U.S. business groups say the Biden administration warning about the risks of operating in Hong Kong has made life more difficult for them as they navigate a security crackdown from China.
Citing the introduction of a tough national security law on Chinese territory last year, the United States “Business Advice” Friday warned of greater surveillance of trade data and threats to freedom of information from Hong Kong’s reduction on previously free media.
But city officials said they were already aware of the risks, and complained that the warning made it more difficult for them to convince their main offices of the persistent benefits of operating in the territory.
“The general tone is that the business community doesn’t need Foggy Bottom to tell them there are risks or how to manage them,” said a person close to U.S. multinationals, referring to the U.S. State Department.
The American Chamber of Commerce issued a statement shortly after the council’s publication highlighting the value its members have been given to operating in the city.
“This adds another level of complexity to being an American businessman in Hong Kong,” Tara Joseph, president of the American Chamber of Commerce, said of the council.
“It was perhaps a little disturbing why it is being put in place in this way, leaving people wondering if Hong Kong is at greater risk of being crushed in US-China tensions when Hong Kong still has special qualities.”
Since the introduction of the National Security Law last year, prisons have been filling up, people seen as disloyal to China have been targeted by the government and civil service, the media and education systems have been targeted. have been remodeled to bring them closer to those in mainland China.
But the change has not provoked an exodus of foreign banks and companies, which are eager to take advantage of China’s pandemic recovery and the promise of liberalization of the financial market on the continent.
A member of the U.S. business community in Hong Kong said that although many were “horrified” by the police chasing pro-democracy activists in unmarked vans, they did not see it as relevant to their activities. “More than 90 percent of the Fortune 500 is represented in Hong Kong and they are going nowhere, China still represents the strongest consumer market in the world,” added an American banker in Hong Kong.
Joseph said there were a lot of reasons why businesses wanted to stay in Hong Kong. “[Hong Kong is] tax efficient, it is an international hub and there is a reason why the company’s legal teams are based here. “
U.S. officials, however, say China “can’t go either way” and insist the political situation will affect the business environment. Biden issued the advice in part because he thought companies were not taking escalating risks seriously enough, the Financial Times was told.
“Imposing a continent system is not compatible” with being an attractive international financial center, said another U.S. official.
Companies in Hong Kong have been trying to adapt to the new security regime. They trained staff on how to respond if authorities storm their offices and request documents without court warrants. Increasingly uncomfortable with keeping data in town, some have moved their servers to the sea.
The Hong Kong government is pursuing a number of other laws that have caused further discomfort. Friday confirmed it will follow tough anti-doxxing laws, the details of which have affected U.S. technology companies such as Google and Facebook. Under the laws, which apply extrajudicially, employees could face imprisonment for failing to return material posted online under the orders of the city’s privacy commissioner.
Despite US movements, there is no sign of a change of direction from China, nor from the Hong Kong government. “The words and actions of foreign business leaders fully demonstrate that the business environment in Hong Kong has not been undermined since the implementation of the [security law]. On the contrary, it has become even better, ”said Edward Yau, the city’s trade secretary.
Analysts doubt what the U.S. council will achieve beyond the political stance. It does not contain any new legal obligations for American companies, although the United States has separately sanctioned seven middle-class Chinese officials in Hong Kong, a move that Chinese state media have declared exposed the United States as a “paper tiger.” “.
Kurt Tong, former U.S. consul general in Hong Kong, said: “The U.S. government finds that there are few ways to punish China for its promises violated in a specific way in Hong Kong without even seriously harming the interests of the United States and long-term residents in Hong Kong. ”
However, the Chinese government’s attempts to push back sanctions could harden the balancing act for U.S. companies in Hong Kong.
Laws recently passed by Beijing allow it to impose sanctions on anyone who helps foreign nations impose sanctions on Chinese companies and officials. The United States says the legislation did not explicitly exempt Hong Kong-based operations.
Enforcement of sanctions laws in the city could force companies to separate their operations in China and Hong Kong from the rest of their global business, said Douglas Arner, a law professor and financial regulation expert. at the University of Hong Kong.
But Christine Savage, a sanctions expert and partner at King & Spalding, warned that there was no guarantee that this would protect companies from potential punitive actions by Beijing.
“We are certainly concerned that there may still be retaliatory measures [because] the national security law has a language that suggests you can be held responsible in China for actions you take outside of China, ”he said.