Biden to warn US companies of risks of operating in Hong Kong

The Biden administration will this week warn US companies of the increasing risks of operating in Hong Kong as China asserts greater control over the financial hub.

According to three people familiar with the message, those threats include the Chinese government’s ability to gain access to data that foreign companies store in Hong Kong and a new law that allows Beijing to impose sanctions against anyone that enables foreign penalties to be implemented against Chinese groups and officials.

President Joe Biden is planning to issue the warning and impose more sanctions this week in response to Beijing’s crackdown on the pro-democracy movement in Hong Kong and the genocide the US has accused Beijing of committing against Muslim Uyghurs in Xinjiang.

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On Tuesday, the US will update a warning that the Trump administration issued on Xinjiang last year, according to five people familiar with the decision. The business advisory will stress the legal risks that US companies face unless they ensure that their supply chains are not implicated in forced labour in Xinjiang.

The decision was driven partly by the view that companies are not taking the issue seriously enough.

“The point of the advisory is to stress [that] if you do not exit these supply chains you run a risk of violating US law,” said an official who did not want to be named. “We want to make clear to the business community . . . that they need to be aware of reputational, economic and legal risk of their involvement with entities involved in human rights abuses.”

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While Biden is intensifying the Trump administration’s focus on Xinjiang, the move will mark the first time a US administration has issued a business advisory in relation to Hong Kong.

A person familiar with the matter said there had been dissent within the administration, with some officials concerned that the warning would discourage US companies from operating in a critical financial centre. But more hawkish officials argued successfully that companies needed to grasp the nature of the risk of doing so.

In a separate event, Biden may impose more sanctions against Chinese officials in Hong Kong, according to a person familiar with the discussions. The warning will mention recent events such as the forced closure of Apple Daily, the pro-democracy tabloid owned by Jimmy Lai.

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Last week, the US commerce department added 14 Chinese companies to its export blacklist, accusing the companies of involvement in human rights abuses and surveillance in Xinjiang. Beijing criticised the move as an “unreasonable suppression” and vowed to respond with “necessary measures”.

The White House is also considering a policy that would allow Hong Kong citizens in the US to remain after their visas expire if they face potential political persecution in Hong Kong. But that policy is being debated and is not expected to be part of the package of actions to be announced this week.

The warning will reverberate in the sizeable US business community in Hong Kong. The American Chamber of Commerce in the city has more than 1,200 members and 282 US companies based their regional headquarters there in 2020.

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US companies have been unnerved about the passage of a national security law a year ago, partly because it would allow Beijing to access data stored on servers in Hong Kong. More recently, companies have become alarmed by the possibility that China could apply the counter-sanctions law, which allows for the seizure of assets, in Hong Kong.

While a decision on whether to provide asylum to Hong Kong citizens in the US had not been finalised, any such development would anger Beijing, which is hostile to foreign governments such as the UK and Canada offering shelter to those escaping political persecution.

Beijing has not prevented Hong Kong residents from taking up the British National (Overseas) visa programme, but it has made it harder for those who do so to redeem their retirement savings.

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The White House and state department declined to comment on the imminent actions on Hong Kong.

Follow Demetri Sevastopulo and Primrose Riordan on Twitter

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