HSBC is expanding in China to counter lower profitability in the UK and US. But it's not been a smooth operation so far, and politics hasn't helped. Image Credit: Bloomberg

New York: HSBC Holdings has been accused by US Secretary of State Michael Pompeo of aiding the Chinese government's clampdown on Hong Kong.

Pompeo cited reports that the British bank had stopped executives of Hong Kong-based publisher Next Media from accessing their credit cards and personal bank accounts following the arrest of the company's founder, Jimmy Lai. In a written statement, Pompeo also said HSBC continued to provide banking services to people sanctioned by the US.

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"The bank is thus maintaining accounts for individuals who have been sanctioned for denying freedom for Hong Kongers, while shutting accounts for those seeking freedom," said Pompeo.

Open support

The secretary of state repeated criticism of HSBC's decision in June to allow its most senior banker in Asia, Peter Wong, to sign a petition supporting the new Hong Kong security law that critics say has stifled freedom in the former British colony. HSBC's shares are down 45 per cent so far this year.

"Free nations must ensure that corporate interests are not suborned by the CCP to aid its political repression," Pompeo said. He offered support to the British government to counter what he described as the "coercive bullying tactics" of the Chinese authorities.

Caught in the firefight

HSBC has been walking a political tightrope amid unrelenting pressure from both China and the US as tensions between the two superpowers escalated with tit-for-tat sanctions over a crackdown on Hong Kong and threats against some of China's biggest companies. The London-based bank is seeking to expand in China to boost profits, shifting away from struggling operations in Europe and the US.

Global banks including Citigroup and Standard Chartered have stepped up scrutiny of clients in Hong Kong, aiming to avoid violating US sanctions on officials in the city, people familiar with the matter said earlier this month. Citigroup is already taking steps to suspend accounts linked to some of the 11 targeted individuals.

Even China's largest state-run banks operating in Hong Kong are taking tentative steps to comply with US sanctions, seeking to safeguard their access to crucial dollar funding and overseas networks. At some lenders, transactions via the US are banned, while compliance must now review and sign off on others that would previously have been immediately processed.

Hong Kong's Chief Executive Carrie Lam already said she's having trouble using her credit cards after the sanctions. Chris Tang, the city's police chief, transferred the mortgage loans for his apartment from HSBC to BOC Hong Kong Holdings Ltd. at the beginning of August.