HSBC Holdings PLC’s endorsement of a proposed Chinese security law in Hong Kong has begun to widen fault lines over the British institution’s relationship to the city’s masters in Beijing.
The bank’s statement on the eve of the June 4 anniversary of the 1989 crackdown in Tiananmen Square of a looming security law heightened worries among both executives and the rank-and-file over staff conflict, as well as potential blowback on the streets of Hong Kong.
It’s an ever more precarious balancing act for Chairman Mark Tucker, who needs to avoid drawing the ire of clients, employees, investors and policymakers while maintaining access to the world’s second-largest economy. The lender, which was born in the 19th century as the Hongkong and Shanghai Banking Corp. and makes 40 percent of its revenue in Hong Kong and mainland China, is exposed like few other Western companies to a standoff between Beijing and Washington.
The fallout underscores the unrelenting pressure from both sides of the political divide. British lawmakers slammed the bank, calling its decision to back Beijing shortsighted and cynical. In contrast, official Chinese media warned that London-based HSBC needs to toe the line to keep its business on track.
"We still need to watch HSBC’s moves in the future,” according to a commentary in the Global Times, a Communist Party tabloid. "There’s a bottom line that HSBC can’t cross, otherwise the bank could lose the China market.”
HSBC wasn’t alone. Standard Chartered PLC, along with businesses including Jardine Matheson Holdings Ltd. and Swire Pacific Ltd. and tycoons such as Li Ka-shing and Michael Kadoorie have come out in support of China’s proposal in recent weeks even as a poll showed broad public opposition.
In Hong Kong, where employees have focused on steering the lender through an economic upheaval after the outbreak of the coronavirus, the bank was put on the spot by the city’s former leader, Leung Chun-ying, who is also vice chairman of the Chinese People’s Political Consultative Conference, the nation’s top political advisory body, a post that qualifies him as a state leader. He blasted it for not publicly supporting China’s plan.
"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,’” an HSBC spokeswoman said.
There was disappointment in the Hong Kong offices, where it employs 22,000 people, that the firm caved to the political pressure, according to employees interviewed by Bloomberg News, who asked not to be named discussing a sensitive subject.
The situation is getting increasingly politicized, with the bank being attacked from all sides, said a Hong Kong-based employee surnamed Wong, who has been at the firm for more than five years. More questions are being asked by mainland Chinese clients about personal political positions, Wong said.
The decision to publicly state HSBC’s stance was taken by top management on the mainland, in response to growing pressure after Leung’s remark and backlash in the nation’s official media, according to two people familiar with the matter. HSBC is also still dealing with the fallout from cooperating with a U.S. probe into Huawei Technologies Co., making it even more important to stamp out any new controversies.
In contrast, mainland staff expressed satisfaction toward Asia chief Peter Wong’s show of public support for the legislation that would ban subversion, secession, terrorism and foreign interference in the former British colony. Wong is also member of the CPPCC, the political advisory body.
One employee said there was relief at finally being able to give an answer to clients on the bank’s position on the issue. HSBC has about 8,000 staff on the mainland, of whom all but a few dozen are local hires.
So far, there have been no signs of attacks on HSBC branches in Hong Kong, but there have been renewed calls on social media for customers to close their accounts. The bank is still restoring the two iconic bronze lion statues that sit outside its main office after they were attacked by protesters in January following a move by the lender to close an account used by a group that helps the pro-democracy movement.
Critics say pressure on companies will backfire on the local economy and undermine Hong Kong’s appeal as an international financial and commercial hub.
"A financial institution could make its own assumption and risk evaluation on upcoming legal or even government change,” said James To, an elected member of the Legislative Council, where he sits on the financial-affairs panel. "But that should remain their internal affair, instead of having to declare it out loud.”
Democracy activists are also calling for support from the business community.
Joshua Wong, a leading campaigner, said in a Bloomberg Television interview that he wants to engage corporate leaders since HSBC’s decision "implies how Hong Kong’s business companies and economic freedoms are being threatened by Beijing.” Media tycoon and pro-democracy advocate Jimmy Lai said on Twitter that "it is the cost the world pays turning a blind eye to the #CCP bully.”
U.K. opposition lawmakers called on HSBC and Standard Chartered to rescind their support for the security law. The banks’ positions are "completely at odds with the values framework in which financial institutions should be operating,” the Labour Party’s Lisa Nandy, who is shadow foreign secretary, and Anneliese Dodds, who is shadow chancellor, said in a letter.