HSBC opens Shanghai fin-tech firm as controversies swirl, profits sink

Source: Global Times Published: 2020/9/9 19:43:40


HSBC Insurance, owned by the HSBC Group, announced on Wednesday that it has set up a fin-tech venture in Shanghai amid the company's controversies involving social unrest in Hong Kong last year and the arrest of Huawei's Meng Wanzhou in Canada at the request of the US government. 

The new company is expected to bring business growth in HSBC's China operations, which already contributes most of the bank's profits.

The fin-tech company is expected to open at the end of this year, and will provide solutions for financial institutions, both inside the group as well as outside. Its products will include big-data-based management platforms. 

The latest expansion of HSBC's operations in China shows that HSBC continues to invest in the Chinese market, Bryce Johns, global executive of HSBC Life said. 

The establishment of the new company is a sign of the continuous opening up of China's financial market, Deng Yu, senior research fellow of the Atlantis Financial Research Institute, told the Global Times on Wednesday.

"It sends a positive signal that the Chinese market is open to any kind of capital as long as it follows the approval process, which means that China separates political issues from finance," Deng said. 

In July, China scrapped foreign ownership limits in most of the financial sector, which is valued at around $45 trillion. Under the new rule, foreign investors, including the London-based HSBC, can fully own financial businesses. 

HSBC is, after all, a major global bank that does a lot of business in China, said Deng. For example, HSBC is the second-largest shareholder in one of the biggest banks in China, Bank of Communications, with a stake of about 19 percent.

The expansion in China will mean a big increase in profits for HSBC, which underperformed in the first half of this year, Deng said.

HSBC's first-half statements, released in August, showed that net profits fell 69 percent year-on-year to $3.1 billion. In the second quarter alone, net profits fell 88 percent to $600 million.

"Investing in a new company in Shanghai is the best choice for HSBC. Its first-half financial results were inadequat that it needed Chinese mainland investments to make up for losses in its Hong Kong business. In fin-tech in particular, the mainland is growing fast and the dividends are huge, which will be rewarding for HSBC," said Deng.

The bank has drawn much criticism in China for its involvement in Hong Kong social unrest and the case of Huawei, where it was widely accused of framing Meng Wanzhou, CFO of Huawei. 

Deng noted that the new company could be a sign that HSBC is seeking to improve its image in the Chinese mainland. 

"Compared with Hong Kong, the amount of international financial investment in Shanghai is still small. HSBC's new fin-tech firm will bring investment to Shanghai and help Shanghai become a global financial center," he added.


blog comments powered by Disqus