Feeling heat in Hong Kong
WESTERN businesses are in a highly compromised position over the anti-government protests in Hong Kong.
Two UK-listed banks, HSBC and Standard Chartered, issued advertisements in local papers calling for a peaceful resolution, which were widely seen as attempts to appease the Chinese government.
HSBC has a long history in Hong Kong, which accounts for a large chunk of its profits, and hopes to expand in China.
There is speculation that its former chief executive John Flint was forced out at the behest of the Chinese government, despite his shameless sucking up to the regime.
Before he was kicked out, Flint opined that the Chinese economic system ‘gives Western liberal democracies pause for thought, because here is a deeply socialist system that’s served its people really well’.
It is not clear whether he was defenestrated at the behest of China or whether he really had just proved a disappointment to the new chairman, as the bank claimed.
But there has been at least one British executive casualty. Rupert Hogg left his post at Cathay Pacific in a swirl of unsubstantiated rumour he had resigned rather than hand over the names of protesters among his crew and pilots.
Good for him if it’s true. The idea of a company informing on its own staff for their political views is profoundly disturbing.
The atmosphere inside Cathay Pacific sounds poisonous and terrifying, with employees saying they barely dare speak to their colleagues for fear of being denounced to the Chinese authorities.
Companies and their leaders like to put up a facade of neutrality but it’s impossible for them to be apolitical. Their decisions over where to do business are always political, and they are made on the basis of profit, not principle.
Barclays’ decision to pull out of apartheid South Africa in 1986, for example, was down to realpolitik not morality. Its share in the UK student market had fallen from 27pc to 15pc as it was the subject of a boycott in many universities, and that was judged to outweigh the South African income.
The bank could probably by that stage also scent the way the wind was blowing in Nelson Mandela’s journey from Robben Island to the presidency, and did not want to remain on the wrong side of history.
Standard Chartered and HSBC have shown they have few scruples when dealing with controversial regimes. Both have been heavily fined in the US for busting sanctions and doing business with Iran and other rogue states. HSBC was also found to have allowed itself to be used as the laundry for a torrent of Mexican drug money.
When it comes to protesting, bank bosses are not averse to some anti-government agitation of their own when it suits them.
In 2015 HSBC threatened to move its headquarters out of the UK because it didn’t like the banking levy and was also miffed at the then government’s insistence it ringfence its retail bank to safeguard the British taxpayer from casino finance. In the event, it stayed put – wisely so, as it turns out.
The rise of China is throwing up many difficult questions for Western governments and companies. John Flint is right that liberal democracies are under pressure. They have been since the financial crisis of 2008, which banks like HSBC did so much to create. He is wrong, though, to suggest that authoritarian socialism has the answers.
The world has yet to find a superior system to capitalism. Long-term prosperity depends on democracy, property rights, freedom of speech and freedom of choice. Bankers, of all people, ought to know it.
Another Ashley
POOR old Laura Ashley. Its leg-of-mutton sleeved frocks and flowery fabrics were once the height of middle-class hippy chic, but that was then. This is now, and the brand has not been a style leader for 40 years.
Its Malaysian owners say fashion sales are growing, thanks to improved designs. Home furnishings, where it faces competition from everyone from John Lewis to Ikea, has been a disappointment.
The latest big idea is Laura Ashley hotels, where customers can ‘live the interior design dream’ and while away the afternoon in a chintzy Laura Ashley tearoom nibbling on crustless sandwiches and macarons.
But there’s no getting away from that share price, which has tanked more than 90pc in five years. What next? Mike Ashley has a voracious appetite for distressed retailers. He’s a bit busy trying to find an audit firm prepared to check the books for him at Sports Direct, but maybe he could find time to make an offer. He wouldn’t even need to change the name much.