US Hong Kong warning signals Washington could do more (lawyer)

The United States has issued a warning to U.S. companies operating in Hong Kong, signaling that Washington may take further action, an international trade compliance lawyer said.

Adam Smith, partner at Gibson, Dunn & Crutcher law firm, said Friday’s financial and regulatory risk advice was “pretty important” but “is not doing anything about changing the rules.” for the time being.

However, it does indicate “there is a lot more the United States could do” from a political standpoint, he told CNBC’s “Capital Connection” on Monday.

The nine-page notice released on Friday warned that U.S. businesses faced several risks posed by China’s national security law in Hong Kong. Washington also announced sanctions against seven Chinese officials for violating Hong Kong autonomy.

On what the United States might do in response to Beijing’s crackdown on Hong Kong, Smith stressed that what “would really change the nature of the engagement and the risks for the parties in Hong Kong” would be sanctions against organizations, entities and institutions, which were absent. until now.

Sanctions against individuals can be a challenge for US businesses in Hong Kong, but the “real difficulty” would come from restrictions on organizations with which businesses must frequently interact, he said.

For now, however, there are “too many opportunities” in Hong Kong for companies to leave the city.

“Hong Kong… still has an incredible amount of human capital that many businesses still need,” he said.

Kurt Tong, a former consul general representing the United States and mission chief in Hong Kong and Macau, said Hong Kong was still a good place for business despite the risks.

“There is a legal risk, there is a reputational risk, there is a certain operational risk – but I think those risks are measured,” he said.

“At the same time, (businesses) need to keep an eye on the bigger picture, namely that China is a huge and attractive economy to do business with. And Hong Kong is in many ways still… l ‘one of the best platforms to do this job, “he added.

Tong, who is a partner with consultancy firm The Asia Group, said the rule of law in Hong Kong has deteriorated, but most companies are not convinced it has been completely wiped out.

“I think it will take more to drive companies out of Hong Kong than the changes that have taken place so far,” he told CNBC’s “Squawk Box Asia”.

As for the way forward, Tong said he expects US President Joe Biden and Chinese President Xi Jinping to meet in the fall and discuss each of their “red lines” which cannot. be crossed.

In the meantime, he said, “diplomatic battles” will continue.

“The rhetoric has been so harsh on both sides, so there is a lot to be done to save face,” he added.

Trade talks between the two sides are at a standstill at the moment, and the United States has no incentive to enter into negotiations because it does not believe that such negotiations will be successful, Tong said.

“It’s a complex picture… of US-China relations under the Biden-Xi era,” Tong said. “We’re still on the first scene of the first act of how it’s going to play out over the next year or so.”