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Wartime Shanghai: A Tycoon Triumphs Over the Emporer

Originally published by World War II magazine. Published Online: January 05, 2007 
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The Chinese were no strangers to war when the first bombs fell on Pearl Harbor in December 1941. For almost a decade they had been battling the Japanese for control of their own country. Using Chinese resistance to their move to take over Manchuria as a pretext, the Japanese attacked Shanghai in January 1932. For three months warring parties fought one another for control of the city. Known as the "Paris of the East," Shanghai was a financial powerhouse coveted by both sides.

Stuck in the middle of the bloody battle for mastery of the city was the International Settlement, an enclave of Western businessmen and diplomats that operated as a world apart. Within the settlement — and at the center of the business world of Shanghai — was Victor Sassoon, a wealthy bon vivant who worked tirelessly to protect Western interests in the Orient and rescue European Jews while looking out for his own considerable financial holdings in the city.

Sassoon was heir to a fabulous fortune and a prominent member of a great commercial dynasty. The Sassoons were Sephardic Jews who originally came from Baghdad. David Sassoon, Victor's great-grandfather, had abandoned the Middle East in favor of London, and within a generation or two the Sassoons, like the Rothschilds before them, had become members of the British establishment with a far-flung mercantile empire.

It was Victor's grandfather who broke away from the main family business and set up his own concern, E.D. Sassoon and Co. Hardworking and occasionally ruthless, the Sassoons established branch offices in Bombay and Shanghai. Cotton and opium were the twin pillars of their success in the early days, with fully one-fifth of the highly addictive drug consumed in China arriving on boats operated by the Sassoons.

Victor Sassoon was born on December 30, 1881, in Naples, where his parents had stopped while en route to India. Raised and educated in England, Sassoon was British to the core.

Upon reaching adulthood Victor was sent out to Bombay and Shanghai to learn the family trade. While there, the fledgling merchant prince gained a well-deserved reputation as a ladies' man, pursuing horses, women and wealth with equal passion. When Britain found itself at war in 1914, the deeply patriotic Sassoon volunteered for the Royal Flying Corps. His aviation career was cut short, however, by a crippling accident. In constant pain for the rest of his life, the tycoon walked with the help of two silver-handled canes.

Sassoon returned to Bombay and became a prominent member of the textile industry and a leading light in horse-racing circles. He once remarked, "There is only one race greater than the Jews and that is the Derby." When his father died in 1924 he inherited the family title and fortune. Henceforth he would be Sir Victor Sassoon. But India was restive in the 1920s and taxes were discouragingly high. Patriotic but pragmatic, Sir Victor decided to take advantage of the opportunities emerging in the East and moved his operations lock, stock and barrel to Shanghai.

Sassoon found the social and business atmosphere there congenial. Labor was cheap, taxes were low and foreigners enjoyed many privileges. At first the Shanghai business community did not know quite what to make of Sir Victor. He was less a businessman than a financial wizard, magically transforming the face of the city in less than a decade. Thanks to Sir Victor's vision and money, Shanghai soon had the tallest buildings outside the United States. Across from Suzhou Creek, he built Embankment House, the largest building on the China coast, with a frontage of a quarter mile. More would follow, including Hamilton House (a big apartment hotel), Cathay Mansions and Grosvenor House, as well as a multitude of Chinese residences, shops, theaters and offices. By the mid-1930s, Sassoon was the top realtor in Shanghai, if not in all China.

Sir Victor's crowning achievement, however, was the Cathay Hotel/Sassoon House. The hotel was at the entrance of Nanking Road, the "Mayfair" of the city and its commercial center. The property was close to the Bund, Shanghai's all-important waterfront district. The first four floors housed offices, a shopping arcade and two banks. The third floor was occupied by E.D. Sassoon and Co., where Sassoon managed his empire. The rest of the structure was the hotel.

The Cathay was an instant success and a legend in its own time. Its severe yet elegant ferroconcrete facade, topped by a green pyramid roof, became the very symbol of the economic boom in 1930s Shanghai. It was an art deco masterpiece, its lobby sheathed in marble, its luxury and service unsurpassed.

