HSBC Embraces China’s Crackdown on Hong Kong, Goes All-In on Asia Pivot

Beijing squeezes, and HSBC knows where it makes most of its money. Standard Chartered, another UK bank, did the same.

By Nick Corbishley, for WOLF STREET:

Global banking behemoth HSBC threw its full weight behind China’s imposition of security legislation on Hong Kong, arguing that the new law will help bring much-needed political stability and economic growth and development to the city. The bank’s kowtowing to Beijing is the inevitable culmination of the UK-based lender’s multiyear Asian re-pivot, but it also risks attracting U.S. ire. And if recent history is any indication, that tends not to end happily for global lenders.

In a post on one of HSBC’s social media accounts in China, the bank’s Asia-Pacific head Peter Wong signed a petition backing the law. “HSBC respects and supports any laws that stabilize the social order in Hong Kong and revitalize economic prosperity and development in Hong Kong,” Wong said in the post.

Mr. Wong’s comments were quickly seconded by the institution he represents. Asked to comment on the social media post, an HSBC spokeswoman in London said: “We respect and support laws and regulations that will enable Hong Kong to recover and rebuild the economy and, at the same time, maintain the principle of ‘one country two systems.'”

The governments of the U.S., the UK and their five-eye partners, Australia, Canada, and New Zealand, would beg to differ. They assert that China’s new security law obliterates the one country, two systems principle, “dramatically eroding,” in the words of UK Premier Boris Johnson, the partial autonomy Hong Kong was granted when London handed back control of the city to Beijing in 1997. Yesterday, Johnson offered refuge to up to 3 million Hong Kong citizens, which is unlikely to have gone down well in Beijing.

Relations between the UK and China have not been this strained for decades. Until recently, the UK government had viewed China as a key strategic partner in its post-Brexit future. At Davos in 2016, the then Chancellor of the Exchequer George Osborne said the UK wanted to be China’s best partner in the West. As part of this charm offensive, Downing Street awarded the tender to design and build a number of nuclear power stations to a consortium led by China’s state-owned General Nuclear Power Group and France’s EDF. Chinese participation in one of those projects, Sizewell C, is now being reconsidered.

But the British banks and companies that depend on Hong Kong and mainland China for most of their revenues and profits do not have that luxury. They are stuck where they are and they know what side their bread is buttered on. Just in case they forgot, former Hong Kong chief executive Leung Chun-ying was on hand last week to remind them. In a Facebook post the pro-Beijing former apparatchik urged everyone with HSBC bank accounts, particularly HK officials and HK delegates to the legislative and consultative bodies in the mainland, to stop using them, until the bank made its position clear on China’s security law, which it did five days later.

On the same day, fellow British bank that is heavily invested in China and Hong Kong, Standard Chartered, did the same.

That declaration will have pleased Beijing and its loyalists in Hong Kong no end, but it could also alienate many of the bank’s traditional customers that have more separatist leanings. It is also likely to infuriate ministers in London and further strain the lender’s relations with the U.S., where authorities in 2012 slapped it on the wrist after being found guilty of breaching sanctions and laundering money for Mexican drug cartels. US regulators have hit HSBC with $5.5 billion in fines since 2012 for a laundry list of offenses, including money laundering.

Headquartered in London, regulated by the Bank of England and generally considered to be Europe’s biggest bank by assets, HSBC is in reality first and foremost an Asian bank. It’s in Hong Kong, the city where it first cut its teeth over 150 years ago, that the lion’s share of its business is done. The city accounted for 35% of HSBC’s revenues and 60% of its global pretax income in 2019. Throw in mainland China and it reaches 75%.

But Hong Kong’s local economy is now in the throes of its deepest recession on record as it reels from the combined impact of over a year of political unrest, protracted trade war, and the coronavirus. That is bad news for HSBC, for whom commercial real estate in the city accounts for 45% of its total group equity, according to analysts at Jefferies. Hong Kong’s commercial real estate market is already under huge pressure after mainland Chinese investors stopped buying a couple of months ago. Now there are concerns that China’s plan to impose national security legislation could trigger a flight of capital out of the city.

Until this week HSBC, like so many Hong Kong-based businesses, had tried to stay above the fray of politics, even while the city was roiled by political unrest last year. It refused to criticize the pro-sovereignty protests out of fear of alienating many of its customers. But it also had to keep Beijing on side, which probably explains why the lender shut down an account used to finance protest-related causes late last year, after which protesters vandalized some of its bank branches.

Keeping Beijing on your side is easier said than done when Beijing is engaged in an escalating trade war with Washington, to whom HSBC is also heavily indebted thanks to the deferred prosecution agreement it was gifted by the DOJ in 2012, after being found guilty of breaching sanctions and laundering money for Mexican drug cartels.

Last year, HSBC paid off part of that debt by ratting out Chinese telecoms giant Huawei to U.S. authorities for breaching U.S. sanctions on Iran. But in doing that, it infuriated Beijing, which threatened to place the bank on its black list of “unreliable entities,” which would have cut the lender off from its biggest market. In the end, that didn’t happen and since then, HSBC has further cemented its position as the biggest Western bank in China.

But every now and then, the bank is given a not-so-gentle reminder about who’s boss: “HSBC’s profits mainly come from China, but the board of directors and senior management are almost all British,” wrote Leung Chunying in a Facebook post, adding that the bank’s lucrative position should not be taken for granted. Its China business could be “replaced overnight” by Chinese or other overseas banks.

That’s the threat it faces in the East. In the West time will tell what sort of a whirlwind it’s latest actions will reap. By Nick Corbishley, for WOLF STREET.

Hong Kong’s most important source of inbound investment — mainland China — has vanished, with huge ramifications for commercial real estate. Read... With No Mainland Chinese Buyers, Hong Kong’s Commercial Real Estate Dives

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  98 comments for “HSBC Embraces China’s Crackdown on Hong Kong, Goes All-In on Asia Pivot

  1. Joe Saba says:

    hey President Trump
    gotta another CHINESE COMPANY TO BAN in u.s.

    HSBC is now CHINESE conglomorate

  2. Shawn says:

    Wow, China, HSBC, the CCP, reminds me of a 1987 movie, The Untouchables staring Costner, Connery and De Niro of 1930s Chicago gangsters during prohibition.

  3. Javert Chip says:

    Given all the work China has done to replace Hong Kong with Shanghai, it’s difficult to understand how a somewhat global British bank remains viable in Hong Kong (let alone China).

    Other, freer Asian cities (Singapore, Kuala Lumpur, et al) would love to absorb market share from struggling Hong Kong’s global banking.

    Who knows what the future holds, but strict US sanctions restricting China’s access to the US Federal Reserve system would be devastating for China (as it was for Iran) and probably ruinous for HSBC.

    Based on HSBC’s 21st century history of regulatory compliance, HSBC certainly doesn’t inspire much Western confidence as a trusted party. I guess you gotta “go with what you know”, but this looks like a pretty high stakes bet.

    • timbers says:

      “strict US sanctions restricting China’s access to the US Federal Reserve system would be devastating for China (as it was for Iran) and probably ruinous for HSBC.”

