By Newley Purnell
HONG KONG -- Rising tensions between the U.S. and China over
Hong Kong have American businesses caught in the crosshairs.
Companies in the global financial and trading hub, already
battered by a year of violent protests and the coronavirus
pandemic, face a long period of further uncertainty amid a fight
that they fear could disrupt their operations and that casts doubt
over their long-term future here.
After China last week approved a plan to impose new
national-security laws on Hong Kong, President Trump on Friday said
the U.S. would no longer treat Hong Kong as a separate entity from
China and would roll back policy exemptions for the city. They
could include measures such as export controls, tariffs and visa
restrictions, according to analysts, but businesses will have to
wait for details and the timing of any moves.
"It's going to be a challenging week ahead as there are no firm
details on how this special economic relationship will be
untangled," said Tara Joseph, president of the American Chamber of
Commerce in Hong Kong. More clarity is "essential because our
business here is large and important," she said.
About 85,000 U.S. citizens work in the city, with more than
1,300 U.S. companies operating here, some with regional
headquarters. American companies with offices in Hong Kong range
from Apple Inc. to Procter & Gamble Co., and FedEx Corp.
The U.S. is Hong Kong's second-largest trading partner, after
China, accounting for 6.2% of trade last year, compared with 50.8%
for trade with China. Hong Kong officials point to the U.S. trade
surplus with the city, which they said amounted to $297 billion
between 2009 to 2018, to show how U.S. interests are also at
risk.
"We do not believe that sanctions or trade restrictions against
Hong Kong are justified," a Hong Kong government spokesman said
late Saturday. "They will lead to a breakdown of the mutually
beneficial Hong Kong-U.S. relationship built up over the years and
only hurt local and U.S. businesses in Hong Kong and the people
working for them."
Both sides will lose if the Trump administration follows through
with the threat to eliminate all special treatment for Hong Kong,
Daniel Russel, vice president of the U.S.-based Asia Society Policy
Institute, said. "The impact would fall heavily on Hong Kong, with
negative effects on U.S. companies operating there as well," he
said.
When China's legislature last week approved a plan to impose a
new law on Hong Kong, saying the city was a loophole in its
national security, it also was light on details and how the law
will be enforced. The law will be drafted in the coming weeks.
Officials have already said Chinese security agencies will be
allowed to operate in the city for the first time.
Officials in Beijing and Hong Kong said only a small minority of
people will be affected by the law, as it targets activities deemed
subversive, or promoting independence or terrorism. The law also
targets what Beijing considers foreign interference in the city's
affairs. China has repeatedly accused the U.S. and foreign forces
of stoking last year's social unrest.
Opposition groups in the city contend that the law is just the
start of Hong Kong being assimilated as just another Chinese city
and reject government statements that people will retain freedom of
speech and assembly. China promised to guarantee those rights under
a 1984 agreement with the U.K. that returned sovereignty of its
colony in 1997.
Andrew Lo, chief executive of Hong Kong-based immigration
consultancy Anlex, said inquiries from residents in the city
seeking to emigrate had risen from about 10 per day before the new
security law was revealed to about 100 per day now. That could
represent challenges to global companies that want to attract and
retain top talent in the city.
"People are shocked in Hong Kong," he said. "For parents, they
prefer to live here in Hong Kong and earn their living, but then
they think about their children and they think it's better to go,"
he said.
Felix Chung, a pro-business lawmaker who leads the city's
Liberal Party, said many in the local business community welcomed
China's new security law because they believe it will help tamp
down protests that have hurt their businesses.
"Hong Kong is just sitting in the middle of two big guys and
they are having a fight," he said. "What actually worries me is not
from China but from the U.S. What has Hong Kong done to the U.S.?,"
he said.
The European Union Chamber of Commerce in China said in a
statement before President Trump spoke Friday that businesses in
Europe have depended on Hong Kong's support for principles such as
individual liberties and the rule of law, and that without them,
"the allure of this important city will be greatly diminished."
"The devil's in the details," said Allan Zeman, a pro-Beijing
businessman in Hong Kong who is also an economic adviser to the
Hong Kong government, referring to the next steps that might come
from the U.S. administration. Pointing to the trade surplus the
U.S. enjoys with the city, he added that controls on exports may
hurt the U.S. economically more than Hong Kong, which has a minimal
manufacturing sector and doesn't export.
Mr. Zeman, who has lived in Hong Kong for decades, said that
over time he has seen cycles of events where some companies might
exit -- such as in 1989 after the Tiananmen Square massacre or in
1997 when China reclaimed sovereignty from Britain. "You'll always
have some Nervous Nellies leave."
Mr. Zeman said he thinks many companies will choose to stay as
they are here for gateway access to China, as well as for its low
tax regime and free flow of capital.
For many Americans in Hong Kong, "it's an emotional and fragile
moment," said Ms. Joseph, whose chamber represents hundreds of
American companies. "Many of us have worked and lived here for many
years and we love Hong Kong."
--Natasha Khan contributed to this article.
Write to Newley Purnell at newley.purnell@wsj.com
(END) Dow Jones Newswires
May 31, 2020 09:36 ET (13:36 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.