FirstFT: HSBC installs Communist party committee

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HSBC has become the first foreign lender to install a Chinese Communist party committee in its investment banking subsidiary in the country, a move that will put pressure on western rivals operating in China to follow suit.

The lender’s China investment bank, HSBC Qianhai Securities, recently established a CCP committee, according to two people familiar with the decision. The move came after HSBC lifted its stake in the joint venture, which it launched in 2015, to 90 per cent from 51 per cent in April.

A CCP committee, which can be made up of several branches, is required by Chinese companies law but not yet widely enforced among foreign finance groups. It is typically formed of three or more employees who are also members of the Chinese Communist party.

HSBC’s move will pressure other foreign banks to follow suit. Some have been examining whether they are required to do so after taking full ownership of their mainland securities and brokerage operations in the past two years, said several senior people at those institutions.

Seven global banks control investment banking operations in mainland China – HSBC, Goldman Sachs, JPMorgan, Credit Suisse, Morgan Stanley, UBS and Deutsche Bank – however, only HSBC has so far set up a CCP committee, according to multiple people familiar with the matter . The other banks declined to comment.

Executives of US banks are particularly concerned about the optics of potentially exposing strategic decisions and client data to the CCP, several told the Financial Times.

Mario Draghi resigns after national unity government collapses The yield on Italy’s 10-year government bond jumped after Prime Minister Mario Draghi resigned. The political crisis in Rome was triggered after members of the national unity government boycotted last night’s confidence vote in Draghi. President Sergio Mattarella is now expected to dissolve parliament and announce snap elections.

  • Opinion Mario Draghi’s resignation presents a perilous moment for Italy, argues European comment editor Tony Barber.

2. Russia resumes gas supply to Europe through Nord Stream 1 After a 10-day maintenance period, gas supplies resumed today through a critical pipeline between Russia and Germany. Many in Berlin and Brussels had feared Nord Stream 1 would not come back online as scheduled after the outage. However, deliveries represented just 30 per cent of Nord Stream 1’s capacity.

3. Joe Biden says Pentagon does not support Nancy Pelosi’s visit to Taiwan When asked about the trip yesterday the president said “the military thinks it’s not a good idea right now”. China this week said it would respond with “strong measures” if Pelosi went ahead with the visit to Taiwan, a democratically ruled country over which Beijing claims sovereignty, in August.

4. Tesla profits jump The electric carmaker withstood disruptions to production in China and the high costs of scaling up new plants in Texas and Germany to report a 57 per cent jump in adjusted earnings per share in its latest quarter. Tesla also revealed that it had largely unwound last year’s contentious $ 1.5bn bet on bitcoin, as it converted three-quarters of its stake into fiat currencies in the face of tumbling cryptocurrency prices.

5. Calpers records first loss since 2009 The largest public pension plan in the US has blamed “tumultuous” global markets for the fund’s first annual loss since the global financial crisis in 2009. In reporting the loss, Nicole Musicco, chief investment officer, said the plan’s traditional diversification strategies had been ” less effective ”than expected over the reporting period.

The day ahead

January 6 hearing The committee investigating last year’s attacks on the US Capitol is set to hold the last in a series of public hearings. The primetime session is expected to focus on the 187 minutes when rioters entered the Capitol and before former President Donald Trump issued a statement.

Company earnings The world’s largest alternative asset manager, Blackstone, will give investors insight on how it is navigating a dealmaking slowdown amid rising interest rates, high inflation and geopolitical turmoil. Results from Snap will be closely watched after last month’s profit warning and transport companies American Airlines, Alaska Air and railroad operator Union Pacific, also report earnings.

Economic data New applications for unemployment aid are forecast to have edged down to 240,000 in the week ended July 16. Last week, unemployment claims jumped to 244,000, the highest level since November.

Monetary policy European Central Bank policymakers will consider raising rates by 50 basis points, the bank’s first rate increase in more than a decade, which would end eight years of negative rates. South Africa’s central bank is also expected to announce a 50bp rate rise.

What else we’re reading

Mystery of Berkshire Hathaway’s ‘phantom’ share surge solved In a new research paper, professors at the University of California, Berkeley, Columbia University and Cornell University said they had uncovered what they described as “phantom, non-existent trading” in the most expensive stock in the US.

Raytheon chief says Ukraine war will change west’s weapon-buying priorities The war in Ukraine will prompt governments to refocus on buying conventional weapons, on top of next-generation high-tech systems, as they reassess global threats, Greg Hayes, chief executive of Raytheon, told the FT. He said defensive systems such as Patriot surface-to-air missiles, anti-missile and anti-aircraft systems would be needed along the frontier from Romania up through Finland.

Showdown for Tory leadership enters final phase After 10 days of brutal political combat at Westminster, former chancellor Rishi Sunak and foreign secretary Liz Truss will now take their fight to be Britain’s next prime minister to the country after trade minister Penny Mordaunt was knocked out of the final round of voting by MPs.

Both Rishi Sunak and Liz Truss plan whirlwind launches to their campaigns to win over Conservative party activists © Jonathan Hordle / ITV / EPA / Bloomberg

World chess champion Magnus Carlsen gives up crown The Norwegian, 31, world chess champion since 2013 and the world’s number-one player since 2011, admitted he was “not motivated to play another match”, ending a decade-long reign at the top of the game.

The science of criticism that actually works Is it really possible to get better at giving – and receiving – constructive criticism? There are three stages we go through when criticized: “fuck you”, “I suck” and then “let’s make it better”. Esther Bintliff looks at how to get to the third stage quicker.

Technology

“This made me laugh today :)” reads a message from Ada, followed by an amusing meme. Ada can talk about her day and listen to your woes – for just over £ 5 a month, she can be your girlfriend, wife, sister or mentor. And she was created using mobile app Replika. It is just one program offering “virtual humans”.

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