      Think again, only this time about how much the U.S would lose, too.

      China, Russia, and others have built an alternative the U.S. SWIFT system to plan for just this eventuality. Additionally, as the U.S. declines, the danger is that it will flail out in desperate anger much the Romans did, and create it’s own self destruction by starting every more economically draining foreign adventures. China and Russia have gamed this out, and they know time is on their side. The longer they can avoid direct confrontation with U.S., the better their chances and the weaker the U.S. grows due to it’s ever more expensive and debilitating foreign over reach.

      • Paulo says:

        Exactly, Timbers, well said.

        Furthermore, all those once allies who have been tariffed and insulted for the last 3.5 years will just sit back and watch with their new friends and arrangements.

        You want friends? Have to play nice. I think we learn this in grade 1. Maybe K.

        • Thomas Roberts says:

          The swift system is headquartered in Brussels, Belgium. The fact that the us dollar is the used as the main global currency gives America alot of control over it, because, America can cut institutions or swift from us dollars. The US Dollar is harder to move away from than swift.

          The US Dollar loss as the main global currency, would have major effects across the entire world and not just America. The yuan could never replace it, because, China is trying to achieve what in finance is called the impossible trinity. The yuan and China is even more politically controlling than America, so, it’s a non starter. The eurozone may collapse, so the euro cannot be a replacement. After that they are no real contenders, euro has some chance, but, if the us dollar were to go out the window, there are 2 actual possibilities. Switching to hard currencies or going almost entirely to currency swaps. Currency swaps are what China and Russia are currently doing, basically, if Russia “or someone in Russia” wants to sell/buy something they would have to use their own currency or the native currency of the country being traded with. The big issue with this system is that, it would be alot harder to benchmark the prices of everything, especially commodities. That is the easier option of the 2.

          The other option is that countries would expect, currencies back by commodities such as the precious metals “gold, silver, and platinum”. This would cause massive changes to the entire world. Countries would be now required to have roughly balanced trading and most of undeveloped Asia “China, India, and more” would collapse. Many countries would benefit from hard currencies in the long run, possibly almost everyone outside Asia. Russia would be the biggest winner in this choice. China would be a major, if not the biggest loser from this. But, China is dumb enough, to think hard currencies, would benefit them. In the hard currencies world, its possible that a few precious metals backed currencies, could become the standards. A gold backed us dollar might be among them. Gold would be the benchmark in this system, but, silver and platinum would still work, because, they can be benchmarked against gold.

        • Javert Chip says:


          You may worry about friends.

          Nations don’t have friends, they have national interests.

          Example: few years back, Russia cut off gas to the EU in the middle of winter. Even you might admit that was a wee bit unfriendly. Russia plays very hard-ball on energy pricing. Does that stop the EU from cozying up to Russia? Absolutely not.

          So much for your national “friends” theory.

        • char says:

          Russia never cut off gas to Europe. They cut it off to Ukraine, but that was before the troubles, because it stole gas. Was also swiftly solved

        • Javert Chip says:


          You’d probably feel a little different if you & your family were among those cut off in the middle of a northern Europe winter.

          Rather than soothing over unfriendly actions, what would you submit are some of Russia’s current friendly actions?

        • char says:

          It was from the first of January, not during a cold snap and it was over in a week.Consumer did not experienced anything of it except maybe media noise.

      • Ryan says:

        Currencies are valued on a relative basis. Sure, China and Russia can build alternative systems but when you place the ruble and yuan next to the dollar, which currency is trusted more?

        Currencies are not based on absolute value but relative value. Each currency pair can be thought of as a battle of trust between two countries.

        • FP says:

          To Javert above
          Other view is Ukraine breached the contract it had with Russia for gas transit, used its position to try to get better conditions (and Ukraine was already paying Russian gas well below market price) and was even stealing the gas, to which Russia reacted in that way and started the Nordstream project. As a reminder, since cold war times, Russia has been selling gas to Europe and both have honored the contracts signed, separating business from feelings

        • Javert Chip says:


          No matter how much lipstick you put on it, stopping gas shipments to the EU in the middle of winter resulting in people freezing to death still sounds pretty unfriendly.

          Other unfriendly acts might include the annexation of Crimea and Russia’s “interest” in the Baltic states.

          Russia seems to have lots of unfriendly tricks.

      • Cas127 says:

        “China and Russia have gamed this out, and they know time is on their side.”

        I don’t think there is a “their side” vis a vis Russia and China.

        If you don’t think Russia and China know exactly what the other is, you are kidding yourself.

        Russia, fairly hysterically about borders at the best of times, does not love the fact that China’s 1B+ live just to the south of its vast, untapped, very thinly populated Siberian regions (Mongolia is basically yet another of Russia’s favorite tools…a buffer state).

        And there is a very good reason why Russia has much better relations with India and Vietnam than China does.

        America’s foreign policy has been grossly incompetent and counterproductive, though.

        But lumping Russia and China into some illogical cahoots will only encourage more US foreign policy panic porn.

        • Thomas Roberts says:

          This is true,

          It’s important to note that Russia wants to join NATO and be aligned with the EU “have a deal very roughly along the lines of the nordic countries”, but, is the only country in Europe, except for maybe Belarus, to not be given these offers. If Russia were to join NATO the balance of power in the world be almost absolute.

          Racism against Russia, will likely lead to an alternate growing world military alliance and do unknown things to the world economy, possibly dividing up the world again, hopefully without the nuclear war threats. China, could end up on the outside of both of these world economies and world military alliances.

        • MCH says:

          Has someone been reading Clancy’s the Bear and the Dragon again?

          Yes, China and Russia and Iran each have their own interests, and they do not likely align, but the thing they have in common, they need to bring down the established order so as to set themselves up to be the new order. They will deal with their allies of convenience once the main opposition is out of the way.

          The biggest challenge they had to overcome are these two puddles called the Pacific and the Atlantic, but thanks to the internet and profit seeking corporations, their jobs are now much easier.

        • Cas127 says:


          While a US/Russia alliance would have a Nixon-to-China quality and possibly transient benefits, Putin’s Russia is alternatively too paranoid and expansionist (see Syria and Libya) to be a reliable ally.

          But that doesn’t mean that Russia and China can’t be counted on to be at perpetual side-eye over Siberian resources…making their true alliance very unlikely (thankfully for US).

          Bottom line, the US Gvt has shown itself far too incompetent to be trusted with advanced geopolitics and the US should continue to rely on the only things that have really saved the nation from its increasingly incompetent DC leadership…the Atlantic and the Pacific.

        • Cas127 says:


          “They will deal with their allies of convenience once the main opposition is out of the way.”

          Yeah, worked for Germany and Russia in WW2…

        • MCH says:


          And by the way, I think Chinese government tends to be a little smarter than this in terms of their calculus and they learned very well from history in terms of military and economic capabilities of the US. (although I have to say, all of Xi’s pronouncements of self-sufficiency and all the boasting since he came to power has been highly detrimental, and the so called wolf warrior imbeciles they have running around as diplomats are not helping either, it’s like they’ve been taking lessons at Trump’s school of diplomacy) But it is certainly clear that it near impossible to just have a divorce from China without crippling economies around the world.

