Multinational corporate executives are keenly watching HSBC’s increasingly perilous tight-rope dance. Goodness knows, they may be next in line to perform.
With apologies to Standard Chartered, London-based HSBC is the face of Hong Kong’s financial industry and is one of the biggest multinational corporations in the city. In an uncomfortable but unavoidable foray into politics, HSBC recently cast its support for Beijing’s “national security law” imposed on Hong Kong.
With that, HSBC—which is short for Hong Kong Shanghai Banking Corp.—has drawn fierce criticism from the U.S. and UK governments for supporting the crushing of political dissent in Hong Kong, and from the Chinese Communist Party (CCP) for its reluctant and delayed support as well as the bank’s previous efforts in cooperating with the U.S. (more on that later).
An Unavoidable Path
For years, HSBC has adhered to the time-honored tradition of major companies saying as little as possible publicly about politics. Privately, executives give assurances to government authorities that their interests are aligned.But that tactic no longer works. While mainland-controlled banks operating in Hong Kong asked their staff members to sign petitions in support of China’s “security law,” HSBC (and Standard Chartered) relented after facing intense criticism from the CCP press for not getting behind the “security law.”
That decision has drawn a rebuke from U.S. and UK politicians. Secretary of State Mike Pompeo on June 9 called HSBC’s decision “corporate kowtowing.” UK politicians, especially Tory MPs, also have criticized HSBC’s move.
It should also be noted that HSBC is just one of the chess pieces in an increasingly tense standoff between Beijing on one hand, and Washington and now London on the other. The CCP is no doubt holding hostage HSBC’s mainland China franchise as a negotiation tool in exchange for the UK’s 5G buildout, which Huawei is bidding for.
To be fair, HSBC had no chance in this fight.
But the bank’s hopeless situation is largely self-imposed. Years ago, HSBC decided to go “all-in” on Hong Kong and China to grow revenues. Fifteen years ago, HSBC’s revenue contributions were diversified, with Europe being the biggest driver, followed by North America and Asia, according to research by the Financial Times. It also had a small South America franchise. It was a true global bank.
‘Far From Safe’
But HSBC’s subservient attitude toward the CCP may not yet pay off.Beijing sees HSBC as an enemy for having cooperated with U.S. authorities in the Meng Wanzhou case. The bank’s internal investigation on the Huawei CFO uncovered Huawei’s dealings with Iran, which eventually led to Meng’s arrest.
U.S. prosecutors allege that Meng defrauded HSBC and other banks by misrepresenting Huawei’s relationship with several front companies that were set up to do business with Iran, in violation of U.S. sanctions.
Now the CCP claims that HSBC may have “set up traps” to ensnare Meng, according to an op-ed in the Global Times, an English-language mouthpiece of the CCP. The piece speculates that if those charges are true, then HSBC is “far from safe” and may “face sanctions under Chinese law.”
What transpired isn’t important for mainland Chinese prosecutors. But corporate leaders must understand that the CCP will seek to punish any company or individual it wants to, even those who have cast their lot with Beijing.
It’s becoming increasingly clear that the Chinese government’s capriciousness and China’s lack of fair judiciary present huge risks to multinational companies doing business in China.
The ongoing HSBC saga offers a warning.