Celebrities stayed there, including comedian Charlie Chaplin and playwright Noel Coward, who worked on Private Lives while recuperating from the flu. The Cathay and its owner were already renowned when the Japanese first attacked Shanghai in January 1932. The hotel was close enough to the warring armies to provide staff and visitors alike with a view of the action. Stray bullets whizzed by, and the hotel's outside walls were peppered and gouged with shrapnel. With typical aplomb, Sassoon described his precarious location near the fighting as the "front row of the stalls."

On one occasion Sassoon limped to the front of the hotel, intending to film the action. Suddenly a bullet passed perilously close to his head, crashing into a nearby window. A Chinese soldier had fired on the tycoon, apparently thinking he was a Japanese sniper. When the Chinese general in charge heard of the close call experienced by one of Shanghai's most influential denizens, he sent an aide over to express his profound regrets and assurances that the guilty party would be punished. Not to be outdone, the Japanese offered their apologies as well for the shrapnel damage they inflicted on the "Honorable Cathay." Sir Victor, with typical aplomb, downplayed the incident. "On the whole," he recalled, "everything was most gentlemanly."

Outnumbered and outgunned, the Chinese fought on for as long as they could, but were eventually driven out, and the Japanese took control of much of the city. Only the International Settlement remained inviolate — at least for the moment. Shanghai rejoiced and rebuilt. By 1935 the city was once again experiencing a real estate boom, and Sassoon continued to lead the way.

Beneath the cool, optimistic surface, however, Sir Victor was a very worried man. He had invested millions of pounds in Shanghai, and if the Japanese took over he might lose the empire it had taken a century for his ancestors to build.

The boom time, however, was underway just as the international situation deteriorated. Adolf Hitler had come to power in 1933, and Germany's Jews were beginning to get a taste of what their future would be like in the Nazi state. As persecution mounted, thousands began to emigrate. Many countries shut their doors, but not Shanghai, which had no passport requirements and seemed to offer the refugees a safe haven.

Sir Victor Sassoon and other wealthy Shanghai Jews, such as Ellis Hayim and Horace Kadoorie, did what they could to help. Sassoon paid for soup kitchens and schools, and donated Embankment House to provide shelter. He also gave money to ensure that Jewish refugee children would have an ample supply of milk. When a Jewish doctor treating a polio patient asked for a state-of-the-art iron lung, Sir Victor provided him with the first such device in Asia. The tycoon gave orders that it be made available for any hospital, Chinese or European, that needed it.

Business was interrupted once again in the summer of 1937. Using the fabricated abduction of a Japanese soldier at the Marco Polo Bridge near Peking as a pretext to invade, the emperor's officers reacted with force. The Second Sino-Japanese war was on, and China would not see peace for years. Given its importance and the riches it contained, Shanghai was once again the scene of intense fighting.

Around 4:30 on the afternoon of August 13, 1937 — "Bloody Saturday" — Chinese bombers tried to drop their payloads on the light cruiser Idzumo. Two bombs fell from the sky, even as crowds of civilians cheered. One fell on the roof of the Palace Hotel, Cathay's neighbor across the Nanking Road, reducing it to a crown of flames. But it was the second bomb that created the most carnage. It glanced off the Cathay's walls and detonated in the packed street.

Lucien Ovadia, Sir Victor's cousin and one of his right-hand men, was in his office when the bombs struck. It was a hot day and he had two windows open. The force of the blast hurled him across the room like a rag doll. Recovering, he hurried downstairs to assess the damage. Much of the elegant glass had been shattered, but the building was intact and the hotel up and running within hours.

Just outside, the situation was quite different. Cars burned fiercely, the passenger seats filled with blackened corpses. Hundreds of bodies lay strewn about — many of them dismembered beyond recognition. It was said that pieces of human flesh spattered the Cathay's walls up to the fifth and sixth floors.

Whole districts were laid waste in the subsequent fighting as Chinese troops bravely battled the invaders. Generalissimo Chiang Kai-shek, supreme leader of the Republic of China, upped the ante by sending in his crack 87th and 88th divisions, but after three months of stubborn resistance, the Chinese were at last forced to give way, and Chiang ordered a fighting withdrawal into the vast Chinese interior. The Japanese army quickly moved in to claim its prize, seizing assets and carrying away anything of value.

