Chinese Communist Party branch formed in HSBC onshore venture
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Chinese Communist Party branch formed in HSBC onshore venture

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Employees at HSBC's mainland China securities joint venture have formed a Chinese Communist Party (CCP) branch, in what is believed to be one of the first such branches formed in a foreign-owned finance operation.

Having such a branch is not uncommon among local and foreign companies in the mainland and has been a requirement for privately owned companies to list on domestic bourses there since 2018. Their role is often similar to labour unions or employee advocacy groups within a company.

The move comes just over three months after HSBC raised its ownership stake in its joint venture, HSBC Qianhai Securities, to 90 per cent from 51 per cent.

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"These branches are common and can be set up by as few as three employees," a HSBC spokeswoman said. "It is important to note that management has no role in establishing such groups, they do not influence the direction of the business, and have no formal role in the day to day activities of the business. HSBC does not track the political affiliation of its employees."

HSBC, Hong Kong's biggest currency-issuing lender, established HSBC Qianhai Securities in 2017. Headquartered in Shenzhen, the business offers securities underwriting, brokerage and investment advisory services.

The Financial Times first reported the formation of the CCP branch on Thursday.

The formation of a CCP branch comes as more foreign asset managers, banks and insurers are seeking to acquire full ownership stakes in their onshore joint ventures following rule changes last year and could foreshadow similar branches forming at other foreign-owned financial firms in the mainland.

For example, HSBC agreed to buy out in May 2021 its life insurance joint venture partner in China and take full control of that business.

Goldman Sachs, JPMorgan Chase and Morgan Stanley are among foreign banks who have increased their stakes or moved to take full control of their onshore securities businesses.

More than 92 per cent of China's 500 biggest private companies had party organisations as of 2019, according to a report by the All-China Federation of Industry and Commerce, a CCP-affiliated group that acts as a bridge between the government and the private sector.

The formation of a party branch also could be another flashpoint for the London-based bank. HSBC has found itself caught in the middle of geopolitical squabbles in recent years between China and Western governments as its businesses straddle commerce between east and west.

Ping An Insurance Group, its largest shareholder, is pressing HSBC to spin off its Asian operations, in part because of the potential fallout from further geopolitical tensions. Asia is HSBC's biggest profit centre, but executives have said much of its business relies on its international reach.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.