Could American banks get caught in the middle of US-China rift over Hong Kong?
- A gateway to China, Hong Kong also serves as an important regional hub for America’s largest lenders
- American banks accounted for about 5 per cent of total assets in the city last year, according to HKMA
A gateway for capital flowing in and out of mainland China, Hong Kong has for decades also served as a lucrative regional hub for America’s biggest banks operating in Asia.
But, rising tensions between the United States and China are threatening to leave foreign lenders – and billions of dollars in potential revenue as the mainland’s financial services industry opens up further – stuck in the middle.
On Wednesday, US Secretary of State Mike Pompeo said Hong Kong no longer maintained a “high degree of autonomy” from China, after the National People’s Congress (NPC) said it would adopt new national security legislation tailor-made for the city following months of anti-government street protests. The resolution was passed by a near unanimous vote on Thursday.
The Trump administration has not said what actions it might take in response other than President Donald Trump saying he planned to do “something” this week. The declaration represents the latest firestorm, as relations have deteriorated dramatically between the world’s two biggest economies in recent years.
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Hong Kong is no longer autonomous from China, US determines
“We expect the latest move to have considerable implications for the city, with the threat of higher tariffs, sanctions, as well as tougher investment and visa rules between Hong Kong and the US, including potential sanctions on businesses – particularly banks – operating in the city found to be supporting anyone in violation of the ‘one country, two systems’ model,” said Benjamin Quinlan, managing partner of consultancy Quinlan & Associates.