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Finance

HSBC takes fire from top investor and US for backing China law

Aviva and Pompeo find fault with bank over Hong Kong national security bill

HONG KONG -- HSBC Holdings is facing criticism from a leading shareholder as well as top foreign officials over its decision to endorse China's new national security laws for Hong Kong.

David Cummings, chief investment officer at the investment arm of British insurer Aviva, has questioned moves by fellow British financial institutions HSBC and Standard Chartered to publicly back the Chinese bills without having details of what measures they contain. Aviva holds $1 billion in shares of the two banks, ranking as one of the 12 largest shareholders of both.

"If companies make political statements, they must accept the corporate social responsibilities that follow," Cummings said in an emailed statement. "Consequently, we expect both companies to confirm that they will also speak out publicly if there are any future abuses of democratic freedoms connected to the law."

An Aviva spokesman later said the investor had had conversations with both banks. Aviva would not comment on its buying or selling intentions with any stock, the spokesman said.

U.S. Secretary of State Mike Pompeo on Tuesday also criticized HSBC's move in a statement affirming that Washington "stands with our allies and partners against the Chinese Communist Party's coercive bullying tactics."

The fallout exemplifies the quandaries faced by multinational companies active in China in balancing pressures from their home governments, shareholders and staff with those coming from Beijing and its allies.

This has come to a head over the national security laws, which China sees as a tool to restore order after months of political protests in Hong Kong while residents and foreign governments worry about the curtailment of free speech and other civil liberties. For companies like HSBC and StanChart that count greater China as their biggest market, the squeeze is particularly acute.

C.Y. Leung, the former chief executive of Hong Kong and a vice chairman of the Chinese People's Political Consultative Conference, Beijing's top advisory council, had publicly threatened HSBC with a consumer boycott over its earlier reticence about the national security laws.

HSBC generated 55% of its total pretax profits from Hong Kong alone last year and also has a large presence in mainland China. The bank is focusing even more on both markets as Europe and the Americas have been underperforming.

Just ahead of the June 4 Tiananmen Square crackdown anniversary, HSBC's China unit had posted photos on social media of Peter Wong, the bank's top executive for Asia, signing a petition in Hong Kong in support of the security laws.

An accompanying statement in the bank's name said, "We reiterate that we respect and support laws and regulation that will enable Hong Kong to recover and rebuild the economy." Standard Chartered last week also issued a statement saying the security laws could help maintain the city's long-term economic and social stability.

In his own statement, referring to the Chinese Communist Party and news reports that Beijing had threatened to penalize HSBC if Britain bars Huawei Technologies equipment from its phone networks, Pompeo said, "The CCP's browbeating of HSBC, in particular, should serve as a cautionary tale."

He commented that the bank's show of support for the security laws "seems to have earned HSBC little respect in Beijing, which continues to use the bank's business in China as political leverage against London."

Since declaring support for the law, HSBC shares in Hong Kong have climbed 8.5% while StanChart is up 12%. The Hang Seng Index has risen 4.5%.

Aviva's investment arm is an accredited foreign institutional investor in China. The company also has a life insurance joint venture with state-owned food company COFCO Group.

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