WASHINGTON—The Biden administration is warning American businesses about the increasing risks of operating in Hong Kong as China’s tightening grip on the city causes business conditions to deteriorate.
In an advisory to be issued Friday, the Biden administration warns businesses and individuals working for them that they are subject to a restrictive national security law that Beijing imposed on Hong Kong a year ago. The advisory cites the risks of electronic surveillance without warrants and of having to surrender corporate and customer data to the government, according to an administration official.
Beijing and Hong Kong have “implemented actions that have undermined the legal and regulatory environment, which is critical for individuals or businesses to operate freely and with legal certainty,” the official said. “The developments over the last year in Hong Kong represent clear operational, financial, legal and reputational risks for multinational firms.”
Beijing deployed the national security law to stamp out an antigovernment protest movement that rocked Hong Kong. The law gives broad authority to the security apparatus. Authorities have arrested democracy activists, journalists and government critics, chilling free speech and, according to rights and legal groups, eroding the Western-style rule of law that bolstered Hong Kong as an international hub for business and finance.
“The situation in Hong Kong is deteriorating,” President Biden said Thursday when asked about the planned advisory during a news conference. He said that “the Chinese government is not keeping its commitment”—a reference to the treaty ending British rule over the city in which Beijing pledged to preserve Hong Kong’s capitalist, open system.
A Chinese foreign ministry spokesman, asked about the advisory, reiterated Beijing’s opposition to “U.S. interference in China’s internal affairs under the pretext of the Hong Kong issue.” The spokesman,
said in Beijing on Wednesday that current laws protect foreign investors in Hong Kong that society there “has returned to the right track” since the national security law was imposed.
The Biden administration advisory on Hong Kong follows another U.S. warning this week for companies with supply-chain ties to China’s Xinjiang region, where China has detained Muslim minorities in large numbers and drawn international condemnation.
American businesses, especially financial firms, are among the biggest investors in Hong Kong. Dozens of international companies have moved their regional headquarters or offices from the city since 2019, according to government data, and a survey by the American Chamber of Commerce in Hong Kong released in May found that 42% of the 325 respondents said they were considering or planning to leave the city.
The new business advisory “provides companies with information that can assist them in making informed business decisions and properly assessing risk,” the administration official said.
In the wake of Beijing’s crackdown, the Trump administration rolled back certain commercial, legal and other privileges for Hong Kong that don’t apply to the rest of China and targeted top officials with sanctions, including
the city’s chief executive.
The advisory reminds businesses that “certain types of engagement” with sanctioned individuals and entities potentially carry consequences, the official said. It also warns that businesses may face retaliation from authorities for complying with U.S. sanctions, the official said.
Businesses that rely on a free and open press may face restricted access to information, according to the planned advisory. U.S. officials and foreign business groups have raised concerns that the national security law could compromise the security of data—as is already the case in the rest of China.
“We know that a healthy business community relies on the rule of law, which the national security law that applies to Hong Kong continues to undermine,” State Department spokesman
said Tuesday, declining to provide specifics on the advisory.
“Rule-of-law risks that were formerly limited to mainland China are now increasingly a concern in Hong Kong,” he said. “That’s of great concern to us.”
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