An estimated 130,000 people rallied in Hong Kong’s central business district on Monday night to urge the U.S. to pass the Hong Kong Human Rights and Democracy Act. The rally was the latest in a range of attempts—including mass demonstrations in front of the U.S. Consulate, lobbying trips to Washington D.C., and much waving of the U.S. flag—by some participants of the Hong Kong protests to win American support for their cause.
If the legislation passes, Hong Kong will be subject an annual U.S. government review to determine whether it still meets the requirements to qualify for its special trade status with the U.S. That status grants the region a bilateral trade agreement distinct from the U.S.-China relationship, and depends on the maintenance of the “One country, two systems” policy that separates Hong Kong’s legal and financial infrastructure from that of mainland China.
For its promoters in the Hong Kong protest movement, the act would bring greater American scrutiny to bear on China’s moves in the special administrative region, thus providing them a measure of protection against mainland incursion. But, some analysts note, the move could jeopardize the city’s economy or backfire on protesters and pave the way for Beijing’s intervention.
The U.S. House of Representatives is expected to vote on the bill this week, possibly as early as Tuesday.
Stoking uncertainty worries
The act, a reintroduction of one drafted in 2017, gained traction again this summer when the current protests were kicking off, and then in September when U.S. House speaker Nancy Pelosi announced her support and said she would bring the bill to a vote “as soon as possible.”
The bill states that Hong Kong and mainland Chinese government officials who infringe on “basic freedoms” in Hong Kong could be denied entry in the U.S., or have their U.S.-based assets frozen, similar to the U.S. government’s blacklisting of entities it says have aided state repression of ethnic minorities in Xinjiang.
The act also calls for an annual report from the Department of Commerce on “China’s efforts to use Hong Kong to evade U.S. export controls and sanctions,” which likely relates to some U.S. officials’ fears that sensitive technologies sold in Hong Kong could be accessed by mainland Chinese firms. Several signatories of a letter expressing this concern, including Sen. Marco Rubio, also support the HKHRDA.
However, the mere existence of the act’s oversight may have unintended effects, analysts note. Annual reviews could inject uncertainty over Hong Kong’s continued special trade status, a level of unpredictability that may make the financial hub less attractive to foreign investors and businesses who, looking for economic stability, could choose to invest or set up shop elsewhere.
“The business community is quite worried about this development,” says Alfred Wu, an associate professor at the National University of Singapore who researches governance and fiscal relations in Greater China.
“Uncertainty [is] the most important thing,” Wu says. “In the past, Hong Kong was a very stable place for business, in between the west and the east. Now Hong Kong looks like a center of turbulence, not only politically but also economically.”
And the reviews might not even achieve their intended function, says Steve Tsang, director of the University of London’s SOAS China Institute. Tsang says he is “not convinced” that the act will achieve its proponents’ goals of protecting Hong Kong from mainland intervention, as it only calls for periodic reviews of the situation and leaves the underlying Hong Kong Policy Act, which guarantees the special trade status, untouched.
Friendly fire
For Yifan Zhang, an associate professor of economics at the Chinese University of Hong Kong, passage of the act, which he believes is likely, could “backfire” on its supporters in Hong Kong.
“The paradox is […] if there is a real risk of losing this trade status, Western companies may want to move out, and then mainland firms, particularly [state-owned enterprises], will move in and then they’ll have a greater influence in Hong Kong, further reducing Hong Kong’s autonomy,” Zhang says.
The University of London’s Tsang voices similar worries. He says if the act passes it will give more credibility to the narrative pushed by the mainland government that the protests in Hong Kong are the result of “malicious plots by foreign black hands.”
“In other words, it may end up making it easier for Beijing to justify hard repression later if it chooses to do so,” Tsang says. “The only likely effect is to embolden the protesters to keep going and perhaps, for some, sustain the violence. I do not see that as in the best interest of [Hong Kong].”
Currently, Hong Kong is a free trade zone with its own seat in the World Trade Organization. The territory is not subject to any tariffs or Entity List embargoes that the U.S. places on China. Hong Kong remains an important conduit for capital flowing out of the mainland and into international markets; its stock exchange lists over 1,100 mainland firms; and it makes up over half of all foreign direct investment into China.
China benefits from having two systems to serve its economy, says Zhang: a more state-led, “inward-looking” mainland economy and a more market-oriented, international economy in Hong Kong, which plays a significant role in connecting China’s market with the rest of the world.
Zhang says that it is thus in China’s interest to have Hong Kong function as a separate customs territory with an independent trade status: “Having two systems certainly benefits the mainland economy and they don’t want to lose it.”
And, he adds, if Beijing does lose that benefit, the big loser will be Hong Kong.
“It may be very precious support for the protesters fighting for political rights,” Zhang says, “but economically Hong Kong will pay a price.”
Besides the HKHRDA, another act introduced to the U.S. Congress in September aims to restrict exports of tear gas and other crowd control technology from the U.S. to Hong Kong, where police have used increasing levels of force in violent clashes with protesters.
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