Two major banks with listings in London and deep Asian connections both supported the new national security law that has been imposed on the former British colony by China, a move that has been condemned in the UK, the US and other countries.

HSBC and Standard Chartered, UK-listed banks with historic connections to Asia and big wealth management players, have backed mainland China’s new security laws for Hong Kong. The move has drawn fire from UK and US politicians. 

HSBC said in a statement: “We respect and support laws and regulations that will enable HK to recover and rebuild the economy and, at the same time, maintain the principle of ‘one country two systems’.”

Standard Chartered said: “We believe the national security law can help maintain the long-term economic and social stability of Hong Kong. The ‘one country, two systems’ principle is core to the future success of Hong Kong and has always been the bedrock of the business community’s confidence. We hope greater clarity on the final legislative provisions will enable Hong Kong to maintain economic and social stability. We remain positive that Hong Kong will continue playing a key role as an international financial hub and Standard Chartered is committed to contributing to its continued success.”

The comments follow a statement by the Hong Kong Association of Banks, on 26 May, supporting the new security law. “A stable business environment is a key prerequisite for the sustainable development of Hong Kong as an international financial centre. The Hong Kong Association of Banks (HKAB) believes that after the legislative provisions and implementation details of the national security law in Hong Kong are promulgated, the market and general public will have a better understanding of the contents of the legislation, investor confidence be strengthened, and growth momentum be regained in all industries.”

Not everyone is on board. A report by Reuters quoted Japanese bank Nomura saying that it was "seriously" examining its presence in Hong Kong.

Autonomy
Beijing’s move to impose a national security law on the jurisdiction – the former British colony – arguably threatens to end the autonomy of Hong Kong before it was due to be fully absorbed by China by 2047. The law is regarded as a threat to free speech and other civil liberties. Wealth management figures have told this news service that some HNW individuals and firms may increasingly seek to relocate. 

The UK signed an agreement in the 1980s – under the Margaret Thatcher administration – agreeing with Beijing to transfer Hong Kong to China by 1997, as duly happened under the “Basic Law”. Under that structure, there is a "one country, two systems" principle stating that the governance and economic system practised in mainland China are not extended to Hong Kong.

Protests erupted a year ago in Hong Kong over attempts by the local government to extradite people to the mainland. Weeks of protests ended in a stalemate; the start of the COVID-19 pandemic temporarily appeared to put controversy on hold. The US, Australia and the UK have all criticised Beijing’s steps, adding to tensions over US-China trade, and other issues such as spying and human rights violations.

Banks are typically reticent to comment on political issues. Such is the importance of Hong Kong as a financial hub – important for IPOs for example – that the banks’ willingness to speak out is telling. 
 

Political frowns
The UK government has already vowed to consider extending UK citizenship rights to eligible Hong Kong residents, a major step. Yesterday, UK and US politicians criticised the banks. 

“I wonder why HSBC and StanChart are choosing to back an authoritarian state’s repression of liberties and undermining of the rule of law,” Tom Tugendhat, UK Conservative Party member and chair of the Foreign Affairs Committee tweeted (source: Reuters).

Florida senator Rick Scott tweeted that HSBC had “chosen profits over human rights.” (Source: Reuters)

Asked about the position taken by both banks, a spokesman for British Prime Minister Boris Johnson said (various media reports): “If China proceeds with this security legislation, it would be in direct conflict with its obligations under the Joint Declaration ... our message is both clear and shared by our international partners”.