By assets, HSBC is the world’s sixth-largest bank, proudly claiming 40 million customers in 64 countries and territories.
But HSBC has a big red problem. The bank must balance international business with the retained favor of a Chinese regime that has no regard for international norms. And from Communist China’s perspective, only HSBC’s absolute loyalty is enough to deserve its gratitude. This catches the British-headquartered financial giant between the rock of its global presence and the hard reality of Xi Jinping’s rule. For HSBC in particular, it’s no small concern. As the Financial Times notes, Hong Kong accounts for more than half of HSBC’s annual profits. Take away its Hong Kong presence, and the bank faces catastrophe.
HSBC has tried to protect itself here by supporting China’s new Hong Kong security law. That law shreds Hong Kongers’ rights and Beijing’s treaty obligations under the Sino-British joint declaration, but HSBC isn’t terribly concerned. Unlike U.S. banks, which have remained largely silent on the law (a pathetic enough choice), HSBC has signed a petition endorsing it.
Such submission hasn’t earned HSBC much favor. China’s primary Western focus propaganda outlet, the Global Times, has published repeated editorials in recent weeks attacking the bank. China is infuriated over what it claims is HSBC’s role in facilitating the arrest of Huawei executive Meng Wanzhou. Meng is currently under house arrest in Canada, challenging an extradition request by the United States.
On Monday, the Global Times published another rant on HSBC’s need to pay penance.
“Despite its recent efforts to pander to China by vocally backing the national security law for Hong Kong,” the latest editorial disdainfully observes, “many believe that the bank’s precedent of bending its business principles and ethics to follow the U.S. government’s order suggests it is untrustworthy … some observers believe there is a possibility that the bank may betray certain Chinese companies again in the future.”
This language; “untrustworthy,” “betray,” is a window into the absolute fealty demanded by Xi’s Communist Party. But the Global Times wasn’t done. “HSBC’s case could serve as a warning,” it wryly noted, “to other companies that it’s not that easy to rebuild trust in China.” Translation: Those who deal with China must do so on their knees.
It’s important not to observe this dynamic without context. After all, China’s approach to HSBC is just one example of its broader all-or-nothing strategy. Just as China demands intellectual property transfers from foreign technology firms in return for market access, it demands submission from its neighbors on issues such as the South China Sea territorial dispute. And where Beijing sees something it doesn’t like, it lashes out or opens concentration camps.
Compromise, put simply, is not a word in Xi’s little red rule book.
HSBC had better wake up to this reality and more actively diversify out of Hong Kong and the Chinese market. It’s clear that Xi is committed to his pursuit of global hegemony. So at some point or later, HSBC’s customers outside China will force it to figure out that Xi’s price tag is too high.
