UNDER THE INFLUENCE OF THE US ACTIONS, HONG KONG FINALLY BECOMES THE CHINESE HONG KONG

UNDER THE INFLUENCE OF THE US ACTIONS, HONG KONG FINALLY BECOMES THE CHINESE HONG KONG 22.07.2020

President of the United States D.A week ago, Trump signed a law on sanctions against China because of the situation with Hong Kong – the formal reason for the introduction of economic sanctions was Beijing's decision to develop a new law on national security of the Hong Kong SAR, which, according to Washington, changes the existing model of "one country, two systems".

On the other hand, it does not take into account the fact that mass political protests continued in Hong Kong with external support for more than a year, and Beijing's introduction of additional security measures in the SAR is a natural reaction to new risks of destabilization (although, for example, in June this year, Trump was generally ready to use the army against his people during mass riots in the United States under the slogan "Black lives matter", which still causes the most acute debates in American society https://www.usatoday.com/.../esper-milley-grilled.../5404056002/).

According to Trump's decision on Hong Kong, sanctions restrictions can be imposed against people and companies involved in the development and adoption of the national security law in Hong Kong. By a separate decree, Trump also deprived Hong Kong of a special economic status. According to him, such a decision will become "a powerful new tool to bring to justice those who participated in the destruction of freedoms in Hong Kong." Thus, a media image is deliberately and consistently created in which Trump allegedly worries about the development of democracy and the human rights situation in Hong Kong.

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The American president also signed an executive order depriving the special administrative region of a special economic status. He explained that this means the abolition of privileges, special treatment in the economic sphere and the export of technologies of special importance. According to Trump, such a decision will become a "powerful new tool" in order to bring to justice those who participated in the destruction of freedoms in Hong Kong.

"No more privileges, no special economic regime and no export of sensitive technologies," Trump said and signed two documents: the sanctions law passed by Congress and a separate presidential order. "From now on, we will treat Hong Kong the same as mainland China." After that, according to President Trump, Hong Kong will no longer be able to compete with free markets. "In the future, we will significantly increase the volume of business, since we just lost one competitor," Trump said.

First, Washington banned the export of defense products and high technologies to Hong Kong. Then the US Congress passed a law allowing to impose sanctions against Chinese officials involved in human rights violations in the autonomy. Restrictions are also imposed against banks that, after the introduction of such sanctions, will deliberately deal with these officials for at least another year.

Trump gave his office 15 days to prepare for the abolition of preferences in trade, equalize the rights of Hong Kong passport holders with ordinary Chinese, stop training police officers and suspend the extradition agreement. Experts note that the document specifically emphasizes that no provision of it can be interpreted as "permission for the use of military force against China".

The law also provides for a mechanism for lifting sanctions and excluding individuals and organizations from the sanctions list. In section 15 of his Executive Order on Hong Kong Normalization, Trump left himself a loophole for normalizing relations with Beijing, where he noted that " if, based on consideration of the conditions, obligations and expectations expressed in the joint declaration, I determine that changes in China's actions ensure that Hong Kong will be autonomous enough to justify differential treatment of the PRC in accordance with US law, I will review the decisions and actions made, taken and directed in accordance with this decree " (https://www.whitehouse.gov/.../presidents-executive-order-ho.../).

American experts are already saying that thanks to Trump's decision on Hong Kong, the United States is actually losing more than China. In addition, they argue that Trump's actions hardly care about democracy in Hong Kong. In fact, Trump is trying to distract the attention of the American audience from the worst situation in the world, which has developed in the United States under the influence of the COVID-19 epidemic.
(https://edition.cnn.com/.../meanwhile-in-america-j.../index.html)

The most popular American TV channel CNN devoted a detailed report to Hong Kong (https://edition.cnn.com/.../hong-kong-special-stat.../index.html). In particular, it says that with regard to Hong Kong, President Trump has once again chosen a dramatic but doomed policy that will do little harm to China, but further isolating the United States from its allies. American experts note that, like Trump's current trade war, his sanctions policy in Hong Kong is aimed at punishing China, without worrying about the effectiveness of actions or the cost to American interests. They call Washington's removal of Hong Kong's special customs status a "toothless and rather symbolic" action, rather than a measure to exert pressure on the PRC.

The most authoritative American think tank, the Peterson Institute for International Economics, has already expressed its opinion on this issue. (https://www.piie.com/…/china-economic-watch/trumps-latest-m…)
Its experts remind that the economy of Hong Kong consists mainly of financial, logistics and other services, and not of industrial goods. Of Hong Kong's total exports to the US of $ 45 billion, only 1% is actually produced in Hong Kong and was eligible for low US tariffs. Most of Hong Kong's exports to the United States are goods produced in China, which are re-exported through Hong Kong and are already subject to the same high tariffs as goods that China exports directly. Thus, the "Trump's sanctions strike" is meaningless.

