China’s ambassador to the United Kingdom, Liu Xiaoming, responded this week by accusing the country of “gross interference” in Hong Kong and saying any treatment of China as an enemy is “completely wrong.”
HSBC’s relationship with both countries makes it an obvious target as relations worsen, according to Willy Lam, an adjunct professor for the Center of China Studies at the Chinese University of Hong Kong.
Split between two worlds
HSBC was founded in 1865 by Scottish businessman Thomas Sutherland, who took inspiration from his home nation’s flag to create the bank’s iconic red and white hexagonal logo.
Until the 1990s, it was generally referred to simply as “Hong Kong bank,” according to historians David Kynaston and Richard Roberts, who tracked the company’s rise in the book, “The Lion Wakes: A Modern History of HSBC.”
It once even acted as Hong Kong’s unofficial monetary authority in some capacities as the city’s economy opened up to the world, printing currency and setting the stage for foreign exchange, Kynaston and Roberts wrote.
“It could be said that we are a quasi-central bank,” HSBC’s former chairman, Michael Sandberg, is quoted in the book as saying in 1976. “Hong Kong’s interests and well-being are very much in tune with ours.”
In 1992, HSBC moved its headquarters to London to comply with takeover regulations after acquiring Midland Bank, a large British retail bank that helped its new owner almost double its employee headcount.
Since then, the company has periodically mulled the idea of relocating its headquarters away from London.
Even as the company’s business grows elsewhere, HSBC may want to stay in London so as to not lose its status as a globally focused bank, according to Dragon Tang, a professor of finance at the University of Hong Kong. He added that moving away from the United Kingdom could be seen as a sign of giving up on the European market.
A company spokesperson referred CNN Business to a previous statement that said “there are no discussions to review HSBC’s global headquarters, and no plans to reopen the issue.”
Forced to choose
HSBC has a lot riding on Hong Kong — and politicians know it.
“I just thought, ‘Wow,'” said Alistair Carmichael, a British lawmaker who joined several members of parliament in writing to HSBC to express concern about the move. He argued that by caving to Beijing’s demands, the company has essentially “offered themselves up” as a political football.
“They did themselves no good whatsoever,” Carmichael told CNN Business, adding that he and his colleagues had yet to hear back from the bank. “Once you pick a side, it’s very hard to walk away from that side.”
HSBC declined to comment on criticism the bank has received from UK politicians.
The bank has also long been floated as a potential target for retaliation by Beijing in its battle with the West over trade, technology and national security.
Liu, the Chinese ambassador, warned this week that Britain “will have to bear the consequences” should it treat China as a “hostile country.”
Retaliation from China isn’t all that HSBC needs to worry about. US Secretary of State Mike Pompeo has blasted the company for its actions, saying that “corporate kowtows” would not earn the bank respect in Beijing.
HSBC declined to comment on the news report. The company’s Hong Kong-listed shares fell 4.3% on Wednesday after the report, while its shares listed in London dropped 2.9%. The stock continued to slump Thursday in Hong Kong.
There’s unease within HSBC’s staff, too. An HSBC employee who has been with the bank for several years told CNN Business that workers in Hong Kong were upset when they learned of the company’s support for the law.
“I am so disappointed,” said the employee, who requested anonymity because he feared being targeted for his comments. “Obviously, the bank could imagine that there are some concerns.”
HSBC declined to comment on the reaction from staff.
The employee said that he wrote to management last year expressing concern about Hong Kong’s increasingly politicized business environment, and that the company had assured him it would stay out of the political fray.
“I used to be very proud of the bank,” he said. But “if you asked me the question of whether I feel proud or not to be one of the members in this bank, definitely the answer at this moment would be ‘no.'”
As diplomatic tensions simmer, some observers caution that the company could be forced off the political fence again.
“They are between the devil and the deep blue sea. They will want to see how the situation in China and Hong Kong settles down. They’ll want to see how much the political heat in the UK persists,” Philip Augar, a UK banking expert, told BBC Radio 4 on Tuesday.