HONG KONG • China’s largest state-run banks operating in Hong Kong are taking tentative steps to comply with United States sanctions imposed on officials in the city as they seek to safeguard their access to crucial US dollar funding and overseas networks.
Major lenders with operations in the US, including Bank of China, China Construction Bank and China Merchants Bank, have turned cautious on opening new accounts for the 11 sanctioned officials, including Hong Kong Chief Executive Carrie Lam, according to people familiar with the matter.
At least one bank has suspended such activity.
At some lenders, transactions via the US are banned, while others will now review and sign off on transactions that would previously have been immediately processed, the people said.
Such steps underscore the ability of the US to use the greenback’s dominance in international transactions as a pressure point in the intensifying stand-off with China.
China’s state-owned lenders need to preserve their access to global financial markets, particularly at a time when Beijing is leaning on them to prop up the economy from the fallout of the coronavirus outbreak.
China’s four largest banks had US$1.1 trillion (S$1.5 trillion) in dollar funding at the end of last year, Bloomberg Intelligence data shows. Bank of China had the biggest exposure to US dollars among its local peers, followed by Industrial and Commercial Bank of China, the world’s largest bank.
The lenders have been expanding their presence globally over the past decade by adding branches, making acquisitions and granting loans to fund everything from local power plants to toll roads.
US President Donald Trump last week sanctioned Chinese and Hong Kong officials including Mrs Lam, director of the Hong Kong and Macau Affairs Office Xia Baolong, and Hong Kong police commissioner Chris Tang for their roles in implementing the national security law in Hong Kong.
Their property and assets in the US will be frozen and banks are forbidden from doing business with them.
Meanwhile, local banks in Hong Kong are concerned as well since they all have some US dealings such as foreign exchange and settlement, one person said.
But the Hong Kong Monetary Authority, the city’s de facto central bank, sought to ease concerns last Saturday by saying that lenders in the city have no obligation to follow US sanctions under local law.