Janice R. Andrews
A revised warning about business risks in Hong Kong has been released by the US, which cites worries about the broad implications of national security regulations. Rejecting the charges as “false and baseless,” the Hong Kong administration accused the US of trying to spread fear among investors and companies.
The five major US departments—State, Agriculture, Commerce, Homeland Security, and Treasury—joined forces on Saturday to publish a warning that reiterates concerns first expressed in a 2021 alert. The US administration claims that national security rules enforced in mainland China are increasingly exposing individuals and enterprises in Hong Kong to the same risks.
The American Business Advisory: Principal Issues
US officials cautioned in the alert that firms face serious risks due to Hong Kong’s changing regulatory environment, especially with regard to the sweeping implementation of national security regulations. Following massive pro-democracy demonstrations, Beijing enforced the first legislation on June 30, 2020, while Hong Kong passed a second ordinance on March 23, 2024. Both statutes make subversion, secession, cooperation with foreign forces, and terrorism illegal; nevertheless, Western countries and human rights organizations are concerned about their ambiguous wording and expansive application.
The advise noted that there were growing similarities between the legal systems of mainland China and Hong Kong and that businesses should be mindful that the dangers they faced in the PRC (People’s Republic of China) are now increasingly evident in Hong Kong.
Additionally, US officials emphasized that these regulations may not only apply to enterprises operating in mainland China and Hong Kong, but also may extend beyond China’s borders. The advise raised particular worries about future legal challenges, heightened scrutiny, and financial penalties for companies thought to have broken these rules.
Hong Kong’s Reply: Allegations of Inciting Fear
In a sharply worded reply, the Hong Kong administration rejected the US charges. The statement said that by releasing the advise, Washington was purposefully trying to incite anxiety among investors and companies.
In response, the Hong Kong administration stated, “Overall, the cornerstone of Hong Kong’s success remains intact.” “We implore the US government to desist from spreading misinformation and unfounded charges regarding the circumstances in Hong Kong and to stop spreading fear by sending out the fictitious “business advise” to US citizens and businesses doing business in Hong Kong.”
Authorities in Hong Kong also cited the city’s ongoing attraction from foreign businesses as proof that national security regulations have not discouraged foreign investment. Dismissing criticism from Western countries, human rights organizations, and the UN, they emphasized that the rules are intended to safeguard national security while preserving a stable economic climate.
A Closer Examining of the National Security Laws
2020 saw the enactment of the national security law, which Beijing imposed and which significantly altered Hong Kong’s legal system. It granted the government broad new powers that resulted in hundreds of arrests, mostly of opposition politicians, journalists, and pro-democracy demonstrators. Beijing defended the bill, arguing that it was an essential step toward bringing peace and security back to Hong Kong after months of unrest in 2019. The law has drawn a lot of criticism, meanwhile, due to its expansive definitions and effects on press freedom and civil liberties.
Hong Kong established a second national security legislation in March 2024 in addition to the law enforced by Beijing. Among other offenses, this new ordinance targets treason, sedition, espionage, sabotage, and outside intervention. It limits suspects’ access to legal counsel and permits up to 16 days of pre-charge detention; some felonies attract life sentences in jail. The measure, according to critics, gives the government undue power, further undermining the city’s once-autonomous status.
Western governments—the US in particular—have voiced alarm about these measures, claiming that they endanger Hong Kong’s legal system and business climate.
Possible Effect on Companies
The US advice particularly cautioned that firms operating in Hong Kong may suffer if national security rules are applied. If an organization’s actions are found to be in violation of these regulations, they may be subject to financial penalties, legal challenges, and reputational problems. The advise also mentioned how the government of Hong Kong has taken strong action to uphold the law even outside of its boundaries.
For instance, in July 2023, the authorities in Hong Kong issued arrest warrants and bounty demands for eight pro-democracy campaigners who had fled their home country. Among them were former MPs Ted Hui and Dennis Kwok. Five additional exiled activists were put on the list in December after HK$1 million in bounties were set on their heads. Major financial institutions such as HSBC and Manulife have already frozen the pension accounts of some of these individuals due to the actions of the Hong Kong government.
Legal Risks and US Sanctions
US sanctions add even another level of complication for companies doing business in Hong Kong. In 2020, the US placed sanctions on a number of high-ranking Hong Kong officials, including Carrie Lam, the city’s leader at the time, shortly after Beijing enforced the national security law. The sanctions forbid US companies from doing deal with these officials financially and freeze their assets. US legislators demanded further penalties on 27 more Hong Kong officials in July 2024. These officials included judges and police officers who were engaged in issues pertaining to national security.
Businesses in Hong Kong may have to deal with “conflicting jurisdictional requirements” if they are governed by both US sanctions and national security regulations in Hong Kong, according to the US guidance. According to the alert, there might be serious legal and criminal consequences for breaking US sanctions.
Final Thoughts
Beijing and Washington are becoming more tense about Hong Kong’s legal system, as seen by the US warning about commercial dangers in the city. As national security regulations persistently transform Hong Kong, enterprises would have to maneuver through more intricate legal landscapes. But the government of Hong Kong is unwavering in its position, arguing that the national security measures are essential to preserving stability and dismissing any suggestion that they endanger commercial activities.
In spite of Hong Kong’s promises, the US guidance has highlighted the uncertainties that firms in the city face, leading them to carefully evaluate the changing risks as the legal landscape keeps changing.
