A leading think tank has urged the British government to encourage major banks such as HSBC and Standard Chartered to relocate their operations from Hong Kong to the United Kingdom in response to increasing Chinese influence over the city’s financial sector. The China Strategic Risks Institute (CSRI) released a report warning that Hong Kong’s financial infrastructure is being increasingly leveraged to serve China’s strategic interests following Beijing’s tightening control since the 2019 pro-democracy protests.

The report highlights concerns that banks with significant business ties in both Hong Kong and mainland China could face conflicting legal demands from London and Beijing during geopolitical tensions, such as a potential conflict over Taiwan. Ryan Wu, a co-author of the report, stated that these financial institutions might be pressured by Chinese authorities to take actions detrimental to British clients, including freezing assets held by UK firms or savers. Wu pointed to a recent example where Chinese regulators effectively instructed HSBC to block British National Overseas visa holders from accessing their pensions after leaving Hong Kong, a move perceived as politically motivated.

Wu also drew parallels between the current situation and the challenges faced by British companies operating in Russia following its invasion of Ukraine, when many firms were compelled to exit the country in compliance with Western sanctions, incurring substantial losses and operational difficulties.

The CSRI recommends that UK regulators and government ministers work to create streamlined procedures facilitating the relocation of key operations from Hong Kong to Britain. Currently, firms seeking to transfer critical functions such as payment processing face lengthy approval processes involving the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority—often stretching to nearly a year. Wu emphasized the need for a fast-track system, especially to ensure business continuity during geopolitical crises.

These warnings come amid growing concerns over the exposure of major UK banks to China at a time when Beijing’s Communist Party is asserting tighter control over its economy. This month saw HSBC, Standard Chartered, and Asia-focused insurer Prudential experience significant market value declines following reports that Chinese authorities were cracking down on capital outflows by restricting new bank account openings in Hong Kong.

The debate over China’s influence on the UK has intensified not only in financial circles but also in national security discussions, fuelled by recent spying allegations and protests opposing the construction of a new Chinese consulate building in London, which opponents argue could be used for espionage activities. The CSRI’s recommendations underscore the urgency for the UK government to safeguard its financial institutions from potential leverage exerted by Beijing through Hong Kong’s evolving regulatory landscape.