Getting caught between two sovereign countries is never a fun experience for a bank, even if the worst that happens is that the lesser of them relieves you of the obligation to do business there. But China is not Argentina—certainly not if you are the Hongkong and Shanghai Banking Corp.—nor is there really a lesser power in a dispute between China and the United States. Oh, and did we mention that we’re talking about HSBC, which quite frankly has enough problems without finding itself a pawn in the growing cold war between the world’s two superpowers and largest economies?
HSBC was already walking a very fine line, forced by business necessities and amorality to side with China over its decision to tear up its 1997 treaty with the U.K. and any pretense to human rights in one of its namesake cities, a move condemned by and ratcheting up tensions with the U.S. It also probably couldn’t have foreseen the current unpleasantness when, back in 2016, the Justice Department asked for some information about a little Chinese telecommunications giant and then-HSBC client, Huawei. Not that it could have done very much even if it had, since thanks to a 2012 money laundering settlement, the DoJ pretty well had HSBC over a barrel.
Anyway, this cooperation with U.S. authorities four years ago is all of a sudden big news in China, with government mouthpiece the People’s Daily accusing HSBC—which, again, derives most of its revenue from China—of “setting a trap” for Huawei in conjunction with the DoJ, which trap led Huawei to allegedly violate U.S. sanctions and eventually to another of the issues exacerbating U.S.-China tensions, the arrest and proposed extradition of Huawei CFO Meng Wanzhou.
The U.S. has sought to ban Huawei from its own and other countries’ telecommunications networks and is seeking the extradition from Canada of Ms. Meng for allegedly misleading banks about ties between Huawei and an affiliated company in Iran. The banks, which included HSBC, cleared hundreds of millions of dollars in transactions that potentially violated international sanctions, the U.S. alleges.
Things are especially dire for HSBC in that it can’t simply retreat to its nominal home base, London, given that the U.K. has rather forcefully thrown in its lot on matters Hong Kong and Huawei with the Trump Administration.
So what is a giant multinational bank with especially deep ties to China supposed to do in such a situation? Why, scramble to have it both ways.
In the statement, first released on Chinese social media and geared toward a local audience, HSBC said it wasn’t involved in the DOJ’s decision to investigate Huawei or to arrest Huawei finance chief Meng Wanzhou and doesn’t have any hostility to the company. It said it relies on communities understanding that international banks must follow international rules, and that they should consider “the values and contributions of their services provided to international customers and local markets….”
Huawei lawyers alleged this year in Canada that the DOJ’s grip on the bank gave HSBC a motive to present Huawei as the mastermind of its sanctions violations. HSBC denies that…. In its statement Saturday, HSBC said it is “rooted in China” and a “supporter of its economic and social development.”