Secretary of State Mike Pompeo declared Wednesday that Hong Kong is no longer autonomous from China - a landmark decision that will likely escalate already strained U.S.-China relations and which could have serious economic consequences for the global financial hub.
"No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground," Pompeo said in a statement.
Pompeo's decision was sparked by the Chinese government's move to assert sweeping authority over Hong Kong and comes as tensions between the Trump administration and Beijing have dramatically escalated over the coronavirus outbreak.
Hong Kong was returned to China from British control as a semi-autonomous territory in 1997 - on the condition that China maintained a "one country, two systems" framework guaranteeing freedoms not found on the mainland.
But Chinese leader Xi Jinping is now poised to push a national security law through his rubber-stamp legislature that would ban treason and other perceived offenses in Hong Kong - a move critics say is designed to stifle pro-democracy protests there and put the territory firmly under China's rule.
"Hong Kong and its dynamic, enterprising, and free people have flourished for decades as a bastion of liberty, and this decision gives me no pleasure," Pompeo said. "While the United States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now clear that China is modeling Hong Kong after itself."
Pompeo was required to make the determination under a U.S. law that grants Hong Kong special trading status - including exemptions from certain tariffs and export controls that the U.S. imposes on China.
In a show of support for Hong Kong's autonomy and the democracy protesters, Congress passed bipartisan legislation last year requiring the State Department to annually reconsider the territory's special treatment, which has helped elevate the city to a global financial power.
Chinese officials were furious when President Donald Trump signed the bill into law last year.It's not clear if the administration will now move to strip Hong Kong of those economic perks.
Foreign policy experts said the decision could have far-reaching consequences.
"This is potentially massive," Michael Fuchs, a former deputy assistant secretary of state for East Asian and Pacific affairs in the Obama administration, tweeted on Wednesday.
Fuchs, who is now with the liberal Center for American Progress think tank, said the question is whether the U.S. "will impose sanctions or rescind certain trade arrangements with Hong Kong, which could fundamentally change US-China relations, Hong Kong's future, and the global economic system."
But Mark Galasiewski, an investment analyst at Elliott Wave International, a financial forecasting firm, said the U.S. action is not likely to have more than a temporary impact on Hong Kong stocks because markets there have already plummeted in 2020.
The "one country, two systems" framework was intended to make sure that capitalist Hong Kong retained a measure of legal, economic and financial independence from socialist mainland China, but that autonomy has come under increasing attack, with Beijing pushing to increase its control over Hong Kong. Hong Kong was rocked by almost six months of violent anti-China, pro-democracy protests last year after Beijing tried to impose an extradition law on Hong Kong.
Although that extradition law failed to pass, anti-China sentiment in Hong Kong has increased, protests have proliferated and Beijing has continued to try to undermine Hong Kong's rights.
The new proposed Chinese national security law would ban "treason, secession, sedition and subversion" in Hong Kong.
Joshua Wong, a Hong Kong democracy activist, said China's proposed national security law would do severe damage to the territory's business sector - leading to potential boycotts and other fallout.
In a thread posted on Twitter, Wong said Hong Kong's autonomy - including its independent judiciary and relatively loose business regulations - have drawn financial investment to the territory but that is now in jeopardy. He called on the Trump administration, as well as European and Asian leaders, to reconsider Hong kong's special trade status.
"Hong Kong will be assimilated into China's authoritarian regime, on both rule of law and human rights protections" if Xi's national security law is passed, he said. "The proposed law is the stepping stone for (China's) future intervention."
The Trump administration's announcement comes after U.S. lawmakers proposed a bill to sanction any person with a role in violating "China's obligations to Hong Kong under the (Sino-British) Joint Declaration and the Basic Law" - the formal terms under which Hong Kong was granted partial legal, economic and financial independence.
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There was no immediate reaction from Beijing, and it's not clear what impact, if any, the action will have on a pending trade deal between the U.S. and China. "Phase 1" of the agreement was signed less than five months ago and despite both sides adopting a harsher diplomatic tone, they have been coy about whether they intend to implement it.
Pompeo and Trump have accused China of misleading the U.S. and other countries about the novel coronavirus, which first emerged in Wuhan before spreading across the globe. Beijing denies any suggestions it has not been transparent about its coronavirus outbreak.
The Council on Foreign Relations, a Washington-based think tank, warned in an analysis May 21 that "the risk of a military confrontation in the South China Sea involving the United States and China could rise significantly in the next eighteen months, particularly if their relationship continues to deteriorate as a result of ongoing trade frictions and recriminations over the novel coronavirus pandemic."
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This article originally appeared on USA TODAY: US-China tensions: Pompeo declares Hong Kong no longer autonomous