Congress should turn President Donald Trump’s 2020 executive order suspending Hong Kong’s special trade status into law, an advisory panel said, citing China’s “complete political control” over the city and its regulatory environment.
The recommendation appears in the U.S.-China Economic and Security Review Commission’s annual report, released on Nov. 18. The commission—an independent body created by Congress in 2000—advises lawmakers on the national security implications of economic and trade relations between the world’s two largest economies.
With these laws in place, Hong Kong is now subject to the same level of repression against free speech and assembly as the communist regime-ruled mainland, the commission said.
“China has completely reneged on its promise to preserve a significant degree of autonomy for Hong Kong under ‘One Country, Two Systems,’ leaving the remnants of rule of law and judicial independence as a thin veneer,” it wrote in the report.
Economically, the report notes, Hong Kong has grown more dependent on mainland China and increasingly aligned with Beijing’s priorities. The city is even beginning to show some of China’s own economic strains, including weak consumer spending and a prolonged property market downturn.
At the same time, Hong Kong’s professional and financial sectors are having a growing presence of mainland firms, as foreign companies scale back operations. The city’s workforce has also shifted: over 90 percent of applicants under Hong Kong’s Top Talent visa program now come from mainland China, many seeking a pathway to permanent residency.
Despite its efforts to fully integrate Hong Kong, China continues to promote the image of the city as a distinct, autonomous financial center. But Beijing’s intervention this year in the ongoing sale of CK Hutchison Holdings’ port assets shows how deeply Chinese interests now shape Hong Kong’s commercial sphere, the report said.
For U.S. companies operating in Hong Kong, the commission said, this should serve as a warning of how far Beijing would go to interfere in business decisions of private firms based in the city when its strategic priorities are at stake.
“While these actions have primarily impacted Hong Kong domestic firms to date, foreign firms operating in Hong Kong should be wary of relying on Hong Kong as an independent business jurisdiction with the protections of rule of law,” it warned.
Codifying these measures, the commission said, would prevent future administrations from overturning them without congressional approval.
The commission also recommended that, given Hong Kong’s growing role as a hub for sanctions evasion benefiting Russia, Iran, and North Korea, Congress should require Hong Kong to comply with U.S. sanctions in order to maintain its status as an offshore U.S. dollar clearing center. It further called for secondary sanctions on Chinese and Hong Kong financial institutions that facilitate illicit transactions, as well as creating a permanent interagency task force to disrupt evasion networks operating through the city.
“The [Hong Kong government] steadfastly safeguards national sovereignty, security and development interests, and fully and faithfully lives up to this top priority of the ‘One Country, Two Systems’ principle,” it said, reiterating standard official rhetoric.
