The U.S. will warn American companies this week of the increasing risks of operating in Hong Kong, the Financial Times reported, as Washington seeks to ramp up pressure over Beijing’s crackdown on the financial center.
The risks include the Chinese government’s ability to gain access to data that foreign companies store in Hong Kong, the FT said Tuesday, citing three people familiar with the matter it didn’t identify. A new law that allows Beijing to retaliate against anyone complying with anti-China sanctions is also among the U.S. concerns, the newspaper said.
The decision was driven in part by the view that companies weren’t taking the issue seriously enough, the FT said.
Separately, the U.S. will later Tuesday update a warning that the Trump administration issued on Xinjiang last year, the FT said, citing five people it didn’t identify. A representative from the U.S. consulate in Hong Kong declined to comment on the article.
The benchmark Hang Seng Index was little changed after the report.
“American as well as other foreign companies will continue to assess and manage the risks that they are facing, especially for companies that belong to the more sensitive industries,” said Tommy Wu, a senior economist at Oxford Economics. “Companies that value Hong Kong as the gateway in and out of China will continue to stay or even expand in Hong Kong.”
Such a warning from President Joe Biden’s administration would underscore how Washington’s concerns about the former British colony have escalated since Beijing launched a crackdown on local democracy demonstrations in 2019. It would follow a Trump administration decision last year to roll back special trade privileges granted to Hong Kong in recognition of China’s promise to ensure its “high degree of autonomy” from Beijing.
The Chinese Foreign Ministry reaffirmed its opposition to what it views as U.S. interference in Hong Kong’s affairs Tuesday when asked about the report. Ministry spokesman Zhao Lijian told reporters that the city had been more stable under the security law.
For multinational companies, the broadening struggle between the U.S. and China for influence in Asia has fueled concerns that they might become collateral damage.
“Our member businesses still see the value of Hong Kong, although that has been put under increasing stress in the last few years,” said Tara Joseph, president of the American Chamber of Commerce in Hong Kong. “Because of that commitment to Hong Kong, our members closely follow U.S. and China policy developments that may impact their operations.”
An AmCham report released in May showed more than 40% of members surveyed by the lobby group said they might leave the city, underscoring the business community’s concerns over issues in the city including the security law.
Last month, China’s top legislative body asserted sweeping powers to seize assets and block business transactions in a new law intended to allow President Xi Jinping to hit back against sanctions by the U.S. and its allies.
The legislation followed the powerful national security law introduced in Hong Kong last year aimed at, among other things, banning “collusion with foreign and external forces.”
The U.S. has since warned individuals about traveling to Hong Kong, including a State Department advisory asserting that the security law “could subject U.S. citizens who have been publicly critical of the PRC to a heightened risk of arrest, detention, expulsion or prosecution.”
Hong Kong’s government has disputed claims that the security law has damaged the city’s business environment, citing the continued strength of local markets and an abundance of multinational companies. Chief Executive Carrie Lam, who was among local officials sanctioned by the Trump administration, last week cited favorable statements by foreign business groups about the city’s outlook as evidence that Western complaints about the security law were overblown.
“The words and deeds of these foreign business leaders fully demonstrate that the business environment in Hong Kong has not been undermined after the implementation of the national security law,” Lam said. “On the contrary, it has become even better.”
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