China announced Thursday that it plans to introduce a law in Hong Kong that is expected to ban sedition, secession and subversion against Beijing. It will also enable Chinese national security agencies to operate in the city.
“Hong Kong today stands as a model of free trade, strong governance, free flow of information and efficiency,” said Robert Grieves, chairman of the American Chamber of Commerce in Hong Kong, in a statement. “No one wins if the foundation for Hong Kong’s role as a prime international business and financial center is eroded.”
A traditionally stable place to operate
Even so, Hong Kong’s status as a global business destination never quite felt secure after the protests broke out.
“The road to Hell is often paved with good intentions,” Li said in August. “We need to be mindful of unintended consequences.”
The United States imported nearly $17 billion in goods and services from Hong Kong in 2018, while exporting $50 billion.
But those numbers don’t tell the whole story of the US-Hong Kong relationship, and the special status offers the city much more than trade privileges.
“[It’s] a bit misleading … because the US counts trade that passes through Hong Kong to China as trade with China,” said William Reinsch, the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington. “Regardless, I think the real issue is less the actual amount of trade than the signal a change in status would send about the unreliability of doing business with Hong Kong.”
A serious development
More than 1,300 US companies alone operate in the city, according to analysts at Citi, who added that the threat of revoking Hong Kong’s special status with the United States “could weigh on business confidence.”
“It remains to be seen if the US would revoke the act immediately,” they wrote in a research note on Friday. “Our economists have argued special status of [Hong Kong] is likely to stay in the near term, as both US and China have significant interests in maintaining the status quo.”
Secretary of State Mike Pompeo said Friday that Beijing’s plan would be “a death knell” for the autonomy Hong Kong was promised. And if it went ahead, it would affect Washington’s assessment of the status of the territory.
“The United States strongly urges Beijing to reconsider its disastrous proposal, abide by its international obligations, and respect Hong Kong’s high degree of autonomy, democratic institutions, and civil liberties, which are key to preserving its special status under US law,” he said.
“This authoritarian national security plan will most certainly bring into question [Hong Kong’s] status as a global banking center,” wrote Stephen Innes, chief global markets strategist at AxiCorp, in a research note Friday. “I think this is quite serious.”
Companies that do business in Hong Kong are also concerned about what Beijing’s national security law could mean for people who work in the city, and whether it could have a chilling effect on the ability to attract foreign workers.
“A Beijing inspired national security law leaves open an interpretation of how such an act will be enforced,” said Tara Joseph, president of the American Chamber of Commerce in Hong Kong, in a statement.
The business lobby group added that the “enactment of a vaguely defined national security law will make it harder to recruit and retain top tier talent.”