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In the midst of the frenzied looting, the International Settlement continued its peculiar existence — a peaceful enclave within a city ravaged by war. The Japanese coveted this real estate and all its riches, but to invade the settlement would be to provoke war with Britain and the United States. Japan was not yet prepared to overtly take on the Anglo-Americans; instead they actively pursued a covert campaign to gain control of the settlement. That campaign quickly ran into a brick wall as Sassoon, working as much from patriotism as self-interest, led the effort to keep the Japanese out of the settlement — and out of his pockets.

Shanghai was now crowded with refugees of every description. Housing was at a premium, and with his substantial real estate holdings, Sassoon was profiting from his city's misfortune when he traveled to the United States in the fall of 1938. The darling of the American press corps, he could always be relied on for provocative copy. Sassoon freely disparaged Shanghai's new masters and hinted that an Anglo-American-French economic embargo would soon drive the aggressors out of China. On another trip, this time in 1939, Sassoon told an American radio audience that the Japanese people must soon revolt against the power-mad military clique that ruled them. His comments filtered back to China, where Japanese authorities controlled every inch of Shanghai apart from the settlement. Government officials were outraged, and some Japanese newspapers called for his arrest.

The Japanese authorities in Shanghai soon began to suggest that Sir Victor might be wise to combine his extensive holdings in the city with their own in order to "safeguard" his interests. Sassoon naturally did not think much of the idea and was going to reject it when he was approached by British authorities, who urged the tycoon to stall as long as possible. He tried, but prevarication did not suit his temperament. It was not long before a Japanese colonel arrived at Sassoon House with an entourage that included aides and two armed sergeants. The colonel bowed deeply, as did his entourage, when Sassoon's right-hand man Ovadia appeared. Samurai sword dangling at his side, the colonel handed Ovadia the list of the real estate the Japanese intended to contribute to the merger. A quick glance confirmed that the emperor's properties were little better than vermin-infested slums.

Having expected such a proposition, Ovadia handed the colonel a list of what Sassoon was prepared to offer. None of the most coveted properties were on it. The colonel exploded. "This is an insult to Japan," he yelled as he jumped to his feet. "We will never forgive you."

Unable to negotiate control of the settlement and unwilling to take it by force, the Japanese resorted to gangster-like tactics: Assassins and their ilk terrorized the city, and the largely British-run municipal police could do little about the violence. Chinese businessmen were kidnapped, carried to Japanese-held territory and tortured until they gave money to the conquerors or their puppets. Chinese merchants, bankers and newspapermen who had found temporary refuge in the settlement were favorite murder targets.

Incidents of arson went hand in hand with assassination. Buildings were mysteriously put to the torch. Japanese authorities approached businessmen in the settlement, Sir Victor included, and suggested they contribute to a "fund" to maintain law and order. It was the old protection racket. Sir Victor would not contribute one penny.

Seeming to thrive in this dangerous atmosphere of roaming assassins, Sassoon remained defiant, wearing his old Royal Flying Corps tie and showing British and American films in the Cathay's ballroom. He did whatever he could to maintain a sense of normality within the settlement, for both its inhabitants and visiting businessmen. Always outwardly courteous to the Japanese, he kept a loaded service revolver in his desk — "to repel boarders," he said.

Stymied by Sir Victor's efforts, the Japanese decided to embark on a last attempt to woo him to their side. A private dinner party was held for the tycoon at the Cathay. A Japanese officer was lavish in his compliments, but hinted that Sir Victor's empire depended too much on Chinese currency, and that it might collapse with China's inevitable defeat.

Sir Victor took out his monocle, cleaned it carefully — as if for emphasis — and, replacing it in his eye, said he wasn't worried. After all, he had a large overdraft in Shanghai — he kept funds elsewhere, in other countries, other climes. "What?" responded the Japanese officer. "A Sassoon with an overdraft?" "Of course," replied Sir Victor. "You must understand that no one with any sense keeps money around when there are robbers in the neighborhood." There was a stunned silence. "Tell me, Sir Victor," the officer inquired, "why are you anti-Japanese?" Sassoon deliberately took his time, clipping a fresh cigar with care. "I am not anti-Japanese at all," he replied. "I am simply pro-Sassoon and very pro-British." Sir Victor was not about to be intimidated, nor would he be flattered into submission. The officer, seething, left.

