Nanyang Brothers Tobacco

The history of the Nanyang Brothers Tobacco Company (hereafter, Nanyang) illustrates the emergence of Chinese family-run enterprises under the impact of nationalism and foreign economic competition in the early twentieth century. Nanyang's founder, Jian Zhaonan (1870–1923) from Guangzhou (Canton), had gained business experience in Japan, Hong Kong, and Bangkok before he established the Nanyang business with his brother Jian Yujie in Hong Kong in 1905. One-fourth of Nanyang's capital came from Jian Zhaonan's shipping business in Japan, and the rest from investors belonging to his networks of family, fellow Cantonese, and overseas Chinese in Southeast Asia.

Nanyang's cigarettes were sold throughout countries such as Thailand, Malaya, Indonesia, and Borneo where the company was able to operate without encountering severe government tobacco monopolies, steep import duties, or competition from the British-American Tobacco Company (BAT), which dominated the China cigarette market at the time. Sporadically, Chinese political boycotts of foreign goods increased Nanyang's cigarette sales but also contributed to dangerous business fluctuations that almost led to the company's bankruptcy in 1908. Fortunately, the Chinese revolution of 1911 gave new impetus to the business: the Jian brothers financially contributed to the republican political movement under Sun Yat-sen (1866–1925), another Cantonese with strong support among the overseas Chinese community. Gaining popularity as a patriotic Chinese product, Nanyang cigarettes generated for the first time substantial profits all over Southeast Asia.

By 1915 the Jian brothers entered the China market, ready to take on the foreign commercial competition, in particular BAT, and opened an office in Guangzhou. Threatened by the competition, BAT resorted to slander, unsavory marketing methods, and occasional sabotage. Nanyang retaliated with more aggressive and distinctive advertising: the company's association with Chinese nationalism became its most effective marketing strategy, emphasizing that "Chinese should smoke Chinese cigarettes." Sales in China increased so substantially that a second factory was built in Hong Kong.

Nanyang's attempt to establish its presence in Shanghai and northern China from 1916 to 1917 turned into open commercial warfare with BAT. As a Cantonese firm, local knowledge and nationalistic sentiment had worked for Nanyang in the south of China and Southeast Asia but was limited in the north, where BAT had local knowledge through its network of local distributors and the nationalistic agenda was a minor political concern. By 1916 Nanyang urgently needed capital for business expansion from investors outside the family network. Jian Zhaonan began talks with BAT about a merger, but negotiations fell through due to lack of support on both sides. The only other option of attracting new funds was to form Nanyang into a joint-stock company. To avoid control through outside shareholders, Jian Zhaonan reorganized the company and strengthened his own financial position as Nanyang's largest stockholder before the company registered with the Chinese government as a joint-stock company in 1918.

The May Fourth Movement in 1919 involved massive boycotts of foreign, especially Japanese, goods, but did not benefit Nanyang's business. However, Nanyang managed to stay in business and eventually reaped profits due to the application of professional management to its financial structure and manufacturing system. Nanyang's investment in publishing houses, newspapers, and philanthropy enhanced the company's advertising opportunities. When the early 1920s brought labor protest to factories all over China, the Jian brothers improved working conditions and offered their workers social and educational benefits, thus effectively discouraging strike activities at their factories. Nanyang increasingly resembled Western corporate enterprises, successfully imitating many aspects of its main competitor BAT.

Jian Zhaonan's death in 1923 deprived the company of competent leadership in a time of deteriorating business conditions due to high taxation, currency depreciation, natural disasters, and warlord rule. The Jian family began to actively support the Guomindang Party, especially during the anti-British May Thirtieth Movement in 1925 that inflicted great damage on BAT's business and enhanced Nanyang's market share. However, soon after Chiang Kai-shek (1887–1975) came to power in 1927, the Nationalist government began to extort funds from companies through heavy taxation and other extractions. Ironically, BAT's profits grew between 1927 and 1930 due to tariff protection and diplomatic support for the foreign company, while Nanyang and smaller Chinese competitors suffered heavy losses.

With the Japanese invasion of the northeast in 1931, the increasing influence of the Japanese Imperial Tobacco Monopoly excluded Chinese competition from the area. When Japan began the occupation of China in 1937, the monopoly expropriated Chinese-owned cigarette companies. Due to financial pressure, the Jian family surrendered control over Nanyang in 1937 and T. V. Song (1894–1971) became the new chairman, but Nanyang's production and profits declined drastically during World War II. After the establishment of the socialist Chinese state in 1949, Nanyang was eventually nationalized in 1951 and members of the Jian family joined the new government in various capacities. Today the Nanyang Brothers Tobacco Company Limited operates in Hong Kong as a major tobacco supplier and manufacturer of the famous "Double Happiness" cigarettes. The company is listed on the Hong Kong Stock Exchange; it supplies mainland China and is developing the Southeast Asia and Taiwan markets.

SEE ALSO Banking; British-American Tobacco; China; Ethnic Groups, Cantonese; Hong Kong; Import Substitution; Industrialization;Nationalism;Singapore;Tobacco.

BIBLIOGRAPHY

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Brown, Rajeswary Ampalavanar, ed. Chinese Business Enterprise in Asia. London and New York: Routledge, 1995.

Coble, Parks M. The Shanghai Capitalists and the Nationalist Government, 1927–37. Cambridge, MA: Council on East Asian Studies, Harvard University, 1986.

Cochran, Sherman. Big Business in China: Sino-Foreign Rivalry in the Cigarette Industry, 1890–1930. Cambridge, MA: Harvard University Press, 1980.

Cochran, Sherman. Encountering Chinese Networks: Western, Japanese, and Chinese Corporations in China, 1880–1937. Berkeley: University of California Press, 2000.

Gerth, Karl. China Made: Consumer Culture and the Creation of the Nation. Cambridge, MA: Harvard University Asia Center, 2003.

Elisabeth Köll