Explainer: How ending Hong Kong’s ‘special status’ could affect U.S. companies

WASHINGTON (Reuters) – New Chinese national security restrictions imposed on Hong Kong could draw a U.S. revocation of the former British colony’s “special status” under U.S. law, a move that would have far-reaching trade and investment implications.

U.S. businesses oppose any change in Washington’s recognition of Hong Kong as a sufficiently autonomous city, where major U.S. companies enjoy access to China and Southeast Asia, and where bilateral trade flourishes across various parts of the economy, from wine to financial services.

A new U.S. law requires the State Department to certify at least annually that Hong Kong, which experienced widespread protests last year over China’s extradition plans, retains enough autonomy to justify favorable U.S. trading terms. President Donald Trump warned on Thursday that Washington could react “very strongly” to China’s new restrictions.

Here is a look at some of the consequences of a change in that status.

CORPORATE HEADACHES

A revocation of the special status would cause problems for the more than 1,300 American companies with business operations in Hong Kong, including nearly every major U.S. financial firm. The State Department said 85,000 U.S. citizens lived in Hong Kong in 2018.

Visa-free travel access to Hong Kong could revert to strict Chinese visa rules, impeding business travel and work visa approvals.

As of 2018, the stock of U.S. foreign direct investment in Hong Kong stood at $82.5 billion, an increase of $1.2 billion that year, according to U.S. Commerce Department data. Hong Kong’s investment in the United States rose $3.5 billion in 2018 to $16.9 billion.

Hong Kong’s autonomy, civil liberties, rule of law and access to China make it attractive to international companies, and a change in that status could push some U.S. firms into costly moves elsewhere in the region.

“Numerous American companies invest in Hong Kong because of its special status, its geographic location and market-based economic system,” the U.S.-China Business Council said in a statement. “Any change to this status quo would irreparably damage American global business interests.”

TRADE

Some $67 billion in annual Hong Kong-U.S. trade of goods and services could be put at risk as Hong Kong would lose its preferential lower U.S. tariff rate.

Hong Kong is treated separately from mainland China’s more managed economy, and its exports to the United States are treated differently. Hong Kong has a zero tariff rate on imports of U.S. goods, which also could be at risk.

Hong Kong was the source of the largest bilateral U.S. goods trade surplus last year, at $26.1 billion, based on U.S. Census Bureau data.

According to Hong Kong’s Trade and Industry Department, the former British colony in 2018 was the United States’ third-largest export market for wine, its fourth-largest for beef and seventh-largest for all agricultural products.

BROADER U.S.-CHINA RELATIONS

A U.S. revocation of Hong Kong’s special status would be viewed by Beijing as interfering with its sovereignty, and China has previously threatened to “take strong countermeasures.”

Eswar Prasad, a trade professor at Cornell University and a former head of the International Monetary Fund’s China department, said Hong Kong is a “hot-button” economic and political issue for China, much like U.S. sanctions on Chinese telecoms giant Huawei Technologies Co Ltd.

A precarious U.S.-China trade truce, already strained by Trump’s anger at China over the coronavirus pandemic and a slow start to Beijing’s purchases under the Phase 1 trade deal between the two countries could collapse into new tariffs and counter-sanctions, he said.

The United States also maintains export control offices and academic exchanges in Hong Kong separate from mainland China.

(Reporting by David Lawder; Editing by Paul Simao)

Hong Kong protest tide turns into sea of flames

By James Pomfret

HONG KONG (Reuters) – Chinese-ruled Hong Kong introduced a bill into the legislature in February that would have allowed the extradition of defendants to mainland China for the first time to face trial in courts controlled by the Communist Party.

The move touched a raw nerve, with many in the liberal, free-wheeling financial hub fearing an erosion of Hong Kong’s judicial independence and individual rights, amid fears individuals wouldn’t be guaranteed a fair trial.

The former British colony returned to Chinese rule in 1997 with promises that its autonomy and freedoms were guaranteed. But in recent years, many have been angered by a perceived tightening grip by China. The extradition law was seen as a final straw.

