Early history
China Merchants Steam Navigation Company was a shipping company founded on 16 December 1872 by the then Viceroy of Zhili Li Hongzhang, who was also concurrently serving as Commissioner of the Beiyang Fleet.[4] Its purpose was to capture part of the international trade, which had been virtually monopolized by foreign companies based in Treaty ports. 80% of the company's start-up capital was provided by native Chinese, making this the first transportation company using modern technology not based on foreign ownership. It obtained government support and received a monopoly contract to transport the tribute grain from the Yangzi Valley to the capital city of Beijing. The company also received loans from government sources and monopoly rights that prevented the founding of rival Chinese steamship companies.[5]
Initially, Li Hongzhang appointed Zhu Qiang as manager at the Shanghai office, assisted by his younger brother Zhu Qizhao. The Zhu brothers and extended family had a large and successful sea-going junk business, shipping sand, rice and other cargoes along the regional coast. Zhu Qiang had already purchased an official rank as a sub-Prefect in Zhejiang.[6] The listed Chinese name for this company in the early 1870s was Zhao Shang Gongsi Ju, although by the 1880s it had turned into Lunchuan Zhaoshang Zongju .[7]
In 1872, the company acquired its first steamship, an old combined sail & steam-powered vessel named SS Aden.[8] The ship was previously owned and operated by the Peninsular and Oriental Steam Navigation Company (P & O).[9][10] However, the Zhu brothers lacked knowledge about modern steamships and their operations, and that they were unsuitable to head the new endeavour. They subsequently replaced Zhu Qiang as manager with the appointment of Tang Jingxing to this position in 1873. Both Zhu brothers, however, being substantial shareholders, retained positions in the company as "Rice Tribute" managers.[11]
By 1877, the company was still not turning a profit and a decision was taken to expand the fleet significantly in an attempt to break the foreign shipping companies' virtual monopoly on the China coastal trading routes. The company purchased the entire fleet of 17 vessels from the Shanghai Steam Navigation Company whose agents were the old-established American Treaty-port traders, Russell & Company.[12]
In 1885, Sheng Xuanhuai was named the company's director-general General to improve its fortunes,[13] following the departure of Tang Jingxing for other industrial projects.
During the Sino-French War of 1884-85, ownership of the ships was temporarily transferred to Russell & Co. in order to avoid seizure by French forces, but after hostilities had ceased, they were purchased back by CMSNCo., for the same price they had been sold for.[14]
The company enjoyed profitability for a few years under Sheng's directorship and began paying out annual dividends. However, by 1904, the company's finances had once again slipped into losses. Sheng, who had appointed a whole series of corrupt cronies to the management during his tenure, was eased out of control in 1911 when Dr. Wu Ting-fang took over as managing director with a view to reorganizing the company.[13][15]
By 1912, the fleet size of the company had grown to 29 coastal and river steamers, all crewed by foreign (mainly British) captains.[16]
During the early 20th century up until the time of the revolution, there was a long and continual power struggle between Sheng and the various shareholders over control of the company. Following the revolution, in June 1913, shareholders of the CMSNCo. agreed to a scheme for the company to be reorganized with a new constitution. The company at this time possessed 31 ships and owned wharves and property in some 20 Chinese ports, with total assets valued at an estimated 25 million taels of silver.[17]
Following Sheng's death in 1916, Li Hongzhang's grandson, Li Guojie, was appointed as a board director of CMSNCo. Li Guojie had previously served as the Chinese Minister to Belgium (1910-1912).[18] In 1924 he was elected as chairman of the board of directors.[19]
Civil war period
In 1927, Li continued to head the company although the entire Chinese shipping industry was placed under the supervision of the Communications Ministry of the Nationalist government. In 1929, the Nationalist government commenced investigations into past financial dealings of the company, and in particular those of the late Sheng Xianhuai. After uncovering evidence of impropriety, the Jiangsu Provincial Government ordered the confiscation of assets from Sheng's estate. Li Guojie also came under suspicion for misappropriating funds from the company and for taking out personal bank loans secured on the company's assets. This culminated in a lawsuit again Li to recover lost monies.
The scandal escalated when on 24 July 1930, Zhao Tieqiao, a senior member of the Shanghai Investment Promotion Bureau tasked with investigating past financial irregularities, was assassinated outside the company's offices in Shanghai.[20] Li immediately fell under suspicion but lacking sufficient he was instead detained on economic fraud charges relating to obtaining personal foreign loans using state-owned assets as collateral. He was convicted and sentenced to 3 years imprisonment. However, through his political connections he was soon released. Li remained in Shanghai, heavily involved in the corrupt political power struggles prevalent in that era. He was shot outside his Shanghai home on 19 February 1939 and died soon afterwards.[21]
The firm was nationalized and reorganized as the China Merchants Group in 1935, acquiring the name it uses today.[22]
Post-Civil War split
In 1949, following the Chinese Civil War, the company's head office was transferred together with the Republic of China government from the Mainland to Taiwan. On December 28, 1972, because Communist China obtained the "Chinese seat" in the United Nations, in order to prevent Communist China from taking over the assets of the original CMSNCo, the CMSNCo in Taiwan invested in Yang Ming Marine Transport Corporation, thereby transferring assets to Yang Ming Marine Transport. In March 1995, The Taipei-based part of CMSNCo finally merged with Yang Ming Marine Transport Corporation.[24][25]
Meanwhile, the People's Republic of China retained ownership of some of the company's ships and of the Hong Kong subsidiary, allowing the latter to retain its name (China Merchants Steam Navigation Company Limited) to avoid legal disputes. In 1950, transfer of the original core company was moved to its Hong Kong headquarters but with overall control still being retained by the PRC.[26]
