessmen) 58 Yau Ma Tei 451 Yau Tat Shin (Rao Desheng) 176 Yau Tat Shin (Yao desheng) 175 Yau Tuck Seng (Yao Desheng) 299 Yeo Chang Boon (Yang Zuanwen) 313 Yeoh Kongsi (Yang Gongsi) 27 Yew, Loke 202 Yin, K.Y. 480 Yip-In-Tsoi 273 Yi (righteousness) 147, 205 Yoko Ueda 138 Yong Chun (Eng Choon) district, Fujian province 290, 291 Yong Chun sub-group 291 Yong-le emperor 342 Yong Pung How (Yang Bangxiao) 131 Yoshihara Kunio 349–351, 371, 408, 412, 414, 419 Yuan Fa Hang (Yuen Fat Hong firm) 90 Yuanxiao festival 35 Yuchengco group of companies 417, 419–421 Yue-kong Pao (Bao Yugang) 440, 443

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Yuen Fat Hong firm (Yuan Fa Hang) 90 Zaibatsu 133 Zeelandia 457 Zeng Xianzi 440, 441 Zhang Bishi (Chang Pi-shih or Thio Tiauw Siat) 41, 50, 75, 256, 281, 284, 306 Zhang brothers (Tjong brothers) 352, 361 Zhanggui (Manager) 52 Zhang Hongnan (Tjong A Fie) 352, 354, 355 Zhang Yunan (Chang Yu-nan, or Tjong Jong Hian) 352, 354–357 Zhangzhou (Changchou) sub-group 291 Zhao Rugua 381 Zheng Chenggong (Koxinga) 458–461 Zheng Da 242 Zheng Guanying (Cheng Kuanying) 50 Zheng Jing 458 Zheng Keshuang 458 Zheng Zhao 242 Zheng Zhilong 459 Zheng Zongxing 238 Zhiguo (governing the state) 147 Zhi (wisdom) 147 Zhongguo Insurance Company Ltd. (Zhongguo baoxian gufen youxian gongsi) 404 Zhonghua minzu (Chinese race) 4 Zhong Hua School (Zhong Hua xuetang) 40 Zhongshu, Dong 205

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Ethnic Chinese Business in Asia: History, Culture and Business Enterprise

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Index

Zhongxing Bank (China Bank Corporation) 401 Zhongxing yinhang (China Bank Corporation) 403 Zhongyuan festival 35 Zhu Fan Zhi (Records of Foreign Nations) 380–382

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519

Zhuren (Section head) 104 Zhu Xi (Song Confucianist leader) 40 Zhu Zai Guan (Coolie barracoon) 22 Zi Zheng (Qing brevet title) 305, 354–359

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