Chinese threat to HSBC
THE effort by Chinese controlled insurer Ping An to marshal support for a break-up of UK-based and regulated HSBC is no ordinary demonstration of shareholder activism.
Everything involving corporations directly falling under the influence of Beijing has to be seen strategically and not as a case of a key investor seeking to release value.
It was not just the geopolitics of Nato which changed when Russia invaded Ukraine. It was the moment the West woke up to the idea that trade and economic cooperation, the underpinnings of globalisation, could never be the same again.
Severing ties with Russia is hard enough given Europe’s dependence on its energy, as
this weekend’s divisions in the EU over cutting off Moscow’s oil has shown.
But severing relations with the world’s second-largest economy, China – if it comes to that – would be infinitely more complicated. It can be no coincidence that Ping An, with a £9.2bn stake in the £100bn HSBC, decided to go public in its ambitions over the May Day weekend sacred to socialists.
At the same time as Ping An was issuing its challenge to chairman Mark Tucker of HSBC, the Chinese government was hosting an emergency meeting in Beijing with domestic and international banks.
Top of the agenda was how banks and financial institutions operating in China could best protect the People’s Republic from swingeing financial sanctions should there be some kind of strategic rift.
There already is anger and resentment in the West over China’s clampdown on political freedom. The suppression of basic rights such as free expression has led to a slow erosion of commerce in Hong Kong and the exodus of 89,000 holders of UK overseas passports to Britain.
AT THE Beijing gathering of banks – including HSBC – discussion largely focused on how to immunise China against similar asset seizures. Further toughening of controls over Hong Kong and its free-wheeling capitalism or Chinese attempts to intimidate Taiwan could spur US/Western sanctions.
Another flashpoint could be more tangible steps by President Xi Jinping to support Vladimir Putin with money and arms, undermining efforts to isolate Moscow.
China is concerned about the fate of its £2.6trillion of foreign currency reserves, of which about half are held overseas. It saw how swiftly Nato countries froze Russian holdings. Since its foundation in 1865, HSBC has managed to steer a course through the tumult of South Asian politics, spanning the 19th century opium wars, the Communist revolution, Chairman Mao’s ‘Great Leap Forward’ of 1958, bloodshed in 1989 at Tiananmen Square and recent suppression in Hong Kong.
HSBC may have earned two-thirds of its £14.6bn of 2020-21 earnings in Asia but its trust in the region stems from its UK base and regulation by the Bank of England.
Splitting off its Asian operations would expose it to less credible Hong Kong and Beijing control. It also might mean sacrificing its role as the main conduit of large financial transfers to New York.
There is no such thing as benign Chinese capitalism. Very little has been heard from China’s greatest entrepreneur of the online age, Jack Ma, creator of Alibaba, since he clashed with Beijing. Ping Am is the fox seeking to get inside the HSBC chicken coop. It is up to the bank’s board, UK regulators and the other 90pc of shareholders to make sure Beijing influence is kept at arm’s length.