The Biden administration warned U.S. companies Friday that their operations and activities in Hong Kong could pose financial, legal and reputational risks following legislative changes by the Chinese government to bring the territory’s pro-democracy movement to heel.
The advisory from the Departments of State, Treasury, Commerce and Homeland Security cautioned businesses that they are subject to the former British colony’s laws, including a broadly defined year-old national security law that Beijing has used to arrest several foreign nationals, including one American citizen, for any perceived threats to its authority.
The risks mentioned by the advisory fall into four categories: risks for businesses following the imposition of the national security law, data privacy risks, risks regarding transparency and access to critical business information, and risks for businesses with exposure to sanctioned Hong Kong or mainland Chinese entities or individuals.
“Hong Kong, in many respects, is a separate legal jurisdiction from the [People’s Republic of China], maintaining a separate currency, as well as separate regulatory structures to supervise companies operating in the territory,” the advisory said. “However, the PRC’s imposition of the [national security law] on Hong Kong in June 2020 led to major structural changes that significantly reduced Hong Kong’s autonomy. As a result, business and rule-of-law risks that were formerly limited to mainland China are now increasingly a concern in Hong Kong.”
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Authorities could, for instance, electronically surveil businesses without warrants, or compel them to surrender corporate and customer data. Businesses that rely on a free and open press may face restricted access to information as Beijing continues its crackdown on independent media, such as the pro-democracy newspaper Apple Daily, whose executives were arrested last month.
Individuals and entities should also be aware of the potential consequences of “certain types of engagement” with sanctioned individuals or entities without a license from the Department of Treasury’s Office of Foreign Assets Control or other exemption, the advisory said. A failure to comply with U.S. sanctions, it said, could result in civil and criminal penalties under U.S. law.
The Biden administration added that businesses operating in Hong Kong could face heightened risks and uncertainty related to Chinese retaliation against companies that comply with sanctions imposed by the United States and other countries.
“Hong Kong’s business environment has deteriorated in the past year,” said Secretary of State Antony Blinken.
The warning comes days after Washington reiterated that businesses with supply-chain and investment ties to China’s northwestern Xinjiang Uyghur Autonomous Region could run the risk of violating U.S. law as a result of “ongoing genocide” against Uyghurs and other Turkic Muslim minorities. It has also been more than a year since former President Donald Trump stripped Hong Kong of its preferential status under U.S. law to penalize Beijing for what he described as “oppressive actions” against the luxury and financial hub.
Hong Kong’s government was quick to fire back following the advisory’s release.
“The U.S. administration’s latest attempt to issue a so-called ‘advisory’ to U.S. businesses and individuals operating in Hong Kong based on totally ridiculous and unfounded fear-mongering about the situation in Hong Kong only serves to prove yet again its hypocrisy and double standards, driven by ideological hegemony,” it said in a statement. “The main victims of this latest fallout will sadly be those U.S. businesses and U.S. citizens who have taken Hong Kong as their home.”
China has also promised to “respond strongly” to any measures by Washington.
“I’d like to stress that Hong Kong is part of China and its affairs are purely China’s internal affairs,” Chinese Foreign Ministry spokesman Zhao Lijian said at a news briefing in Beijing on Friday. “No country has the right to make wanton criticism and meddle in them. The Chinese government is firmly determined to oppose U.S. interference in Hong Kong affairs, safeguard national sovereignty, security and development interests and implement ‘one country, two systems.’ The U.S. should adhere to international law and basic norms governing international relations, stop meddling in Hong Kong affairs in any form and stop interfering in China’s domestic affairs.”
But Secretary of State Antony Blinken said Beijing has “chipped away at Hong Kong’s reputation of accountable, transparent governance and respect for individual freedoms,” breaking its pledge to leave the territory’s high level of autonomy unaltered for 50 years following its return from British rule in 1997.
The Biden administration sanctioned Chen Dong, Yang Jianping, Qiu Hong, Lu Xinning, Tan Tieniu, He Jing, and Yin Zonghua, all deputy directors of the liaison office of the Central People’s Government of the Hong Kong Special Administrative Region, which Blinken described as China’s “main platform for projecting its influence in Hong Kong and has repeatedly undermined the high degree of autonomy promised for Hong Kong in the Sino-British Joint declaration.”
“Hong Kong’s business environment has deteriorated in the past year. The many legal, financial, operational and reputational risks long present in mainland China are now increasingly prevalent in Hong Kong,” he said in a statement. “Today, we send a clear message that the United States resolutely stands with Hong Kongers.”