On a rainy Saturday at the end of May outside the Wan Chai subway station in Hong Kong, HSBC’s Asia-Pacific chief executive Peter Wong Tung-shun added his name to a petition in support of the Chinese legislature’s plan to enact a national security law for the city.
The photograph of Wong, wearing a face mask and clad in his weekend casuals, was shared on the bank’s account on China’s popular Weibo social media network, setting off an uproar in Washington and London. US Secretary of State Mike Pompeo chided the bank for its “corporate kowtow” to Beijing, while HSBC’s 12th largest shareholder Aviva Investors Trust Services said it’s “uneasy” about the bank’s action.
The furore highlights the tightrope that multinational companies must walk in an increasingly polarised world when it comes to China, even for a century-old bank that traces its roots to Hong Kong and Shanghai during British colonial days. It’s particularly alarming for HSBC, operating 170 outlets in more than 50 cities - the biggest overseas lender - in mainland China, which claims Asia as the biggest regional contributor to its operating income.
“That interconnectivity of East and West is a huge part of their franchise strength,” said Fahed Kunwar, who recommends investors “sell” the bank, at the stock brokerage Redburn (Europe). “Really, the issues right now are very, very threatening to them. They’re kind of caught in a geopolitical tug of war between the US and China.”
The run-up to HSBC publicly supporting the law showed the pressure Beijing can exert – both directly or through surrogates – on Western companies seeking the right to do business in the world’s second-biggest economy and the sometimes uncomfortably close intermingling of politics and business in the mainland.
Wong, who has run the bank’s Asia-Pacific business since 2010, is one of the 124 members of Hong Kong’s delegation to the Chinese People’s Political Consultative Conference (CPPCC), an advisory body to the Chinese legislature that includes Communist Party cadres and non-members, business leaders, the press, religious leaders and representatives from Hong Kong and Macau.
On May 22, the day after the Chinese legislature said it would introduce a security law to quell attempts at secession and subversion in the restive city, more than 80 members of the Hong Kong delegation gathered in the Chinese capital. Wong, a CPPCC delegate since 2018, did not travel to Beijing, adhering with travel restrictions during the coronavirus pandemic.
Led by the city’s former Chief Secretary Henry Tang Ying-yen, they declared at a press conference on state broadcaster CCTV that “all the CPPCC members in Hong Kong firmly endorse and support” a draft resolution by the National People’s Congress, China’s top legislative body, for the security law.
Hong Kong’s government – led by Chief Executive Carrie Lam Cheng Yuet-ngor – put on a full-court press for the city’s biggest businesses to publicly come out in favour of the law, and it soon became clear that Wong, as a member of the top political advisory body to Beijing, had to publicly offer his support, according to a person familiar with the bank’s thinking.
That left HSBC with almost no choice as one of three lenders authorised to issue currency notes in the city, but to come out in favour of the measure, the person said.
Wong, who is not a Communist Party member, soon learned that all members – even those who had not attended – were expected to publicly express their support for the legislation, the person said.
It was unclear if the missive came directly from Beijing’s liaison office in Hong Kong or through the committee itself, but the office wanted CPPCC delegates to provide evidence that they had signed the petition, the person said.
For his part, Wong has stayed quiet on the matter, other than a June 3 interview with state news agency Xinhua, in which he said HSBC “respects and supports any laws that stabilise the social order in Hong Kong and revitalise economic prosperity and development”. Wong declined to comment for this article through a spokesman.
Like many of its banking rivals, HSBC has tried to avoid political battles in the past. The first two acronyms of the bank’s name and brand reflect its root in Hong Kong and Shanghai, established in the two cities 155 years ago in March.
In those days, Wong would have been known as a taipan, a colonial-era term for the most prominent captains of industry. Still, bank executives often lived by the principle that the lender considered itself a “guest” in whichever country it operated in and would act as such.
The shifting winds recently, however, made it increasingly difficult for HSBC to avoid being viewed as taking a side in political matters, particularly as a row intensifies between Beijing and Washington DC, analysts and company insiders said.
Even as the national security law was adopted this week, the US Congress passed legislation that would impose sanctions on foreign banks that engage in “significant transactions” with officials deemed to have impeded Hong Kong’s autonomy, including making it more difficult for those banks to engage in foreign exchange transactions involving US dollars. US President Donald Trump has not said whether he will sign the bill into law.
The escalation of the geopolitical tensions between China and the US poses the risk of a “paradigm shift” in global trade, capital flows and financial markets, according to Iacopo Dalu, a research analyst at Janus Henderson Investors.
“HSBC has built an enviable history of success at the centre of this nodal structure,” he said. “With changes in the status quo increasingly possible, HSBC has to ask itself existential questions around its global footprint and positioning.”
The success of the bank continues to be tied to Asia decades after it moved its headquarters to London in 1993.
