City & Business: Jardine makes enemies where it needs friends

JARDINE HOUSE in Hong Kong has long been rudely described by the Chinese as the house of a thousand arseholes. The nickname is mainly explained by the tower block's curious use of portholes for windows. But there is also a subtext: for many years now, the Jardine Matheson international trading empire has been seen locally as a stuffy, arrogant, stand-offish company whose masters live far away in the English shires and which seems determined to desert the colony that has so gloriously enriched it.

Ten years ago, Jardine famously shifted domicile to Bermuda. Last week it seemed to complete the process of withdrawal from the colony's regulatory embrace when it announced its intention to delist by the end of this year. Jardine has been threatening to cut its remaining ties for some time, so it could perhaps be forgiven for failing to anticipate the hurricane of abuse and derision that greeted its announcement. The move also seems of little immediate practical significance to anyone.

Jardine Matheson is nevertheless one of Hong Kong's oldest companies. It moved there from Shanghai in 1949 at the time of the Communist revolution, and it has thrived and prospered in this small capitalist outpost ever since. To delist looks an extreme and callous act of disloyalty and ingratitude - a kick in the teeth for the place that has made Jardine what it is today.

So why did the two Keswicks who run Jardine, Henry and Simon, do it? On the face of it, the damage to reputation far outweighs any advantage the group achieves in regulatory tidiness. Nor is there much in the argument that Jardine only did it as a precautionary act ahead of the change of sovereignty in 1997; the Hong Kong takeover code is about the last thing the new Chinese government will have on its mind.

To the Keswicks, that's not really the point, however. With a major constitutional change imminent, they want to transform their operation from a Hong Kong company into an essentially British company that does a lot of business in Hong Kong, a bit like Cable & Wireless and Standard Chartered. 'It's a deeply symbolic thing,' said one Jardine source. 'It's the difference between whether you are ultimately answerable to the People's National Congress in Peking or to the supreme court of the House of Lords. Which would you rather have?'

But that's not the way it's being read in Hong Kong. For a company of Jardine's size and importance to delist is a severe blow to the colony's credibility as a financial centre. And somehow I doubt that the prospect of Chinese rule was the major influence. Once upon a time the Keswicks were a powerful force in Hong Kong; they called the shots. But as the Chinese business community grew and prospered, Jardine's ability to influence things to its own advantage declined. Is not the truth of this delisting that the Keswicks, increasingly deprived of their once-powerful position in government and regulation, have merely decided to uproot to another small colony, Bermuda, where once more they will be kings? That's the way it looks from the outside at least.

Perhaps one day the delisting will be seen as an act of inspired foresight that prevented the company from being disadvantaged by Hong Kong's new Chinese masters. In the meantime, however, it can only be a big force for harm. Despite its international pretensions, Jardine still relies on Hong Kong for the vast bulk of its business and profits. It has made a big mistake.