HSBC has survived more than 150 years of turmoil but can it prevail this time as it is squeezed by the superpowers
The Hong Kong & Shanghai Banking Corporation ( HSBC), the UK’s biggest bank, dominates the Hong Kong skyline.
The Norman Foster-designed headquarters of the £100billion colossus sits at the heart of the frenetic Central district, symbolising HSBC’s status as the most powerful financial group in Asia.
With a significant presence in China, it has found itself between a rock and a hard place over the past year in the escalating war of words between China and the US.
Imposing: HSBC’s Norman Foster-designed headquarters sits at the heart of Hong Kong’s frenetic Central district
That position is unlikely to get any easier following the UK decision to ban Chinese telecoms giant Huawei from any involvement in the UK’s 5G infrastructure, a blow to fraught Sino-British relations.
But HSBC has made its allegiance clear as, in recent weeks, Boris Johnson’s Government has flexed its muscles in defence of Hong Kong after China imposed a draconian security law on the former territory.
HSBC supported the People’s Republic’s authoritarian regime, with a statement by Peter Wong, the bank’s Hong Kong-based chief executive for the Asia-Pacific region.
The principle of ‘one country, two systems’ in the deal signed between China and Britain before the Union flag was lowered over the territory in 1997, permitted freedoms unknown on the Chinese mainland.
It was designed to preserve the democratic, legal and regulatory framework which has allowed Hong Kong to prosper and develop as Asia’s most important financial hub.
Until now China has ruthlessly exploited the trust in Hong Kong conferred by its special status. It has used it to raise hundreds of billions, if not trillions, in US dollars by effectively privatising many of its largest and most successful companies on the Hong Kong Stock Exchange.
HSBC’s kowtow to Beijing has aroused high passions in London and Washington. Foreign Secretary Dominic Raab denounced the bank in the House of Commons while the US passed laws allowing sanctions on any Western bank providing services to Chinese officials responsible for the clampdown in Hong Kong.
And if anything should give pause to HSBC’s directors at its headquarters at London’s Canary Wharf it should be this: in 2012 after a Congressional investigation, it was fined £1.5billion by US authorities after settling charges of money laundering for Mexican drug kingpins and sanctions-busting in the Middle East. HSBC was placed on notice that it could lose its American licence. That would seriously threaten operations. The bank operates the main monetary artery which connects Hong Kong to investors and commerce in New York. In 2019, some £8trillion was pumped through this channel with nine of the ten largest Chinese banks using HSBC’s systems.
However, British chairman Mark Tucker is betting that there are limits to the amount of self-harm that London or Washington are willing to deliver to their own financial systems and to trade in defence of political freedoms in Hong Kong.
He is doubling down on China. In my conversations with Tucker, he vehemently makes the point that politics have changed in Hong Kong and China down the ages but HSBC has survived and prospered.
The bank started out as the financial arm of the Peninsular & Oriental shipping company (P&O). It has been established in Hong Kong since 1865, a period covering opium wars, the rise of communism, Mao’s long march and President Nixon’s diplomatic overtures to the People’s Republic in 1971. Its skill in navigating the tides of history has imbued the bank with a sense of invulnerability.
With the political battle over the UK’s relationship with China at boiling point over the role of Huawei, HSBC is deter – mined to push ahead with its China strategy, in defiance of Downing Street, the Commons and at least one top shareholder, the insurer Aviva.
Early this month the bank announced that it is hiring 100 more ‘wealth managers’ as a part of a push into the mainland. Such expansion, when the bank is cutting 35,000 jobs around the world, will alarm China hawks in London and Washington.
It is understandable that with so much economic value – up to 90 per cent of its revenues come from Hong Kong and Asia– HSBC feels it has no choice but to operate under the beady eye of Beijing and its security services.
But when it expressed obeisance to an invasive, undemocratic security law, it overstepped the mark.
Big companies often have to live with hostile regimes but generally are careful not to directly become involved in politics. By siding with China, which has an appalling human rights record, HSBC has done itself enormous damage in Westminster and the City.