Blog

The Biden government warned US companies on Friday that they face serious and escalating risks in Hong Kong as the Chinese government increasingly cracks down on freedoms in the financial center.

The US issued a “business advisory” on threats ranging from China’s ability to access data stored on servers in Hong Kong to a new Chinese law allowing sanctions against anyone who helps foreign nations, sanctions against Chinese companies and enforce officials are enough.

The appraisal warned that the recently passed counter-sanctions law “does not make an explicit distinction between mainland China, Hong Kong and Macau,” suggesting that US companies in Hong Kong were at increased risk.

It also expressed concern about the national security law that Beijing imposed on Hong Kong last year to address political disagreements, pointing out that an American citizen had been arrested under the law.

“This new legal landscape. . . could adversely affect companies and individuals doing business in Hong Kong, ”the advisory reads. “You should be aware of the potential reputational, regulatory, financial and, in certain cases, legal risks associated with your operations in Hong Kong.”

Joe Biden also imposed sanctions on seven senior Chinese officials working in Beijing’s Hong Kong office.

The moves, first reported in the Financial Times, are the latest attempt to push back China because of its increasingly draconian moves against the pro-democracy movement in the former British colony.

This is the first time a US government has issued a business advisory service on Hong Kong.

“Given Beijing’s decisions last year that stifled the democratic aspirations of the Hong Kong people, we are taking action,” said Antony Blinken, US Secretary of State. “Today we are sending a clear message that the US is resolutely on the side of the Hong Kong people.”

The Hong Kong government said the advice was a malicious attempt to damage the city’s reputation as a business hub. “Any attempt to intervene in Hong Kong’s affairs and curb China’s development is doomed to failure,” added China’s Hong Kong office. “The Chinese will deal a direct blow to US reckless behavior.”

Kurt Tong, a China expert from Asia Group who was US consul general in Hong Kong until 2019, said the move was a “mixture of denouncing political rhetoric against China” and consular advice for companies.

“Non-Chinese firms in Hong Kong will make their own decisions after weighing the city’s unique business opportunities with their best assessments of increased legal, operational and reputational risks,” he said. “Right now it seems that most overseas investors see the benefits of Hong Kong as outweighing the risks.”

Tong said the main concern of many foreign companies in Hong Kong is whether the judiciary will remain independent.

Sino-US relations have continued to slide after the first high-level meeting between the Biden government and China in Alaska, which erupted into a bitter public banter.

Beijing has since snubbed the US by refusing to meet Wendy Sherman, the US deputy secretary of state, with her counterpart during a scheduled meeting in Tianjin in late July. China instead offered a meeting with the fifth-tier foreign ministry official, which the Biden government refused. US officials stress that a meeting can still happen if China reverses course and offers a suitable counterpart.

But the combination of the economic warning and sanctions is likely to complicate the talks. China reacted angrily in March when the US sanctioned Chinese officials shortly before the Alaska meeting, the first and only high-level talks between the nations since Biden took office.

Recommended

Biden has taken a much tougher stance on China than most experts expected. He has reprimanded China for its aggressive military activities near Taiwan, the erosion of freedoms in Hong Kong, its coercive economic behavior and the alleged genocide of Uyghurs in Xinjiang.

The deterioration in relationships has worried the business community, who had hoped Biden would adopt a less aggressive tone. The prospect of the consultation was not well received by the US economy in Hong Kong, fearing it could encourage backlash against American companies operating in the city.

The American Chamber of Commerce in Hong Kong said on the recommendation that it was “very aware” of the geopolitical risks.

“Hong Kong remains a critical and dynamic mediator of trade and the flow of finance between East and West,” the chamber said. “It has internationally recognized commercial law, it has a more open and mature digital infrastructure than many of its Asian competitors.”

Follow on Twitter: Demetri Sevastopulo