China, US Will Kill ‘GOOSE THAT LAYS GOLDEN EGGS’ IF Hong Kong Crisis NOT EXTINGUISHED, International Analysts Warn

Hong Kong’s status as a major global financial hub serving both Beijing and the interests of American multinationals may end thanks to the ongoing political escalation between the Trump administration and Chinese authorities over the city’s future, experts warn.

Late last month, Chinese lawmakers passed a new national security law for the Hong Kong Special Administrative Region, with the legislation ostensibly aimed at putting an end to any secessionist, subversive and terrorist activity in the territory.

The bill’s passage sparked fresh protests in the city, while US President Donald Trump accused China of “breaking its word” on Hong Kong autonomy and the ‘one country, two systems’ approach to governance and replacing it with a “one country, one system” attitude.

Subsequently, Trump ordered his administration to “begin the process of eliminating policy that gives Hong Kong different and special treatment,” while the State Department announced the sell-off of some $1.82 billion in Hong Kong property.

Chinese authorities blasted the US measures, calling on foreign nations to “immediately cease” their interference in China’s affairs, and warning that if Washington “continues to insist on meddling,” Beijing would be “ready to implement” unspecified “countermeasures.”

Hong Kong authorities, meanwhile, have dismissed residents’ concerns about the impact of the US pressure campaign, with Financial Secretary Paul Chan pointing out last week that the US accounts for just 0.1 percent of Hong Kong’s manufactured goods exports. Hong Kong, on the other hand, is the third largest importer of US wines, and the fourth-largest importer of US beef. Furthermore, he said, US firms own considerable assets in the region’s service, finance and professional service industry. Overall, US exports to Hong Kong and the SAR’s direct investment in the US have generated more than 210,000 US jobs, according to Chan’s calculations.

According to the official, some 1,300 US companies operate in Hong Kong, including nearly 300 regional headquarters for Asia operations. In total, Chan said, US operations have netted Washington a trade surplus of close to $300 billion over the past decade, helping to bridge the gap in the US’s massive $350-$400 billion-a-year trade deficit with China.

Hong Kong Night View

Killing the Goose That the Lays Golden Eggs

The free movement of capital and lack of currency controls are the main advantages US businesses have in Hong Kong, with operations in the autonomous Chinese region giving them a window into the mainland without having to follow the more stringent investment and operations laws there.

The benefits go both ways, says Pavel Bazhanov, a specialist in Chinese business law. “For China, Hong Kong is valuable as an international financial center. This is in fact one of the reasons why Beijing kept the previously existing laws and autonomy status there.

US businesses in Hong Kong will face losses, as will the city itself, with authorities facing not only the prospect of the withdraw of capital to ‘quieter harbours’, but a brain drain of local qualified expats and foreign nationals.”

His concerns are echoed by Alexei Kuznetsov, economist and acting director of the Russian Academy of Sciences’ Institute of Scientific Information for Social Sciences. “As far as the question of how beneficial [Hong Kong’s status] is to China: it would be foolish to slaughter the goose that lays the golden eggs,” he says.

At the same time, Kuznetsov notes that China is a different country today than it was in 1997, with the threats posed by a decline of Hong Kong’s importance far smaller than they were 25 years ago.

“Over the past decades, the PRC has taken off dramatically in development, including when it comes to foreign investment, and it’s become pointless to talk about any exceptional importance of special economic zones,” he says.

Admittedly, if the US does strip the city of its special status, regional rivals like Singapore and Tokyo “will be only too happy about it,” the economist concludes.