The first protests flared in March and April and snowballed. On June 9, an estimated one million people took to the streets. The city’s Beijing-backed leader, Carrie Lam, suspended the extradition bill on June 14 but this didn’t pacify the protesters who wanted it to be scrapped entirely.

A protester holding up an anti-extradition bill banner fell from the roof of a luxury mall and died. Protesters consider this to be the first death of the movement during a demonstration.

On July 1, anti-government protesters held a mass march, after which they stormed the legislature. Hardline activists rampaged through the building, smashing furniture and spray-painting walls and the coat of arms.

The unprecedented attack marked a turning point from a peaceful, 79-day pro-democracy street sit-in in 2014 that had achieved nothing. Young protesters would use violence more often in a bid to exert more pressure on the city government, trashing government buildings, shopping malls and metro stations.

As the arrests of protesters began to mount, some began using petrol bombs to slow police advances on the crowds and to allow people time to escape.

The violence in one of the safest major cities in the world was becoming more regular. Police countered petrol bombs and rocks with tear gas, pepper spray, rubber bullets and eventually the occasional live round. A water cannon was deployed by police for the first time in the industrial New Territories town of Tsuen Wan on Aug. 25.

Weekend after weekend, streets of the city, in different places but often in the up-market Central business area and the Causeway Bay shopping district, would become a sea of flames. Tear gas billowed between the high-rises as sirens wailed on some of the most densely populated streets on Earth.

There were several injuries but no deaths from direct police fire.

Protesters were now railing against perceived police brutality that helped fuel public anger and protest turnouts.

After nearly two months of upheaval, with the protests now morphing into a fully-fledged anti-government movement with five key demands, including full democracy, the protesters turned their attention to the airport, one of Asia’s most spectacular aviation hubs, built by the British in the dying days of colonial rule and reached by a series of gleaming bridges.

TOO LITTLE, TOO LATE

Thousands of protesters staged a sit-in inside the arrivals hall that led to the airport shutting down for several days. The move garnered international headlines with the travel plans of thousands of foreign nationals thrown into disarray.

The protests kept up their momentum, week after week, until Hong Kong’s leader eventually formally withdrew the detested extradition bill on Sept. 4.

But many protesters said it was too little, too late.

They continued to press their other demands, including an amnesty for the thousands already arrested and an independent investigation into alleged police brutality.

Tension was also building between protesters and pro-Beijing residents, including those in one of the “reddest” pro-China districts of North Point on Hong Kong island. Chinese banks and businesses, or those perceived as being pro-Beijing, came under attack.

In mid-November, students turned several university campuses into fortresses, barricading themselves inside and clashing with riot police on the periphery. On Nov. 12, riot police at Chinese University fired more than 1,000 rounds of tear gas at protesters.

A few days later, hundreds of front-line protesters became trapped inside Hong Kong’s Polytechnic University, at the mouth of the now-closed Cross-Harbour Tunnel on the Kowloon side of the water. They manufactured an arsenal of petrol bombs and practised firing bows and arrows in the half-empty swimming pool as police blocked the exits.

The protesters battled riot police for several intense days amid fears of a bloody clampdown. In the end, hundreds of arrests were made, while scores of protesters resorted to desperate means to escape, including rappelling off bridges on ropes and hopping on to the backs of motorbikes and even trying to swim out through the sewers.

After the siege of PolyU, Hong Kong held a city-wide election on Nov. 24 that pro-democracy candidates won in a landslide with a record-high turnout.

Democrats seized nearly 90 percent of the nearly 450 seats on offer. A mass year-end march on Hong Kong island also drew an estimated 800,000 people showing continued public support.

The crisis has not only shaken Hong Kong, but posed one of the gravest populist challenges to Chinese President Xi Jinping, with some protesters calling for outright independence from China.

China denies interfering in Hong Kong’s affairs and blames the unrest on the West, specifically the United States and Britain. It has backed Hong Kong leader Lam in her efforts to quell the violence but says it will not tolerate any threat to Chinese sovereignty.

