In showdown between China and the west, HSBC gets caught in the middle

HSBC, a big global bank based in Britain, has long reveled in and profited from its deep relationship with China.

By Alexandra Stevenson

Like Hong Kong, HSBC has long sat at the crossroads between East and West, a big global bank based in Britain that has reveled in and profited from its deep relationship with China. And like Hong Kong, it is now caught in the middle of a new era of confrontation between Beijing and major Western governments.

In China, HSBC has been accused of “setting traps” to ensnare the Chinese tech giant, Huawei. In Britain, it has been admonished for lobbying on behalf of Huawei.

Straddling neutral ground is no longer an option. HSBC got called out in China for not publicly backing the new national security law in Hong Kong. When the bank eventually expressed support on its Chinese social media account, members of the British Parliament demanded an explanation and urged HSBC to rescind the statement.

Global businesses are increasingly under pressure to pick sides as the United States and its allies target the political and economic agenda of China.

American technology companies like Facebook, Twitter, Google and LinkedIn have pledged to defy data requests in Hong Kong under China’s new security law. Manufacturers have disentangled their supply chains to cut out Chinese companies that the U.S. government has banned over human rights violations or national security concerns. Big banks are scouring client lists to ensure compliance after the United States imposed sanctions on individuals considered to be eroding Hong Kong’s autonomy.

Many multinationals also worry that complying with U.S. law may mean breaking the new Chinese rules in Hong Kong — or cost them access to the second-largest economy in the world. A recent survey by the American Chamber of Commerce found that nearly half of the firms it surveyed are “extremely concerned” about recent developments with the national security law.

“There are multiple tail winds pushing the global business world toward this highly geopolitically sensitive environment where the landscape has shifted fundamentally and you can no longer be agnostic.” said Jude Blanchette, a China scholar at the Center for Strategic and International Studies in Washington. “It is the logical extension of this new paradigm where economic security is now considered national security.”

HSBC and Huawei declined to comment.

HSBC, which now derives most of its revenues in Hong Kong and China, has long navigated politics and profits.

During Japan’s occupation of Hong Kong during World War II, the head of HSBC was forced to sign bank notes for the Japanese government. He also secretly provided aid to military prisoners and bank employees.

As Britain and China negotiated the handover of Hong Kong in the early 1980s, HSBC was viewed with mistrust by the Chinese Communist Party for its role in helping to finance the trade of opium in the late 1880s. In a move that helped it win back Beijing’s favor, it made plans for a splashy new headquarters in Hong Kong.

HSBC also began to lend to the local businessmen who would go on to build the conglomerates that turned the city into a global financial center. As Hong Kong profited from its role as a gateway between China and the west, HSBC’s own business boomed.

But HSBC’s unique standing has become a pitfall. During the anti-government demonstrations last year, HSBC was targeted for its Beijing connections. Protesters smeared red paint on the bronze lions outside the bank’s headquarters and set one on fire.

One of HSBC’s clients, Huawei, has been the major source of political tension for the bank.

The Trump administration put Huawei and other Chinese technology companies on a so-called entity list over national security concerns, which prevents them from using American technology and software. In response, China created its own list and last year, Chinese state media suggested that HSBC be put on it.

As Washington lobbied Western governments to block Huawei from building their 5G networks, HSBC’s chairman, Mark Tucker, held private meetings with advisers to Prime Minister Boris Johnson on behalf of the Chinese company. Local British media and politicians lashed out at HSBC.

One member of Parliament took to Twitter to write about it. “The binary choice being forced on companies like HSBC is not coming from the U.K. We are not asking private businesses to endorse policy or face punishment. We are not threatening to withdraw economic cooperation if a U.K. company fails in a bid,” wrote Tom Tugendhat, a member of the Conservative Party and chairman of Britain’s Foreign Affairs Committee.

Even before the back-channel gestures failed and Britain blocked Huawei, HSBC was in the crosshairs of China’s state-run media. “The HSBC chairman’s warning to Downing Street is far-fetched and absurd, and seems more like a political statement than a business comment,” The Global Times wrote in an editorial on its English website.

In recent days, Beijing has hurled a series of accusations against HSBC for cooperating in the case against the Huawei chief financial officer, Meng Wanzhou, who is in detention in Canada and fighting extradition to the United States.

Huawei is accused of flouting Iranian sanctions and misleading HSBC about its dealings with an Iranian company. Meng’s legal team has argued that Huawei did not hide anything from HSBC about its dealings in Iran.

“Wallowing in degradation and with its reputation at rock bottom, HSBC may struggle to continue to enjoy treatment in China,” one state-controlled newspaper warned. Piling on, other state controlled newspapers accused HSBC of malice and dishonesty.

The People’s Daily accused HSBC of “setting traps” and argued that the evidence filed to the court revealed that the case was “entirely a political case” with “fabricated criminal evidence.”

On its Chinese social media account, the bank offered a simple defense of its cooperation with prosecutors. “HSBC has no malice against Huawei, nor has it ‘framed’ Huawei,” it said in its statement.

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