By Lananh Nguyen, Saeed Azhar and Scott Murdoch
WASHINGTON/HONG KONG (Reuters) – Top U.S. bankers came under pressure from lawmakers on Wednesday to take a tougher stance on doing business with China amid rising tensions between Washington and Beijing over Taiwan’s sovereignty and China’s data for human rights.
During a hearing before the House Financial Services Committee, Republican Congressman Blaine Luetkemeyer pressed bank chief executives on how they would respond in the hypothetical case of a Chinese invasion of Taiwan.
Lawmakers also urged the CEOs to condemn China’s “human rights abuses,” a departure from previous sessions that tended to focus on domestic issues such as housing and consumer protection.
“We will follow the government’s guidance, which has been for decades to work with China,” said Bank of America Chief Executive Brian Moynihan. “If they change that position, we will change it immediately, as we did in Russia.”
JPMorgan Chase CEO Jamie Dimon and Citigroup CEO Jane Fraser agreed, saying their banks would follow government guidance if China were to invade Taiwan.
The increased scrutiny underscores the challenges the country’s biggest lenders increasingly face as they try to balance commercial interests with pressure from policymakers, activists and investors to take positions on environmental, social and governance issues.
Wall Street giants including JPMorgan, Goldman Sachs and Morgan Stanley have sought in recent years to expand their businesses in China, the world’s second-largest economy.
Authorities there have given US banks more ownership of their securities businesses, despite rising geopolitical tension. Despite a larger footprint, China is still not a major profit center for those banks.
“There would be little significant gain for the US or loss for China if banks curtailed operations there,” said Hong Kong-based Global Source Partners analyst Andrew Collier.
“The symbolism, however, is more important, because China is very concerned about decoupling in trade and imports of key products such as semiconductors, so any pressure on the financial sector would send worrying signals to Beijing.”
Responding to a question about the remarks by U.S. 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” for U.S. relations. – China.
“The US side must strictly adhere to the one-China principle and the provisions in the three US-China joint communiques, diligently and effectively implement the position of US leaders not to support Taiwan independence, stop manipulating issues related to do with Taiwan.”
‘HYPOTHETICAL QUESTION’
JPMorgan, which has been in China since 1921, serves Chinese and international corporations, financial institutions and government agencies. Last year it became the first foreign firm to fully own a securities venture in China.
Citigroup, which was the first US bank to set up shop in China in 1902, last year applied for a securities license in the Chinese territory as part of its push to grow business in the market.
China has conducted military exercises near Taiwan in recent weeks. After US House Speaker Nancy Pelosi visited Taipei, China fired missiles into waters near the island, although its activities have since scaled back.
China claims to have democratically ruled Taiwan as its territory. Taiwan’s government rejects China’s claims to sovereignty.
Congressman Luetkemeyer asked Fraser what Citigroup would do if a war broke out over Taiwan.
“It’s a hypothetical question,” Fraser said. “We will most likely have a reduced presence.” Citigroup has a global reach spanning more than 160 countries.
When asked later by Republican Lance Gooden if she would condemn China’s “continued human rights abuses,” Fraser hesitated. “Punishment is a strong word,” she said. “We are certainly very anxious to see it.”
JPMorgan’s Dimon also warned that the US needed to compete with Chinese banks, which have grown in size in recent years to become the world’s largest.
“I will do everything in my power to make sure we compete with the best Chinese banks in the world. It is as important to America’s future that America maintains its financial supremacy as 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)
