HONG KONG — A possible U.S. move to scrap preferential trade treatment would not damage Hong Kong’s status as an international financial center, the city’s commerce minister told the Nikkei Asian Review in an exclusive interview on Monday.
“One thing I can assure the international community is that Hong Kong [will] remain the same place where we uphold rule of law, freedom, and remain the most competitive and the freest [market],” said Edward Yau, the secretary for commerce and economic development, amid a raging controversy over national security legislation proposed by Beijing.
“I don’t think that there’s any suggestion that these [key strengths] would be eroded,” Yau added.
The prospect of a Beijing power grab and potential punishment by the U.S. — the city’s second-largest trading partner after China itself — clearly unnerved investors last week. Yau was speaking on the first trading day since Beijing’s proposal sent the Hong Kong stock market to its steepest fall in five years.
The security legislation drew swift and fierce international condemnation, as it is seen as an attempt by China to further crack down on dissent in the former British colony. Washington reacted by threatening to cancel Hong Kong’s special status as a separate trading entity from China, which affords the city tariff exemptions and allows imports of sensitive technology.
At the height of Hong Kong’s pro-democracy protests last year, the U.S. Congress overwhelmingly passed the Hong Kong Human Rights and Democracy Act, which requires the State Department to annually review the city’s autonomy and freedoms to decide whether to extend the preferential trade and investment rights.
Hong Kong’s leadership, however, views trade as a two-way street.
“There was no preferential treatment unilaterally given by the U.S. to Hong Kong,” he said. “Hong Kong is a free port. We earned the status by [keeping] our doors open. It was not a gift from anybody. … It is a fair trade.”
He added that the U.S. would also suffer if it strips Hong Kong’s status, as the resultant trade barriers would “affect the trade balance between the two places.”
In 2019, the U.S. had a $26.1 billion trade surplus with Hong Kong — its largest bilateral surplus. “They would have to consider what implications [the action] would be on us as well as on themselves,” Yau said.
The minister said that as a longtime exemplar of free markets, Hong Kong is not preparing to impose any retaliatory trade barriers against the U.S. But he said the government would “look into whether [Washington’s actions] have contravened any agreements in the World Trade Organization,” where Hong Kong is a founding member.
Although business chambers and analysts have voiced concern over the legislation’s potential impact on free speech and free flow of information, Yau stressed that it targets only “a very small number of people who are willfully imposing risk to national security.” General business activity, he maintained, would not be affected.
“Market analysts doing their job — as long as they’re not doing this to subvert government or to split the country, or to invite terrorism or foreign influences — why should they worry?” Yau said.
On the contrary, he argued, the legislation would ensure a safer and more stable business environment for international investors.
“What I got asked the most last year was whether Hong Kong is still a safe place to conduct business,” he said. “I believe businessmen would make wise decisions by looking at fundamentals, by looking at returns.”