US lawmakers keep pressure on major banks over relations with China and Taiwan

US lawmakers keep pressure on major banks over relations with China and Taiwan

2/2


2/2

Written by Lanan Nguyen, Saeed Azhar and Scott Murdoch

WASHINGTON/HONG KONG (Reuters) – Top US bankers came under pressure from lawmakers on Wednesday to take a tougher line on dealing with China, amid rising tensions between Washington and Beijing over Taiwan’s sovereignty and China’s human rights record.

During a hearing before the US House of Representatives Financial Services Committee, Republican Congressman Blaine Luetkemer pressed the bank’s chief executives on how they would respond to the hypothetical event of the Chinese invasion of Taiwan.

The lawmakers also asked executives to condemn “human rights abuses” in China, a departure from previous hearings that tended to focus on domestic issues such as housing and consumer protection.

“We will follow the government’s guidance, which for decades has been to work with China,” said Bank of America (NYSE:) CEO Brian Moynihan. β€œIf they change this situation, we will change it immediately, as we did in Russia.”

JPMorgan Chase (NYSE:) CEO Jamie Dimon and City Group Jane Fraser, CEO of the New York Stock Exchange, agreed with both, saying their banks would follow government directives if China invaded Taiwan.

The increased scrutiny is highlighting the challenges that the country’s largest lenders increasingly face as they try to balance business interests and pressure from policy makers, activists and investors to take positions on environmental, social and governance issues.

Wall Street giants including JPMorgan, Goldman Sachs (NYSE:) and Morgan Stanley (NYSE: πŸ™‚ has sought in recent years to expand its business in China, the world’s second largest economy.

READ ALSO :   Michael Perry's "Big Short" sounds the alarm about tensions between China and the United States

Authorities there have given US banks greater ownership of their securities business despite rising geopolitical tensions. Despite having a larger footprint, China is not yet a big profit center for those banks.

“There will be significant gains for the United States or losses for China if banks reduce their operations there,” said Andrew Collier, an analyst at Hong Kong-based Global Source Partners.

“However, symbolism is more important, because China is very concerned about decoupling trade and imports of key products such as semiconductors, so any pressure on the financial sector will send worrying signals to Beijing.”

Asked about the remarks of US bank CEOs and lawmakers, Chinese Foreign Ministry spokesman Zhao Lijian said Thursday that “the Taiwan issue has always been the most important and sensitive issue” of US-China relations.

“The US side should strictly abide by the one-China principle and the three provisions of the US-China joint communique, earnestly and effectively implement the position of US leaders not to support Taiwan independence, and stop playing games on Taiwan-related issues.”

‘default question’

JPMorgan, which has been operating in China since 1921, caters to Chinese and international companies, financial institutions, and government agencies. Last year, it became the first foreign company to fully own a securities venture in China.

Citigroup, which was the first US bank to open a store in China in 1902, last year applied for a securities license from mainland China as part of its drive to ramp up business in the market.

China has conducted military exercises near Taiwan in recent weeks. After US House Speaker Nancy Pelosi visited Taipei, China launched missiles into waters near the island, although its activities have since declined.

READ ALSO :   Newmont delays investment decision on Peruvian mine until 2024

China claims that Taiwan is democratically governed as its territory. The Taiwan government rejects China’s sovereignty claims.

Congressman Luetkemeyer asked Fraser what the Citigroup would do if war broke out on Taiwan.

“It’s a hypothetical question,” Fraser said. β€œIt is very likely that our presence will be limited.” Citigroup has a global reach spanning over 160 countries.

And when Republican Lance Godin later asked her if she would condemn “the ongoing human rights abuses in China,” Fraser hesitated. “Condemnation is a strong word,” she said. “We certainly feel very sad to see her.”

JPMorgan’s Dimon also warned that the US should compete with Chinese banks, which have grown in size over the past few years to become the largest in the world.

“I will do everything in my power to make sure that we compete with the best Chinese banks in the world. It is just as important to America’s future that America maintains its financial edge as anything else.”

Newsletter Updates

Enter your email address below to subscribe to our newsletter