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In general, the conclusion is that Hong Kong and American interests, not Beijing, will be the main victims of Trump's decision to abandon the special relationship. Two-way free currency exchange, preferential customs regime and visa-free regime have made Hong Kong the center of American trade in the region. In 2018, US foreign investment in Hong Kong amounted to more than $ 82 billion.

More than 1,300 American companies (represented in the fields of trade, finance and services) work in the megapolis, of which about 800 are regional offices or headquarters. The SAR is an important market for American exports of meat and agricultural products (Hong Kong is the 3rd largest market for American wine and the 4th-for beef). In 2019, the US trade surplus with Hong Kong amounted to $ 26 billion, which is the highest indicator among American trading partners.

By revoking the special status of Hong Kong, the president risks abandoning American enterprises based in the city. Along with higher tariffs on the goods they ship back to the United States, these businesses may eventually be subject to stricter controls on access to and use of American technologies. The most important thing here, according to American economists, is that the inability to maintain the special status of Hong Kong will cause a reaction from Beijing, since in turn China may be considering tightening regulatory control over the tax, regulatory and legal systems that American business in the SAR is subject to.

According to CNN, "avoiding situations that challenge US interests, as Trump did with Hong Kong, only to hide behind a wall of increasingly high barriers, will only lead to the fact that China is unlikely to be limited, but America is increasingly lonely" (https://edition.cnn.com/.../hong-kong-special-stat.../index.html).

The United States really commands respect with such a pluralism of opinions. In addition, the Americans ' determination to defend their position is admirable (even if it goes against the opinion of their president), here it is enough to recall how Twitter hid Trump's inappropriate political statements in June of this year. On the basis of this, it can be assumed that American business, which has now become a hostage to an electoral game that he does not understand, will still remind him of himself in November of this year.

What can the current situation mean in general?

First. President Donald Trump ordered to cancel only part of the privileges, but refrained from declaring a full-scale war of sanctions that could undermine Hong Kong's status as the world financial capital and a conductor of capital to China. Trump refrains from starting a currency war against Hong Kong in order to undermine the basis of its financial power - the binding of the local dollar to the American dollar. In general, Washington is ready to escalate the confrontation and impose sanctions - visa, trade and financial. Not all experts are confident in their effectiveness, but most agree that the White House will escalate the pressure until the November presidential election, giving Trump a chance for a second term. The existence of a legal loophole for the lifting of sanctions gives reason to believe that after the elections the issue can be removed (either by Trump himself, or by a more successful candidate in the elections who will lead the United States).

Second. Thus, we can also say that by his actions, Trump seriously played along with Beijing and left the protesters in Hong Kong without direct American support. Washington has played out its classic scheme: in a crisis, when it becomes clear that it is impossible to achieve victory, the United States withdraws itself. Of course, sanctions are being imposed, information propaganda is being deployed, statements are being made (mainly to "save face"). Now the protesting groups cannot count on the support of the United States. In political language, this also means that with this July decree, Trump actually recognized Beijing's victory in Hong Kong. By signing this document, he made it clear to Hong Kongers: "guys, you are holding on, we support you in general, you see-even sanctions have been imposed, but, sorry, I have elections now." It seems like an excuse that in the coming months he will be able to voice during his electoral speeches: "after all, I took a serious step against China and its dictatorship." But the protesting groups in Hong Kong will not get anything from this.

The third. The imposition of sanctions against Hong Kong is another foreign policy bluff. It has long been proven that American sanctions do not bring visible damage to which they are aimed. In particular, the sanctions regime against Iran or Russia did not give the result that Washington expected (there are many studies of American scientists on the effectiveness of American economic sanctions https://web.stanford.edu/.../i.../Readings/pape_97%20(jstor). pdf). In addition, it will probably be very difficult (if at all possible) to block China, the second economy in the world, which occupies 16% of global GDP. Again, the American leader somehow forgot about American business, whose interests he allegedly actively protects. It is also possible that some American TNCs may change their jurisdiction from the American one to any other one that will not prevent them from doing business in the 1.4 billion-dollar growing Chinese market. Business is business, and Trump cannot fail to understand this (at least if we proceed from the fact that he always emphasizes that in politics he acts like a true businessman, which in general looks doubtful).

Fourth. It is obvious that China has won in this dispute. Hong Kong is finally becoming a Chinese Hong Kong and a full-fledged part of the PRC, without any international conditions. In any case, the presence of a special economic zone in the form of a free Hong Kong gave considerable preferences for the PRC. However, from the point of view of domestic policy and ideology (of any state), the presence of two different political and legal models on its territory looked generally ambiguous. The irony is that the most important political phrase that Trump said is " Hong Kong will now be treated the same as mainland China." The confrontation between the United States and China, which escalated under D. Trump, only accelerated the course of history and prematurely turned Hong Kong into a completely Chinese metropolis. This aspect, apparently, was missed in Washington. The self-removal of the United States from Hong Kong will stimulate its active rapprochement with mainland China, which will only be welcomed by Beijing.

What is the idea of Trump's game, or is there one at all?

China Studies Centre,
Nur-Sultan, 2020



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