Hong Kong version of the National Security Law | Cancellation of special treatment damages Hong Kong-US trade? Analysis: The relationship is complex and difficult to break up

world economy

Author: Liang Kaiyi

2020-05-29 12:55

Beijing implemented the "Hong Kong version of the National Security Law" and Washington responded by threatening to cancel the special treatment in Hong Kong. If the United States cancels special treatment, in addition to the trade between the two sides being affected, companies in the United States and Hong Kong will also face heavy losses. However, some analysts believe that the long-standing complex relationship between Hong Kong and the Western world will be difficult to break up.

Hong Kong-US trade relationship hits

During the trade war between China and the United States, Hong Kong, as an independent customs zone, thus avoided the vortex involved in the confrontation between the major powers. However, if Washington cancels special treatment, Hong Kong will be forced to "participate in the war" and the United States may levy taxes on Hong Kong.

According to the Office of the United States Trade Representative, the total value of trade in goods and services between the United States and Hong Kong exceeded US $ 66 billion in 2018, of which US $ 50.1 billion was exports of goods and services from the United States and US $ 16.8 billion was exports of goods and services from Hong Kong. According to the Hong Kong Government Trade and Industry Department, the United States is Hong Kong's second largest trading partner. In 2018, Hong Kong was the third largest US wine export market, fourth largest beef and meat product market, and seventh largest agricultural product market. Hong Kong ’s main exports to the US include machinery and plastics.

Analysts of the Eurasian Group, a consulting firm, believe that because Hong Kong ’s exports to the United States are small, even if the United States imposes trade war tariffs on Hong Kong, it will have a limited impact on American companies operating in Hong Kong. However, Mark Williams, Asia chief economist at Capital Economics, believes that the greater risk is that the United States restricts the sale of sensitive technologies to Hong Kong companies. "Knowledge-intensive products from the United States only account for About 5% of Hong Kong's total imports. However, restricting Hong Kong companies from purchasing sensitive products will wipe out Hong Kong's advantage over mainland China as a place of business. "

↓↓↓ The "Hong Kong version of the National Security Law" has attracted various parties to debate. If you want to know the status of the representatives in various places, you can click on the picture to understand:

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Influence foreign investment intention

The abolition of special treatment also has the opportunity to influence foreign investment intentions. According to the US State Department, there are currently more than 1,300 US companies operating in Hong Kong, while there are 85,000 Americans in Hong Kong. Researchers at Capital Partners quoted an American Chamber of Commerce survey and pointed out that American companies have already planned to reduce investment in Hong Kong. "Hong Kong's success is mainly based on its ability to attract (foreign direct investment) and enjoy the productivity dividend from hosting companies with international competitiveness.

As soon as news of Beijing's implementation of the "Hong Kong version of the National Security Law" came out, the Hang Seng Index plunged more than 1,300 points, reflecting investors' nervousness about Hong Kong's prospects. Brown Brothers Harriman strategists believe that U.S.-China relations will deteriorate further and warn that the Hong Kong dollar may be under pressure. If the Hong Kong dollar weakens, it may raise interest rates and cause investors to transfer funds.

People currently holding US passports can enjoy visa-free treatment when they travel to Hong Kong. However, if the relationship between the two countries deteriorates, visa restrictions may be imposed. Rodrigo Catril, currency strategist at the National Australia Bank, pointed out that the decision of US Secretary of State Mike Pompeo opened the door to the opportunity to implement tariffs on Hong Kong, restrict visas or freeze senior officials ’property. Warning that if the US side intervenes in internal affairs, it will take countermeasures.

Beijing's implementation of the "Hong Kong version of the National Security Law" has caused controversy. The picture shows that on May 24, demonstrators in Hong Kong launched a march to protest Beijing's implementation of the "Hong Kong version of the National Security Law." During this period, the banner of "Recover Hong Kong, Revolution of the Times" was held high. (Reuters)

Policy shift to touch complex issues

Although the United States has a far-reaching impact on the cancellation of Hong Kong's special treatment, Kaitou Macro believes that it has no direct impact on Hong Kong's international status. The World Trade Organization still views Hong Kong as an independent customs zone, and the International Monetary Fund and World Bank also regard Hong Kong as an independent entity.

Moreover, the relationship between Hong Kong and the Western world has a long history and complexity, and it cannot be easily broken up. The Eurasian Group pointed out that redefining Washington ’s treatment of Hong Kong will encounter complex issues, including regulatory cooperation, tax treatment and legal cooperation. The analysis also believes that President Donald Trump is unlikely to impose sanctions immediately, undermining Hong Kong's financial stability, such as making it difficult for the Hong Kong government to clear US dollar transactions. In the future, it may trigger the relocation of enterprises and capital outflow, but the process will take several years.

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