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Washington
Secretary of State Mike Pompeo said he certified to Congress Wednesday that Hong Kong no longer enjoys a high degree of autonomy from China -- a decision that could result in the loss of Hong Kong's special trading status with the US and threaten the its standing as an international financial hub.
"The State Department is required by the Hong Kong Policy Act to assess the autonomy of the territory from China. After careful study of developments over the reporting period, I certified to Congress today that Hong Kong does not continue to warrant treatment under United States laws in the same manner as U.S. laws were applied to Hong Kong before July 1997," he said in a statement. "No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground."
His decision comes after Beijing introduced controversial national security legislation for Hong Kong -- legislation that Pompeo again denounced in Wednesday's statement as a "disastrous decision." Last week, the top US diplomat warned that the passage of the legislation would be a "death knell" for Hong Kong's autonomy.
The proposed law has prompted protests in Hong Kong and has been denounced internationally, with observers warning it could curtail many of the fundamental political freedoms and civil liberties guaranteed in the agreement handing the city over from British to Chinese rule in 1997.
Under the "One Country, Two Systems" policy, Hong Kong retains limited democracy and civil liberties despite being under Beijing's control. The autonomous region also holds a special trade status with the US, which grants it certain exemptions on trade that are not enjoyed by mainland China.
Last year, Congress passed and President Donald Trump signed into law the Hong Kong Human Rights and Democracy Act in support of the region's pro-democracy protesters. Under that law, the US must annually verify to Congress that Hong Kong remains autonomous from China, or it risks losing its special status.
Trump will determine next steps
A congressional aide told CNN that the certification does not automatically trigger action and the President will determine the next steps.
The loss of its special status would have significant financial implications. The US Consulate General in Hong Kong says it represents more than 1,200 US companies doing business there -- more than 800 are either regional offices or headquarters. Hong Kong was the US' 21st largest goods trading partner in 2018, according to the Office of the US Trade Representative. According to the US Census Bureau, the US exported $6.36 billion in goods and imported $952 million in goods from Hong Kong in the first quarter of 2020.
Bill Reinsch, the Scholl Chair in International Business at the Center for Strategic and International Studies, predicted that a loss of status would result in "an exodus, and not just American companies going elsewhere."
"It's bad news for Hong Kong as a financial center. Money goes where it's safe," he told CNN. "It will also be a signal for banks to be very, very careful about Hong Kong. They've worked very very hard to maintain the position they're in, which is very precarious."
"Watch and see what London does, watch and see what Tokyo does. It's going to change and the victims will be the people of Hong Kong -- Xi Jinping doesn't suffer at all," he said.
Stephen Orlins, president of the nonprofit National Committee on United States-China Relations, said ending the special status would be "catastrophic."
"If we end Hong Kong's separate status we hurt the people of Hong Kong more than it hurts the people of mainland China. It will devastate them. So the people who you try to protect, you are shooting," he told CNN.
Pompeo said the decision on Hong Kong's autonomy "gives (him) no pleasure," noting that "Hong Kong and its dynamic, enterprising, and free people have flourished for decades as a bastion of liberty."
"But sound policy making requires a recognition of reality," he said. "While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself."
Rep. Michael McCaul, the Texas Republican who chairs the China Task Force, said the decision was "regrettable, but the Chinese Communist Party left us no choice."
Sen. Lindsey Graham, a South Carolina Republican and close ally of the President, called on the Senate to "act on bipartisan legislation sanctioning China for the destruction of Hong Kong's democracy and freedom."
Adds to tensions over pandemic
The decision comes as the rhetoric between Washington and Beijing has grown increasingly adversarial amid the coronavirus pandemic. The Trump administration has foisted blame on China for failing to be sufficiently transparent at the outset of the dead
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