By William Mauldin
WASHINGTON -- As U.S. officials weigh sanctioning China over its
recent moves in Hong Kong, the city's status as a global financial
center limits the menu of effective levers available to
Major actions against Hong Kong's financial system risk hitting
U.S., Western and Hong Kong companies and consumers, officials and
analysts say. More targeted sanctions against Chinese officials and
trade measures against products made in Hong Kong would have little
impact on Beijing's integration of the city into the mainland's
political and security system, these people say.
Trump administration officials discussed Hong Kong plans
Thursday in a White House meeting, according to people familiar
with the gathering. Officials will regroup early this week and may
announce sanctions or other measures, one official said.
"You want to find sanctions that hurt the perpetrators of the
law without shooting yourself in the foot, and it's a difficult
exercise," said Wendy Cutler, vice president of the Asia Society
Policy Institute and a former senior U.S. trade official. "There
are a lot of options, but none of them are great."
Beijing last month unveiled a new security law that gives the
mainland greater role in policing and limiting political movements
on the territory, a step that the U.S., U.K. and other Western
countries say violates the "one country, two systems" principle and
the treaty that transferred Hong Kong to Chinese administration in
China has warned the Trump administration to stay out of what it
describes as a domestic political matter, and has threatened to
retaliate against measures the U.S. levels against it.
"China and the U.S. should not seek to remodel each other,"
Chinese Foreign Minister Wang Yi said Thursday in a speech in
Beijing. "Instead, they must work together to find ways to peaceful
coexistence of different systems and civilizations."
President Trump in May laid out possible steps Washington would
consider if Beijing went ahead with its security law, including
ending both the U.S.'s extradition treaty with Hong Kong and the
territory's special trade and travel status for exports and
travelers. But so far the administration has only announced it
would prevent an unknown number of Chinese citizens from getting
visas and limit military and security-related exports to Hong
Some State Department officials have discussed the possibility
of undercutting Hong Kong as a top financial center -- one that
benefits China -- by taking steps to destroy Hong Kong's pegged
exchange rate to the U.S. dollar, according to two people familiar
with the discussions.
But a senior Trump administration official said that the move
against Hong Kong's currency has been excluded from the measures
under consideration, at least in the near term. Also, many U.S.
economic officials would oppose major new financial sanctions when
the global economy is swooning under the coronavirus pandemic.
The State Department declined to comment on economic policies
toward Hong Kong. The White House declined to comment.
A more likely option is a suite of narrowly targeted sanctions,
current and former U.S. officials say. The House and Senate
unanimously passed a law this month enabling the State and Treasury
departments to impose sanctions on people or entities involved in
carrying out the Hong Kong security law. It would also target banks
that facilitate significant transactions involving those people or
Mr. Trump is expected to sign the bill, given the broad
congressional support, say people following the legislation. The
administration is already likely able to rely on previous
authorizations for targeted sanctions, including a 2019 law aimed
at Beijing's moves in Hong Kong after massive protests erupted on
"Washington will probably impose some sanctions on midlevel
Chinese officials over the new Hong Kong law, but it will avoid
actions that threaten the territory's financial stability or its
peg against the dollar," Michael Hirson, the top China expert at
the Eurasia Group, wrote Friday in a note.
Mr. Trump has previously hesitated to confront China over
certain issues, given the concerns over negotiations to end the
tit-for-tat trade war he pursued upon taking office. He signed a
"phase-one" trade agreement in January that requires China to
purchase tens of billions of extra U.S. exports this year. China
isn't on track to meet those purchase requirements this year.
China experts expect the U.S. to soon cancel its extradition
treaty with Hong Kong due to concerns about the lack of independent
police and courts on the territory under China's new security law.
Mr. Trump has already threatened to end it. The president also has
mentioned the possibility of ending Hong Kong's special trade and
Mainland Chinese goods still face tariffs, even after the
phase-one trade deal. Yet Hong Kong's exports to the U.S. last year
totaled just $4.7 billion, compared with $452 billion from the
Last month, U.S. lawmakers from both parties introduced a bill
to give refugee status to Hong Kong residents at risk of
persecution under the new national security law.
In the U.K., Prime Minister Boris Johnson said his government
plans to change immigration rules to permit as many as 3 million
holders of British national (overseas) passports to stay and work
in the U.K. for five years on a path to citizenship.
With overall U.S.-China tensions still rising, friction over
Hong Kong may be wrapped into overall pressure on Beijing, much as
Russia's annexation of Crimea presaged friction and sanctions in
The U.S. is considering taking further steps against China's
hacking efforts targeting the U.S., the senior official said.
Secretary of State Mike Pompeo, when asked this past week during a
Fox News interview if the U.S. should ban Chinese social-media apps
including TikTok, said the government was looking into the
This month the U.S. sent two aircraft carriers to the South
China Sea, which extends south of Hong Kong and surrounds islands
disputed among China and other Asian nations. The Treasury and
State departments last week imposed sanctions against top officials
in China's Xinjiang region over the treatment of Uighur Muslims and
other minority groups there.
Mr. Pompeo met his Chinese counterpart Yang Jiechi in Hawaii
last month for a gathering seen as an effort to derail escalating
tensions. U.S. officials didn't cite any concrete progress coming
from the meeting.
--Alex Leary contributed to this article.
Write to William Mauldin at firstname.lastname@example.org
(END) Dow Jones Newswires
July 12, 2020 14:14 ET (18:14 GMT)
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