Gabriel Pogrund and Jack Hazlewood
January 09 2022
HSBC said it had complied with all relevant rules and sanctions legislation
HSBC is holding millions of pounds of shares in a subsidiary of a sanctioned Chinese paramilitary organisation responsible for atrocities against Uighur Muslims.
The UK’s biggest bank bought £2.2 million of shares in Xinjiang Tianye, a chemicals and plastics company, for an anonymous client last year. It continues to act as custodian, meaning that it earns money holding the shares and is responsible for their safekeeping. Xinjiang Tianye Group describes itself as a “large state-owned enterprise in the eighth division of XPCC”, the Xinjiang Production and Construction Corps.
The corps is a vast paramilitary and economic organisation that is often described as a “state within a state”. It has helped to oversee the surveillance, mass detention and forced labour of hundreds of thousands of Uighurs and other Muslim minorities in Xinjiang. It is subject to US sanctions.
The group controls numerous publicly traded subsidiaries, including Xinjiang Tianye, which is listed on the Shanghai stock exchange and is, according to academic research, itself directly involved in the abuses, including forced labour transfers.
The US subjected the corps to sanctions under the global Magnitsky Act in 2020, citing its “serious rights abuses against ethnic minorities”. It has faced further sanctions under the Biden administration, which says it is complicit in slave labour.
American citizens, including those working for foreign companies such as HSBC, whose headquarters are in London, are banned from transactions or services involving the XPCC.
HSBC, which previously said it would follow the controversial national security law giving China sweeping powers over Hong Kong, said it had complied with all relevant rules and sanctions legislation.
Asked whether any US employees had been aware of, or involved in, the purchase, it declined to comment. However, Marco Rubio, the US senator, said facilitating such trades was “another example of a company turning a blind eye to genocide and slavery just to turn a profit”.
Iain Duncan Smith, the former Conservative Party leader, said: “Project Kow-Tow is alive and well in some British companies. After all, HSBC seem more and more to have thrown their lot in with the despotic Chinese government.”
Founded as the Hongkong and Shanghai Banking Corporation 156 years ago, the bank moved its HQ from Hong Kong to London in 1993, four years before Britain returned the colony to China. Over the past decade, it has pivoted back to Hong Kong, where it makes more than half its profits.
Last year Dominic Raab, foreign secretary at the time, reprimanded the bank after it said it would follow the national security law, saying that the rights of people in Hong Kong should not be “sacrificed on the altar of bankers’ bonuses”.
A 2021 report by Sheffield Hallam University said that Tianye documents suggested that it was involved in a “wide array of so-called poverty alleviation programmes” — a euphemism for Uighur oppression — “including labour transfers and vocational training programmes”.
HSBC said that it was merely holding a client’s shares, which were traded through the Shanghai-Hong Kong Stock Connect. Participants in that system were required to comply with the rules of the Hong Kong central clearing and settlement system.
“HSBC complies with all applicable laws and regulations in the jurisdictions in which it operates,” the bank said.