The United States is treating Hong Kong as mainland China. Business is starting to do the same

Alongside the choice to finish the particular buying and selling relationship Tuesday, Trump additionally signed a separate piece of laws that might impose sanctions on companies and people which can be seen as serving to China limit Hong Kong’s autonomy.

Without its privilege as a particular financial system below US regulation, “there won’t be big differences between Hong Kong and other big Chinese cities like Beijing and Shanghai,” stated Simon Lee, senior lecturer of worldwide enterprise at the Chinese University of Hong Kong. “Foreign companies will think whether they need to maintain their existing scale of operations in Hong Kong.”

In a press release, the Chinese Foreign Ministry known as on Washington to “stop interfering in any way in China’s internal affairs, including Hong Kong affairs.” It additionally urged the Trump administration to chorus from implementing its new regulation concerning Hong Kong.

The influence on commerce

Since 1992, Hong Kong’s particular standing has allowed the items passing by means of its borders to bear completely different controls than these in the mainland. During the US-China commerce battle, for instance, it allowed Hong Kong to keep away from the tariffs that Washington imposed on Chinese items.

The new govt order may put an finish to that, as it goals to “revoke license exceptions” for exports to Hong Kong.

And the majority of products exported from Hong Kong — about 99% — are re-exports, that means that they’re items passing by means of the territory from one other nation, Pang defined.

That implies that if these items are from mainland China, they’re already topic to any tariff that applies to Chinese items. So “in terms of tariffs, there should be no difference whether there is a removal of the special status,” Pang wrote in a May analysis report.

What’s extra regarding is the general deteriorating relationship between the United States and China, she informed CNN Business.

“I’m not interested right now in talking to China,” Trump stated. “They hit us with the plague, so right now I’m not interested in talking to China about another deal.”

The prospect of a “second wave” in the commerce battle can be way more damaging to Hong Kong’s financial system than the new US edict on the metropolis, stated Pang.

A blow to enterprise confidence

Trade is just one a part of the story.

In current months, tensions have been effervescent up between China and the West, turning Hong Kong right into a political battleground and elevating much more questions on the metropolis’s future.

One respondent wrote that the laws was “extremely broad and could be used for anything at all.” Authorities in Hong Kong, although, insist the regulation is wanted to restore stability after months of unrest.

“Hong Kong is just a city in the gap between the political conflict between the two large superpowers,” George Leung, CEO of the Hong Kong General Chamber of Commerce, informed CNN Business. “We are just an international business city here doing business between the East and West, and should not be suffering from the threat of sanctions on anything affecting the Hong Kong wellbeing.”

More severe penalties additionally seem to have been mentioned.

While the Trump administration has not pursued the “nuclear option” of focusing on the Hong Kong greenback, the metropolis’s worldwide relevance “would immediately be called into question” if that have been to happen, stated Brock Silvers, chief funding officer for Hong Kong-based Adamas Asset Management.

“The role of Hong Kong was already evolving in light of its newly redefined relationship with China,” Silvers stated. “Although Hong Kong’s international role could diminish over time if concerned firms relocate to Singapore and elsewhere, Hong Kong may find new relevance as a center for Chinese finance.”

— Eric Cheung, Kevin Liptak, Kristie Lu Stout, Jason Hoffman and Sugam Pokharel contributed to this report.