China: US government issues statement July 16 warning of business risks in Hong Kong

Event

On July 16, US officials issued an advisory warning of potential business risks to organizations and individuals operating in the Hong Kong Special Administrative Region. The statement specifically cited potential impacts of a national security law introduced in summer 2020, as well as risks of potential electronic surveillance and those associated with US sanctions imposed on officials in Hong Kong. US authorities say firms operating in Hong Kong increasingly face “legal, financial, operational, and reputational risks long present in mainland China” as central government authorities expand their influence in the territory. Additionally, on July 16, the US State Department announced sanctions on seven officials working in the Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region.

Context

Hong Kong's national security law, introduced in summer 2020, further intensified already elevated tensions between the US and Chinese governments. The law criminalizes behavior deemed to engage in or encourage separatism, subversion, terrorism, and collusion with foreign powers. Chinese authorities say the measure was needed to prevent foreign political interference, especially after large-scale and disruptive protests in 2019-2020. Critics, including the US and several allied governments, say the law undermines Hong Kong’s autonomy under the “one country, two systems” approach outlined in the 1984 Sino-British Joint Declaration. Enforcement of the national security law has effectively reduced the scope of some political activity and public speech in Hong Kong, as authorities have used its provisions to target prominent anti-government activists and organizations, and many other groups and individuals have altered their activities to avoid scrutiny. Since the law’s introduction, a total of around 120 people have been arrested under its provisions. As of July 17, 2021, Hong Kong authorities have cited the law to arrest only one foreigner – a US national who was chairman of the Asian Human Rights Commission and who had extensive ties with activist groups. US officials have imposed economic sanctions on dozens of mainland Chinese and Hong Kong officials in response to the national security law. The sanctions effectively prevent the targeted individuals from accessing US-based financial services. Chinese officials have recently passed legislation authorizing officials to impose retaliatory economic and travel restrictions on individuals and organizations that enact unilateral sanctions on China; however, officials have not used the provisions of the legislation to target any group or individuals.

Because of elevated tensions between Washington and Beijing, the July 16 US government advisory is likely at least partially politically motivated. Highlighting potential business risks in Hong Kong allows US officials to marginally increase economic and political pressure on the Chinese government. Despite decreased political freedoms in Hong Kong, officials in both Hong Kong and mainland China generally wish to encourage trade and investment ties with US individuals and firms, and arbitrarily targeting US nationals of companies would undermine these long-standing economic imperatives. Actionable political threats to foreign nationals remain limited almost exclusively to any individuals involved with or directly linked to anti-government activism within Hong Kong or mainland China. Nevertheless, generally increased US-China political tensions, the national security law, related US sanctions, and potential Chinese retaliatory measures may increase the threat of legal scrutiny for individuals and organizations operating in the territory.