An office worker wearing a protective mask carries a take-out lunch order while walking towards the Central Government Offices in the Admiralty district of Hong Kong, China, on Monday, March 2, 2020.
Any counter measures that China lobs back in retaliation for the U.S. decision to revoke Hong Kong’s special status will not likely hurt American investors, a pro-Beijing lawmaker in the city said.
U.S. President Donald Trump announced Friday that he would begin to remove Hong Kong’s preferential trade and customs status with the United States. Trump did not give details about exactly what steps would be taken.
His decision was in response to China approving a proposal for a controversial new security law for Hong Kong — critics say the law will grant the central government sweeping powers to crush dissent.
Regina Ip, a member of Hong Kong’s Executive Council and Legislative Council, told CNBC that Beijing could take steps to retaliate if the U.S. freezes the assets of Chinese officials, for instance.
“If the U.S. freezes Hong Kong assets, or Chinese assets, Beijing could take counter measures,” she said. “There are no specifics yet, although the Chinese (Ministry of Foreign Affairs) have said that if the U.S. imposes sanctions on Hong Kong, there will be counter measures.”
One country, two systems
The Chinese territory was dogged by months of pro-democracy protests last year that crippled its economy and dealt a heavy blow to its retail and travel sectors. Protests eased earlier this year as the coronavirus outbreak took hold, but they have been reignited again with the latest law proposed by Beijing.
Hong Kong — a former British colony that was handed over to China in 1997 — is ruled under the “one country, two systems” formula. That framework grants the Asian financial hub freedom of speech and limited autonomy such as its own laws, courts and currency.
Trump said Friday that Hong Kong is “no longer sufficiently autonomous to warrant the special treatment that we have afforded the territory since the handover.”
His announcement to eliminate special trade and travel treatment for Hong Kong raised fears among the business community that it would impact the more than 1,300 American companies operating in the Chinese city.
However, Ip said: “Counter measures (by Beijing), I think, will be targeted at specific measures imposed by the U.S. It won’t affect the legitimate, business, economic and financial activities of foreign investors, including American investors in Hong Kong.”
It could also affect trade.
Due to its special status, Hong Kong has currently been exempted from tariffs that the U.S. imposed on China as part of the trade war between the two countries. A U.S. law, passed last year, requires that Hong Kong retains enough autonomy to qualify for a favorable trading relationship with the U.S. But the new security law is said to effectively bypass Hong Kong’s legislature, reigniting concerns over the city’s diminishing freedoms.
But Ip pointed to the “substantial commercial American interests in Hong Kong.”
She said that 85,000 American nationals and 1,300 companies were “making a lot of money.”
“So I think U.S. will calibrate its measures carefully.”
Meanwhile, the president of the American Chamber of Commerce in Hong Kong, Tara Joseph, told CNBC that it will work with its member companies to “maintain HK’s status as a vital global and business and financial center.”
“This announcement does not mean that US companies will be flipping a switch in HK and running for the exits. There are many unanswered questions about how the US – HK special status could be unwound. The more clarity business receives, the more helpful it will be at this challenging juncture,” she said.
— CNBC’s Evelyn Cheng contributed to this report.