      • Wolf Richter says:


        Don’t throw Russia and China into the same economic category. Russia’s economy is quite a bit smaller than California’s economy.

      • Javert Chip says:

        China & others can build all the electronic transfer systems they want; that’s trivial. What’s really important is access to the American dollar and capital markets.

        With just 5% of global population, 40% of the $100T global bond markets is American; 54% of the $90T global equity (stock) market is American.

        If you’re going to sell commodities for future delivery (say, oil in a year), you don’t want the purchase to be in a currency (like the Russian ruble or Turkish lira) that depreciates quickly. The American dollar is the gold standard (or least dirty shirt).

        • Cas127 says:


          In the end, the currency with the most productive capacity behind it will be the one that the rest of the world wants/needs.

          The grotesque incompetents that have constituted DC leadersh*t for the last 50 or 60 years have largely relied on the dollar to paper over their habitual f ups…to the point where everyone is starting to see the USD as a played out old whore.

          Perpetual hundreds of billions of dollar annual trade deficits will do that…accumulated foreign claims on the US asset base have nearly eaten through the seed corn…what foreign trade partner wants to hold the equivalent of the 4th mortgage on a nearly useless industrial plant from the 30’s…

          DC awfulness has essentially ruined the US economy.

      • Canadian says:

        I’m always amused at the notion that an “alternative financial system” assembled by gangster states like China and Russia could replace an open, regulated western system as an “alternative.” These are kleptocracies with a history of wholesale theft of assets without warning.

        • Petunia says:

          Exactly, confidence is the name of the game in banking and Russia and China barely trust each other.

          Javert’s comment above about building another version of Swift is also correct. We could probably get it up and running in just over a month depending on the lead time to buy and install the equipment. Definitely, in less than 90 days.

          To expand on the theme of confidence, the banksters shot themselves in the foot this last decade stealing everything. Nobody trust them either, they would have made more money over the long run not ruining their reputations.

  4. MiTurn says:

    I think that the future is unfolding in a predictable fashion. Simply follow the money, so to speak. Hedge your bets and carry on.

  5. VintageVNvet says:

    Not sure to which factor, revenue or income this sentence refers Nick or Wolf?

    ”Throw in mainland China and it reaches 75%.”

    Please clarify.

    thank you,

    • Nick Corbishley says:


      The 75% figure you asked about refers to global income, not revenue. Will ask Wolf to rejig the sentence to make it clearer.



  6. Tonymike says:

    HSBC, the drug and money laundering HSBC? Going along to get along.

  7. Cas127 says:

    Wow…get the popcorn.

    HSBC’s bending over and greasing up for China is directly at odds with UK’s aggressively pro HK position (visas, etc.).

    And it wasn’t long ago *at all* that the UK bailed out HSBC. A very, very expensive bailout.

    It will hurt both…but I would not bet on the bank…too many ways for worldwide bank operations to get mangled by angered gvts.

    HSBC clearly shifted loyalties to Chinese gvt.

    • Thomas Roberts says:

      The UK’s position as a global finance hub was already screwed, because, of Brexit. At this point, the UK would be better off rebuilding its conventional economy. Going hard against China, will help build up solidarity and may help them, get their conventional economy going. This is especially the case, as making any sort of deal “especially trade” with China always end badly. So It’s not really a loss to go against China. Maybe, they could keep enough finance to keep them going. Although HSBC would be lost, going against China, might get the UK some finance opportunities that arise, because, of China attempts to blackmail the world, that will probably escalate during China’s upcoming downfall.

      • Petunia says:

        China needs HSBC more than the bank needs China. HSBC is their western portal to the rest of the world, without it China is much more constrained.

        I would guess some other western bank would volunteer to take its place.

        • Thomas Roberts says:

          I don’t have much confidence in either though. Xi has destroyed any hopes that I or most of the world had of China, becoming, a productive part of the globe economy. The fact that during a pandemic that they caused, one where they corrupted the international organization in charge of tracking such things, they had the sheer fu**ing balls to blackmail the world into compliance or else be cut off from medical supplies. The Czech Prime Minister had to make out with the Chinese flag in order to buy, what turned out to be defective medical supplies, that the Chinese played off as donations. Politicians aren’t going to forget this. They will be forced to play along until CCP19 is dealt with, but after that, there will be a reckoning.

          There are a lot of major issues in China and China isn’t as strong or as important as it thinks it is.

        • MC01 says:

          Most large foreign banks have large operations in China, usually headquartered in Shanghai or, less often, Shenzhen.

          Deutsche Bank (who else?) has paid enormous sums in legalized bribes to get ahead of the curve in China: last year DB was once again fined by the US Department of Justice $16 million for “hiring relatives of foreign government officials to win business in China”. DB did not challenge the charges.
          DB analysts have been enormously bullish about China over the past few years (including pushing HNA Group and Luckin Coffee) and since the Covid-19 crisis started they have effectively acted as a PR firm for Beijing.

          This is yet another proof of the depths Europe, and Germany in particular, is sinking to appease Beijing. Our very near-sighted politicians only see the short-term trade surplus and are allowing China to buy all the technology Japan, Korea and the US are denying her for the “Made in China 2025” plan. In a few months we’ll probably just hand the tech to the them on a silver platter.
          I won’t even get into how we are still being forced to believe in the outright lies originating from Beijing and their chums at the OMS/WHO because we fear to be cut off from a questionable supply of crummy facemasks whose use is already declining.
          Now I have to stop because as the song goes “Rage takes over again”.

        • Thomas Roberts says:

          China really isn’t as strong as people think. It’s merely the most populated place in the world “a bad thing” and the biggest manufacturing hub. Still, most of the the high end technologies including jet engines and things such as chip fabrication they are unable to do to any reasonable extent.

          Right now the worlds biggest chip maker TSMC is based in Taiwan has cut off Huawei from its chips, because of China’s invasion threats and America’s threat to cut off TSMC from the equipment it needs. Huawei will be effectively unable to produce almost anything. TSMC could be forced to cut off the rest of China’s domestic electronics industry and if it does along with a few other companies, China will be unable to catch up in time to avoid the near total collapse of its domestic electronics industry. But, that is one of only many such things that can be done.

        • Thomas Roberts says:

          Right now, even if the west doesn’t have all the factories, it does have all the technology. And China for awhile merely deluded the world with false expectations of it. Already, for many reasons predating Trump, factories are being pulled from China. Once a few critical things like medical production are moved out of China, China will be unable to threaten America and the West anymore. After that, the west has complete leverage. Xi has blown through all of China’s possible threats such as cut off rare earth metals and things like that, they have fallen flat on their face for everything except medical supplies. Take that and a couple of other things out of China and they are done. China can threaten to retaliate, but, it’s only a bluff as they are more dependent on the west than vice versa. As soon as the west stands up to China, China will be forced to fold, and then its days of threatening are over. It will do nothing, because, it can do nothing.

      • Tim says:

        Not necessarily.

