The US is treating Hong Kong as mainland China. Enterprise is beginning to do the identical

The most recent blow to town’s standing got here Tuesday, when US President Donald Trump adopted by on a risk to revoke the USA’ particular relationship with Hong Kong, which has up to now exempted town from sure tariffs, amongst different privileges.

“Hong Kong will now be handled the identical as mainland China,” Trump stated in a speech on the White Home.

The Trump administration first steered it might change its view of Hong Kong a number of weeks in the past, when China started getting ready to impose a sweeping nationwide safety regulation on town. Critics of the regulation say it undercuts political and authorized freedoms which have existed since Britain handed the previous colony to China in 1997.

Because the regulation took impact on July 1, considerations over Hong Kong amongst international companies and political leaders have solely grown. Some tech corporations have pulled again from the market, whereas corporations have expressed concern in regards to the new regulation’s broad attain and ambiguity. The New York Occasions on Tuesday additionally introduced that it might transfer a few of its employees primarily based in Hong Kong to Seoul because it started to “make contingency plans.”

Alongside the choice to finish the particular buying and selling relationship Tuesday, Trump additionally signed a separate piece of laws that will impose sanctions on companies and people which are seen as serving to China limit Hong Kong’s autonomy.

With out its privilege as a particular financial system underneath US regulation, “there will not be large variations between Hong Kong and different large Chinese language cities like Beijing and Shanghai,” stated Simon Lee, senior lecturer of worldwide enterprise on the Chinese language College of Hong Kong. “International corporations will assume whether or not they should keep their present scale of operations in Hong Kong.”

In an announcement, the Chinese language International Ministry referred to as on Washington to “cease interfering in any approach in China’s inside affairs, together with Hong Kong affairs.” It additionally urged the Trump administration to chorus from implementing its new regulation concerning Hong Kong.

The impression on commerce

Since 1992, Hong Kong’s particular standing has allowed the products passing by its borders to bear totally different controls than these within the mainland. In the course of the US-China commerce struggle, for instance, it allowed Hong Kong to keep away from the tariffs that Washington imposed on Chinese language items.

The brand new government order might put an finish to that, because it goals to “revoke license exceptions” for exports to Hong Kong.

And nearly all of items exported from Hong Kong — about 99% — are re-exports, that means that they’re items passing by the territory from one other nation, Pang defined.

That implies that if these items are from mainland China, they’re already topic to any tariff that applies to Chinese language items. So “when it comes to tariffs, there needs to be no distinction whether or not there’s a elimination of the particular standing,” Pang wrote in a Might analysis report.

What’s extra regarding is the general deteriorating relationship between the USA and China, she instructed CNN Enterprise.

“I am not proper now in speaking to China,” Trump stated. “They hit us with the plague, so proper now I am not involved in speaking to China about one other deal.”

The prospect of a “second wave” within the commerce struggle could be much more damaging to Hong Kong’s financial system than the brand new US edict on town, stated Pang.

A blow to enterprise confidence

Commerce is just one a part of the story.

In latest months, tensions have been effervescent up between China and the West, turning Hong Kong right into a political battleground and elevating much more questions in regards to the metropolis’s future.

One respondent wrote that the laws was “extraordinarily broad and could possibly be used for something in any respect.” Authorities in Hong Kong, although, insist the regulation is required to revive stability after months of unrest.

“Hong Kong is only a metropolis within the hole between the political battle between the 2 massive superpowers,” George Leung, CEO of the Hong Kong Basic Chamber of Commerce, instructed CNN Enterprise. “We’re simply a global enterprise metropolis right here doing enterprise between the East and West, and shouldn’t be affected by the specter of sanctions on something affecting the Hong Kong wellbeing.”

Extra severe penalties additionally seem to have been mentioned.

Whereas the Trump administration has not pursued the “nuclear possibility” of concentrating on the Hong Kong greenback, town’s worldwide relevance “would instantly be referred to as into query” if that had been to happen, stated Brock Silvers, chief funding officer for Hong Kong-based Adamas Asset Administration.

“The function of Hong Kong was already evolving in mild of its newly redefined relationship with China,” Silvers stated. “Though Hong Kong’s worldwide function might diminish over time if involved corporations relocate to Singapore and elsewhere, Hong Kong could discover new relevance as a middle for Chinese language finance.”

— Eric Cheung, Kevin Liptak, Kristie Lu Stout, Jason Hoffman and Sugam Pokharel contributed to this report.