Hong Kong warns removing U.S. special status is a 'double-edged sword'

HONG KONG — Hong Kong told the United States to keep out of the debate over national security legislation being imposed by China, and warned that withdrawal of the financial hub’s special status under U.S. law could backfire on the U.S. economy.

President Donald Trump is due to announce later on Friday his response to the Chinese parliament’s advancement this week of security legislation for Hong Kong, which many lawyers, diplomats and investors fear could erode the city’s freedoms.

The former British colony has been racked by civil unrest amid fears Beijing is curbing the high degree of autonomy it has enjoyed under a “one country, two systems” formula adopted when it returned to Chinese rule in 1997.

“Any sanctions are a double-edged sword that will not only harm the interests of Hong Kong but also significantly those of the U.S.,” Hong Kong’s government said late on Thursday.

From 2009 to 2018, the U.S. trade surplus of $297 billion with Hong Kong was the biggest among all Washington’s trading partners, and 1,300 U.S. firms were based in the city, it said.

Beijing says the new legislation, likely to come into force before September, will tackle secession, subversion, terrorism and foreign interference in the city. It could see Chinese intelligence agencies set up bases in Hong Kong.

China’s Ministry of Public Security (MPS) said it would “guide and support Hong Kong police to stop violence and restore order.” Hong Kong’s police have been independent from China and the MPS has no enforcement powers in the city.

Riot police fired pepper pellets this week to disperse thousands of protesters in the city’s first major unrest since anti-government demonstrations paralyzed it for months last year, and after the coronavirus dampened fervor this year.

INTERNATIONAL CONCERN

The Fitch ratings agency said it expected Hong Kong’s economy to contract by 5% this year, in large part because of the coronavirus, and the outlook for the operating environment for its banks was negative.

Hong Kong’s Hang Seng index, which has lost about 3% after the news of the security legislation, was down 0.711% in the early afternoon.

Trump’s top economic adviser, Larry Kudlow, warned that Hong Kong, which has enjoyed special privileges under U.S. law on the basis of its high degree of autonomy from Beijing, may now need to be treated like China on trade and other financial matters.

The State Department said it could “no longer certify that Hong Kong continues to warrant (differential) treatment” from Beijing.

Chinese authorities and Hong Kong’s Beijing-backed government say the legislation poses no threat to the city’s autonomy and the interests of foreign investors would be preserved.

Many Hong Kong residents feel their city is on the cusp of historic change, however.

“No matter how it turns out, I’ll always stand on the people’s side,” said Samantha Tam, 27. The office worker said the uncertainty had made her put on hold plans to have a baby after she gets married next year.

“When Hong Kong really loses special status, China will see the consequences. I just want to burn together,” she said, paraphrasing a protest slogan aimed at Beijing: “If we burn, you burn with us.”

Hong Kong’s Beijing-backed leader, Carrie Lam, urged citizens to “join hands to pursue our dreams while putting aside our differences,” in a statement published in newspapers.

The legislation was needed because of a “terrorist threat,” she said, adding that organizations advocating “independence and self-determination” had challenged the authority of mainland and local governments and pleaded for foreign interference.

The five demands of last-year’s pro-democracy protest movement included universal suffrage and an independent inquiry into police handling of the protests, but not independence. A minority of protesters waved “Hong Kong independence” flags.

Independence is anathema for Beijing.

Protesters see the security legislation, along with a bill to criminalize disrespect for China’s national anthem, as Beijing’s latest attempt to tighten its control of the city.

Australia, Britain, Canada and the United States are among the nations that have condemned the proposed security legislation. Japan said it was “seriously concerned.”

Britain said it would give greater visa rights to British national overseas passport holders from Hong Kong unless China suspended its plans.

(Reporting by Sarah Wu and Marius Zaharia; Writing by Michael Perry and Robert Birsel; Editing by Stephen Coates and Clarence Fernandez)