U.S. business groups said that the Biden administration issued warnings about the risks of doing business in Hong Kong, which made their lives more difficult in the process of dealing with China’s comprehensive security crackdown.
Take, for example, the introduction of strict national security laws on Chinese territory last year. The United States “Business Consulting” It warned on Friday that Hong Kong’s suppression of previously free media would impose stricter monitoring of commercial data and threaten freedom of information.
But businessmen in the city said they were aware of the risks and complained that the proposal made it more difficult for them to convince the headquarters of the continuing benefits of operating in the area.
“The overall tone is that the business community does not need Foggy Bottom to tell them that there is a risk or how to manage it,” said a person close to US multinational corporations when referring to the US State Department.
The American Chamber of Commerce issued a statement shortly after the announcement, emphasizing the value of its members to operating in the city.
Tara Joseph, President of the American Chamber of Commerce, said of the consultation: “This adds another layer of complexity to American businessmen in Hong Kong.”
“Perhaps a bit worrying, why it is arranged in this way makes people wonder whether Hong Kong is more likely to be overwhelmed by the tensions between the United States and China when Hong Kong is still special.”
Since the promulgation of the National Security Law last year, prisons have been overcrowded, people deemed unfaithful to China have become government targets, and civil servants, media, and education systems are being transformed to bring them closer to mainland China.
But this shift has not prompted the outflow of banks and foreign companies, which are eager to take advantage of the recovery of the Chinese pandemic and the promise of liberalization of the mainland’s financial markets.
An American business person in Hong Kong said that although many people were “shocked” by the police using unmarked trucks to take away democracy activists, they thought it had nothing to do with their business. “More than 90% of the Fortune 500 companies have representative offices in Hong Kong. They have nowhere to go. China is still the world’s strongest consumer market,” added an American banker based in Hong Kong.
Joseph said that there are many reasons why companies want to stay in Hong Kong. “[Hong Kong is] Tax saving, it is an international hub, and the corporate legal team has reasons to work here. “
However, US officials stated that China “cannot have the best of both worlds” and insisted that the political situation will affect the business environment. A person told the Financial Times that part of the reason Biden issued this recommendation was because he believed that the company did not take the escalating risks seriously enough.
Another US official stated that “imposing the continental system is incompatible with becoming an attractive international financial center.”
Companies in Hong Kong have worked hard to adapt to the new security system. They trained their employees to understand how they would respond if the authorities raided their offices and asked for documents without court authorization. Increasingly uncomfortable with storing data in cities, some people have moved their servers overseas.
The Hong Kong government is implementing a series of other laws, which has caused further unease. The company confirmed on Friday that it will implement strict anti-human search laws, the details of which involve US technology companies such as Google and Facebook. According to the law applicable outside the law, employees may face jail for failing to delete materials posted online in accordance with the order of the city’s privacy commissioner.
Despite the actions taken by the United States, the Chinese and Hong Kong governments have shown no signs of changing their course. “The words and deeds of foreign business leaders fully demonstrate that Hong Kong’s business environment has not been damaged after the implementation of the “New Regulations.” [security law]On the contrary, it got better,” said Edward Yau, the city’s minister of commerce.
Analysts questioned what the U.S. consultation would achieve in addition to its political stance. It does not contain new legal obligations for American companies, even though the United States separately sanctioned seven middle-level Chinese officials in Hong Kong, and the Chinese state media said that the move exposed the United States as a “paper tiger.”
Former U.S. Consul General in Hong Kong, Kurt Tang, said: “The U.S. government has discovered that there is almost no way to punish China’s dishonesty behavior in a Hong Kong-specific way without seriously harming U.S. interests and long-term Hong Kong residents.”
However, the Chinese government’s attempts to counter sanctions may strengthen the balancing act of US companies in Hong Kong.
Beijing’s recently passed law allows sanctions to be imposed on anyone who helps foreign countries impose sanctions on Chinese companies and officials. The United States stated that the legislation does not expressly exempt businesses in Hong Kong.
Douglas Arner, a law professor at the University of Hong Kong and an expert in financial regulation, said that the implementation of anti-sanctions laws in Hong Kong could force companies to separate their China and Hong Kong operations from other global operations.
But Christine Savage, a sanctions expert and partner at King & Spalding, warned that there is no guarantee that this will protect the company from potential punitive actions in Beijing.
“Of course there are concerns that retaliatory measures may still be taken [because] The wording of the National Security Law implies that you can be responsible in China for actions you take outside of China,” she said.