Fears of US Treating Hong Kong as ‘China’

What makes Hong Kong still a global business hub may be under threat from Donald Trump.

With many Chinese cities having become nearly as developmentally advanced as Hong Kong, the question has always been what comparative advantage this "Special Administrative Region" still has. It used to be the gateway to the mainland, until mainland cities could pretty much do anything for foreigners what Hong Kong could. To cut a long story short, the "one country, two systems" idea has another differentiation that has continued Hong Kong's economic relevance.

You see, Hong Kong is regarded as a different entity from the PRC proper by the United States government. As such, it has some advantages the mainland does not such as trading privileges for "dual use" (civilian and military purposes) technologies. However, this unique status is being endangered by the Trump administration which is concerned that Hong Kong may be a backdoor for trading in these sensitive technologies on behalf of Communist China.

Is the United States soon going to lump Hong Kong with the rest of mainland China? Traders in Hong Kong fear this prospect:

Hong Kong business groups are starting to worry the Trump administration will open the door to ending the financial hub’s preferential trade status, rendering it “just another Chinese city” as its government gets closer to Beijing.

The U.S.-China Economic and Security Review Commission stoked fears last month with a recommendation that Congress reassess Hong Kong’s special trading status for some sensitive U.S. technology imports. It said Beijing’s statements and legislative actions “continue to run counter to China’s promise to uphold Hong Kong’s autonomy.”

If President Donald Trump acts on the recommendation, it would only impact dual-use technology with consumer and military applications -- like carbon fiber used to make both golf clubs and missile components -- that represent about 2 percent of U.S. exports to Hong Kong. But the blow to the city’s image may be irreparable.

Trump isn't exactly a stickler for democratic practices, but it's precisely Hong Kong's perceived kowtowing to the mainland that may land its status in trouble:

The U.S. Consulate in Hong Kong declined to comment when asked whether Trump was considering any action against the city. It pointed to a statement last month from Consul General Kurt Tong, who said “we are quite focused on the importance of the ‘one country, two systems’ framework” that allows Hong Kong to maintain a distinct economic, legal and political system.

In its annual May report on the city’s autonomy, the U.S. consulate said “certain actions” by China were inconsistent with its commitment to allow Hong Kong to exercise a high degree of self-governance. But it found that the city “generally” maintains a high degree of autonomy, “more than sufficient to justify continued special treatment.”

How independent is Hong Kong from mainland pressure? Given the cutthroat level of competition among Chinese cities, even the aforementioned 2% allowed trade in "dual use" technologies may be what sets it apart in this day and age and still means something. Trump, however, may have different ideas about Hong Kong's role in the world.