Westpac’s China Reversal is Another Boomerang Policy

Euromoney, October 21 2020

Westpac’s decision to shut its operations in Hong Kong and China continues the steady ebb and flow of Australian banks in and out of Asia.

See also: ANZ, conducting a Standard Chartered-style buildout in Asia before deciding to quit everything except trade and institutional; CBA, the first Australian bank to open a Mumbai branch, to close it six years later; and NAB, which closed institutional offices in Singapore, Korea and Malaysia as well as a Japan securities company.

Even by Australian standards, Westpac was impressively swift to find reverse gear.

It is only two years since the bank was meeting with Chinese regulators to see how it could take advantage of China liberalizing its financial markets. It is only one year since the bank moved into a flash new office on the 54th floor of the Shanghai Tower, where fellow tenants included Alibaba.

Westpac is sticking around in Singapore, which will now be one of only three international branches the bank holds worldwide, the others being London and New York. It is closing Beijing, Shanghai, Hong Kong, Mumbai and Jakarta.

This is all part of a plan to reduce risk-weighted assets by more than A$5 billion ($5.2 billion), but the greater China-heavy nature of the closures does invite the question: is this partly because of Australia’s deteriorating relationship with China?

Diplomatic tensions between the two are at their worst level in recent memory, with the latest step being China telling its steelmakers and power plants to stop importing Australian coal, following the Australian government calling for an investigation into the origins of coronavirus in April.

It raises the further question of to what extent Singapore’s financial centre is benefiting from China geopolitical tensions and Hong Kong’s national security crackdown.

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