        Just to play Devil’s Advocate, The City has adapted before and has a substantial number of reasons to keep working to do so notwithstanding many headwinds. How many people with high net worth are going to want to remain in China’s orbit over the next few years?

        How secure are Tokyo, Singapore and Melbourne?

        Frankfurt is orderly, Like Zurich and Geneva, but hardly lively.

        Who wants to hang around in Paris waiting for either the next riot or round of socialist taxes.

        New York, well maybe.

        So, London. Not as bad as an option, all said and done.

        • MC01 says:

          Actually German and Swiss cities have excellent and very lively music scenes, apart perhaps from Geneva. I dare say that for certain music styles they are much better than London and audio systems tend to be higher quality to boot.
          That’s the main reason I could never live and work there full time: after a couple of weeks I’d be so worn out by nearly nightly escapades as to be unserviceable.

        • VintageVNvet says:

          Tim and MC01,
          you make me remember my days, and especially nights, living in London when the live music scene was as good or better than SF, and at least seemed to be a ton safer
          too cheap to take a taxi, i had to walk from west end to the flat in the north end where i slept most of the days for long enough to become, ”non serviceable”… or so said a little birdy
          Amsterdam and Paris seemed very boring and stuffy in comparison 50 years ago

  8. timbers says:

    “We respect and support laws and regulations that will enable Hong Kong…maintain the principle of ‘one country two systems.’”

    “The governments of the U.S., the UK and their five-eye partners, Australia, Canada, and New Zealand, would beg to differ.”

    The fabulous five-eyes can disagree, but the facts are not on their side (as usual). But then, when has the U.S. and it’s poodles ever honored even 1 single foreign treaty or agreement when cared not to, or cared about facts?

    In 1997 Britain, China, Hong Kong, agreed and signed the Basic Law. The U.S. to my knowledge did not object but if it did, it’s doesn’t not matter as it is not it’s sovereign. One part of Basic Law required Hong Kong enact a security law. It did not do this. In this case, likely China considers any meaningful security law must include stoping U.S. foreign intervention and meddling by funding NGO’s and other organizations seeking to foment unrest, rebellion, and regime change in China.

    HSBC siding with China over U.S. is sign of U.S. decline in the world. This is worthy of great note. Here is another sign of decline among so very many:

    “The US has 4 per cent of the world’s population but more than 30 per cent of its confirmed coronavirus cases and 25 per cent of its confirmed deaths.”

    • Javert Chip says:


      HSBC has struggled legally and financially to compete as an international bank. It’s lost that competitive struggle, and now has to shrink (it was never going to be a top investment bank).

      HSBC’s roots and most profitable region is east Asia. It simply wasn’t large enough to divest Asia and try to become a purely western bank.

      The move to Hong Kong is high risk; hypothetically, do you seriously believe China plans on allowing a successful HSBC to remain free or take business & profits from Chinese state-owned banks?

      • Petunia says:

        HSBC was a banking powerhouse before China was opened to the west. They didn’t dominate in Asia because of Japan, but they were one of the top banks in the world.

        In the late 1980’s they bought a small regional NY bank I worked for, so their reach is significant in America as well.

    • Canadian says:

      Ah, I always come close to pitying those foolish enough to bet against the USA and West. Almost.

      • Cas127 says:

        “foolish enough to bet against the US”

        Used to and might be true if DC had not been committed to cos-playing “Masque of the Red Death” in all its arrogant, self-pleasuring assumption of insurmountable superiority for the last six decades.

        And China has thoroughly kicked the US’ ass industrially and economically for the last 20 years…you simply can’t argue with the trade numbers.

        Economically healthy countries do not run never ending trade deficits.

        • Tim says:


          For the last 4-5 years, as far as I am aware, the US manufacturing sector employment and revenue have grown. China’s working age population continues to decline. Their employment in all areas continues to decline. They have a greyng population. The US doesn’t.

          China’s massive growth has been built on shady debt and theft.

          I would argue that China has gambled big and posted impressive numbers, but thatth reality is wide of the mark and further growth is ultimately unsustainable.

        • Javert Chip says:


          Point taken on US trade deficit.

          However, debt is debt, whether it comes from trade deficits or other spending.

          China simply has other ways of pissing away money. Totalitarian/communist states have severely limited options for subjugating citizens (I’m referring to the ones not already in slave labor concentration camps): the state promises better economic conditions, requiring massive amounts of debt & corruption, or you roll out the army & tanks to eliminate dissent.

          Having seen China’s C-19 behavior, nations are already moving supply chains to other countries; unclear how much disintermediation China will experience in the next 2-5 years.


  9. R2D2 says:

    Britain has been rolling over and selling off the family silver for the past 50 years. A relentless fire-sale of its famous brands on the cheap. Rolls Royce cars were gifted to Germany, BA airline was gifted to Spain, Costa Coffee was gifted to the US, and on and on it goes. Just last week, the UK’s largest beer-brewer was handed to Denmark for a song.

    Everyone in Britain with a brain knows where this one is headed… HSBC will eventually be flogged off to a Chinese or HK bank on the cheap, British execs will be turfed off the board, and the HQ will be relocated from London to Hong Kong or Shanghai.

    It is a familiar, depressing tale of capitulation. UK is just “giving up”.

    • Jonathan Vause says:

      you mean, ‘the UK is the destination of choice for global investors looking for safe assets, behind the US’? why yes, yes it is, and if foreigners are willing to pay over the odds for them they can have them. we can always start another company and carry on

    • Saltcreep says:

      Any entity running a trade deficit is going to have to balance its trades over the capital accounts by transferring ownership of domestic assets to external entitiies. It is simply an inevitable consequence of the chronic trade imbalance.

      But, as JV points out, maybe it’ll yet work out that the new owners of the transferred debts, properties and companies that on aggregate end up with the short end of the stick?

  10. sunny129 says:

    HSBC is a poster boy for corrupt global Banking system, where ‘CRIME in open day light’ ( Mexican Drug cartel connection) still pays, where as citizens with minor drug offenses are still rotting in jail.

    In Mexico city, the branches of HSBC had tellers windows to custom fit for the deposit of cartels money in suitcases, which they can just drop off.

    One can see war on drugs is futile from the very beginning when global banks like HSBC is behind them. they got the slaps on their wrists, and business as usual. Hypocrisy at all levels all the way up!

    Paying Millions in fine is part of ‘cost of doing business’ for them ( or any mega banks involved in shady businesses) when the profits are running in Billions!

    • char says:

      Hong Kong & Shanghai Banking Corporation was founded to deal with the money of the opium trade so what do you expect?

  11. Michael Grace says:

    Made its initial capital from the “Opium Wars” and so it goes on…..

    • Cas127 says:

      It is interesting just how few in the West appreciate just how much China learned from losing the Opium Wars and how China has managed to reverse the international roles…

  12. Mean Chicken says:

    Bet on a communist country, lol.

    • Cas127 says:

      One that kicked the US’ ass, industrially and economically for last 20 yrs.

      But arrogant, unjustified poses of superiority will turn things around…

  13. Willy Winky says:

    The CCP is already squeezing out the major HK property developers as PRC players are now outbidding them on large numbers of property parcel auctions.

