London-based bank sets up internal Chinese Communist Party Committee to appease Beijing

One of the world’s largest banks established a Chinese Communist Party committee in its investment bank in the country, showing Beijing that it is willing to play by its rules.

London-based HSBC, Europe’s second-largest lender, recently established a CCP committee in HSBC Qianhai Securities, a joint venture it launched with Qianhai Financial Holdings, a Chinese financial services company, reports the Financial Times.

Chines companies are required to have a CCP committee by law, but it is loosely enforced among foreign finance groups, reports the FT. Each committee, made up of at least three or more employees who are also members of the ruling Chinese Communist party, serves both as a workers’ union and a means for Beijing to install a party representative into a leadership.

HSBC recently lifted its stake in its joint venture with Qianhai in April, from 51% to 90%.

Financial analysts and China experts say HSBC’s move will pressure other foreign banks operating in China to do the same.

“It is significant in the sense of where [HSBC] is allocating its future,” a senior-level source at another mainland financial institution who has followed the issue closely told the FT, on condition of anonymity.

“It is increasing its ties with an autocracy that clearly has views on how far it wants to reach into private companies. It is another brick in that wall.”

Originally named the Hongkong and Shanhai Bank, HSBC was founded in 1985by a Scottish banker in the then-British colony of Hong Kong. The majority of its profits come from Asia, even though it is based in the U.K.

HSBC has recently come under fire from Western lawmakers over its public support of Hong Kong’s national security law, enacted by mainland loyalists after the 2019 pro-democracy protests. The bank has been accused of freezing the accounts of activists on behalf of Beijing.

HSBC released a statement saying that CCP committees are commonplace in China and would not influence regular business.

Florida Sen. Marco Rubio (R), blasted the decision in a press release, saying: “These communist party committees are not just for show. They exist to influence, monitor, and ultimately control the company.”

But another FT source defended HSBC’s decision as the correct one for any company operating on the mainland.

“You don’t second guess the authorities in China,” the second source said.

“If they catch up they put you in the sin bin. Any American bank who isn’t doing the same is playing a dangerous game.”