This past week marked a turning point for the Asian financial hub with new measures from Beijing within Hong Kong and retaliation from the United States. Traditionally known as Asia’s financial capital with the highest concentration of banking institutions in the world, Hong Kong’s stock market went into its sharpest plunge in five years, leaving Hong Kong’s future and China as a whole uncertain.
This peril comes from Beijing, which last Thursday proposed a draft order released by China’s National People Congress to enact national security laws to oppose “any foreign or overseas forces interfering in the affairs of the Hong Kong Special Administrative Region in any fashion” and to “stop and punish foreign and overseas forces’ use of Hong Kong to carry out spearatist, subversive, infiltrative or destructive activities.” At stake is the semi-autonomous status of Hong Kong to govern with an independent judiciary, enable free expression and low financial and trade barriers globally. Thus, in choosing to enact the national security legislation calls into question the validity of the “one country, two systems” constitutional agreement.
However, the economic implications are projected to be exacerbated with the deteriorating bilateral relations between the United States and China. According to Fred Hu, a prominent investor and former chairman of Goldman Sachs’ Greater China business, “investors worry that a clash between the superpowers would consequently impact Hong Kong’s position as a bridge between China’s powerful economic engine and the rest of the world.” With Hong Kong known to be a safe haven for civil society and the pursuit of expression and social justice, this commandeering law threatens the very principles Hong Kong resonates. In doing so, National Security Advisor for the United States, Robert O’Brien, foreshadowed potential trade sanctions and revoking the territory’s special status within United States law. At a time when Hong Kong requires foreign direct investments, the implementation of such a policy would undermine the free enterprise and democratic system at hand, endangering relations with corporations and governments. By challenging Hong Kong’s autonomous market puts at risk the appeal for it to be a place to do business, thus in turn hindering Chinese economic growth..
Within the United States, Senators Chris Van Hollen and Pat Toomey have tabled a bipartisan bill to sanction both officials and entities that enforce said national security regulations. By sanctioning financial institutions, it opens a new front to the already fractious relationship with both China and Hong Kong. In the coming weeks, it will be imperative for the international community to recognize the gravity of the situation at hand, being the future of international banking, accumulation of trade, commerce and technology. It can be expected that the suppression of dissent, curtailing freedom of expression and enforced detainment will be executed under the notion of national security. At such a time, the reactions of intergovernmental bodies and superpowers will be crucial in determining the operational management and environment for corporations within Hong Kong. If Hong Kong aims to remain the financial center they are today, international cooperation will not only be crucial for Hong Kong’s future, but also China as a whole. If left unaccomplished, the largely volatile and unpredictable political environment could devastate financial economies around the world.