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China’s banking and insurance regulator has hit out at the United States’ sanctions on Hong Kong. Photo: Dfic

US-China relations: Beijing condemns financial sanctions on Hong Kong

  • America’s ‘actions to undermine financial stability in Hong Kong are not only against the Chinese people but also against the people of the world’, CBIRC says
  • But watchdog offers little advice on how lenders in the city should deal with the new restrictions
China’s banking and insurance regulator has declared the United States’ financial sanctions on Hong Kong organisations and officials accused of eroding the city’s autonomy as “lacking legality”.
In a statement published on its website, the China Banking and Insurance Regulatory Commission (CBIRC), issued a stern challenge to Washington.

“Any US actions to undermine financial stability in Hong Kong are not only against the Chinese people but also against the people of the world, including the American people. We advise the US government not to act unilaterally to shoot itself in the foot,” it said.

“The US has placed domestic laws above international laws and interfered in the normal business of financial institutions. It not only lacks legality but also violates the principles of the market economy.”

The CBIRC, whose chairman Guo Shuqing is also Communist Party secretary of the People’s Bank of China, said the US practice of using “long-arm jurisdiction” and “financial hegemony” to impose sanctions were not in line with “market economy principals”.
The statement made no reference to possible retaliation, nor did it offer specific guidance on how Chinese banks in Hong Kong should deal with the sanctions.

It said only that lenders should conduct their business “in compliance with laws and regulations” and provide good financial services to “all customers, including Hong Kong citizens and enterprises”.

The CBIRC does not directly regulate banks in Hong Kong, but many mainland lenders have branches there.
Washington is set to publish a list of financial institutions in Hong Kong that do businesses with individuals sanctioned by the US under the Hong Kong Autonomy Act. The city’s Chief Executive Carrie Lam Cheng Yuet-ngor was among the first batch of 11 people to be named.

The sanctions pushed many lenders, including Chinese state banks, to review or even sever business deals with the blacklisted individuals, even though the Hong Kong Monetary Authority said they were under no obligation to comply with America’s rulings.

The situation for Chinese banks is complicated as they could be seen as cooperating with the US in punishing Hong Kong and mainland Chinese officials if they comply with the sanctions, or face restrictions themselves if they refuse.

None of the Chinese state banks with branches in Hong Kong have issued an official statement on what they plan to do.

China’s wish to end US dollar dominance is unlikely to come true

Bloomberg reported earlier this month that Chinese lenders in Hong Kong, including Bank of China, China Construction Bank and China Merchants Bank, were taking tentative steps to comply with the US sanctions.

The CBIRC said it hoped to resolve China-US economic and financial problems through “cooperation and consultation”, and said that Hong Kong’s role as an international financial hub would not be weakened by the situation but become “more prosperous and stable”.

This article appeared in the South China Morning Post print edition as: China’s banking regulator condemns US financial sanctions on Hong Kong