Pompeo says Hong Kong is no longer autonomous from China, jeopardizing billions of dollars of business activities

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Pompeo: Hong Kong is no longer autonomous from China 0:22

(CNN) - United States Secretary of State Mike Pompeo said he certified to Congress on Wednesday that Hong Kong no longer enjoys a high degree of autonomy from China, a decision that could result in the loss of trade status. Hong Kong's special deal with the North American country and threaten its position as an international financial center.

“The State Department is obliged, under the Hong Kong Policy Law, to assess the autonomy of the territory with respect to China. After a careful study of events during the reporting period, I certified today to Congress that Hong Kong does not continue to guarantee treatment under United States law in the same way that United States law was applied to Hong Kong before July 1997, ”he said in a statement. "No reasonable person today can claim that Hong Kong maintains a high degree of autonomy from China, given the facts on the ground," he added.

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 passing the legislation would be a "death sentence" for Hong Kong's autonomy.

The bill has sparked protests in Hong Kong and has been internationally denounced. Observers have warned that it could restrict many of the fundamental political freedoms and guaranteed civil liberties in the deal that passed the city from British rule to Chinese in 1997.

Under the "one country, two systems" policy, Hong Kong maintains limited democracy and civil liberties despite being under the control of Beijing. The autonomous region also has a special trade statute with the United States, which guarantees certain exemptions in commercial operations that are not enjoyed by mainland China.

Last year, Congress passed and the president signed the Hong Kong Human Rights and Democracy Law in support of pro-democracy protesters from the region. Under that law, the United States must verify to Congress each year that Hong Kong remains autonomous from China, or runs the risk of losing its special status.

Trump will determine next steps

An aide to Congress told CNN that the certification does not automatically trigger specific action and that the president will determine the next steps.

Loss of special status would have important financial implications. The U.S. Consulate General in Hong Kong says it represents more than 1,200 U.S. companies doing business there. More than 800 are regional offices or headquarters.

Hong Kong was the 21st largest trading partner of the United States in 2018, according to the Office of the United States Trade Representative. According to the United States Census Bureau, the country exported $ 6.36 billion in goods and imported $ 952 million in goods from Hong Kong in the first quarter of 2020.

Bill Reinsch, president of the school of 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."

"This is bad news for Hong Kong as a financial center. The money goes where it is safe, "he told CNN. "It will also be a signal for banks to be very, very careful about Hong Kong. They have worked very, very hard to maintain the position they are in, which is very precarious, ”he added.

“See and see what London does, see and see what Tokyo does. It will change and the victims will be the people of Hong Kong, Xi Jinping does not suffer at all, ”he said.

Stephen Orlins, chairman of the National Committee on United States-China Relations, a non-profit organization, said the end of the special statute would be "catastrophic."

"If we end Hong Kong's specific statute, we harm the Hong Kong population more than it damages the people of mainland China. It will devastate them. So you are shooting at the people you are trying to protect, ”he told CNN.

Pompeo said that Hong Kong's autonomy decision does not give him any satisfaction, noting that "Hong Kong and its dynamic, entrepreneurial and free people have flourished for decades as a bastion of freedom."

"But sound policymaking requires an acknowledgment of reality," he said. "While the United States once hoped that free and prosperous Hong Kong would be a model for authoritarian China, it is now clear that China is modeling Hong Kong in its image," he explained.

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Representative Michael McCaul, a Texas Republican who chairs the China Working Group, said the decision was "regrettable." "But the Chinese Communist Party left us no other option," he clarified.

Senator Lindsey Graham, a Republican from South Carolina and a close ally of the President, called on the Senate to "act through bipartisan legislation that sanctions China for the destruction of democracy and freedom in Hong Kong."

Situation that adds to the tensions caused by the pandemic

The decision comes at a time when rhetoric between Washington and Beijing has become increasingly conflictive amid the coronavirus pandemic. The Trump administration has blamed China for not being transparent enough when the deadly virus outbreak broke out.

Orlins said the Hong Kong government certification fits in with the broader strategy of blaming China.

READ: Trump's dilemma with China: how to punish Beijing without hurting the US economy and his possible reelection

"The Trump campaign decided to divert the action of his mismanagement of the coronavirus pandemic to blame China. So a finding that the continental government violated the 'one country, two systems' model and therefore Hong Kong would no longer benefit from the separate tariff system would be perceived as a blow to China and would fit into its plan for reelection, but it would be so terrible for the people of Hong Kong, ”he told CNN.

Under the agreement between the United Kingdom and China in 1997, the Basic Law of Hong Kong was intended to ensure a high degree of autonomy of the territory with an independent executive, legislative and judicial system and control over its financial system, human rights and liberties. Beijing also promised that by 2017 Hong Kong citizens would be able to choose their own local government. However, over the past two decades, China has consistently taken steps to infringe on Hong Kong's autonomy, culminating in this new security bill that overlooks the territory's legislature.

Pompeo said weeks ago that he had delayed the report required by Congress on Hong Kong's autonomy because the State Department was "closely watching what is happening there." He said that pro-democracy lawmakers were mistreated last week while trying to stop a procedural irregularity by lawmakers in favor of Beijing. Prominent Hong Kong activists like Martin Lee and Jimmy Lai were brought to justice.

"Actions like these make it more difficult to assess that Hong Kong remains highly autonomous from mainland China," he said. The top American diplomat also repeatedly warned of the impact that national security legislation would have on the United States' assessment.

China has tried to enforce legal and psychological obedience in Hong Kong, lobbying since 2012 for education to instill "patriotism" in Hong Kong's children. In 2014, China released a report asserting its authority over Hong Kong, sparking protests, and then went on to ban pro-Hong Kong small political parties and silence voices in favor of independence. In 2015, Beijing began kidnapping independent booksellers who went missing in China, sparking protests internationally. In 2019, a bill allowing the extradition of criminals to China caused thousands of protesters to take to the streets of Hong Kong, fearful that the territory's special status was constantly being corroded.

Cristina Alesci and Zachary Cohen CNN contributed to this report.

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