By Jade Tang
The formal relationship between the United States (the “US”) and Hong Kong is based upon the “one country, two systems” framework established in the Basic Law of Hong Kong. The United States-Hong Kong Policy Act of 1992 (the “HK Policy Act”) enacted by the US establishes the US government’s policy of treating Hong Kong as a non-sovereign entity distinct from China for purposes of US-Hong Kong trade and economic cooperation.
On 19th November 2019 following a similar move by the House of Representatives, the US Senate passed the Hong Kong Human Rights and Democracy Act of 2019 (the “HK Human Rights Bill”), which is intended to amend the HK Policy Act. Despite passage by both the House and Senate, however, the HK Human Rights Bill will not become law until the US President signs off on it.
This writer tries to explore key provisions of the HK Human Rights Bill and analyse its potential impact on Hong Kong should it be passed from the commercial point of view. This article should not form any advice on US laws and legislation.
Major provisions of the HK Human Rights Bill
Should the HK Human Rights Bill be enacted, it entails (and indeed, expands the scope of), among other things, an annual review of the degree of autonomy of Hong Kong, which was the justification for preferential trade and economic benefits as a result of the city’s special status granted under the HK Policy Act – It is indeed with this special status Hong Kong is shielded from tariffs on Chinese goods levied by the US.
Should the special status of Hong Kong be revoked, it would be unavoidable for Hong Kong to suffer a heavy economic blow from various tariffs and import and export restrictions. There is also the possibility of US sanctions imposed on Hong Kong, creating challenges to Hong Kong’s commercial services and potentially unseating it from its position as an international financial hub.
Other benefits afforded by the special status, such as the free currency exchange between Hong Kong and US Dollars, import of sensitive technologies from the US to Hong Kong, and circumvention by Hong Kong residents of visa restrictions that apply to their mainland Chinese counterparts, would likely be cancelled should the HK Human Rights Bill be enacted.
Not only would Hong Kong suffer, but the US-Hong Kong relationship could also be jeopardized. There are currently more than 1,300 US firms operating in Hong Kong. The US trade surplus with Hong Kong is the single largest with a US trading partner, and the US remains a major source of foreign direct investment in Hong Kong.
From a business perspective, if the HK Human Rights Bill becomes law, we can expect to see a chilling effect on US trade and investments in Hong Kong. While it is unclear how substantial the economic impact it would have on Hong Kong, it is almost certain that Hong Kong’s reputation as a trusted player in the global economy would be adversely affected.
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