Both US and China stand to lose if Hong Kong is badly damaged
- Punitive American measures in response to Beijing’s national security law will not spell the end of the city, but both sides have to think carefully before their next move
Retaliation is inevitable where the struggle between China and the United States on a host of issues is concerned. Hong Kong is centre stage in the battle after US President Donald Trump acted against Beijing’s imposition of the national security law on the city by signing an order ending its preferential trade treatment and enacting a bill requiring sanctions against officials, foreign individuals and banks for any perceived erosion of a promised high degree of autonomy.
The foreign ministry has warned of countermeasures, without specifying targets. But Hong Kong is too important for all involved for it to be turned into another front; to insist on such a path will be a losing game for both.
The US measures are sweeping and bound to impact Hong Kong’s international image and the sentiment of foreign firms in the city. They include sanctions against local and mainland officials identified as damaging rights guaranteed by our mini-constitution, the Basic Law, and secondary penalties against individuals and financial institutions who do business with them.
There is a rescinding of the special privileges the US has granted the city in economics, foreign policy and security, leading to limits on the exports of sensitive technology, making it more difficult for Hongkongers to get American visas, ending police training and scrapping an extradition treaty.
Trump claimed his executive order meant the city would now be treated as no different from the mainland.
Given anti-China sentiment in America on both sides of the political divide, the measures were anticipated – to the point that Hong Kong’s stock market was barely affected.
But foreign firms in the city, particularly banks, have been put in a difficult position, having to choose sides. Many companies are likely to reassess whether their presence is advantageous or if moving elsewhere in the region would be more beneficial.
But Hong Kong’s low tax rate, position as a transport hub and location next to the mainland, are still attractive reasons for choosing it as a business base.
Beijing vows to retaliate after Trump ends US privileges for Hong Kong
Although relations between the US and China are at their worst in decades, there is no denying the economic benefits both derive from each other. Their economies remain highly intertwined and the city retains an important position in ensuring trade and investment flows.
Trump realises that; the US dollar will continue to be freely exchanged with its Hong Kong counterpart.
Beijing had legitimate reasons to close national security loopholes in Hong Kong. But to ease concerns, it has to strike a fine balance in enforcing the law. Both China and the US have to carefully consider their next moves; to overreach will damage their interests as well as Hong Kong’s role as Asia’s world city.