    Essentially these are state-backed (owned) enterprises – or let’s call it what it is – the CCP cadres own them because they are the state.

    HSBC is faced with a similar problem compounded by the fact that the bank financed the opium trade back in the day. The Chinese have long memories and no doubt will be looking for payback at some point (as in pushing HSBC out of the market with PRC banks owned by the CCP muscling in)

    With all their eggs in one basket HSBC is in a very precarious position indeed.

    I came across this quote on another site earlier:

    “People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.” John Kenneth Galbraith

    Having observed the HK protests (and spending 10 weeks on the front lines Oct to Dec speaking to many blackshirts), it has struck me how well-organized and on message the protesters have been.

    They are careful not to go too far and drive away support.

    They have some superb slogans – my favourite is We Burn You Burn… (worthy of Don Draper!)

    Compare that to protests in other countries over the past year and Hong Kong feels like there is an experienced hand guiding it along.

    To put it bluntly… I would not be surprised to learn that some of the property billionaires are secretly assisting the protest movement.

    Surely they would not just sit idly by and let the CCP dismantle their empires…

    By that I do not mean that they have cotrived the protest movement (the movement is real – they fear the CCP and are fighting to retain their freedoms)…. but that they have some experienced hands (PR company?) assisting.

    Take for instance the posters that they distribute at each protest (I’ve got a dozen or so that I have framed… they are that good)…

    Given most of the world is standing against China (particularly the US)… I would also not be surprised to learn that foreign intelligence is active.

    In fact I would assume they are (actually…. I hope they are – because the CCP is a vile thing that needs to be stopped in its tracks).

    • Willy Winky says:

      This just dropped on Bloomberg – interesting timing … aimed at HSBC and Standard Chartered?

      Senators Push ‘Unprecedented’ Sanctions on China Over Hong Kong

      A Senate Republican who’s sponsoring legislation to penalize banks that work with Chinese officials moving to crack down on dissent in Hong Kong said his bill would bring “unprecedented” action to the issue.

      Senator Pat Toomey of Pennsylvania said his bill “penalizes the banks that choose to finance the erosion of Hong Kong’s autonomy and put marginal profits ahead of basic human rights.”

      Toomey said the measure would be “be an unprecedented action toward the Chinese Communist officials and it is intended to create obstacles to that aggression — obstacles that the leadership in Beijing has not encountered before.”

  14. MCH says:

    I’ll take the other side on this one, the bank is essentially looking at it, and making a statement that it’ll stand on the side of law and order. Consider what happened to Hong Kong last year, I don’t think they are necessarily wrong. “Peaceful protests” that end up as riots, I mean, they could technically argue they are on the right side for this, because who wants riots.

    From the fairness perspective, you could also say that given the current state of affairs, the US is functionally no different in its handling of the protest on its own soil than China. In fact, it could be argued that its efforts were much worse.

    If it were the Soviet Union, there is no question what HSBC would do, after all, there is money involved. Finally, lest we forget, even though it is a British bank, HSBC stands for the Hong Kong and Shanghai Banking Corporation. It traces its roots to China back in the golden age of (let me use the appropriate propaganda here) “western imperialism” in China.

    • Javert Chip says:

      HSBC deciding to stand for law and order would be new territory for that bank.

    • Willy Winky says:

      Try walking in the shoes of a resident of Hong Kong.

      I live in New Zealand so I will use this country as an example.

      Let’s say the CCP (Chinese COMMUNIST Party) decided to flaunt international laws and impose their system on this country.

      They would make the PM a puppet — they would violate the NZ constitution – they would strip all freedoms.

      And if anyone said ‘hang on a second Winnie the Pooh … we won’t stand for this’ … they would be shuffled off to the gulag (where they might have their organs removed and sold).

      How would I react to this? Would I riot?

      Nah. I’d pull out a high-powered rifle and I’d fight to the death to drive them out of the country.

      HK people have no more affinity for China that do Kiwis. In fact they live in fear of China. And they find them boorish.

      HKers have rejected all attempts to indoctrinate and assimilate them.

      As would I.

      Who started the fight in Hong Kong?

      The CCP has attempted to chip away at the Basic Law almost from the very beginning. The first protests occurred in 2003 when 500k people took to the streets to oppose and anti-subversion law — the CCP quickly backed down.

      If you want to understand what it is the people of HK fear — Google Yuen Long Triad Attack Hong Kong. I suggest you watch the video of dozens of gangsters beating innocent people with iron rods and bamboo sticks.

      The police did not respond for 40 minutes.

      If a protester had thrown a petrol bomb at a shop in Yuen Long I guarantee you the storm troopers would be on the scene within 10 minutes tops.

      The HK police/govt offers rewards for helping them catch protesters who have committed offences. They do not offer rewards for assisting with arresting the triads involved in beating women.

      If you watch the video the triads did not attempt to hide their faces — how difficult would it be to ID all of them?

      Obviously this attack was meant to intimidate the protesters. And it was almost certainly sanctioned by the CCP and HK govt.

      What other reason would gangsters have for beating women?

      It did not work because soon afterwards the protesters responded by paying the triads a visit in North Point. This time it was not defenceless women … it was young angry men- lots of them– and they had a serious go at the gangsters who tucked their tails and ran back to their clubhouse.

      When the protesters chased them down the cowards pulled out knives…

      You can find video of this if you search Google.

      So when HSBC kowtows to the CCP this is what they are kowtowing to.


      Yes HSBC is damned either way, but let’s not mistake what this is – they have made a deal with the devil.

      The CCP is violating the law and stripping freedoms – and they are killing their golden goose.

      The people of HK cannot be blamed for how they are responding.

      They are not rioting for the sake of rioting – they are attacking the economy.

      They are trying to drive off tourists and businesses — hoping that the CCP will back down when they see their goose being gutted.

      That is why the protesters targeted the airport …. the message was ‘HK is not safe — do not come here’

      And it was working – they had driven HK into recession pre Covid…. the hotel I stayed in from Oct to Dec was at 20% occupancy….

      BTW – I was watching a BBC Hardtalk interview a few months ago — the CCP ambassador to the UK was confronted with questions about the 1 million Uighurs in concentration camps. China was accused of violating international laws.

      His response – ‘Those are your laws. We do not follow your laws’

      I reckon this ‘thing’ needs to be nipped in the bud before it gets… out of hand.

      Because if it’s not then the CCP will be imposing its way of life on all of us (notice what they did to the NBA….)

      And I don’t think we will like that any more than the people of HK like it.

      • Willy Winky says:

        My dream is to have 10 minutes in a locked room with any one of those guys in the white shirts.

      • MCH says:

        I know about those incidents, the problem is those protesters can’t be both MLK and Malcolm X, trying to switch between the two doesn’t work, and in China, being Malcolm X definitely doesn’t work.

        The protesters needed to have stuck with the peaceful demonstration narratives, and yes, get beaten up on live TV and not fight back. The second they fought back, they lost. After a while, all the media reported (if they did it at all) was the chaos and the mayhem, why? Cause it’s exciting, peaceful demonstrations in HK didn’t get nearly as much press as it deserved in the western media. But bring on the smashed up businesses, and the tear gas, and western media is all over this like white on rice.

