New restrictions on China’s national security imposed on Hong Kong could lead to the revocation by the United States of the “special status” of the former British colony under US law, which would have far-reaching consequences for trade and investments.
US companies oppose any change in Washington’s recognition of Hong Kong as a sufficiently autonomous city, where top US companies have access to China and Southeast Asia, and where bilateral trade is flourishing in various sectors of the economy. , from wine to financial services.
A new US law requires the State Department to certify at least once a year that Hong Kong, which last year saw widespread protests over China’s extradition plans, retains sufficient autonomy to justify favorable US trade conditions. . President Donald Trump warned Thursday that Washington could react “very strongly” to China’s new restrictions.
Here is a look at some of the consequences of a change in that status.
Revocation of the special status would cause problems for the more than 1,300 American companies with business operations in Hong Kong, including almost all of the major financial companies in the United States. The State Department said 85,000 American citizens lived in Hong Kong in 2018.
Visa-free access to Hong Kong could revert to strict Chinese visa regulations, preventing business travel and the approval of work visas.
In 2018, U.S. foreign direct investment stocks in Hong Kong totaled $ 82.5 billion, an increase of $ 1.2 billion that year, according to data from the U.S. Department of Commerce. Hong Kong’s investment in the United States increased by $ 3.5 billion in 2018 to $ 16.9 billion.
Hong Kong’s autonomy, civil liberties, the rule of law and access to China make it attractive to international companies, and a change in that status could push some American companies to costly relocations to other parts of the region.
“Many American companies invest in Hong Kong because of its special status, its geographical location, and its market-based economic system,” the US-China Business Council said in a statement. “Any change in this status quo would irreparably harm the interests of American global business.”
Some $ 67 billion in annual trade in goods and services between Hong Kong and the United States could be jeopardized as Hong Kong would lose its lowest US preferential rate.
Hong Kong is treated separately from mainland China’s most managed economy, and its exports to the United States are treated differently. Hong Kong has a zero tariff rate on imports of goods from the United States, which could also be at risk.
Hong Kong was the source of the largest bilateral goods trade surplus in the United States last year, which totaled $ 26.1 billion, according to data from the United States Census Bureau.
According to the Hong Kong Department of Commerce and Industry, in 2018 the former British colony was the third largest export market in the United States for wine, the fourth for beef and the seventh for all agricultural products.
WIDER RELATIONS BETWEEN THE USA AND CHINA
The revocation by the USA Hong Kong’s special status would be seen by Beijing as an interference with its sovereignty, and China has previously threatened to “take strong countermeasures.”
Eswar Prasad, a professor of commerce at Cornell University and former director of the China department of the International Monetary Fund, said Hong Kong is a “hot” political and economic issue for China, much like the US sanctions. to the Chinese telecommunications giant Huawei Technologies Co Ltd.
A precarious trade truce between the US and China, already tense with Trump’s anger against China over the coronavirus pandemic and a slow start to Beijing’s purchases in the framework of Phase 1 of the trade agreement between the two countries could collapse in new tariffs and counteract sanctions, said.
The United States also maintains export control offices and academic exchanges in Hong Kong separate from mainland China. (Reporting by David Lawder Edited by Paul Simao) .. Translate serenitymarkets