Secretary of State Mike Pompeo informed Congress on Wednesday that Hong Kong was no longer autonomous from China, a move that could jeopardize the special administrative region’s favorable trade relationship with the U.S. and open up Chinese officials to sanctions, CNBC informed.
The State Department was required to issue a determination on Hong Kong’s autonomy under pro-democracy legislation passed late last year. The law also requires the President to impose sanctions on foreigners who undermine “fundamental freedoms and autonomy in Hong Kong.”
Pompeo’s move comes amid a controversy in Hong Kong over a proposed national security law from Beijing that has spurred protests in the streets of the former British colony.
The proposed law from China’s National People’s Congress would effectively bypass Hong Kong’s own legislature and targets acts of sedition against the central government in Beijing. Fears over China’s encroachment on the business center’s independence have roiled the region for months and contributed to sending Hong Kong’s economy into a recession last year.
“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Pompeo said in a statement.
“Hong Kong and its dynamic, enterprising, and free people have flourished for decades as a bastion of liberty, and this decision gives me no pleasure. But sound policy making requires a recognition of reality,” Pompeo said. “While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself.”
Hong Kong has so far been exempted from the punishing tariffs on exports to the U.S. that the Trump administration has imposed on China as part of President Donald Trump’s multiyear trade war with the country.
That exemption could be eliminated, though it’s far from certain it will be. Business groups have warned of negative consequences if Hong Kong were to lose its special status, and experts have expressed skepticism that the U.S. will impose substantial costs on China over Hong Kong.
The U.S. has a significant financial relationship with Hong Kong. Trade in goods and services between the U.S. and Hong Kong totaled more than $66 billion in 2018, according to the Office of the U.S. Trade Representative. The State Department has said that there are more than 1,300 U.S. firms doing business in the special administrative region.
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