Hong Kong Special Agreement

In response to these measures, the Trump administration announced on May 27 that Hong Kong`s autonomy had been compromised to such an extent that it “does not justify the treatment of U.S. laws in the same way as that applied in Hong Kong by U.S. law prior to July 1997.” The effects of this announcement were clarified two days later, when the President said that the United States would remove some of Hong Kong`s privileges, such as its special customs status, in light of developments in that country. In addition to the collateral damage done in Hong Kong, the president`s decision will also penalize China. Under the Sino-British Joint Declaration, Hong Kong is a Special Administrative Region of China (SAR) and has both an independent economy and executive, legislative and judicial powers independent of mainland China. Like the United States and Hong Kong, China and Hong Kong have interdependent and interdependent relations. Although Hong Kong is still partially independent of China, China is using Hong Kong`s financial and trade status to bring China in and out. This is essential for China, as Beijing significantly limits financial flows. In addition, China uses Hong Kong as an “Staging Post” for foreign investment in Chinese companies because of its preferential conditions and its ability to move money more freely.

Since 1997, Chinese companies have raised US$335 billion on the Hong Kong stock market, or about 80% of the total capital that Chinese companies collect on non-Chinese stock markets. By comparison, Chinese companies raised $268 billion on the Shanghai Stock Exchange over the same period. About two-thirds of China`s direct investment passes through Hong Kong. In addition, China uses Hong Kong`s open financial system to influence the value of the renminbi. On May 29, President Trump announced that the United States of Hong Kong would lift the special status. As a result, the United States could begin to extend to Hong Kong the same measures as those applied to mainland China. The amendment follows Beijing`s decision to introduce a new national security law in Hong Kong. While the President has not yet proposed a detailed plan and timetable for concrete measures for Hong Kong, all new restrictions will affect the complex and interdependent trade relations between the United States, China and Hong Kong.

Comments are closed.