Asia – with Hong Kong at the centre – is now the lender’s biggest profit driver following the evolution of the company’s strategy since 2010. The bank will become even more dependent on the region under chief executive Noel Quinn’s latest strategy pivot.
On Friday, HSBC said it had hired about 100 wealth managers for a new digital wealth planning and insurance service through its mainland life insurance joint venture and would start a new fintech company to support its China businesses, its latest new investments in the mainland.
The threat became clearer as Beijing’s political surrogates called out the bank for failing to fall in line in the national security controversy, while Chinese media suggested its franchise in China could be in jeopardy.
On May 29, Leung Chun-ying, the former Hong Kong Chief Executive and vice-chairman of the CPPCC, blasted HSBC on his Facebook page for its silence on the security law more than a week after it was announced.
“Neither China nor Hong Kong owes HSBC,” Leung said in a fiery post. “HSBC’s business in China can be replaced by banking in China or other countries overnight.”
He called on the Hong Kong government, businesses in the mainland and the city and members of the CPPCC, to “protect” themselves and not be held hostage like Huawei Technologies Company and to let HSBC “know which side their bread is buttered.”
It was the latest in a flood of online criticism HSBC has endured since it was revealed last year that the bank had provided information to US prosecutors as part of an inquiry into Huawei, which later led to the arrest of Meng Wanzhou, the chief financial officer of the telecommunications company and its founder’s daughter.
The bank went on a charm offensive in Beijing last summer, quietly telling Chinese officials at the time that it had no choice but to comply because it had an obligation under US financial regulations to do so, according to bankers familiar with the matter.
That campaign did not stop the online vitriol. On June 19, the bank pushed back at what it said were “groundless” rumours about the future of its mainland China business, saying in a social media post that China remained “an important strategic market” for the lender and it would continue to invest in its mainland business.
To say there was a lot riding on Wong’s signature would not be an understatement.
Dressed in a pink striped polo shirt and sand-coloured trousers with an umbrella in his hand, Wong, with a photographer in tow, signed a petition in support of the national security law outside the Wan Chai subway station on May 30.
The petition drive was organised by the United Front Supporting National Security Legislation, a Beijing-loyalist group, and reportedly includes signatures from nearly 3 million people. The city’s chief executive Lam was photographed when she added her signature two days earlier.
The photograph of Wong’s signing, complete with a close-up of his name in long hand, was distributed on June 3 on HSBC’s account on Weibo, the dominant social media network in mainland China with more than 430 million monthly active users in 2018, along with a carefully worded statement in Chinese.
“We respect and support laws and regulations that will enable Hong Kong to recover and rebuild the economy and, at the same time, maintain the principle of ‘one country, two systems’,” HSBC said on Weibo, reiterating that its stance is consistent with its membership in the Hong Kong Association of Banks (HKAB), enunciated on May 26.
The writing on the wall became clear for HSBC when the city’s government – including all of its agencies – pressed major employers in Hong Kong to publicly support the national security bill, the person said.
“I don’t think Hong Kong business had a choice,” a senior executive with close ties to HSBC said about the bank’s decision.
The proof in the pudding will be “what [the law] says, how it is implemented and how it is administered and applied,” the executive said, ahead of the text of the law being made public.
Since the law was announced, Jardine Matheson Group, the owner of the Mandarin Oriental hotel, Swire Pacific, the parent of the city’s de facto flagship carrier, and Li Ka-shing, one of Asia’s richest men, all made public statements of support, along with the city’s major developers.
In a June 16 internal memorandum, Greg Guyett, HSBC’s co-head of global banking and markets in London offered his colleagues advice on what he had been telling clients: Hong Kong has been a “critical bridge” between East and West “through calm and through difficult geopolitical decisions”.
Despite the hubbub in political circles, investors have said little publicly about the company’s decision.
Of more than two dozen of HSBC’s biggest investors contacted by the Post, nearly all declined to comment about the decision, saying either they did not discuss individual holdings or they bought its shares as part of an index of stocks.
Aviva Investors Fund Services, which owned 0.4 per cent of HSBC as of May 28, was one of the few to speak out, questioning HSBC’s decision to support the law without knowing how it would be applied.
Asset manager Federated Hermes also said this week it was engaging with the bank on behalf of institutional investors to “fully understand” the bank’s position.
The question for HSBC may come down to whether customers and investors decide to vote with their feet.
If HSBC wants to continue doing business in the West, it will be scrutinised in accordance with Western values, particularly when it comes to human rights and democracy, said Prem Sikka, the chairman of accounting and finance at the University of Sheffield’s Management School.
“They have decided, in some ways, that Western sentiments matter less and their profits matter more,” said Sikka, adding that he is considering moving his current account from HSBC after decades with the bank.
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