Bending the knee to China will ensure that all sides lose

International businesses have to weigh up costs when deciding which clients matter the most. Rolling news and social media mean local decisions have global implications. After choosing to back China’s Communist Party over Hong Kong’s pro-democracy movement, HSBC and Standard Chartered are discovering this, again.

Peter Wong, the chief executive of HSBC’S Asia Pacific arm, spoke favourably of Beijing’s implementation of the new security law in Hong Kong. Standard Chartered also issued a supportive statement. Even though both banks paid lip service to the “one country, two systems” principle, they have effectively endorsed the introduction of laws that will end free speech and many other civil rights in the city, and gone further than most companies would.

HSBC has been at the financial heart of the territory and a bridge between East and West. Built on Scottish banking principles, it grew by knowing how to operate in both jurisdictions and managing changing power dynamics and economic pressures from the days of empire to the World Trade Organisation. Mr Wong’s comments leave that bridge under even greater pressure.

China’s Communist Party (CCP) was always going to introduce the law no matter what HSBC or anyone else said. However, this is a question of how far the Beijing rulers are willing to go to force international firms not just to accept the undermining of the rule of law, but to participate in it.

That raises more questions over what such influence could do to the governance norms expected of firms listed in London or anywhere outside China.

We have seen the various ways Beijing pressures its own companies. Some of its best known firms are not only part of the security state at home in the repression of Uighur rights in Xinjiang or social contract enforcement in Beijing, they are also reported to have been part of intelligence collection operations at the African Union, in Pakistan and perhaps even in Italy. That’s understandable.

The CCP controls, through various avenues, many of these firms and unsurprisingly they do its bidding. The same is true for Chinese banks that laid debt traps across Asia and Africa, which, when sprung, have given Beijing control of strategic assets like a 99-year lease on Hambantota port in Sri Lanka (directly echoing the New Territories treaty that gave Britain parts of the Chinese mainland next to

Hong Kong), and control of Zambia’s important natural resources.

Neither HSBC nor Standard Chartered are, nor should be, under the same pressure. Unlike mainland businesses, they don’t have Communist officials as political officers throughout the company. They are listed abroad. They trade internationally so although China is hugely important to them, they have other clients to consider. What pressure were they put under to side with censorship and control? Both companies are too well led to have been blind to the consequences.

This incident suggests that China’s wolf-warrior tactic of weaponising diplomats and officials has spread. Not content to simply twist the truth about the state of French medical care, as the Chinese ambassador to Paris did, or broadcast false claims that Covid-19 began in Italy, as a foreign ministry spokesman did, it looks like companies may now be forcibly co-opted into a struggle that would ensure all sides lose.

For these companies that’s a real threat. They are risking their reputations for a regime that will only ever ask for more, and putting themselves against the international operating system that has enabled their businesses to thrive. By choosing against Hong Kong’s liberties, they are not only helping to break the bridge between Asia and Europe that has seen them prosper, they are undermining the rule of law, and helping replace it with the rule of force.

If China’s communists continue to ignore their obligations – whether to the Sino-british Joint Declaration over Hong Kong, or intellectual property under the WTO – the first to lose will be the global businesses that straddle that divide. It is not just companies that have shown themselves too weak for too long. Every time countries have failed to stand up to Beijing’s rule-breaking, market manipulation and dumping, the cost of action has risen.

Today, if we are to defend the principles that helped China prosper after the wasted decades of misrule that killed millions, we need to resist Beijing’s power plays. If we fail, it won’t just be the reputations of Standard Chartered and HSBC that suffer. Trade will be damaged and international co-operation swapped for simple obedience to one party. That would truly cost us all.

‘Standard Chartered and HSBC risk their reputations for a regime that will only ever ask for more’