China’s People’s Liberation Army garrison in the territory has stayed in barracks since the handover in 1997. It has beefed up its numbers in the city amid the unrest and troops also helped clear protester barricades outside a barracks in November.

China has warned that any attempt at independence will be crushed.

Hong Kong’s fiery protests in pictures: https://reut.rs/2PNZ4zZ

(Reporting by James Pomfret; editing by Nick Macfie)

Police battle protesters as strike paralyses Hong Kong

Passenger exit a stalled train during a disruption of Mass Transit Railway (MTR) services by protesters at Fortress Hill station in Hong Kong, China August 5, 2019. REUTERS/Kim Kyung-Hoon

By Donny Kwok and Clare Jim

HONG KONG (Reuters) – Police fired tear gas at protesters in multiple parts of Hong Kong on Monday after a general strike hit transport and the city’s Beijing-backed leader warned its prosperity was at risk.

The protests surpassed earlier shows of dissent in scale and intensity, seemingly stoked by Hong Kong chief executive Carrie Lam’s refusal once again to meet any of the protesters’ demands, while warning of an “extremely dangerous situation”.

What started several months ago as demonstrations over an extradition bill that would have let people be sent to mainland China for trial have grown into a much broader backlash against the city government and its political masters in Beijing.

The protests are the greatest political threat to the former British colony’s government since it returned to Chinese rule and one of the biggest popular challenges to Chinese leader Xi Jinping since he came to power in 2012.

Amid extensive disruptions to trains and traffic, tens of thousands of demonstrators fanned out across Hong Kong, spreading pockets of activism to most of its main three regions: Hong Kong island, Kowloon and the New Territories.

Police stations were besieged and roads occupied.

In the evening, a group of men armed with sticks tried to attack the black-clad protesters in the North Point district.

Riot police used tear gas in districts including Wong Tai Sin, Tin Shui Wai, Tai Po, and Admiralty close to the city’s government headquarters.

Speaking to the media for the first time in two weeks, Lam remained defiant, rejecting calls to resign, condemning violence and saying the government would be resolute.

“FAR EXCEEDED ORIGINAL DEMANDS”

She warned that the protests were putting Hong Kong on a path of no return and had hurt its economy.

“They claim they want a revolution and to restore Hong Kong. These actions have far exceeded their original political demands,” said a stern-faced Lam, flanked by some, but not all senior members of her administration.

“These illegal acts that challenge our country’s sovereignty, and jeopardize ‘one country two systems’, will destroy the stability and prosperity of Hong Kong,” Lam said, referring to the territory’s administrative system since 1997, when it was handed back to China.

Demonstrators fear China is gradually encroaching on the island’s cherished autonomy.

China’s Hong Kong and Macao Affairs Office of the State Council said it would hold another news conference on Tuesday at 2.30 pm (0630 GMT), after one last Monday that announced no new major policy shifts by Beijing despite the upheavals.

“I don’t think the government is doing anything to heal society… They provide no solution,” said Jay Leung, 20, a university student who joined a protest, dismissing Lam’s words as a waste of time.

“I didn’t hear anything positive, she just made it worse,” added tourism worker Russell, 38.

Demonstrators blocked key roads, including three tunnels, cutting major arteries linking Hong Kong island and the Kowloon Peninsula. In Yuen Long district, a car rammed through a barricade, knocking down protesters.

Commuters struggled to get to work, with many rail and bus services suspended by activists who blocked trains from leaving stations, some by sitting in doorways.

ECONOMIC DAMAGE

Long lines of traffic snaked across Hong Kong island into the heart of the business center and hundreds of people were stranded at the airport, where more than 200 flights were canceled at one point.

Many businesses shut, and workers stayed home.

“Losing a bit of money now is not such a problem, (compared) with losing everything that the freedom of Hong Kong used to stand for,” said Mark Schmidt, 49, a restaurant manager who closed on Monday.

In an upmarket shopping mall in Sha Tin, scores of shops were shuttered, including clothing retailer H&M as well as luxury brands Chanel and Dior. Protesters in the shopping center chanted: “Strike! Support to the end.”

Many stores in the bustling shopping district of Causeway Bay were closed for part of the day as well as businesses close to the protests.

