Bobby Yip (Reuters)
- Hong Kong lawmakers are considering a bill that would allow extradition of residents to mainland China.
- Passing the law could lead to the US revoking Hong Kong’s special commercial status, potentially exposing it to tariffs on Chinese goods.
- It could also lead foreign companies to flee Hong Kong rather than risk ending up in China’s legal system.
- However, America may hesitate to clamp down on trade with Hong Kong, as it ran a surplus of nearly $34 billion with the territory in 2018.
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Hong Kong lawmakers are considering a bill that would allow extradition of residents to mainland China. Passing the law could lead to the US revoking the territory’s special commercial status, potentially exposing it to tariffs.
Crowds of protesters gathered to oppose the legislation this week, fearing it would open the door to political opponents, journalists, and others being slapped with bogus charges, carted off to face justice in the Chinese legal system, and being forced to hand over private information and corporate secrets.
The US treats Hong Kong as a "non-sovereign entity distinct from China" under its "One Country, Two Systems" framework, according to the State Department. The agency has expressed "grave concern" about the extradition bill, warning it could erode Hong Kong’s independence, business environment, and "long-standing protections of human rights, fundamental freedoms and democratic values," according to Bloomberg.
If Hong Kong passes the law and begins handing over Americans and corporate documents to the Chinese government, it could put at risk its "long-established special status in international affairs," said the State Department, according to Reuters. Without it, Hong Kong could be subject to US tariffs on Chinese goods, which may rise to 25% across the board if a trade deal isn’t struck soon.
Foreign companies might also flee to other countries such as Singapore, said Michael Every, head of Asia-Pacific financial markets research for Rabobank in Hong Kong, according to Forbes.
However, America may think twice about stripping Hong Kong’s special status given the pair’s trade relationship. It exported $50.6 billion in goods and services to the territory in 2018, and imported $16.7 billion, meaning it ran a trade surplus of nearly $34 billion, according to the US Trade Representative. A trade war could lead to US companies paying significantly more to trade items such as electrical machinery and diamonds.
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See Also:
- A full-blown recession and double-digit stock losses: Morgan Stanley just unveiled its revised bear case for the trade war — and it’s not pretty
- ‘We’re going to get rolled’: Billionaire investor Stanley Druckenmiller breaks down why the US is headed for devastating losses to China in the trade and tech wars
- These are the 10 best-performing stocks of this century
SEE ALSO: The US-China trade war just sparked a $14.6 billion exodus from emerging markets
Source: Business Insider – tmohamed@businessinsider.com (Theron Mohamed)