HSBC treads a fine line between angering China and alienating the west
HSBC’s chief executive, Noel Quinn, will be steeling himself
for a grilling on Monday, as the bank’s support for China’s controversial
security laws in Hong Kong and alleged role in the arrest of a Huawei executive
threaten to dominate its second-quarter results.
The company, which has its global headquarters in London but
makes the majority of its profits in Hong Kong and China, will be the last
major UK bank to publish earnings next week. But while HSBC is likely to report
Covid-19 loan loss charges worth $2.7bn (£2bn) – more than the $2.5bn (£1.9bn)
it is expected to make in pre-tax profits – the impact of the virus will be one
of the easier topics to tackle as the bank juggles competing geopolitical
controversies.
Quinn, an HSBC lifer who formally took over as chief
executive in March, is likely to choose his words carefully. HSBC has
traditionally remained neutral on China, but it was on Quinn’s watch, in early
June, that the bank gave its backing for Beijing’s new rules. It said: “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’s Asia Pacific chief executive, Peter Wong, signed
a petition supporting Beijing’s new rules.
The message immediately sparked controversy, with
politicians in London and Washington condemning the bank’s support for the
anti-democratic laws which, critics said, would undermine Hong Kong’s autonomy
under the one country, two systems framework.
Labour frontbenchers chastised HSBC, saying that the laws it
had openly backed violated joint declaration treaty commitments between the UK
and China, and limited freedoms for Hong Kong citizens. They also warned that
the bank risked being the subject of boycotts similar to those aimed in the
1980s at companies that continued to do business in South Africa during the
apartheid era.
The foreign secretary, Dominic Raab, later told parliament
that the rights and freedoms of Hong Kong citizens “should not be sacrificed on
the altar of bankers’ bonuses”.
In Washington, the House of Representatives passed
legislation targeting key Chinese officials, putting banks who do business with
Chinese authorities at risk of sanctions. This came weeks after the US
secretary of state, Mike Pompeo, called HSBC’s endorsement of the security law
a “corporate kowtow”.
Pompeo claimed HSBC’s efforts had been in vain and earned it
no respect in Beijing, after China reportedly threatened to punish the bank if
the UK blocked technology firm Huawei from involvement in building its 5G
network. He warned that HSBC would continue to be used as political leverage by
the Chinese Communist party.
The tit-for-tat retaliation between the west and Beijing
continues, and HSBC is still caught in the middle, despite remaining tight-lipped.
In July, China’s Global Times newspaper – a hawkish state mouthpiece – said
China would counter UK moves to suspend an extradition treaty with Hong Kong by
targeting companies such as Jaguar Land Rover and HSBC.
Last week, HSBC was forced to rubbish claims by Chinese
state media that it had framed Huawei and been an accomplice in US efforts to
arrest its chief financial officer, Meng Wanzhou, in Canada in late 2018. In
its statement, posted on the WeChat Chinese social media platform, the bank said
it had handed over documents to the US Department of Justice only after it was
ordered to do so.
HSBC is now walking a precarious line between offending
China – which is its most lucrative market – and losing the support of the UK
and other western states.
Few of Quinn’s banking rivals would fancy being in his
shoes.
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