        Also, remember this, China has gone out of the way to make sure only the local HK police is cracking down. Not the PLA or cops imported from Shenzhen. And seriously, what did anyone expect the cops of HK to do, let riots get out of hand? One could simply ask tourists to HK how they felt about the demonstration, and you could see a shift over time on their attitudes.

        Speaking of the NBA, what did it do? Fold… because their business depends on them keeping their mouth shut, it’s easy for the King to speak out in the US, but the second it comes down to where there is potential for even more money, he loves China, and keeps his trap shut.

        BTW, anyone who is anti-China should be really thanking the stupid wolf warrior mentality that the Chinese diplomats have adapted. It is the last thing they should want at this point.

        • Willy Winky says:

          Peaceful protests?

          Revisit the year 2014 via a Google search. Half a million peaceful protesters camped on the roads in the CBD.

          The HK puppets smashed them and blasted them with tear gas – threw many of them into prison – and made some promises (that they did not keep).

          Did the people turn violent? Nope.

          They waited…. and waited… and waited…. and waited… but the CCP did not fulfill the promises.

          Slow forward to 2019. Not only did the CCP not make good — they then poked the hive with an extradition bill.

          Did the wasps sting? Nope. They buzzed onto the streets – 2 million of them. Peacefully.

          What did the Chief Puppet do? For weeks she refused to back down on the bill — and still she did not deliver on the 2014 promises.

          Then it got violent.

          And the CCP responded by instructing the storm troopers to beat the living sh it out of those kids. You can google that one too.

          I was a few metres away as one kid was for some reason targeted and thrown to the ground and beaten on the shins with truncheons – he of course struggled to avoid the blows — one of the cops emptied an entire bottle of pepper spray into his face.

          I attempted to intervene and was told ‘he was resisting arrest’ — I continued to harang the cops – one of them raised his pepper spray and screamed ‘move back’ I moved back.

          Very obviously the policy is to beat the protesters into submission.

          What would you have the protesters do – join hands and sing ‘Imagine’….

          Actually they tried that during the Christmas holidays. They gathered in shopping malls and marched around singing Glory to HK and urging people to stab the golden goose and stop shopping.

          How did the CCP respond? Mass arrests. Singing is apparently not allowed.

          And now with Covid distancing rules, the ‘brown shirts’ arrest anyone and everyone if they dare to gather.

          This is a government that sends Triads to beat women.

          This is a government that had to cordon off their Legislative Council with 3000 armed thugs — so that they could pass a law that allows them to fine anyone insulting the flag and national anthem USD6500.

          This is a government that has 1M people in concentration camps.

          This is a government that sells organs of political prisoners (Google that one as well if you are in doubt).

          Peacefully protesting against this government is about as effective as street vendors in Sicily peacefully protesting and refusing to pay protection money to the mob.

          The CCP is a collection of gangsters in suits. They only understand brute force.

          The protesters cannot defeat them with petrol bombs. They understand that.

          Nor can they defeat them with mass peaceful marches.

          But they can use targeted violence to damage the CCP’s money machine.

          And that is what they have been doing. It is not mindless violence.

          The CCP has responded with this National Security Bill. This will allow them to label anyone who opposes them a terrorist.

          Keep in mind it is the CCP who is breaking the law — so who is the terrorist here?

          What we have here is Orwell with a big helping of Huxley being dumped on the people of HK.

          When faced with that you do ‘whatever it takes’

        • Wolf Richter says:

          Willy Winky,

          You’re on fire!

        • Willy Winky says:

          If anyone wants to truly understand what is going on in HK, I advise you skip to the 28:00 mark of this and listen to the protester’s explanation:

        • MCH says:

          Well, Willy, the truth is, if the protesters end up going Malcolm X in China, it literally is giving an excuse for the Chinese government to do what it wants. They already do anyway. Not arguing about your point on the facts here.

          I’m talking about imagery and the audience.

          Think about it, who is the audience in this charade, it isn’t the West. In 2019, China knows what it can expect from the West. So, while it is unhappy about what western media might say, it can still leverage its economic power, something that the West handed over to China through decades of corporate pursuit of profit, aided and abetted by our leaders.

          Seriously, what is the leverage here looking at China? Sanction China? (See Australians complain about their beef exports, or US farmers complain about how the Brazilians are taking over the soy bean sales) The only one who even attempted to do anything to China is the orange haired baboon in the White House, and that won’t last for long. Because first, he is in it for himself, and he’ll make the deal if it’s good. Second, once uncle Joe goes to the White House, it’ll be the normalization of relations, a reset, basically the same old situation. Like The Russian reset 2.0. Except, bigger, and better. Oh, he’ll do the usual lip service, but that’s all.

          The biggest danger the Chinese government faces is itself, it may end up overreaching. Then a general popular unrest would be the most devastating scenario for China. But then, it is getting the tools to try to stifle this unrest, a combination of technology, and the need for Chinese money by foreigners.

          The key is to make sure the home audience is happy. And distractions like HK are actually very welcomed for government, cause now, it gives the Chinese government a point to say, see, what happens when you let a bunch of agitators run amok, they claim they are peaceful protesters, but they are a bunch of terrorists out to make your life hard.

          Remember the audience, and seriously, how much can a bunch of protestors damage China’s economy? Not much, all they are doing is dragging down HK at this point. And gradually turning one half the city against another. It’s a masterpiece in how to deceive and cripple your enemies. I’d think in this situation, even a Ghandi might have a problem trying to stem the tide in HK.

  15. DR DOOM says:

    It’s easy for a nation state to get companies to do their bidding. Companies and Nations are soul-less creatures. Everything is National Security for all Nation States. In the US National Security has replaced the Constitution . American companies will line up to do China’s bidding. The CIA will be in the thick of it also adding its perverted interests to the mix.China will be a slow lethal boa constrictor of liberty in HK. HK will be what China wants it to be. After all HK belongs to China lock,stock and barrel. Resistance is futile…You will be assimilated.

    • Willy Winky says:

      Not without a fight.

      And if it is assimilated and turned into another crappy PRC city to what point?

      There is a reason why HSBC and other multinational businesses maintain their HQs in Hong Kong instead of Shenzhen or Shanghai or Beijing.

      Rule of Law.

      There is no such thing in China. Nobody signs agreements in China. Because it is a joke.

      And now the CCP is violating the Basic Law that is Hong Kong’s mini-constitution. The CCP is violating Rule of Law.

      And that is, understandably, making corporations uncomfortable.

      Let’s face it – Hong Kong is a heavily polluted, expensive, cluttered city with never-ending protests that have the potential to turn it into another ‘Northern Ireland’

      I seriously doubt these protests will end – and the more the CCP turns the screws the more likely the protesters will turn to extreme methods.

      Nobody who has enjoyed freedom takes kindly to being ruled by a totalitarian nightmare. Please note when in China you have no access to any foreign media — you cannot even access Youtube. Many people are not aware of that.

