Jia Kang: foreign banks may cooperate with us long arm jurisdiction at the expense of Chinese Enterprises

category:Finance
 Jia Kang: foreign banks may cooperate with us long arm jurisdiction at the expense of Chinese Enterprises


Jia Kang

The overseas investment of Chinese enterprises is the capital output which is upgraded by commodity output, labor export and technology export in the process of going out facing the world with the vigorous development of Chinas reform and opening up. In the current world is facing a great change in the past century, under the condition that the global epidemic of Sino US trade friction and new crown epidemic has worsened the global investment environment and the overseas investment risk of Chinese enterprises has increased, it is inevitable to create a new pattern of development with domestic cycle as the main body and domestic and international double cycles promoting each other. In the double cycle, further deepening reform and opening up are the key points to cope with the complex environment at home and abroad, and promote the further development of Chinas economy and society in the path of modernization, including Chinese enterprises more actively going out, entering the international market and participating in overseas investment. In this process, it is necessary to cooperate with international financial institutions to expand and carry out relevant business. In response, in recent years, Chinas financial industry has also accelerated the pace of opening up to the outside world.

However, in recent years, with the Chinese enterprises going out to sea, some risk related problems are worthy of our full attention.

For example, during the process of Chinese enterprises going global, Huawei formed the first business scale in the same industry with a large amount of overseas investment, and became one of the few enterprises that China rushed to the worlds leading position. However, after the United States adopted a comprehensive strategy to suppress and contain China, the mengwanzhou case came unexpectedly, and its influence has exceeded the judicial level and attracted global attention. From the public evidence of the case and the information disclosed by the media, there are many risk points before and after Meng Wanzhous arrest, which has a strong warning significance for Chinas offshore enterprises.

First, the United States has a long history of layout. When Chinas financial system is not perfect, it makes enterprises in a weak state of risk control. Only by establishing a more perfect risk control system can we strengthen the control and management of financial risks.

The second is the wide coverage of the US investigation. According to public media reports, at the end of 2012, HSBC signed an extension agreement with the U.S. Department of justice due to its own violations. In 2013, the U.S. Department of justice and the Federal Bureau of investigation designated a U.S. financial investigation company to settle in HSBC. According to the former chief executive of HSBC, there are 200 to 400 US monitors in the bank at any time, who can view all the information of the bank.. While the main customer of HSBC is in China. During the period of its presence in the United States, apart from Huawei, is there any information of Chinese government agencies and other enterprises under the supervision of the United States? We need to be vigilant against the trouble that the United States finds in China through the indirect monitoring of Chinese enterprises through foreign banks and other third-party institutions, and even commits a crime.

Third, foreign banks may cooperate with us long arm jurisdiction at the expense of Chinese enterprises. The key evidence in Meng Wanzhou case comes from HSBC, a famous foreign bank that Huawei has cooperated with for many years in the process of going abroad. According to the financial times, after being targeted by the US Department of justice for its own problems, HSBC agreed to cooperate with the US Department of Justice investigation in other cases in order to escape punishment. Huawei became the victim of such cooperative transaction. According to Chinese media reports, in 2013, a senior executive of HSBC asked Meng Wanzhou to go to Hong Kong to record the conversation. Afterwards, he went to the PPT and other documents used by Huawei to prove that he did not have any non-compliance. He handed it over to the United States to find out. Without any explanation, he ended the cooperative relationship with Huawei. HSBC argued that it could not resist the request and investigation of the US Department of justice, which reflects some of its difficulties, but also means that foreign banks are subject to the long arm jurisdiction of the United States at any time and may sacrifice Chinese customers for the protection of their own interests at any time.

Under the double cycle of open development, economic and financial security is related to the lifeline. At the meeting of the Political Bureau of the CPC Central Committee on July 30 this year, it was stressed that economic and social development during the 14th five year plan period must pay more attention to security. The reality shows that with Chinese enterprises going global and financial opening up, we must speed up the process of internationalization of financial supervision, stick to the bottom line, guard against financial risks, and fully guarantee the safety of Finance and enterprises.

Obviously, while enhancing the risk awareness of enterprises (especially those deeply involved in Globalization) and guiding them to choose safe financial partners, China also needs to establish an effective prevention, early warning and supervision mechanism in the process of foreign financial introduction, so as to avoid attracting wolves into the house. One of our important responsibilities as researchers is to use our professional knowledge to study and explore all aspects of risk prevention related to overseas investment of Chinese enterprises, especially some prominent problems that can be felt.

For example, Sino US trade frictions, technological frictions and diplomatic frictions will inevitably lead to some financial risk factors directly and indirectly. We need to make a detailed and in-depth analysis on the inducing conditions and transmission mechanism of these factors, and establish a financial risk information center and database to carry out pre inspection and early warning of potential financial risks, so as to improve the ability to prevent risks.

For another example, Chinas regulatory authorities have already published the list of unreliable entities in September this year. According to the global times, HSBC may become the first foreign company to be included in the list of unreliable entities, which makes investors doubt whether it is possible for the bank to continue to develop in mainland China and Hong Kong, China, where it mainly operates. On October 13, 2020, the Chinese Ministry of Finance issued an order this week, and more than 10 institutions were selected as the Underwriters and Book Managers of the US $6 billion sovereign bonds. As Hong Kongs largest currency issuing bank, HSBC did not appear on the Underwriters list, which was also after the Chinese government resumed issuing US dollar sovereign bonds in 2017 For the first time. As researchers, our interpretation of this information is Chinas prevention of corporate financial risks. Logically, it includes countermeasures against foreign financial institutions that deliberately disclose important financial information and seriously damage Chinas interests, as well as some form of punishment. As a risk prevention and control mechanism, how to further improve it is also worthy of further understanding and discussion.

Many problems like this will involve professional analysis and in-depth investigation from different angles of economy, law, politics and society. While considering the risk prevention, our thinking orientation should not go to the extreme closed door policy; while it is necessary to emphasize the complex and severe situation that has not undergone major changes in the past 100 years, and therefore it is necessary to rely more on the internal circulation as the main body, we should maintain a full and profound understanding of the necessity and necessity of the mutual promotion of internal and external circulation, With a rational understanding framework, we should grasp the organic connection between deepening Chinas supply side structural reform, building a modern economic system, and promoting the construction of a community of common destiny for mankind in the world, and continue to promote the peaceful development and peaceful rise of Chinas modernization.

(this article is organized from Jia Kangs speech at the Symposium on financial risk prevention of overseas investment of Chinese enterprises)

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