Lionel Barber is former editor of the Financial Times and chairman of the Tate art galleries.
Hong Kong has long enjoyed a uniquely privileged position as a global trading hub between China and the West. This position is now at risk because of the national security law Beijing intends to impose on it, a move that is forcing companies and governments to choose sides in the heated debate over the law's merits.
Last week, HSBC and Standard Chartered Bank abandoned their usual political neutrality and gave public backing to the law. HSBC said in a post on social media in China that it "respects and supports all laws that stabilize Hong Kong's social order." StanChart said it believed the law can "help maintain the long term economic and social stability of Hong Kong."
The stance of the two banks -- coinciding with the anniversary of the brutal crackdown on protesters in Tiananmen Square in 1989 -- has drawn criticism from politicians and human rights groups in the U.K. and the U.S., which argue that the law breaches Hong Kong's autonomy and the fundamental rights of its citizens to free speech.
"I wonder why HSBC and StanChart are choosing to back an authoritarian state's repression of liberties and undermining the rule of law," said Tom Tugendhat, a British Conservative MP and chairman of the Foreign Affairs Committee in the House of Commons.
The U.K.-listed banks have in fact followed the lead of Jardine Matheson Holdings and Swire Pacific, two of the oldest Hong Kong-listed trading houses. All companies have come under intense pressure from pro-Beijing politicians in Hong Kong and state media on the mainland, which have turned the national security law into a litmus test of loyalty to China.
In private, business leaders admit they will "stomach" the law because of the imperative of market access to China which is critical for their long-term growth. The big question is how this mood of reluctant corporate compliance -- some might call it resignation -- will affect the long-term prospects of Hong Kong as a global financial center.
Last week, Nomura Holdings' chief executive Kentaro Okuda said the Japanese bank was reviewing its Greater China strategy and the scale of its 1,000-strong operation in Hong Kong, according to a report in the Financial Times. His comments followed a U.S. threat to revoke Hong Kong's special trade privileges as Washington no longer considers the special administrative region to have the requisite autonomy from Beijing.
Other financial institutions are looking at relocating to Singapore as an alternative, or indeed doubling down on the Chinese mainland. Like JP Morgan, Goldman Sachs and UBS, Nomura has formed a majority-owned joint venture in China which could be expanded in time.
Those with a conspiratorial frame of mind might consider that Beijing's long-term plan was always to weaken Hong Kong in relation to its homegrown financial center in Shanghai. But this ignores the importance of the Hong Kong Stock Exchange as the listing location of choice for blue chip mainland companies like Alibaba Group Holding, Ping An Insurance Group and Tencent Holdings. Hong Kong also enjoys a privileged position as the dominant offshore dollar funding center in Asia, a de facto vote of confidence by all-powerful U.S. regulators like the Federal Reserve which, if withdrawn, would have catastrophic consequences.
The Beijing-friendly decisions by HSBC and StanChart appear to conflict with the increasingly anti-Beijing position in the U.K., where both banks are headquartered. The U.K. has a special relationship with Hong Kong as a former colony. In 1997, it handed over Hong Kong to China under a "one country, two systems" agreement which is supposed to guarantee autonomy under a 50-year transition to 2047.
British Prime Minister Boris Johnson's government has reacted strongly to the national security law and countered Beijing's proposal with a bold initiative of his own: an invitation to let Hong Kong residents come to the U.K. on a 12-month visa, rather than the standard six months.
This is described as a "pathway to citizenship" and would apply to almost three million Hong Kongers who qualify for "British National (Overseas)" status. Beijing has warned the U.K. "to stop interfering in Hong Kong's affairs and China's internal affairs."
The erosion of Hong Kong's autonomy under President Xi Jinping's rule, coupled with pressure from U.S. President Donald Trump, has prompted calls to extend Johnson's offer to full citizenship -- an unexpected twist coming from a country which has sought to reduce immigration from Europe via Brexit.
Fraser Nelson, writing in the Spectator news magazine, says that Britain is the world's most successful melting pot, integrating 5 million migrants over the past decade, with none of the far-right political backlash seen in Europe. "It's hard to argue that there would be any problem with the Hong Kong Chinese, the best educated and most highly skilled and productive immigrants any country could ask for," Nelson says.
Nelson suggests creating a Hong Kong-style low-regulation "charter city" in the north of England. Another location mentioned -- half seriously -- is southwest Scotland, near the estates of the Keswick family whose stake in Jardine Matheson is estimated to be close to $5 billion.
The irony would certainly not be lost on Sir Henry Keswick, who stepped down as Jardine's chairman in 2018, aged 80. Sir Henry has been a master of straddling between East and West, largely because he has remained almost invisible to the public eye. In practice, the straddle is no longer viable, even for the most powerful companies and businessmen.