      Making bombs is not rocket science…. the IRA did it. And the HK diaspora is immense (just as is the Irish)…. plenty of overseas HKers would support and fund extreme acts in HK if push came to shove. I would not rule an outcome of this nature out.

      So what is the CCP going to do if this situation goes nuclear? Martial law in a financial centre is a bad look.

      Capital will head for the exits. The elites including expats will follow.

      The property, stock and bond marks would implode.

      And corporations would quickly shift to a place that is clean, stable, and has rule of law – Singapore.

      And they will leave behind small offices in HK like they do in other filthy, crowded Chinese cities.

      Who benefits from the CCP violating Rule of Law in HK?

      I have not the slightest clue.

      It wasn’t broken — so why does the CCP insist on smashing it?

      • Xabier says:

        Excellent posts

        Why indeed mess up something which was working just fine?

        Maybe it’s the case that totalitarian regimes have an immense will to power, and simply cannot abide anything which lies – even only partly like HK – beyond their grasp.

        Power to be real power -it goes far beyond mere corruption and money – must be untramelled and absolute: no law but the will of the state, and the dictator at the top of the state machinery.

        The laws of the state are merely tools to crush and humiliate enemies.

      • Brant Lee says:

        Well said, Willy W. And it wouldn’t stop with HK, right? Taiwan, SE Asia, and onward, the thirst for complete total control.

      • Cas127 says:

        The China/HK relationship is (and has been for 20+ yrs) a marriage of mutual convenience/fear/loathing.

        Look at the intl trade figures…HK has been a very useful conduit (legal and “illegal”) for China’s incredibly vast industrial output (and to smuggle some of the resultant wealth away from the inherently untrustworthy CCP).

        China knows this and has tolerated it (as a relief valve and because, well, the CCP is plenty corrupt itself).

        But if it wanted to…the CCP could directly/indirectly crush HK in the blink of an eye.

        Of course, millions of well heeled economic refugees, who have been stashing money overseas for decades, would be created (UK says Welcome).

        It is pretty unclear why China is cracking down now…perhaps the hidden capital flows out of China need to be recaptured.

        • MCH says:

          Why is China cracking down now?

          Because China does not want to go through that period where it gets told what to do by the rest of the world again.

          Because you know, there was a time when western powers (especially the Brits, but also the Americans) were running around China like they owned the place. Those memories do not go away, and it was humiliating. Almost as bad as when the Japanese were in control of most of China through the end of WWII.

          Because its a loss of face to accept some degree of responsibility and admit that not everything is under control all the time.

          Because the idiot Wolf Warrior diplomats they have running around are busy trying to push the blame on C19 elsewhere. (they have to outtrump Trump… morons)

          I’m sure I can come up with more reasons, but I think you get the idea…

          For China, money is not more important than independence, and China doesn’t like being lectured to. This isn’t true of HSBC, Google, and all of the other companies that wants access to the Chinese market. Cause profits = good.

          And China will remind anyone that there is a pecking order on this planet, and for the moment, they are #2. So, they invite the rest of the pecking order that is < #2 to shut their yap.

        • Yertrippin says:

          China needs a nationalist win for internal consumption and control and understands there will be zero repercussions. Expect immigration to the UK or Taiwan to be “selective” and very expensive.

        • MCH says:

          Yep, that’s the government’s target audience. It knows that it cannot expect the West for anything, it is leveraging its advantage now against the split between Europe and the US. The former is a basketcase, the latter is getting there. The biggest worry is internal.

          The point here is, people consider Xi a dictator. May be… but people better hope that he stays in power, and is not replaced with someone worse. (because I don’t see a reformer taking his place)

  16. WES says:

    HSBC provides lousy service to it’s customers.

    It will never be a world wide bank.

    It is retreating back to China.

    It is probably shrinking.

    • roddy6667 says:

      HSBC is the 7th largest bank in the world and the largest in Europe. It is very useful to people like me who travel a lot and need to access their money from different countries.

      • Javert Chip says:

        HSBC ($1.1T assets) is the worlds 23rd largest bank (most of the top-10 banks are $2-4+T in assets). I haven’t factored n private banks.

        HSBC does rank #8 in private banking services.

        Don’t know where you got your ranking; here’s where I got mine:

        • Javert Chip says:

          At least 5 other EU banks are larger than HBSC:

          BNP Paribas SA
          Crédit Agricole SA
          Banco Santander SA
          Société Générale
          Deutsche Bank AG
          Barclays Bank PLC

      • Willy Winky says:

        When I used to travel a lot (not moving too far these days!) I had problems with my HSBC card, even if I let the bank know I was going to be using the card in foreign lands.

        I touched down in India a few years ago and stopped at an HSBC ATM to withdraw cash.

        Tried all 3 machines and was rejected with the third machine retaining my card.

        I had a similar problem in Ireland last year. Both my card and my wife’s were rejected by multiple ATMs.

        And the year before in Argentina I had problems but those were more related to capital controls and limits than HSBC (at least I think)

        You are aware that most cards work on international ATMs?

        • Wolf Richter says:

          Willy Winky,

          Ha, happened to me in Japan years ago. I knew that you need to go to special foreigner ATMs to get cash in Japan. But I was using the cards to PAY, and I’d never had problems with that before. Total stunner: neither my Visa nor my MC would work when I tried to buy a Shinkansen ticket.

          So I called the credit card company, and they told me that I should have called them in advance to let them know that I’m traveling because if the card suddenly gets used in an unusual place, they’ll lock it due to fraud suspicions.

          BTW, great insights on HK.

        • Javert Chip says:

          Almost all of the 4,800 US banks will issue a Visa/Mastercard (some in partnership with much larger banks). The world-wide bank total issuing cards used to be around 25-30,000.

          However, each individual bank has the prerogative to decline a transaction for what ever reason (the Visa network does not perform this function). Some bank’s are more flexible than others or use AI to accommodate customers. I frequently travel internationally (or used to…) and use a Fidelity Visa card; I never have to notify Fidelity of travel plans (I also use Wells Fargo and must give them excruciating detailed plans).

      • roddy6667 says:

        If I use an HSBC ATM in China, I pay less than 1% total fees to get money from HSBC US. Most large banks will nick you 3% after all fees and currency exchange.

    • Nicko2 says:

      Our offshore account has been with HSBC for several years, I find their customer service is one of the best, no matter where you’re contacting them from.

  17. Tim says:


    If HSBC is the Canary in a Chinese cage, how long before the CCP begin to squeeze them?

    A bit of forbearance on a loan to this contribution group here. We’ll take your forgetting about that finance group bond as good will..

    Until there is not a lot left?

    • Nicko2 says:

      Not a fan of their illiberal polices, but one has to admit reality; It’s China’s century. The New Silk Road is starting to pay dividends, the middle-class is growing across Africa/MENA/South Asia….all roads/shipping lanes/cargo routes lead to China.

      • Tim says:


        In 30 years time the history books could include chapters on how it all went wrong for China.

        How their debt bubble led to the quality of life expectations of the middle and lower classes being let down. How their unsustainable internal security budget rewarded them with less and less control.

        How ( perhaps) Trump and Biden burst corporate debt by banning all countries with Fed Dollar swap lines from being involved in Chinese debt of any form..

