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For Wall Street firms, China must be one of the most difficult places to make money right now. So it is highly revealing that many of the biggest names in global finance are set to arrive in Hong Kong this week.
Goldman Sachs’ David Solomon, Morgan Stanley’s James Gorman and Citi’s Jane Fraser are due in town, though JPMorgan’s Jamie Dimon will instead be in Paris with the bank’s International Council, a group that Tony Blair chairs. Some of the most senior figures from Europe’s UBS, Barclays, HSBC and Deutsche Bank are visiting, as well as BlackRock, Blackstone and Apollo Global Management, among others.
Few organisations could imagine being able to bring such a line-up together. But the Hong Kong Monetary Authority, the territory’s de facto central bank, is hosting them at a conference with the theme “Living with Complexity”. That phrase offers at least a nod towards how tough the financiers’ task will be.
Part of the event’s purpose is to showcase Hong Kong as a crucial global financial centre, even as US-China tensions fray commercial ties built up over decades.
Viewed from the US, the role of Wall Street titans in that narrative is tricky. Lately the US is making less of a distinction between it and the mainland. President Joe Biden’s executive order banning some US investment into Chinese technology, for example, applies equally to Hong Kong.
John Lee, Hong Kong’s chief executive, is due to make a speech at the conference. But American financiers would probably be nervous about any one-to-one photographs with him. He is under US sanctions for “being involved in coercing, arresting, detaining or imprisoning individuals” under a draconian national security law that Beijing imposed on Hong Kong in the wake of pro-democracy protests in 2019. The sanctions would penalise American financial institutions if they did business with him.
Hong Kong’s role is as a gateway to China, but many US investors have changed their tune on the country. “When we used to go [to the US], everyone wanted to talk about China,” said one senior Hong Kong-based executive who advises investment firms. Now, “it’s almost an uncomfortable topic — they try to change the subject”.
Beijing’s crackdowns on technology companies and private education made investors fear the unpredictability with which their investments in the country could go wrong. China’s slowing growth and its real estate crisis have dulled the commercial rationale and raids on due diligence firms have rattled foreign investors.
Among multinational corporations, the talk is of “decoupling” and “de-risking” from China amid trade restrictions and Beijing’s strict new anti-espionage laws on the use of data. Fears about the possibility of a war over Taiwan lie behind many of those conversations.
“It’s all well and good to have these big public events where everyone espouses their views on the robustness of Hong Kong and China, but the reality is very different,” an asset management specialist based in Hong Kong said. “It’s quite depressing in terms of what’s happening on the ground — there’s not a lot.”
The conference stage is unlikely to be a forum for the world’s most senior bankers to discuss these issues.
Instead, the financiers will be busy trying to get through the event without mis-steps, and with as little attention as possible, aware that ruffling feathers could be particularly problematic in the run-up to an expected meeting between President Biden and President Xi this month. The fact that reporters are being kept out of the room, watching an electronic feed instead, should make the task easier.
Bankers fear that if they are seen to talk up their firm’s China business, they could find themselves in the crosshairs of politicians back home, an executive at one US firm said. They must also avoid comments that could be construed as talking China down.
It is telling that the world’s financial elite is willing to attend despite all of this. The HKMA, which has almost HK$4tn (£410bn) in its Exchange Fund, is an important client for banks and a major investor in private equity funds. Other asset managers in the room are or could become valuable clients too.
Many of the attendees’ firms have a significant presence in China, which they are not abandoning, so they must try to build ties in Beijing, Hong Kong and the west. That is an increasingly tough task. But the biggest names in finance have decided they need, however carefully, to be in the room.
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