HSBC's political tightrope act in Hong Kong opens up internal fault lines

HSBC’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 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 policy makers while maintaining access to the world’s second-largest economy. The lender, born in the 19th century as the Hongkong and Shanghai Banking Corp., makes 40% of its revenue in Hong Kong and mainland China, exposing it 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 short-sighted 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 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.

‘Politicised’

The situation is getting increasingly politicised, 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 the fallout from cooperating with a U.S. probe of Huawei, making it even more important to stamp out any new controversies.