On the impact of the Hong Kong Human Rights and Democracy Act

December 12, 2019 18:52
The new US law has raised concerns in the Hong Kong business community over its impact on the confidence of investors in the city. Photo: Bloomberg

Although it has come as no surprise that US President Donald Trump eventually signed the Hong Kong Human Rights and Democracy Act into law, there are still concerns in the local business community about the new law.

In particular, many are worried about certain provisions in the legislation that explicitly require the US secretary of state to submit an annual certification to Congress as to whether Hong Kong is still able to maintain a sufficient degree of autonomy to justify favorable US trading terms.

So far we haven’t seen any definite sign indicating that Hong Kong’s “special status” is going to change, but such “annual scrutiny” carried out by Washington is undoubtedly going to create some “noises” in the outside world and bring about uncertainty in our business environment, thereby affecting the confidence of investors in our city.

Under the current United States-Hong Kong Policy Act passed in 1992, the US president is already vested with the executive power to either adjust or revoke the “preferential treatments” given to our city anytime that he or she wants to on the grounds that our high degree of autonomy has been undermined.

Also, the US State Department has been examining political and legal developments in our city in the Hong Kong Policy Act reports that it has been publishing through the years.

As such, what the Hong Kong Human Rights and Democracy Act is doing is simply providing the US president and the executive branch a “spare weapon” that may be used against Hong Kong.

And the real impact of the new law on Hong Kong will, in my view, largely depend on how strictly the White House is going to enforce it in the coming days.

Therefore, I believe that in the short run, the implications of the new law for our city would be more psychological than solid.

There is still another worrisome aspect of the Hong Kong Human Rights and Democracy Act, and that is its potential impact on the out tech industry.

Earlier on, the US Department of Commerce has added 28 Chinese governmental and commercial organizations to its Entity List for “engaging in or enabling activities contrary to the foreign policy interests of the United States”.

Among the 28 blacklisted companies is our homegrown SenseTime, a tech startup specializing in artificial intelligence technology. This suggests that the US is tightening its surveillance over the business activities of tech companies in Hong Kong.

The Hong Kong Human Rights and Democracy Act requires that the US Department of Commerce has to issue annual reports over the next seven years assessing whether the Hong Kong government “is adequately enforcing both US export regulations regarding sensitive dual-use items and US and UN sanctions”.

Specifically, the new law requires that the report must examine whether sensitive dual-use items have been re-exported for improper purposes through Hong Kong, and whether the mainland is taking advantage of our city’s status as a separate customs area to import sensitive dual-use items, and whether Hong Kong would become a channel for sending strategic controlled items into the mainland, in the name of development plan of the Guangdong-Hong Kong-Macao Greater Bay Area and development our city into a tech hub.

These requirements will inevitably impose new constraints on tech-related business activities in Hong Kong, and negatively affect the future investment initiatives by foreign tech firms in our city, as well as the development of our own tech industry.

Fortunately, since Hong Kong already has a very well-established mechanism in place on implementing import and export controls over strategically sensitive materials and technologies that is in accordance with international agreements, our city has earned worldwide recognition in this regard over the years.

That being said, as long as Hong Kong is able to keep up its proven “track record” in handling these matters, it will deny the US any excuse to come after us.

But even so, the Hong Kong Human Rights and Democracy Act is still very likely to further complicate the tripartite relations of the US, mainland China and Hong Kong since it will provide new bargaining chips for Washington to gain leverage over Beijing in the days ahead.

This article appeared in the Hong Kong Economic Journal on Dec 5

Translation by Alan Lee

[Chinese version 中文版]

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Dr Dennis Ng Wang-pun is the president of the Chinese Manufacturers' Association of Hong Kong