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Sanctions, new rates? What it means for the US to certify that Hong Kong is not autonomous from China

WASHINGTON – The formal statement by the United States that Hong Kong is no longer autonomous from China paves the way for Washington to impose sanctions on individuals and new tariffs – actions that could threaten its reputation as a financial center, analysts said.

But the “nuclear option” to strip Hong Kong of its special status under US law would do more damage to Hong Kong and its US-based companies than the Chinese government, analysts said the drastic move was unlikely to take in the near future. .

In an assessment required by federal law, Secretary of State Mike Pompeo stated on Wednesday (May 27) that Hong Kong is no longer autonomous from Beijing enough to justify being treated differently from other Chinese cities in trade and other matters.

“No reasonable person today can claim that Hong Kong maintains a high degree of autonomy from China, given the facts on the ground,” he said in a statement.

The move was a condemnation of a national security law that will give Beijing the green light this week, which would tighten central government control over Hong Kong.

President Donald Trump must now decide what actions to take in response to the assessment and should issue an executive order to change Hong Kong’s status under US law. Alternatively, Congress could do this by repealing the Hong Kong Policy Act of 1992.

Deputy Secretary of State for East Asian and Pacific Affairs, David Stilwell, told reporters on Wednesday in a briefing that US measures could include visa and economic sanctions, adding, “We will do our best to ensure that the people of Hong Kong is not being harmed by the best we can. “

China analysts and international trade attorneys said it is likely to apply Chinese tariffs to Hong Kong exports.

“It is likely that the US will no longer grant most-favored-nation treatment to goods originating in Hong Kong that are separate from Chinese goods,” said Nicole Bivens Collinson, President of International Trade and Government Relations at International Sandler, Travis and Rosenberg law firm.

International commercial attorney Fred Rocafort of international law firm Harris Bricken said restrictions on exports to Hong Kong could also likely be part of the U.S. government’s initial response to the certification. He added that this should relate to companies that export sensitive technologies to Hong Kong.

Congress is also likely to adopt a new bill, currently pending, that empowers it to sanction Chinese officials who undermine the autonomy of Hong Kong and banks that do business with them.

Nuclear option

More vocal critics of China in Congress are calling on the US to withdraw completely the special status of Hong Kong, which Florida Republican Senator Marco Rubio called the “nuclear option” in a Washington Post comment last September. .

Missouri Republican Senator Josh Hawley said on Twitter that Mr. Pompeo’s certification should trigger a review of Hong Kong’s special trade laws and treatment by the US, adding, “We shouldn’t stop there. China’s own trade status with the US must be on the table. “

But analysts said such a drastic move would disproportionately harm Hong Kong, especially given its diminishing importance to the Chinese economy.

“Losing its special status would do more damage to Hong Kong than Beijing, which would further burden the already struggling economy and do little harm to Beijing’s long-term plans,” analysts of the Eurasia Group said in a study note Wednesday. They said that a full revocation of Hong Kong’s special status was unlikely.

A former diplomat, Mr. Rocafort, told The Straits Times: “Any policy change that blurs the boundaries between the economies of Hong Kong and the mainland is likely to have an adverse impact on Hong Kong, not least due to the diminished confidence of investors in a market with heavy state intervention and a blatant lack of rule of law. “

He said his customers were already concerned about the future of Hong Kong, even before certification by the State Department, given the threat of national security law, ongoing civil unrest and the possibility of retaliation by China.

“All of this is leading to a dramatic loss of confidence in Hong Kong and accelerating efforts to find alternatives, whether in Singapore or elsewhere,” he said.

The Eurasia Group analysts said, “This is the beginning of an incredibly complicated process to redefine the US treatment of Hong Kong, one that addresses complex issues of regulatory cooperation, tax treatment and legal cooperation.

“These will not unfold quickly, but have significant ripple effects on Hong Kong’s role as a business and financial hub.”

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