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HSBC, the London-based bank with a large presence in Hong Kong, is becoming further ensnared in tensions between Beijing, the U.S., and the U.K.
On Tuesday, U.S. Secretary of State Mike Pompeo said the U.S. “stands with our allies and partners” against Beijing’s “coercive bullying tactics” toward HSBC. With his statement, Pompeo was referring to reports that HSBC executive Mark Tucker warned U.K. Prime Minister Boris Johnson that the Chinese government may punish HSBC if the U.K. decides to ban Huawei, the Chinese tech giant, from building the U.K.’s 5G networks.
“The [Chinese Communist Party’s] browbeating of HSBC, in particular, should serve as a cautionary tale” in relying on Beijing, Pompeo said.
Indeed, HSBC seems stuck between Beijing and a hard place. Governments and investors in western countries see the bank as being far too cozy with the Chinese government. But in China, the bank is being seen as not supportive enough of Beijing’s interests abroad.
National security law scares investors
Last week, HSBC’s Asia head Peter Wong publicly declared support for Beijing’s new national security law in Hong Kong.
Beijing says that the law, which may to go into effect as early as August, will target only select individuals in Hong Kong who threaten China’s national security via subversion, secession, terrorism or foreign interference.
“The legislation targets only a very small number of people whose behaviors gravely jeopardize national security,” said China’s foreign ministry spokesperson Hua Chunying at a press conference on Monday.
The U.S., U.K., and other governments have denounced the law, saying it risks undermining the city’s relative autonomy from Beijing and the ‘one country, two systems’ legal framework that has defined the city’s relationship with the mainland since it was handed over from the U.K. to China in 1997. The details of the law have yet to be released, but it has already sparked fears that Hong Kong’s status as a global financial hub may be under threat, and some 30% of American businesses in Hong Kong are already preparing to scale down their operations in the city.
At her Monday press conference, Hua cited HSBC’s support of the law as a “voice of confidence” that Hong Kong’s business environment won’t be hurt by Beijing’s new policy.
“There is no need whatsoever for foreign investors and the law-abiding Hong Kong residents to worry,” she said.
However, at least one major HSBC investor is concerned.
On Tuesday, the U.K. asset management firm Aviva Investors, which is a top-20 shareholder in HSBC, expressed alarm over the bank’s support for the law.
“We are uneasy at the decisions of HSBC and Standard Chartered to publicly support the proposed new national security law in Hong Kong without knowing the details of the law or how it will operate in practice,” David Cumming, chief investment officer for equities at Aviva Investors, said in an emailed statement, according to the Nikkei Asian Review.
Yet, as those in the west grow wary of HSBC’s support of the central government’s new law, some in mainland China are questioning whether HSBC is devoted enough to Beijing.
The Chinese nationalist-tabloid the Global Times said on Tuesday that HSBC’s support of the law was “late,” and the bank held a “lingering ambiguous attitude” towards the new policy.
In his statement, Pompeo said China’s new alleged threats against HSBC, even after the company’s public support of the law, should serve as a warning for businesses and countries working with Beijing.
“[Wong’s] show of fealty seems to have earned HSBC little respect in Beijing, which continues to use the bank’s business in China as political leverage against London,” Pompeo said.
HSBC and Huawei
Beijing’s new alleged threats against HSBC over Huawei’s contract in the U.K. have also revived previous claims that the London bank colluded with foreign authorities against the Chinese tech giant.
In 2016, HSBC launched an investigation into its own business with Huawei over Washington’s concerns that the Chinese tech giant had covered up its dealings in Iran in violation of U.S. sanctions. HSBC presented its findings to the U.S. Department of Justice in 2017, which the U.S. government then used to bring criminal charges related to the sanctions violations against Huawei’s chief financial officer Meng Wanzhou.
Meng, who is also the daughter of Huawei CEO and founder Ren Zhengfei, was detained by Canadian authorities in December 2018 on extradition orders to the U.S. Shortly thereafter, U.S. authorities announced federal charges against Meng for facilitating Huawei’s business in Iran via an “unofficial affiliate” called Skycom. Huawei sold its stake in Skycom in 2007, but the U.S. alleges that Huawei maintained control of the organization and used it to sell millions of dollars of telecoms equipment in Iran. Huawei denies the allegations.
Meng remains under house arrest in Vancouver while fighting the extradition. On May 27, Canadian courts denied Meng’s most recent appeal to dismiss the charges.
Meng’s case has become a sticking point between Huawei and HSBC.
In February, Huawei accused HSBC of cooperating with the American government’s efforts to “depict Huawei as the mastermind of HSBC’s [own] sanctions violations.” Huawei also said that HSBC misled U.S. authorities about Huawei’s ties to doing business with Iran. HSBC denied the allegations, and said the bank “factually responded to the DOJ’s requests for information.”
Nonetheless, HSBC’s role in the Meng Wanzhou affair, combined with its perceived wavering support for Beijing’s national security law in Hong Kong, will make the bank “far from safe” from government reprisals, according to Chinese state media.
For now, the U.S. is using the HSBC saga as additional firepower in its ongoing battle with China’s leadership regime. “Beijing’s aggressive behavior shows why countries should avoid economic over-reliance on China and should guard their critical infrastructure from [Chinese Communist Party] influence,” Pompeo said.
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