Hong Kong Warned Of More Pain As China-US Spar

Business analysts and political leaders reacted with warnings of more pain for Hong Kong after the US said it now feels the city is not autonomous enough from China to warrant a special status in trade ties.

Leader of the pro-business Liberal Party, Felix Chung said the announcement on this by the US Secretary of State, Mike Pompeo, overnight would affect "the confidence of the business sector in Hong Kong, the future investments and everything will be on hold".

Chung said the SAR's business sector is concerned that the US may strip Hong Kong of its special status as Beijing imposes its new security law for the city.

He said Hong Kong is a victim getting caught in the conflict between China and the United States.

Benjamin Quinlan, CEO and managing partner at Quinlan and Associates also echoed the view, saying the city is now caught in the middle of the China-US standoff.

"We expect the latest move to have considerable implications for the city, with the threat of higher tariffs, sanctions, as well as tougher investment and visa rules between Hong Kong and the US, including potential sanctions on businesses (particularly banks) operating in the city found to be supporting anyone in violation of the 'One Country, Two Systems' model," he said.

"Expect to see businesses and investors become even more skittish over the future over the city as an international financial hub,” the finance expert said.

Hong Kong-based Iris Pang, the chief economist, Greater China at ING, said she is more worried about reaction out of Beijing.

"China will retaliate on this. It's more the Chinese retaliation that I'm waiting for and worried about, because I don't know how they will retaliate,” she said.

But one expert said it was Beijing that stands to lose a lot if it gets into a flux blown sanctions war.

“If Washington opts for hardline measures it would risk all of the financial connectivity that China has to the free market", according to Robert Spalding, a US-China expert at the Hudson Institute.

"Once that goes away, stocks, bonds, financial transactions, Swift, all of that is imperilled," he told Bloomberg News. 

But Julian Ku, an expert on international law at Hofstra University, said Trump was likely to take a softer stance to give Beijing room to manoeuvre.

"I expect him to take some major steps that would show China he is serious, but not to change every US law that applies to Hong Kong," he said. "I expect he would hold back on some matters so that he can offer China a chance to back down."

Former security secretary Regina Ip, meanwhile, played down reports that the US will sanction Hong Kong officials or lawmakers.

She said it was the National People's Congress in Beijing that spearheaded the legislation and not the Hong Kong government and lawmakers here.

Former student activist Joshua Wong and his party Demosisto – which has been calling for Washington to act over Beijing's handling of protests in Hong Kong – said US steps are a “tragic but necessary step”.

Wong blamed Beijing for selling out Hong Kong and said he expects some sanctions to come into effect in a fortnight or so. (additional reporting by Reuters, AFP)