November 28, 2019 / 5:48 AM / 15 days ago

Trump signs Hong Kong bills; Beijing vows retaliation: Now what?

SHANGHAI (Reuters) - U.S. President Donald Trump signed into law here congressional bills that back protesters in Hong Kong and threaten China with possible sanctions on human rights, prompting China's Foreign Ministry on Thursday to warn of "firm counter measures".

FILE PHOTO: U.S. President Donald Trump holds a campaign rally in Sunrise, Florida, U.S., November 26, 2019. REUTERS/Yuri Gripas

Mass protests for more democracy and autonomy have rocked the former British colony and more than 5,800 people have been arrested since June, with the escalating violence raising fears that China will ratchet up its response to end the unrest.

The “Hong Kong Human Rights and Democracy Act,” which the Senate and House passed last week, puts the special treatment Hong Kong enjoys under U.S. law under tighter scrutiny linked to the extent of the territory’s autonomy from Beijing.

A second bill, which Trump also signed, bans the export to the Hong Kong police of crowd-control munitions, such as teargas, pepper spray, rubber bullets and stun guns.

WHAT NEXT?

Britain returned Hong Kong to China in 1997, and the territory was promised a “high degree of autonomy” for 50 years. Among the key drivers of the protests in Hong Kong is the widespread perception that Beijing has been steadily encroaching on that promised autonomy.

The “Hong Kong Human Rights and Democracy Act” that Trump signed requires the State Department to certify at least once a year that Hong Kong retains enough autonomy to justify the favorable U.S. trading terms that have helped it maintain its position as a world financial center.

Officials responsible for human rights violations in Hong Kong could also be subject to sanctions, including visa bans and asset freezes.

While many see the laws as symbolic, they have the potential to upend relations between the United States and Hong Kong.

China’s promise of “high degree of autonomy” for Hong Kong has formed the basis of the territory’s special status under U.S. law.

BEIJING ANGERED

China has denounced the legislation as gross interference and violation of international law, and on Thursday labeled the United States the “biggest black hand” behind the unrest in Hong Kong.

The legislation comes at a time when Beijing and Washington are inching toward a “phase one” agreement to begin to defuse a bruising trade war that Trump has made a top priority.

Beijing has signaled that it wants to keep the Hong Kong issue out of the trade war discussions, but the new laws will exacerbate tensions in the bilateral relationship.

Separately, some analysts say any move to end Hong Kong’s special treatment could prove self-defeating for the United States, which has benefited from the business-friendly conditions in the territory.

If Hong Kong becomes just another Chinese port, this could hurt not just the city and China, but U.S. businesses too, and companies that rely on the territory’s role as a middleman, or for trans-shipping, would likely take their business elsewhere.

HOW IMPORTANT IS HONG KONG’S SPECIAL STATUS?

From a business perspective, one of the most important elements of Hong Kong’s special status has been that it is considered a separate customs and trading zone from China.

That has meant, for instance, that trade-war tariffs don’t apply to exports from Hong Kong.

According to the State Department, 85,000 U.S. citizens lived in Hong Kong in 2018 and more than 1,300 U.S. companies operate there, including nearly every major U.S. financial firm.

Members of a safety team established by police and local authorities arrive on campus to assess and clear unsafe items, at the Hong Kong Polytechnic University (PolyU) in Hong Kong, China, November 28, 2019. REUTERS/Leah Millis

The territory is a major destination for U.S. legal and accounting services and in 2018 the largest U.S. bilateral trade-in-goods surplus was with Hong Kong at $31.1 billion.

Trade between Hong Kong and the United States was estimated to be worth $67.3 billion in 2018, with the United States running a $33.8 billion surplus - its biggest with any country or territory, according to the Office of the U.S. Trade Representative.

The American Chamber of Commerce in Hong Kong has said that anything that changes the status of the territory “would have a chilling effect not only on U.S. trade and investment in Hong Kong but would send negative signals internationally about Hong Kong’s trusted position in the global economy.”

Reporting by John Ruwitch in Shanghai, and David Brunnstrom, Patricial Zengerle and Matt Spetalnick in Washington

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