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The new national security restrictions imposed on Hong Kong by China could lead to the abolition of the “special status” under US law of the former British colony. This would have major implications for trade and investment.
New US law requires the State Department to certify at least once a year that Hong Kong retains sufficient autonomy to justify favorable conditions for trade with the United States. US President Donald Trump warned on Thursday that Washington could react “very strongly” to the new restrictions from China, reminds Reuters.
The abolition of the special status would create problems for more than 1,300 American companies operating in Hong Kong. Visa-free travel to Hong Kong could be abolished and replaced by strict Chinese visa rules that prevent business travel and the rapid issuance of work visas.
By 2018, foreign direct investment by the United States in Hong Kong amounts to $ 82.5 billion, an increase of $ 1.2 billion on an annual basis, according to the US Department of Commerce. Hong Kong’s investment in the United States rose $ 3.5 billion in 2018 to $ 16.9 billion.
Hong Kong’s autonomy, civil liberties, rule of law and access to China make the former British colony attractive to international companies.
“Many US companies are investing in Hong Kong because of its special status, geographical location and economic system,” the US-China Business Council said in a statement. “Any change in this status quo would irreparably damage the interests of American business,” the statement said.
Trade in goods and services between Hong Kong and the United States, worth about $ 67 billion a year, could be put at risk as Hong Kong loses its preferential lower export duty to the United States. Imports from Washington to the autonomous city are also subject to zero duty.
Hong Kong was the source of the largest bilateral trade surplus in the United States last year, or $ 26.1 billion, according to U.S. data. Census Bureau.
According to the Hong Kong Department of Commerce and Industry, the former British colony was the third largest wine export market to the United States, the fourth largest for beef and the seventh largest for all agricultural products in 2018.
The abolition of Hong Kong’s special status will be perceived by Beijing as an interference with its sovereignty. China has threatened to “take strong countermeasures.”
Eswar Prasad, a Cornell University professor and former International Monetary Fund official, said Hong Kong was an economic and political issue for China, similar to US sanctions against Chinese telecommunications giant Huawei Technologies Co Ltd.