        How that led to the Chinese civil war.

        Might not happen. Might happen. Just an alternative point of view based on the theory China could simply be an economic paper dragon with excellent marketing.

      • Tim says:

        In 30 years time the history books could include chapters on how it all went wrong for China.
        How their debt bubble led to the quality of life expectations of the middle and lower classes being let down. How their unsustainable internal security budget rewarded them with less and less control.
        How ( perhaps) Trump and Biden burst corporate debt by banning all countries with Fed Dollar swap lines from being involved in Chinese debt of any form..
        How that led to the terminal difficulties for the ruling junta.
        Might not happen. Might happen. Just an alternative point of view based on the theory China could simply be an economic paper dragon with excellent marketing.

      • Tim says:

        ‘Your comment is awaiting moderation’. Meany.

      • Willy Winky says:

        The CCP has been building ‘bridges to nowhere’ and entire cities that remain empty (google China ghost cities) that are, as expected, falling to bits.

        My partner in Shanghai was telling me a couple of years ago about visiting one of these ghost projects – 200+ villas – only a few were occupied. The others were literally disintegrating as there was no maintenance.

        China is a massive house of cards … if we were allowed to look under the hood we’d be horrified….

        BTW – we sold out of China a year and half ago and he, after having lived there for ten years, headed for the exit.

        He was becoming increasingly anxious about doing business in China — as he put it – the accounting ‘rules’ are opaque — you think you have done everything right but you never know…. and with the Huawei situation (he has a Canadian passport)…. you might end up in the gulag for neglecting to dot an i.

        Going back over a decade, we purchased the online assets of a media group owned by an expat whose China partner (you need a partner…) locked him out of the office and stole the business that he had built from scratch

        As he told me ‘this was always ephemeral…. it’s China’ The domains were registered and the sites hosted outside of China so he was able to retain and sell those.

        Again – this is why HK exists. You cannot invent accounting rules and use them to jail someone … you cannot change the locks on a business and steal it from your partner.

        When this is your SOP then surely China as a system is unlikely to supplant the west as world leader.

        We better hope they do not — because that future looks like a boot stomping on neck – forever.

        • Tim says:

          And yet and yet and yet;

          There are investment groups, clever ‘vulture funds’ etc, seizing the day and opening offices on the mainland to ‘maximise’ the opportunities in distressed bonds.

          They will be followed by other groups, chasing yield, through analysis fit only for their own experiences in very different jurisdictions.

          By which I mean, blindly misapplying their understanding of how they were successful in their original spheres of influence to a mercantilist state that has, at best, an underdeveloped system of law. At worst a state who act with understanding of transaction that is, essentially, ‘The profitable whirlpool’.

        • MC01 says:

          The whole “ghost cities” thing is actually fascinating and I think it betrays a lot of what is actually wrong with China, starting from the indecent haste local governments and developers show in starting a project for fear that somebody higher in the decision chain will simply scrap everything out of a whim or hand the lot to a friend or relative for pennies (plus a nice present for the wife of course).

          I remember being introduced to China back in the 80’s, when a Chinese restaurant opened squat behind my school. My mother took us there to lunch sometimes (ethnic restaurants were exceedingly rare in flyover country those days and hence a special treat) and basically interrogated the owners with a ruthlessness and efficiency the Chinese secret police can only dream about. ;-)
          The owners (a young couple… they may have been around 25 at the time) had come from the Hubei Province via Hong Kong: these were the days when emigration from China was still technically illegal, but the Bamboo Curtain was just as permeable as the Iron Curtain.
          The guy who ran this immigration racket is not merely still alive (he must be over 90 now) but he’s considered some sort of pillar of the community nowadays, with our businessmen and politicians still lining to shake his hands in his Milan home. He has high level connections everywhere from here to Beijing and everybody wants a piece of them nowadays, but the old fox will just smile a lot and then keep on doing whatever he wants. That’s China in a nutshell for you.

  18. LetItRainUSDs says:

    If US leadership are not hypocrites, HSBC should no longer be a primary dealer to the Federal Reserve.

  19. Frank says:

    Hong Kong is Chinese, the treaty giving the territory to Britain was forced from the Chinese at gunboat, the Chinese stuck to the 100 year treaty, the people of Hong kong knew exactly when they would return to Chinese control.
    Imagine the Britsh had forced a 100 year treaty from the USA for control of Long Island at the close of the 1812 war, imagine the USA had stuck to the agreement, do you really think the British or even Long Island itself should be allowed to carry on as it pleased after after 1912 ??, be honest.

    • Javert Chip says:


      You sound like you’re delivering the received wisdom that Hong Kong is Chinese. Absolutely nobody is arguing otherwise.

      When Britain’s Hong Kong lease expired in 1997, Britain & China negotiated a 50-year treaty allowing Hong Kong to maintain it’s independent systems until 2047. At the time, that deal was highly profitable for both nations. No one forced that treaty on China; however, they are now abrogating that agreement.

      Currently and historically, the world is awash with “winners” imposing unpleasant conditions on “losers”. A fairly recent example would be China’s take-over of Tibet.

    • Willy Winky says:

      There is the small matter of the CCP having signed a legally binding document called The Basic Law that guaranteed HK would remain semi-autonomous until 2047.

      It’s 2020.

      Of course the CCP can choose to blow off that agreement early (as they are doing) but there may be severe consequences.

      This is an excellent article explaining why Hong Kong is criticial to China:

  20. Tang says:

    Great stuff. Love all comments giving different insights into the future of HK. Just a point to note. Most contributions look at HK from the perspective of a new borne child which she is never. HK history much older than the CCP 0f China. You know which qing emperor handed HK to the British around the years of the 2 opium wars? HK grew under British administration through the 100 years. Most HK citizens are descendants of mainlanders who fled during the troubled years of wars, unrest, famine. They found solace, the HK dream(whatever may be) in this place and with British rule in general it was more peaceful than many mainland places except for WW2 when Japan captured the island.
    History has shown HK people that their livelihoods can never be taken for granted. 1949 when communist took power in mainland and nationalists elements fled to Taiwan many knew how fragile HK can be.

    Many HK already has left. More in 1997. A classmate left with whole family in 1983 to Canada. Many run restaurant in London, European countries, US.

    HK people knew. Many are prepared. Cannot say for the poor. I dont know. Many cos there are registered elsewhere. All have assets parked elsewhere and invest everywhere. That is why foreign banks prospered because their services in many financial forms are needed. That includes money laundering for which we know which banks are famous. Many mainlanders folks are also in parallel thinking with HK people. They are afraid of the CCP sudden tendency to go crazy and go for their wealth.
    The rule of the law in the mainland is about CCP decision and nothing much. That is why Xi needs foreign exchange control.
    But every country does these. HK people has through the years already hedged their bets. Many hope mainland will and can change to a better world like theirs.

    • char says:

      Many run restaurants. Hard work and in the end not a lot of money and kids that are yellow bounties. Their lazy brother stayed in HK. The only smart thing he ever did was buying his own apartment and he is so much richer. It stings to feel like a looser.

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