China Merchants Group Limited () is a state-owned enterprise (SOE) of the People's Republic of China, operating under the auspices of the Government of China.
Founded in 1872 as the China Merchants Steam Navigation Company in Shanghai, the firm has developed into one of China's leading SOEs since the 1980s and has expanded its global role as a result of China's Belt and Road Initiative in the early 2010s. Its principal business segments span ports and logistics, finance, real estate, and marine equipment manufacturing; the latter is conducted through its wholly-owned subsidiary China Merchants Shipbuilding Industry Group (CMI), one of China's leading state-owned shipbuilding conglomerates.
The group has drawn Western media criticism related to the Belt and Road Initiative at Hambantota Port in Sri Lanka and disputes with DP World over the Port of Djibouti.
Beginnings and growth (1872–1978)
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."Eminent Chinese of the Ching Period by A.W. Hummel1944; Vol2.page-951 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.Kwang-ching Liu, "Steamship enterprise in nineteenth-century China." Journal of Asian Studies 18.4 (1959): 435-455.
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."China's Early Industrialization" -Chapter 4- C.M.S.N.Co Management Personnel by A Feuerwerker, published in 1958
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 ().Shanghai merchant houses listed in "The China Directory" for 1889
In 1872, the company acquired its first steamship, an old combined sail & steam-powered vessel named SS Aden. The ship was previously owned and operated by the Peninsular and Oriental Steam Navigation Company (P & O).P & O Heritage Website - " Fact Sheet 0060 1856/0823 ADEN 1856" https://www.poheritage.com/Upload/Mimsy/Media/factsheet/92662ADEN-1856pdf.pdf downloaded 04.04.2021"The China Year Book 1916" : Chapter XV!! "Shipping" 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."China's Early Industrialization" by A Feuerwerker
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."The China Year Book 1916 : Chapter XV!! "Shipping"
In 1885, Sheng Xuanhuai was named the company's director-general General to improve its fortunes,China Year Book 1916 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.
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.Wu Ting-fang, a Cantonese native was known in Hong Kong as Ng Choy 伍才 Wǔ Cái
By 1912, the fleet size of the company had grown to 29 coastal and river steamers, all crewed by foreign (mainly British) captains.The Chronicle & Directory of China, Japan, Corea etc.etc. "The China Directory" for 1912- Coasting and River Steamers"
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.China Year Book 1921). A tael of silver varied slightly in value depending on its origin and the fineness of silver content. The "Shanghai Tael" in 1915 was worth about one eighth of a Pound Sterling, valuing the company at that time at about £300,000.
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).Eminent Chinese of the Qing Period – Hummel page 471 In 1924 he was elected as chairman of the board of directors.Biography of Li Guojie - Chinese Wikipedia page (in Chinese only) downloaded 2021.04.10
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.Zhao Tieqiao 1886-1930 Baidu biography (in Chinese only). 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.ibid
The firm was nationalized and reorganized as the China Merchants Group in 1935, acquiring the name it uses today. During the Sino-Japanese war, the company sold four of its ships: Haiyuan, Haili, Haichen and Haiheng to the Hong Kong-based trading company Jardine Matheson & Co. Other ships were scuttled during the hostilities.
During World War II, the headquarters moved around, being for a period in Hong Kong and at Chongqing.
After the defeat of Japan in the Second Sino-Japanese War, the Nationalist government confiscated industrial enterprises in formerly Japanese-occupied areas of China and in Japanese puppet states. These confiscated enterprises were re-organized into Chinese state-owned enterprises, primarily under the control of China Merchants Steam Navigation Company, the National Resources Commission, and China Textile Construction Corporation. The company also took over control of 2,158 formerly Japanese ships.
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.
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.China Merchants Group corporate website – History 1912 -1949
Modern history (since 1978) The company slipped into relative obscurity during the Mao era. This only changed with China's opening of its economy in 1978, when the free-trade zones created in China led to the company's revival. On 31 January 1979, Yuan Geng became the first CEO of the PRC-owned company. Yuan had founded the Shekou Industrial Zone in Shenzhen and was made CMG CEO following Beijing's approval of the zone proposal, making it a corner stone of the first special economic zone in Shenzhen as part of Deng Xiaoping's reformist policies. CMG subsequently developed a reputation for its successful Port-Park-City model, which is also referred to as the Shekou Model.
Throughout its development of the Shekou Zone during the 1980s and 1990s, CMG got involved in business sectors beyond shipping, including investing in and operation of amenities, social and industrial infrastructures, numerous industrial ventures from containers to food manufacturing, real estate and finance. In 1987, it founded the first joint-stock bank in the PRC, China Merchants Bank, making it a "highways-to-banking conglomerate".
Although CMG was involved in numerous horizontal businesses, in 2001 this was rationalized to three "core business sectors", namely transport infrastructures, financial, as well as property development and industrial park operations.
Since the Chinese government's adoption of the Belt and Road Initiative in 2013, CMG has been playing a major role in furthering the policy through its flagship port business. CMG has been seeking to expand international operations accordingly. Besides operating in Hong Kong and Mainland China, CMG now has operations in strategic locations across South Asia, Europe, for example in Greece, Lithuania and Belarus, and Africa, including most notably Nigeria and Djibouti.