Members of the Hong Kong Disneyland Cast Members Union went on strike, as did many lifeguards, forcing authorities to close some beaches and swimming pools.

Police, who some have accused of using excessive force, said the situation was spiraling out of control.

Authorities said 420 people have been arrested over the protests since June 9, while police have fired 1,000 rounds of tear gas and about 160 rubber bullets.

The protesters’ demands include a complete withdrawal of the extradition bill and an independent inquiry into government handling of the crisis.

With tourist numbers falling and hotel occupancy rates slumping, the protests are piling pressure on a struggling economy.

IHS Markit’s July Purchasing Managers’ Index for Hong Kong showed private sector business activity dropped to its lowest level in a decade, also weighed down by the Sino-U.S. trade war.

“I would not be surprised if we see a technical recession – two consecutive quarters of contraction,” said Raymond Yeung, chief China economist at ANZ.

The benchmark Hang Seng Index closed down 2.9 percent, falling to its lowest level since January.

(Reporting by Clare Jim, Donny Kwok, James Pomfret, Noah Sin, Twinnie Siu, Vimvam Tong, Kevin Liu, Lukas Job, Felix Tam; Writing by Anne Marie Roantree; Editing by Paul Tait, Clarence Fernandez, Simon Cameron-Moore and Andrew Cawthorne)

After tough year, Hong Kong democracy protesters sound warning to China on New Year’s day

Pro-democracy protesters gather inside civic square, reopened for the first time since Occupy Central movement in 2014, at the government headquarters in Hong Kong, China January 1, 2018.

By Donny Kwok and Wyman Ma

HONG KONG (Reuters) – After a year that saw democracy advocates in Hong Kong jailed and ousted from public office, thousands marched through the streets of Hong Kong on New Year’s Day to warn China not to meddle further in the city’s affairs and undermine its autonomy.

Over the past year, Hong Kong, a former British colony which returned to Chinese rule in 1997, has experienced what critics and pro-democracy activists describe as an intensifying assault on its autonomy by China’s Communist Party leaders.

This is despite Beijing’s promises to grant the city wide-ranging freedoms including an independent judiciary, under a so-called “one country, two systems” framework.

Besides the controversial jailing of several prominent young activists for unlawful assembly over the massive 2014 “Occupy” pro-democracy protests, authorities also ejected six pro-democracy lawmakers from the legislature for failing to take proper oaths of office.

The city’s reputation as one of Asia’s most robust legal jurisdictions has also come under a cloud amidst accusations of a politicization of certain legal cases.

The protesters, who included many middle-aged and elderly citizens, held up banners and chanted the march’s main theme to “Protect Hong Kong” during a walk of several kilometers to the city’s government headquarters.

Others decried an unprecedented move by China’s parliament last week that said part of a high-speed railway station being built in Hong Kong would be regarded as mainland territory governed by mainland laws.

“We are here to tell the government that we will not give up,” said Joshua Wong, one of the democracy activists jailed last year, but who is now out on bail pending an appeal.

“We have encountered many difficulties last year, including some of us being sued and jailed, but we will stand with Hong Kong people. We will fight for the rule of law, fight for Hong Kong, fight for the future, fight for the next generations.”

Two protesters who dressed up as People’s Liberation Army soldiers said they were concerned about the reach of China’s security apparatus. Others called for full democracy as the only lasting means to safeguard the city’s way of life.

The organizers of the march said some 10,000 people had showed up. Police, however, put the figure at 6,200.

The demonstration was largely peaceful, though some protesters who tried to later gather in a forecourt of the government’s headquarters skirmished briefly with security guards.

The so-called “Civic Square” was where the 2014 pro-democracy protests first kicked off when a group of protesters stormed over a fence and faced off with local police.

Despite the defiance on show, some said they feared Hong Kong would continue to be squeezed by Beijing.

“Everyone’s doing what they can,” said Andy Lau who was among the marchers. “If we have the right to demonstrate then we should. But I’m not feeling positive. I think things will get worse.”

