Following the imposition of a sweeping new national security law in Hong Kong last year, a warning to companies over the risks of doing business there has been issued by the United States.
Multinational companies are also subject to the new law and authorities can arrest their employees under the new law, warned a new business advisory from the US.
The mandatory surrender of data to Chinese authorities is another of the risks for multinational companies highlighted in the advisory.
US President Biden said last Thursday that “the situation in Hong Kong is deteriorating”.
“The Chinese government is not keeping its commitment that it made, how it would deal with Hong Kong”, Biden warned prior to the business advisory being issued by the departments of State, Treasury, Commerce and Homeland Security of the US>
Chinese authorities have imposed the controversial new national security law last year in Hong Kong following months-long protests there against an extradition law. The protests were often violent and transformed into a broader anti-China and pro-democracy movement.
The new laws not only undermine the autonomy of the administration of the city but also make it easier to punish protesters.
The US advisory to multinational companies also mentioned warnings about a number of areas such as freedom of the press, data privacy and sanctions imposed by both the US and China.
Sanctions against seven Chinese officials over what was describes as an “erosion of the rule of law” were also imposed by the US as part of the update.
“I think this is quite serious. I think it’s a reflection of the dramatic changes that have gone on in Hong Kong,” said Jeff Moon, a former assistant US trade representative who worked on Hong Kong policy during the Obama administration.
There are hundreds of American companies that do business in Hong Kong, he pointed out. About 280 American firms have their regional headquarters in Hong Kong, according to data from the American Chamber of Commerce of the city.
It was aware “of an increasingly complicated geopolitical environment and its risks”, the Chamber said in a statement. “We are here to support our members to navigate those challenges and risks while also capturing the opportunities of doing business in this region,” it added.
The advisory says potential reputational and legal risks should be considered by businesses that have operations or staff in Hong Kong.
The pressure on the “one country, two systems” principle, that was at one time applicable to Hong Kong, means that the city’s appeal will have changed for foreign companies even though the city continues to be an incredibly valuable economic hub, Moon added.
But withdrawing businesses from the area is not recommended in the advisory.
But companies may consider leaving as a result, said Jamieson Greer, who is an international trade lawyer and former chief of staff to US Trade Representative Bob Lighthizer during the Trump administration.
“China and the US are essentially now telling financial institutions, private equity, other financing institutions, that they may have to choose one side or the other,” he said.
(Adapted from BBC.com)