HSBC Doubles Down on China, Asian Markets Amidst Criticism by US, UK

Former Secretary of State Mike Pompeo addresses the Conservative Political Action Conference held in the Hyatt Regency in Orlando, Fla., on Feb. 27, 2021. (Joe Raedle/Getty Images)
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By Fan Yu

Commentary

After aligning with the Chinese Communist Party (CCP), there’s no turning back.

Having faced criticism in the UK and the United States for endorsing the national security law forced upon Hong Kong by the CCP, global banking giant HSBC is now doubling down on China and the Asian market.

The London-based international bank announced during its fourth-quarter earnings call on Feb. 23 that it would accelerate its “pivot to Asia” by retrenching its retail presence in the United States and investing billions in growing its footprint across Asia, including mainland China, Hong Kong, Singapore, and India.

Peter Wong, the group’s chief executive in Asia Pacific region, outlined a $6 billion investment in Asia over the next five years, with a focus on growing its wealth management and international wholesale business. The bank emphasized Hong Kong, mainland China, India, and Singapore as key drivers of future growth, according to a February presentation to investors.

HSBC is sending several senior executives to the region to lead the effort. Those likely to be relocating to Hong Kong include co-head of global banking and markets Greg Guyett, chief executive of global commercial banking Barry O’Byrne, and chief executive of wealth and personal banking Nuno Matos, according to a Financial Times report citing people familiar with the bank’s plans.

Alongside its plans to expand its Asian presence, HSBC is retrenching from the U.S. market. The bank is set to sell or close its roughly 150 commercial bank branches in the United States, according to a Reuters report.

HSBC’s exit from the U.S. market marks the end of a years-long effort to turn around its struggling U.S. retail arm. Last year, it had already shuttered close to 100 branches.

Overall, the group reported relatively poor 2020 financial results, driven by negative impacts from the CCP virus pandemic. Revenues for 2020 were $50.4 billion, a 10 percent decline from 2019. Profits before tax dropped 34 percent to $8.8 billion, according to HSBC’s full-year 2020 strategic report.

Doubling Down on China

HSBC has drawn criticism from U.S. and UK lawmakers for supporting CCP policies and facilitating Beijing’s oppression of political dissidents.

Last year, the bank endorsed the controversial “national security law” in Hong Kong, a law imposed on the city by Beijing and would be used to crush political dissent to Beijing’s one-party rule.

Late in 2020, it froze the bank accounts of Ted Hui, a former Hong Kong pro-Democracy lawmaker now in exile, and the accounts of the pastor of Good Neighbor North District Church, a church known to have worked with pro-democracy protestors in Hong Kong. And back in 2017, HSBC also refused to open a personal bank account for artist Ai Weiwei, a Chinese political dissident.

HSBC’s CEO, Noel Quinn, was grilled in a UK parliamentary foreign affairs committee hearing in January regarding its freezing of dissident accounts. Quinn said the decision to close Hui’s account was driven purely by the need to comply with local laws.

Given HSBC’s history—and the fierce banking competition in the United States and Europe—it makes sense for the bank to go “all in” on China, and more broadly, Asia in general. It doesn’t hurt that Carrie Lam, Hong Kong’s chief executive, has recently praised the bank and said she would “love” for HSBC to expand its presence in the city—though Lam likely would welcome any business to expand in her city after the recent political turmoil sapped Hong Kong’s status as a global business hub.

The bank has increasingly become Asia-focused even before the acceleration of the “pivot to Asia” strategy. 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 American franchise. It was a true global bank. By 2019, Asia—mostly Greater China—made up more than 50 percent of its revenues, followed by Europe, and its presence in North and South America have dramatically dwindled.

The bank didn’t respond to a request for comment by press time.

Drawing CCP’s Ire

In mainland China, HSBC’s subservient attitude to the CCP hasn’t immediately paid off.

The bank has been criticized by Chinese state media for assisting in the arrest of high-profile Huawei CFO Meng Wanzhou. The bank’s internal investigation on the Huawei CFO uncovered the tech giant’s alleged dealings with Iran, which eventually led to Meng’s arrest in Canada.

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.

But the CCP claims that HSBC may have “set up traps” to ensnare Meng, according to a 2020 op-ed in hawkish state-run outlet Global Times. Given that Meng is still under house arrest in Vancouver, it’s unlikely that HSBC has much goodwill with the CCP at the moment. In February, Meng sued HSBC in a Hong Kong court in an effort to procure documents her defense team believes could fight a U.S. extradition.

Wong, HSBC’s Asia chief executive, is a member of a political advisory body to the CCP, according to the Financial Times. He was apparently instrumental in resolving the rift between the bank and Beijing following Meng’s arrest.

Going forward, HSBC will likely find itself caught in the middle of the political rift between the Chinese regime and the West. Both the United States and Europe have been growing increasingly hawkish on the regime in recent years, and Beijing has shown that it’s unwilling to back down. In the January parliamentary hearing, some MPs brought up the possibility of HSBC breaking up into two, an idea that CEO Quinn dismissed.

There is potentially even more pressure from the Chinese side. In January, Beijing issued new rules to allow Chinese courts to punish global companies operating in China for complying with “unjustified” foreign laws and sanctions. Even if it does not want to, HSBC may be forced to pick sides in the near future.

And given its recent political and business decisions, it’s becoming increasingly clear which side HSBC will pick in this confrontation.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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