Jun 30, 2020
US Hong Kong Sanctions Threaten $1.1T in China Funding
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China’s largest banks have $1.1 trillion in dollar funding at stake and face potentially steep fines from U.S. legislation that targets penalizing lenders doing businesses with Chinese officials involved in Hong Kong’s controversial security law, according to Bloomberg Intelligence.
The bipartisan measure, which was passed by the U.S. Senate and still needs to go through the House and be signed by the U.S. President, bars financial institution from providing accounts to sanctioned officials, many of whom may be assumed to use the services of China’s biggest banks, Francis Chan, a senior analyst at BI in Hong Kong, said in a June 30 note. Banks in violation risk being cut off from accessing the U.S. financial system, he said.
Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd., the nation’s four largest state-backed lenders, had a combined 7.5 trillion yuan ($1.1 trillion) equivalent of U.S. dollar liabilities at the end of 2019, of which 47% were deposits, according to their annual reports. The rest came from the interbank borrowing and issuing securities to global investors.
The legislation would apply penalties against financial institutions only if a bank knowingly does business with an official under sanction. The bill is intended to keep the penalties from capturing a broad swath of U.S. companies, an administration official familiar with the discussions said earlier. Banks will be informed of what entities are on the sanctions list before penalties are imposed, the person said.
Global banks could also be at risk since Chinese officials, their relatives and associates may also be their customers, Chan said. Standard Chartered Plc paid more than $600 million in fines in 2019 for breaching sanctions against Burma, Cuba, Iran, Sudan and Syria. BNP Paribas SA was fined $8.9 billion by the U.S. in 2014, the largest ever on an individual bank, for transactions with Sudan and other blacklisted nations.
The Trump administration overnight escalated pressure on China over its crackdown on Hong Kong by making it harder to export sensitive technology to the city as Beijing is poised on Tuesday to pass the security law. The Commerce Department said it’s suspending regulations allowing special treatment to Hong Kong over things including export license exceptions.
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Newspaper mogul and leading pro-democracy activist arrested in Hong Kong
With the arrests of a newspaper tycoon and a pro-democracy activist, Hong Kong authorities are testing the limits of the city's new "national security" law.
On Monday, Jimmy Lai, founder of Apple Daily, a prominent pro-democracy newspaper, and Agnes Chow, leading pro-democracy activist, were arrested on suspicion of violating the law. Lai has been accused of "colluding with foreign forces" while Chow, 23, has been accused of "inciting secession." Both of these acts are considered criminal under the new law, and both Lai and Chow could face life in prison.
In the morning, police arrested Lai at his home while 200 officers raided his newspaper's offices. Documents and research materials were confiscated from reporters. Lai's two sons and four of his employees were arrested as well. In response, Apple Daily printed 200,000 more copies of its next paper than it normally would. Readers began to line up overnight, just to get their hands on a copy.
It's 2am in #Hongkong. There is a long line of people queuing up for the first batch of @appledaily_hk in Mongkok. We are livestreaming, and 6500 people are watching. I guess no one is getting much sleep tonight. pic.twitter.com/xdfnxdcvLg— Alex Lam 林偉聰 (@lwcalex) August 10, 2020
Chow was also arrested at her home. Officers marched her in handcuffs out to a van, where with a mask-covered face and wide eyes, she looked back at a swarm of reporters one final time. Chow left the pro-democracy student group Demosisto after the law was implemented and didn't post again on Twitter, suggesting that the law may be retroactive despite Hong Kong officials originally saying it would not be applied retroactively.
Hong Kong democracy activist Agnes Chow arrested under security law - @AFP video by @danielchsuen pic.twitter.com/FJhc8Rpel6— Satish Cheney (@SatishCheney) August 10, 2020
The "national security" law, implemented by China for the city several weeks ago, criminalizes secession, subversion, collusion with foreign forces, and terrorism. Because the law is written so vaguely, authorities have been able to use it to crack down on dissidents.
While many have already been arrested under the law, Monday's arrests are the most high-profile so far.
Joshua Wong, the 23-year-old who has become the de facto face of the Hong Kong protest movement, posted a video on Facebook Monday.
"Hong Kongers will not surrender," he said. "Now is not just a fight for democracy and liberty but also a battle between truth and lies. Now is the most urgent situation in Hong Kong. I hope that this is not the last video before I am arrested in the upcoming future. Perhaps the time for me to continue to fight for freedom in Hong Kong is already counting down, but no matter what happens, as a Hong Konger, I love Hong Kong a lot, and I will continue my commitment. My commitment to the democracy movement until the day we see the brighter future in our homeland."News Hong Kong China Protests