By Lananh Nguyen, Saeed Azhar and Scott Murdoch
WASHINGTON/HONG KONG (Reuters) – Lawmakers on Wednesday pressed top U.S. bankers to take a tougher stance on doing business with China amid rising tensions between Washington and Beijing over Taiwan’s sovereignty and rights record. Chinese humans.
During a hearing before the US House Financial Services Committee, Republican Congressman Blaine Luetkemeyer pressed bank CEOs on how they would respond in the event of a Chinese invasion of Taiwan.
Lawmakers also called on the chief executives to condemn China’s “human rights abuses,” unlike previous hearings 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,” Bank of America CEO Brian Moynihan said. “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 agreed, saying their banks would follow government instructions if China invaded Taiwan.
The increased scrutiny underscores the challenges increasingly facing the nation’s largest lenders as they try to balance business interests with pressure from policymakers, activists and investors to take stances on environmental, social and governance issues.
Wall Street giants including JPMorgan, Goldman Sachs and Morgan Stanley have in recent years sought 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 mounting geopolitical tension. Despite a larger footprint, China is still not a huge profit center for those banks.
“There would be little significant gain for the US or loss for China if banks scaled back operations there,” said Andrew Collier, an analyst at Global Source Partners based in Hong Kong.
“However, the symbolism is more important, because China is very concerned about the decoupling of trade and imports from key products like semiconductors, so any pressure on the financial sector would send worrying signals to Beijing.”
Responding to a question about comments from US 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 relations between the United States and China.
“The US side should strictly adhere to the one-China principle and the provisions of the three US-China joint communiqués, earnestly and effectively implement the US leaders’ stance of not supporting Taiwan independence, and stop manipulating Chinese affairs.” related to Taiwan.
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 company in China.
Citigroup, which was the first US bank to establish itself in China in 1902, last year applied for a mainland China securities license as part of its push to boost business in the market.
China has been holding military exercises near Taiwan in recent weeks. After US House Speaker Nancy Pelosi visited Taipei, China fired missiles at waters near the island, though its activities have since been scaled back.
China claims that Taiwan was governed democratically as its own territory. The Taiwanese government rejects China’s sovereignty claims.
Congressman Luetkemeyer asked Fraser what Citigroup would do if a war broke out over Taiwan.
“It’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.
Asked later by Republican Lance Gooden if he would condemn “the continuing human rights abuses in China,” Fraser hesitated. “Condemn is a strong word,” he said. “We are certainly very distressed to see it.”
JPMorgan’s Dimon also warned that the US had 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 ensure that I compete with the best Chinese banks in the world. It is as important to the future of the United States that the United States 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)