Republicans grill top bankers over China ties
By Lananh Nguyen, Saeed Azhar and Scott Murdoch
WASHINGTON/HONG KONG (Reuters) – Top U.S. bankers on Wednesday came under pressure from lawmakers to take a tougher stance on trade relations with China amid growing tensions between Washington and Beijing over Taiwan’s sovereignty and China’s human rights record.
In a hearing before the U.S. House of Representatives Financial Services Committee, Republican Congressman Blaine Luetkemeyer pressed bank CEOs on how they would react in the hypothetical case of a Chinese invasion of Taiwan .
Lawmakers also asked CEOs to condemn “human rights abuses” in China, unlike previous hearings which tended to focus on national issues such as housing and consumer protections.
“We will follow the guidelines of the government, which has been working with China for decades,” said Bank of America chief executive Brian Moynihan. “If they change that position, we will change it immediately, like we did in Russia.”
JPMorgan Chase CEO Jamie Dimon and Citigroup CEO Jane Fraser both agreed, saying their banks would follow government guidelines if China were to invade Taiwan.
The heightened scrutiny underscores the challenges the nation’s biggest lenders increasingly face as they try to balance commercial interests with pressure from policymakers, activists and investors to take a stand on environmental issues, social and governance.
Wall Street giants including JPMorgan, Goldman Sachs and Morgan Stanley have in recent years sought to expand their operations in China, the world’s second-largest economy.
Authorities have granted U.S. banks greater ownership of their securities business despite rising geopolitical tensions. Despite a larger footprint, China is not yet a big profit center for these banks.
“There would be few meaningful gains for the United States or losses for China if banks scale back their operations there,” said Hong Kong-based Global Source Partners analyst Andrew Collier.
“The symbolism, however, is more important, as China is very concerned about decoupling trade and imports of key products like semiconductors, so any pressure on the financial sector would send worrying signals to Beijing.”
Responding to a question about remarks by CEOs and lawmakers of US banks, Chinese Foreign Ministry spokesman Zhao Lijian said on Thursday that “the Taiwan issue has always been the most important and most sensitive” for US-China relations.
“The U.S. side should strictly adhere to the one-China principle and the provisions of the three U.S.-China joint communiques, seriously and effectively implement the U.S. leadership’s position not to support Taiwan independence, stop manipulating in Taiwan”.
JPMorgan, present in China since 1921, serves Chinese and international companies, financial institutions and government agencies. Last year, it became the first foreign company to fully own a securities business in China.
Citigroup, which was the first U.S. bank to set up shop in China in 1902, last year applied for a securities license in mainland China as part of its effort to expand its business in the market.
China has conducted military exercises near Taiwan in recent weeks. After US House of Representatives Speaker Nancy Pelosi’s visit to Taipei, China fired missiles into waters near the island, although its activity has since declined.
China claims to democratically govern Taiwan as its own territory. The Taiwan government rejects China’s sovereignty claims.
Congressman Luetkemeyer asked Fraser what Citigroup would do if a war in Taiwan broke out.
“That’s a hypothetical question,” Fraser said. “It is very likely that we will have a reduced presence.” Citigroup has a global reach that spans more than 160 countries.
When later asked by Republican Lance Gooden if she would condemn “the continuing human rights abuses in China”, Fraser hesitated. “Doom is a strong word,” she said. “We are certainly very distressed to see him.”
JPMorgan’s Dimon also warned that the United States must compete with Chinese banks, which have grown in size in recent 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 very important for the future of America that America maintains its financial supremacy as n anything else.”
(Reporting by Lananh Nguyen and Pete Schroeder; Additional reporting by Saeed Azhar, Scott Murdoch in Hong Kong and Eduardo Baptista in Beijing; Editing by Richard Pullin and Toby Chopra)