American companies doing business in Hong Kong are facing new threats, Washington will warn Friday, amid continuing tensions between the United States and China over the former British colony.
In Hong Kong, an Asia hub for a vast swath of industries, foreign companies have faced greater scrutiny and pressure from multiple sides in the wake of often violent anti-government protests which rocked the city in 2019. The national security law imposed on Hong Kong by Beijing in response has also cast new doubt over what was once one of the most stable legal environments in the region.
In the year since the law was introduced, almost every prominent opposition figure has either been jailed or is facing trial, the Apple Daily newspaper was forced to close, electoral reforms have further scaled back the right of people to choose their leaders, and the independence of the city’s judiciary has come into question.
News of the U.S. advisory was first reported by the Financial Times this week, and was confirmed by President Joe Biden himself on Thursday, during a press conference in Washington alongside German Chancellor Angela Merkel.
“Let me talk about the business advisory,” Mr. Biden said. “The situation in Hong Kong is deteriorating. And the Chinese government is not keeping its commitment that it made how it would deal with – with Hong Kong.”
He added that the statement coming Friday is “more of an advisory as to what may happen in – on Hong Kong. It’s as simple as that and as complicated as that.”
The U.S. is not the only country to see relations with China plummet in the wake of the Hong Kong security law, as well as continuing outrage over the treatment of Uyghurs and other ethnic minorities in China’s Xinjiang region.
In March, Canada joined the U.S., Britain and the European Union in sanctioning Chinese officials deemed responsible for abuses in Xinjiang. Washington has also sanctioned key Hong Kong officials over the crackdown here.
China responded with retaliatory sanctions against a host of Western politicians, think tanks and government bodies, including MP Michael Chong and a subcommittee of the House of Commons. Beijing also passed a new law expanding its ability to take such measures, in order to “hit back [against the] hegemonism and power politics practised by some Western countries,” in the words of a Foreign Ministry spokesperson.
Such retaliation could in future affect Hong Kong-based foreign companies and executives, Washington is expected to say in the advisory. For Canadians here, such warnings will also raise the spectre of Michael Kovrig and Michael Spavor, who were detained by China in December, 2018, following the arrest in Vancouver of Huawei executive Meng Wanzhou on a U.S. extradition request.
The language in the Hong Kong guidance, however, appears muted compared to a similar direction issued by Washington on Tuesday regarding Xinjiang. In that, the State Department warned that U.S. companies engaged in the region could be doing business with entities “complicit in forced labour and other human rights abuses there and throughout China,” and may face legal penalties.
By comparison, the Hong Kong guidance is expected to be more of a reiteration of long-standing concerns since the political situation began to deteriorate in 2019.
Businesspeople and analysts who spoke to The Globe and Mail this week – responding to the Financial Times report previewing Friday’s announcement – agreed that Washington’s warnings would likely not shake many executives in Hong Kong.
Companies that are operating in the city have already weathered a year of protests in 2019 and 12 months of the security law, and are therefore most likely committed to staying.
“This is already an issue at the global level for these firms, they’ve asked these questions before,” said John Marrett, a Hong Kong-based senior analyst with the Economist Intelligence Unit.
Where there would be concern, he felt, was in how the Chinese reacted, especially if any new sanctions are announced by the U.S. on Hong Kong officials.
“They’re more unpredictable and have shown themselves more willing to shoot themselves in the foot than the U.S.,” Mr. Marrett said. “[Beijing is] more willing to sacrifice short-term gains for long-term political aims.”
At a regular press conference on Wednesday, Chinese Foreign Ministry spokesperson Zhao Lijian said Beijing always firmly opposes “U.S. interference in China’s internal affairs under the pretext of the Hong Kong issue.”
Hong Kong laws “clearly protect the rights and interests of foreign investors,” he said. “The so-called advisory to be issued by the U.S. side is a typical political manipulation with double standard.”
David Ahlstrom, a professor at the Chinese University of Hong Kong’s business school, agreed that “anything Washington flags would be common knowledge.”
“I don’t think it would have any effect on firms and individuals doing business or working here already,” he said. “They know the business environment is generally pretty good, and the financial regulations and enforcement here in Hong Kong are quite clear and fair.”
But while the foreign business community is still largely bullish, and often more than willing to overlook Hong Kong’s worsening political situation, there are signs that almost three years of uncertainty has taken its toll.
When the American Chamber of Commerce surveyed its membership in May, some 42 per cent of respondents said they were considering leaving the city, with the national security law by far the leading cause given.
In a statement, the chamber’s president, Tara Joseph, said the survey revealed “growing underlying tensions and nagging fears.”
While she was positive about the ability of business to thrive in the future, right now, “It’s easy to worry about a brain drain of top talent and skills in a gateway city that is fuelled by trade, international capital flows and global connectivity,” Ms. Joseph said.
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