China’s largest state-run banks operating in Hong Kong are taking tentative steps to comply with US sanctions imposed on officials in the territory, seeking to safeguard their access to crucial dollar funding and overseas networks.
Major lenders with operations in the US — including Bank of China Ltd (中國銀行), China Construction Bank Corp (中國建設銀行) and China Merchants Bank Co (招商銀行) — have turned cautious on opening new accounts for the 11 sanctioned officials, including Hong Kong Chief Executive Carrie Lam (林鄭月娥), people familiar with the matter said.
At least one bank has suspended such activity.
At some lenders, transactions via the US are banned, while compliance must review and sign off on others that would previously have been immediately processed, the people said.
Foreign lenders such as Citigroup Inc have taken steps to suspend accounts or are increasing scrutiny of Hong Kong clients.
Such measures underscore the ability of Washington to use the US dollar’s dominance in international transactions as a pressure point in the intensifying standoff with China.
China’s state-owned lenders need to preserve their access to global financial markets, particularly at a time when Beijing is leaning on them to prop up the economy from the fallout of the COVID-19 pandemic.
China’s four largest banks had US$1.1 trillion in dollar funding at the end last year, Bloomberg Intelligence said.
China on Monday retaliated by sanctioning 11 people, including US senators Marco Rubio and Ted Cruz, but stopped short of putting any senior US government officials on its list.
The door for talks with the US remains open, Chinese State Councillor Yang Jiechi (楊潔篪) said on Friday last week.
It did not clarify the potential implications for any institutions that keep doing businesses with those named.
“China’s position on the US sanctions is clear and consistent,” Chinese Ministry of Foreign Affairs spokesman Zhao Lijian (趙立堅) told reporters in Beijing on Wednesday in response to a question about the banks’ move to comply. “The US sanctions are irrational and groundless.”
Bank of China had the biggest exposure to US dollars among its local peers, followed by Industrial and Commercial Bank of China Ltd (中國工商銀行), the world’s largest bank. The lenders have been expanding their presence globally over the past decade by adding branches, making acquisitions and granting loans to fund everything from local power plants to toll roads.
Local banks in Hong Kong are concerned as well since they all have some US dealings such as foreign exchange and settlement, one person said.
The Hong Kong Monetary Authority on Saturday last week sought to ease concerns, saying that lenders in the territory have no obligation to follow US sanctions under local law and urging banks to treat customers fairly in assessing whether to continue providing services.
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