The Hong Kong government, in a statement, said it “fully respects the right of Hong Kong people to take part in processions and their freedom of expression”.

China’s leader Xi Jinping has said that while Hong Kong enjoys a high degree of autonomy under “one country, two systems”, Beijing still holds supreme authority over the city and won’t tolerate any challenge to its authority.

(Additional reporting by Chermaine Lee; Writing by James Pomfret; Editing by Adrian Croft)

Philippine leader says drugs war ‘trivialized’ by human rights concerns

Philippine President Rodrigo Duterte speaks to protesters after he delivered his State of the Nation address at the Congress in Quezon city, Metro Manila Philippines July 24, 2017.

By Karen Lema and Martin Petty

MANILA (Reuters) – Philippine President Rodrigo Duterte on Monday promised an unrelenting war on drugs, defying critics who were “trivializing” his campaign with human rights concerns and unjustly blaming the authorities for the bloodshed.

Duterte wasted little time in his annual state of the nation address to defend a crackdown that has killed thousands of Filipinos. He said that though he valued human life, he needed to tackle “beasts and vultures” that were preying on helpless people and stopping foreign investment from pouring in.

“The fight will be unremitting as it will be unrelenting despite international and local pressure, the fight will not stop,” he said.

“I do not intend to loosen the leash in the campaign or lose the fight against illegal drugs, neither do I intend to preside over the destruction of the Filipino youth by being timid and tentative in my decisions in office.”

The crackdown on drugs is the signature campaign that has defined Duterte’s presidency and caused an international outcry, with rights groups condemning his administration for a campaign that has overwhelmingly targeted drug users from poor communities, and left narcotics kingpins untouched.

Critics say Duterte has turned a blind eye to thousands of deaths during police operations that bear all the hallmarks of executions. Police say they have shot dead suspects only in self defense and deny involvement in a spree of killings of drug users by mysterious vigilantes.

Duterte said critics were wrongly blaming police for most of the deaths and “trivializing” his campaign by talking about the need for due process and to protect human rights.

He said his detractors at home and abroad should help him instead.

“Your efforts will be better spent if you use the influence, moral authority, moral ascendancy of your organizations over your respective sectors to educate the people on the evil of illegal drugs, instead of condemning the authorities, unjustly blaming for every killing that bloodies this country,” he said.

Duterte’s annual address lasted nearly two hours, during which he frequently deviated from a prepared speech that was eventually reduced to brief talking points.

Some 7,000 protesters from numerous groups gathered outside the venue to demonstrate against Duterte. After his speech, he listened to their complaints for several minutes.

 

DEATH BY TAXES

He lashed out strongly at mining companies he said were destroying the environment and threatened to tax them heavily, or close the sector completely.

He said he would consider stopping exports of raw materials until they could be processed domestically, adding it was a “non-negotiable” policy that mining firms would repair damage they had caused, or “I will tax you to death”.

Duterte called on the Senate to pass a tax reform bill to help finance a multi-billion infrastructure program key to his economic agenda.

The lower house passed a leaner version of the proposed measure, the first of five tax reform packages Duterte is pushing to boost state coffers and make the tax system fairer and more simple.

Expected revenues from the original draft, which seeks to cut the personal income tax rate, raise excise taxes on fuel and automobiles, amounted to 162 billion pesos ($3.2 billion).

Duterte also said he would press the legislature to pass a law to grant autonomy to a predominantly Muslim region in Mindanao, a move experts say could help arrest the spread of extremist ideology.

He also said he was prepared to “wait it out” before retaking Mindanao’s Marawi City from Islamic State-inspired rebels, because he was concerned hostages might be killed. He acknowledged there had been intelligence failures and mistakes in assessing the initial threat.

Duterte told reporters he would add 35,000-40,000 new troops over the next two years and buy planes and high-altitude drones to “build an armed forces that can fight all fronts, everywhere”.

Senator Risa Hontiveros, a critic of Duterte, described the president’s much-anticipated address as “a bad open mic performance”.

 

(Additional reporting by Neil Jerome Morales, Enrico dela Cruz and Manuel Mogato; Editing by Nick Macfie)