What does Hong Kong losing its special status with the US mean?

Hong Kong was once compared with New York and London for its robust financial system and various other economic successes, a characteristic that elevated it enough to be considered one of the world's biggest commercial hubs. 

But many things have changed since 1997, when the former British colony became an integral part of China. It has faced pressure campaigns directed by Beijing on several occasions, events that have disrupted life and seen its citizens compelled to take to the streets to protest. This year's demonstrations have increasingly proved an undeviating challenge to Beijing's hegemony. 

The city received an unexpected setback on Wednesday. The hawkish US Secretary of State, Mike Pompeo, announced that Hong Kong will not be entitled to 'special treatment' from Washington anymore, citing the loss of its autonomous status and China's expanding stranglehold on the region.

“I certified to Congress today that Hong Kong does not continue to warrant treatment under United States laws in the same manner as US laws were applied to Hong Kong before July 1997,” Pompeo said.

A day after Pompeo's announcement, Beijing passed a controversial legislation that will enforce harsh national security laws in Hong Kong. They will, in effect, allow them to intervene more directly in political issues and crush dissent if necessary. 

The withdrawal of Washington's diplomatic and legal support means that the world’s tenth-largest exporter and ninth-largest importer, will face the same US tariffs as the rest of China, something which will no doubt prove a bruising punishment for Hong Kong’s fortunes. 

“If Hong Kong loses preferential trade treatment, US tariffs and export controls on China would apply to Hong Kong. This action-reaction sequence of China tightening its hold on Hong Kong and America responding by withdrawing preferential treatment would weaken Hong Kong’s status as a global financial hub,” said Ryan Hass, a former US diplomat and China director of the National Security Council under President Barack Obama, who is currently working for the Brookings Institution. 

In the late 1990s, Washington passed the Hong Kong Policy Act in order to develop a special relationship that would financially benefit the Asian city.

But the US legislation also came with a political mechanism through which the State Department is required to annually evaluate the degree of the city’s autonomy, and therefore to subsequently decide whether the world’s fourth most developed region is truly deserving of Washington's special treatment.

Amid the escalating tensions between the world’s two biggest economies, borne from the two-year-old trade war, to the endless blame game over the coronavirus outbreak, this year’s evaluation of the US State Department appears to be a negative one for Hong Kong, a move that has darkened the city’s prospects. 

“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Pompeo maintained. 

The US statement, along with the recent Chinese legislation on the city’s national security matters, might signify a new era for Hong Kong, a city that owns the largest number of skyscrapers out of the world’s most developed cities. 

Hong Kong has long capitalised on being a port city that could boast strong ties with the Western world. For decades, the city has proved to be a perfect transition point for goods, as well as financial transactions from the Western world to mainland China, and vice versa. 

But with the incremental opening of the Chinese economy to the rest of the world, something that has happened under the Communist party’s rule since the late 1970s, the city’s financial standing has declined. This has damaged its traditional manufacturers. Nearly 90 percent of goods shipped to the US from the city are not produced in the vicinity of Hong Kong but in mainland China. 

“Hong Kong and its dynamic, enterprising and free people have flourished for decades as a bastion of liberty, and this decision gives me no pleasure. But sound policy-making requires a recognition of reality,” Pompeo assessed, referring to the city’s changing fortunes.  

“While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself,” Pompeo concluded, hopelessly.