U.S. threats won't stop China's national security law in Hong Kong, analysts say - CNBC

Threats by the U.S. won't stop China from enacting a national security law in Hong Kong, analysts said on Wednesday.

"No, it won't work, it won't change China's general approach to Hong Kong ... it certainly won't change the approach to national security legislation," Tim Summers, a senior consulting fellow at British think tank, Chatham House, told CNBC's "Street Signs Asia."

China last week announced a draft national security law for Hong Kong, a move critics say would erode the city's freedom. The law is aimed at prohibiting secession, subversion of state power, terrorism activities and foreign interference — but U.S. officials and Congress members have criticized Beijing's move, with some threatening sanctions.

"We've already got a draft decision from the National People's Congress that will be approved tomorrow," he said referring to China's parliament, which kicked off its annual meeting last Friday. "Those comments, those threats from the U.S. are not going to change Beijing's mind on that act."

I think the option that President Trump and the United States have is to revoke some of the special privileges that Hong Kong is offered. But the thing is that's the nuclear option...

Natasha Kassam

research fellow at Lowy Institute

'One country, two systems'

In a post on Twitter late Tuesday, Republican Senator Marco Rubio said if China's "rubber stamp legislature moves forward on Thursday," the U.S. State Department "will have no option" but to certify that Hong Kong "is no longer autonomous" and "sanctions should follow."

Rubio (R-Fla.) is the acting chairman of the influential Senate Intelligence Committee.

Approval of the law will also be a threat to the "one country, two systems" framework, Rubio suggested.

Hong Kong, a former British colony which returned to Chinese rule in 1997, is ruled under the "one country, two systems" policy. It gives the city self-governing power, a largely separate legal and economic framework from mainland China, and various freedoms including limited election rights. Chinese citizens in the mainland do not enjoy the same freedoms.

The "one country, two systems" framework underpins Hong Kong's status as a global financial and business center, especially as a middleman between China and the world. The city's autonomy from China is also a reason why the U.S. treats it differently from other Chinese cities. For example, elevated U.S. tariffs imposed on China in the trade war do not apply to Hong Kong.

But those privileges under American law could be threatened if the State Department — under the Hong Kong Human Rights and Democracy Act of 2019 — decided that the city is not "sufficiently autonomous" from China to justify that "unique treatment."

Possible U.S. sanctions on China?

Still, analysts said Washington wouldn't go that far.

"I think the option that President Trump and the United States have is to revoke some of the special privileges that Hong Kong is offered. But the thing is that's the nuclear option, you can only pull that lever once and it's not clear that will necessarily work," Natasha Kassam, a research fellow at Australian think tank Lowy Institute, told CNBC's "Capital Connection."

She raised the possibility that businesses with a big presence in Hong Kong could highlight the economic consequences of China's decision to introduce the new law.

"That might be the only ways that we could see something like this pulled back. But I have to admit, I'm not very optimistic about that," she added.

Chatham House's Summers said Washington could be under pressure to take action against Beijing, and that could come in the form of targeted "Magnitsky-type sanctions."

The Magnitsky Act is a law passed by Congress in 2012 that enables the U.S. to sanction individuals allegedly involved in corruption and human rights abuses. More recently, the law was used to sanction 17 people for their alleged role in the killing of dissident journalist Jamal Khashoggi.

"I'd be very surprised, though, if there's a sort of bigger decision to revoke Hong Kong's special status on the back of that," Summers said. "Too many U.S. economic and financial interest at stake to go that direction."

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2020-05-27 08:32:29Z