For three years the Japanese had tried to get their hands on the settlement, and for three years they had been stymied by Sassoon and a handful of his business associates. Although Little Tokyo, as Japanese-dominated Shanghai outside the settlement had come to be known, provided them with a toehold in the enclave, the most valuable part of the settlement — the Anglo-American segment just across Soochow Creek — remained frustratingly beyond reach.

When negotiation and the terror campaign failed to achieve the desired results, the Japanese tried a new ploy. They would seize control of the Municipal Council that ran the settlement. By treaty, the settlement, though ruled by a 14-man multi-national council, was still technically on Chinese soil. The council representation was drawn up to ensure British or Anglo-American rule: five British, two American, two Japanese and five Chinese members, elected annually on a "semi-democratic" basis. Voting rights were confined to property-owning taxpayers, and the size of the council would be based on how many enfranchised individuals there were.

The Japanese were underrepresented on the Municipal Council, but if they could sway the Chinese votes, they had a chance of "democratically" taking control. When the council was up for reelection in 1940, the Japanese backed five candidates whose presence in the city had brought in a large Japanese business community. Those votes — and votes beaten or bribed from among the Chinese — would force a favorable result.

In a moment of supreme irony, Sassoon and his compatriots resorted to some very undemocratic means to assure that the representative makeup of the council was preserved. When he got word of the Japanese plan to take control of the council, Sir Victor subdivided his Far Eastern Development Company into smaller units, each nominally given over to a board of directors. Others did the same, which added large numbers of new voters to the rolls, and when the ballots were counted, the Japanese were unable to get the additional seats they needed on the council. Thanks to Sir Victor and others, a Japanese takeover was postponed another year, but it was only a matter of time before they would have their way.

In January 1941, Tony Keswick, the chairman of the council, was shot and wounded by a Japanese agent. He recovered, but the handwriting was on the wall. The Japanese were now able to squeeze concessions from the various foreign consuls. A "reform measure" was bullied through in which candidates for the council would be appointed the nations' representation, not elected. This measure ensured that the Anglo-Americans were in the minority, and that Japanese finally gained more seats.

In the spring of 1941, Sir Victor was advised to leave Shanghai. War with the United States was clearly on the horizon, and once the bullets started flying, everyone knew the Japanese would move quickly to take control of the settlement.

Sassoon was in Bombay when the Japanese finally invaded on December 8, 1941. They quickly seized the Cathay and Sassoon's other holdings and threw several of his executives into prison.

Exiled from his beloved Shanghai, Sassoon did what he could to continue his business while putting his fortune and connections to work for the Allies. Even during the war, many dismissed Sassoon as a cynical businessman and inveterate womanizer. In this they were correct. But forgotten was the important role he had played for many years in blocking Japanese efforts to take over the International Settlement and the part he had in the successful resettlement of some 20,000 Jews, who were thus spared the horrors of the Holocaust.

By 1945 the world had changed. When the exhausted and bankrupt European powers tried to regain authority over their colonial possessions, they found that their former subjects were just as unwilling to accept them as masters as they had been the Japanese. In China, Mao Tse-tung and his resurgent Communist forces resumed their civil war and eventually drove out all Westerners and took control of their fortunes.

The golden age of Shanghai was at an end. But, not surprisingly, Sassoon beat his foes to the punch by selling his considerable holdings before the downfall of Chiang Kai-shek's Nationalists. He set up his new business in the Bahamas, where he was safe from the Communists and from the hefty tax rates in a socialized Britain. He was still wheeling and dealing from Nassau when he died in 1961.

september 2006


This article was written by Eric Nideros and originally appeared in the September 2006 issue of World War II magazine. For more great articles subscribe to World War II magazine today!


2 Responses to “Wartime Shanghai: A Tycoon Triumphs Over the Emporer”


  1. 1
    P.H.Irani says:

    REQ. HISTORY OF MASINA HOSPITAL, ITS TRUSTEES AND THE LEASE DEAD OF THE PROP. URG.

  2. 2
    Tsienwei Li says:

    In August 1937 I was under five. One afternoon my mother was bathing me. A whining sound was heard, we opened the back door and looked eastward, in the direction of the Bund: silhouettes of a mono(?)plane and a fast dropping object were seen, followed by a loud blast.



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