Hong Kong Book Fair

People visit the annual book fair in Hong Kong on Wednesday. Booksellers at the fair are offering a reduced selection of books deemed politically sensitive, as they try to avoid violating a sweeping national security law imposed on the city last year. Matthew Cheng/Associated Press

HONG KONG — The United States warned businesses Friday of the risks of operating in Hong Kong after the passage of a national security law in the city last year and imposed new sanctions on seven Chinese officials who operate in the territory.

The advisory, issued by the U.S. State, Commerce, Homeland Security and Treasury departments, warned that “business and rule of law risks that were formerly limited to mainland China are now increasingly a concern in Hong Kong.” It also highlighted that companies could be exposed to individuals targeted by the sanctions and be punished under American law.

Taken together, the warning and the sanctions further undercut the viability of Hong Kong’s status as a global financial center since the passage of the national security law.

“Today’s announcement makes clear what we already know – if you are a business operating in Hong Kong, you are doing so at your own risk,” said Samuel Chu, managing editor of the Washington-based Hong Kong Democracy Council, a Hong Kong advocacy group. “The regime continues to do lasting and permanent damage to the city’s reputation and the economic well-being of Hong Kongers.”

In a statement, Secretary of State Antony Blinken said Beijing has “chipped away at Hong Kong’s reputation of accountable, transparent governance and respect for individual freedoms.”

“Today, we send a clear message that the United States resolutely stands with Hong Kongers,” he said.

The advisory highlights several risks to businesses operating in Hong Kong, including data privacy, transparency and access to critical business information. Companies, the advisory pointed out, could also face retaliation for complying with sanctions by foreign governments under a new Chinese law. The advisory also points out that foreign nationals, including one U.S. citizen, have been arrested under the national security law, which imposes penalties of up to life in prison for broadly worded crimes.

A spokesman for the Hong Kong government said the move was “ridiculous” and based on “unfounded fearmongering” about the situation there.

“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,” the spokesman added.

Alongside the advisory, the Treasury Department also added seven officials from China’s Hong Kong liaison office to its sanctions list. This adds to a list of 24 Chinese officials the Biden administration previously imposed sanctions on for their roles in quashing the city’s freedoms.

At a news conference Thursday with visiting German Chancellor Angela Merkel, President Biden said their nations will “stand up for democratic principles and universal rights.”

“The situation in Hong Kong is deteriorating,” Biden said. “And the Chinese government is not keeping its commitment that it made on how it would deal with Hong Kong.”

State Department spokesman Ned Price reiterated that the government will continue to hold the city’s officials accountable for subverting the rule of law.

“We know that a healthy business community relies on the rule of law, which the national security law that applies to Hong Kong continues to undermine,” Price said.

The security law has curtailed political freedoms in Hong Kong. In addition to criminalizing dissent with penalties of up to life in prison, the law has been used by the authorities to ban songs and slogans, block distribution of films deemed subversive, and force the closure of the pro-democracy Apple Daily newspaper and charge its executive and editor in chief. Police charged that several articles violated the law, saying they amounted to conspiracy to collude with foreign powers. The government has argued that the law is intended to safeguard national security and has nothing to do with press freedom.

At the same time, China has overhauled Hong Kong’s electoral system to prevent the pro-democracy camp from gaining power, and it has barred government opponents from holding public office.

The U.S. Chamber of Commerce in Hong Kong has 1,400 members, and at least 282 U.S. companies had regional headquarters in the city in 2020. According to the chamber’s survey in January, about 40 percent of 181 respondents believed Hong Kong’s business environment would continue to be unstable in 2021. More than 60 percent are concerned that further imposed sanctions would harm Hong Kong. Nearly half are worried that the tightening grip on freedom of speech will result in a “brain drain” and a “non-transparent legal system.”

While most businesses expect their regional headquarters to remain in the city for the next three years, downsizing is happening as a result of “cost cutting and concerns over Hong Kong’s future as a major business hub,” the survey reported.

Responding to reports about the U.S. advisory at a news conference Wednesday, Chinese Foreign Ministry spokesman Zhao Lijian called it a “typical political manipulation with double standard.”

“The Basic Law of Hong Kong and other relevant laws clearly protect the rights and interests of foreign investors,” Zhao said, adding that Hong Kong society has “returned to the right track” since the passage of the national security law last year.

Lau Siu-Kai, vice chairman of the Chinese Association of Hong Kong and Macao Studies, addressed the media Thursday and reiterated a speech by Xia Baolong, director of the Hong Kong and Macao Affairs Office, condemning the sanctions. He told reporters that they will “strengthen Beijing’s determination to withstand or to disrupt Western efforts of intervention into Hong Kong affairs.”

On Tuesday, the State Department released an advisory about conducting business with supply chains and investments in Xinjiang, given the “forced labor” and “human rights abuses there and throughout China” targeting Uyghurs and other ethnic and religious minority groups.

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