Advertisement
The View
CommentHong Kong
Benjamin Poon
Zhigang Tao
Benjamin PoonandZhigang Tao

The View | A Chinese spin-off would ring-fence HSBC’s golden goose amid US-China tensions

  • Given geopolitical pressures, a split would protect HSBC’s hugely profitable Hong Kong and mainland business, while letting its global banking business proceed with fewer regulatory burdens and better financial discipline

Reading Time:4 minutes
Why you can trust SCMP
0
The HSBC main building in Central, Hong Kong on April 26. Photo: Nora Tam
Benjamin PoonandZhigang Tao
Last month, HSBC reported a 28 per cent year-on-year drop in its first-quarter profits, mainly due to troubled loans in its Russian and mainland Chinese businesses. Since then, there have been calls for HSBC to split into two – one side focused on Asia, the other on its global business.
First, The Wall Street Journal reported than an unnamed investor had made the demand via a public relations firm. Then Bloomberg and the Financial Times reported that Ping An, China’s largest insurer and the bank’s biggest shareholder, was pushing the demand with the board. HSBC swiftly dismissed the idea. However, we believe a split is worthy of further consideration.
Last June, when China rolled out its anti-sanctions law in response to what it calls the “long-arm jurisdiction” of the West, we proposed that multinational companies caught in the geopolitical crosshairs – such as Nike, HSBC and Huawei Technologies Co – consider spinning off their China- and US-centred businesses.

While picking sides is an option (for example, choosing to do business with either the United States or China exclusively), a better choice is to have two separate companies with separate boards and different brands serving two different markets.

The geopolitical tensions between China and the US show little sign of subsiding. In Hong Kong, meanwhile, the next chief executive is unlikely to take it lightly if HSBC continues to deny the leader of the city its banking services. This will further shrink HSBC’s breathing space in Hong Kong and mainland China.

01:24

Hong Kong leader Carrie Lam says she gets around sanctions by collecting her salary in cash

Hong Kong leader Carrie Lam says she gets around sanctions by collecting her salary in cash

Beyond geopolitical considerations, there are business management reasons for HSBC to consider splitting into two.

Advertisement