China plans anti-sanctions law for Hong Kong

Beijing is increasing the pressure: A law against sanctions from abroad, however, is putting companies and banks in Hong Kong between the fronts. Is the free status of the economic metropolis in danger?

China’s leadership wants to pass laws for Hong Kong and Macao to ward off foreign sanctions.

The Standing Committee of the People’s Congress discussed amendments to the annexes of the Basic Laws of each of China’s two special administrative regions in Beijing. A decision is expected Friday, Hong Kong media reported.

The plan is causing unease among international companies and financial institutions, which fear being caught between political fronts in China’s disputes with the United States and Europe. There is also concern that Hong Kong’s special status as a free Asian business and financial hub could be jeopardized.

Experts see the law as a deterrent tool to keep the U.S. or Europe from imposing further sanctions. Because of the suppression of the democracy movement in Hong Kong and the treatment of the Muslim minority of the Uyghurs in Xinjiang in northwest China, the U.S. and the EU had issued various sanctions against responsible persons in Hong Kong and in China.

U.S. sanctions imposed a year ago include Hong Kong Chief Executive Carrie Lam, Beijing Liaison Office Director Luo Huining, and several ministers and former police chiefs. In November, the government chief complained she had “piles of cash” lying around at home because she could no longer keep a bank account due to the sanctions.

In June, the People’s Congress had already passed such a law against foreign sanctions for the People’s Republic. It prohibits companies and individuals from implementing sanctions against Chinese companies and instead calls for cooperation with Chinese countermeasures. It threatens punitive measures for companies, managers and family members, such as freezing accounts, revoking visas and deportation. Affected companies may also sue foreign companies for damages.

It is still unclear how quickly Hong Kong’s parliament, which is not freely elected, will adapt the law to local conditions. Since the text is very vague, much will depend on the actual implementation, as experts point out. But this leaves foreign companies and banks in a quandary.

After the controversial security law, with which the authorities are taking massive action against critics in Hong Kong, and the electoral law reform, which excludes opposition members regarded as unpatriotic, it is another bill with which Beijing is expanding its influence.

The U.S. government warned multinationals of new threats in Hong Kong back in July. There was talk of “operational, financial, legal and reputational risks” from the security law and other legislative changes. China’s leadership and the loyal Hong Kong government are “undermining the legal and regulatory environment that is important for individuals and businesses to operate freely and with legal certainty in Hong Kong.”

Since its return to China in 1997, the former British crown colony is supposed to be autonomously administered and enjoy extensive civil liberties. But after the metropolis experienced sustained demonstrations with calls for more democracy, Beijing tightened its grip over the special administrative region.

Many critics are on trial or already in prison. Others have left Hong Kong. In the twelve months since the security law was enacted, Hong Kong’s population has already shrunk by 90,000 people. Opposition groups, including the teachers’ union, have disbanded for fear of prosecution.

Whereas the autonomy principle of “one country, two systems” used to apply, Hong Kong is now being adapted more and more to the communist People’s Republic, so that critics also see only “one system.