Why powerful China must pick its battles: boom-time Japan offers a cautionary tale

The fates of HSBC and Cathay top brass suggest China is reading the riot act to multinationals

But the loss of goodwill could come at great cost when there are other, more important, battles to be fought – such as the trade war

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The Chinese national flag is displayed on a Hong Kong building in a show of support for the government, as seen from Tsim Sha Tsui on August 12. Photo: Nora Tam

Published: 10:30am, 23 Aug 2019Updated: 10:58am, 23 Aug 2019

Yes, I really am old enough to remember Japan’s economic boom of the 1980s, when the country boasted by far the second-largest economy in the world. When you couldn’t walk down the Ginza for people. When an apple cost US$40 at a street stall. When it was incredibly tough and fearfully expensive to do business, because of the non-tariff barriers and unwelcoming attitude.

As a result, businesses worked remotely, doing as little as possible within Japan. Legal drafting was done in Hong Kong. Tiny representative offices were used instead of full branches. Integration was minimised: financially, socially and culturally. So, when the economy cooled, companies had limited commitment and it was easy to trim.

Ten years later, I was walking down the Ginza and you could almost see tumbleweed blowing down the road. Because everything had to be in Japan’s favour, they had blown the opportunity to build trust and goodwill among the global business community when they had the chance.

Within a space of 10 days, two iconic Hong Kong, foreign-based, multinationals lost their chief executives, something that is usually a twice-a-decade event.

Naturally, all involved denied that it had anything to do with China or the protests. It reminds me of a famous English court case where a respected peer of the realm denied an affair with the young woman in the witness box. She replied, “Well [giggle], he would, wouldn’t he?”

After 30 years with HSBC, CEO John Flint, and his China head, Helen Wong Pik-kuen, were axed. This was originally thought to be an apparent tiff between the chairman and CEO, but the Financial Times has convincingly linked it back to a meeting between China’s very smart ambassador to the UK, Liu Xiaoming, and the now former CEO – that did not go well.