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It used to be said that Hong Kong was ruled by 'hongs' such as Jardines, Wharf and Swire, with grandees from each congregating at the Jockey Club, another great institution of influence.
The term hongs usually refers to British-owned trading houses concerned with trade with China, which later diversified to become huge conglomerates.
These are best epitomised by Jardines, one of the original hongs, which was said to have inspired James Clavell's novel, Noble House.  
The company's dealings with the region included smuggling opium into China. After one of its opium shipments was seized by the Chinese authorities, it persuaded the British government to start the first opium war in 1839. The objective was to force China to pay compensation, cede Hong Kong to Britain, open more ports to trade and legitimise trade in the narcotic.  
The huge profits gained from opium dealing enabled the group to expand into many other businesses, which formed the foundation of the group we know today. 
Indeed, the hongs dominated the city's commercial landscape up until the 1970s, when the power of these institutions entered an era of prolonged decline. 
Jardine's traditional role as a middleman was increasingly being undercut as manufacturers started to sell directly to their customers. As a result, Jardine's growth stagnated and it was hit by losses in new ventures when it tried to diversify.
Hutchison Whampoa got into trouble after it over-extended itself with numerous acquisitions. It had to be rescued by HSBC, which ended up with about 22 per cent equity stake in the company. 
Wheelock, which was only marginally profitable under the Marden family, was unable to pay for the delivery of some vessels it had ordered when the recession hit in the mid-80s. 
Ironically, HSBC, which was involved in the rise of many of the hongs, also often delivered their death blows, if only by orchestrating their takeovers by non-British, local entrepreneurs. 
After listing Hutchison Whampoa in 1978, HSBC sold its 22 per cent stake in the company to Li Ka-shing for HK$639 million (which was reportedly at half the fair value) without opening up the sale to competing bids. In addition, HSBC effectively financed Li for the acquisition by giving him deferred payment terms. 
The deal catapulted Li up the ladder to become one of the leading tycoons in Hong Kong. He later directed much banking business to HSBC to show his gratitude. 
HSBC was also instrumental in the rise of Pao Yue-kong. The bank financed the equity required for the construction of his ships, which were financed with Japanese government loans and then leased long term  (backed by guarantees issued by Japanese banks) to Japanese trading companies. 
The arrangement made Pao the world's largest ship owner in 1979. Pao astutely cut his fleet during the shipping crisis in the late '70s and used the cash to build a stake in Wharf. With the financing and advice provided by HSBC, he took control of Wharf from Jardines. 
Pao also bought more than a 30 per cent in Wheelock and was engaged in a bidding war with Khoo Teck Puat  (a Singaporean banker) who had bought a 14 per cent stake from the Marden family, which he subsequently increased to about 30 per cent. Pao outbid Khoo, who then sold his entire stake to Pao to make an enormous profit. 
There are no permanent enemies in business. In 1986, Pao and Khoo co-operated with Robert Holmes a Court (an Australian corporate raider) to take a significant stake in Standard Chartered Bank, which was devastated by the recession in the mid-80s. The trio's investment helped the bank fend off a hostile take-over from Lloyds Bank.
The loss of Wharf, and the fear of losing more assets and being taken over, caused the Jardines group to focus on putting together a costly cross-shareholding structure between Jardine Matheson  and Jardine Strategic.  The project occupied Jardines for the better part of the '80s. As a result, it missed out on the opportunity to pick up attractive real estate at bargain prices during the downturn. That formed the basis of the fortunes of many Hong Kong tycoons today. 
Other important factors in the decline of the hongs were the rise of the mainland and the return of Hong Kong to it. Many businesses and people in Hong Kong were deeply concerned about the post-1997 arrangements in the city.  
Swire Pacific and Jardine Matheson moved their registered offices to Bermuda. Jardines went a step further by shifting its primary stock exchange listings from Hong Kong to London in 1991, and its Asian stock listings from Hong Kong to Singapore in 1994. As a result,  Jardines was not able to operate on the mainland in a meaningful way until 1996, after its chairman, Alasdair Morrison,  apologised to Beijing.  Even after that, Jardines did not make it big on the mainland. 
Swire, on the other hand, was used by the mainland to show its determination to maintain the prosperity of Hong Kong after the handover and stem the flight of businesses from the city.
In 1987, Citic took a 12.5 per cent stake in Cathay Pacific after it was listed in 1986. Citic took the position to demonstrate the mainland's commitment to Hong Kong. 
Unlike Jardines, Swire had been able to increase its presence in the mainland through the '80s and '90s in partnership with Citic and other mainland partners. For example, it set up beverage and paint production plants and Taikoo Aircraft Engineering Company,  and acquired a 25 per cent interest in Shekou Container Terminals.  
But even Swire's excellent connections and consummate deal-making skills on the mainland, could not prevent mainland interests from encroaching on its businesses. 
As the handover approached, China National Aviation Corporation (CNAC)  reportedly threatened to set up a rival airline in Hong Kong to compete with Cathay Pacific on its profitable international routes. To head off this threat, Cathay Pacific sold new shares to Citic to increase its stake to 25 per cent, paring Swire's stake to below the controlling 50 per cent level. CNAC also acquired around 36 per cent of Dragonair to become its largest shareholder, cutting Cathay Pacific's and Swire's combined stake from 43 per cent to 25.5 per cent. In return, CNAC agreed to limit itself to developing Dragonair. 
In contrast, Hong Kong companies faced no such impediments.  They have expanded rapidly in recent decades, growth that has largely passed the hongs by.



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