Hong Kong has become a center for money laundering and sanctions evasion under the tightening grip of Beijing, US lawmakers have warned, calling for a re-evaluation of America\u2019s close business relationship with the Asian financial hub. <\/p>\n
In a letter to US Treasury Secretary Janet Yellen Monday, bipartisan leaders of the House Select Committee on China demanded greater scrutiny from Washington of Hong Kong\u2019s much prized financial sector, a pillar of the economy that\u2019s home to many big US banks and accounts for more than one-fifth of the Chinese territory\u2019s gross domestic product. <\/p>\n
Hong Kong has become a \u201cglobal leader\u201d in illicit practices, it said, including in the export of controlled Western technology to Russia, the creation of front companies to buy Iranian oil and the managing of \u201cghost ships\u201d that engage in illegal trade with North Korea. <\/p>\n
Since Beijing imposed a national security law on the city in 2020, \u201cHong Kong has shifted from a trusted global financial center to a critical player in the deepening authoritarian axis of the People\u2019s Republic of China, Iran, Russia, and North Korea,\u201d the lawmakers said. <\/p>\n
\u201cWe must now question whether longstanding US policy towards Hong Kong, particularly towards its financial and banking sector, is appropriate,\u201d they added. <\/p>\n
In 2020, then-President Donald Trump revoked the special treatment Hong Kong had long enjoyed under US law, to punish Beijing for imposing the national security law on the once-outspoken city. The executive order effectively ended the city\u2019s separate customs treatment from mainland China by suspending a 1992 law granting Hong Kong special economic status. <\/p>\n
Since then, dozens of Hong Kong-based companies have been hit by US sanctions for evading extensive measures imposed on Russia in response to its invasion of Ukraine, including the supply of critical dual\u2011use goods such as semiconductors. <\/p>\n
Hong Kong officials have previously said the city has no obligation to implement unilateral sanctions imposed by other countries \u2013 including when a mega yacht linked to a Russian oligarch sanctioned by the US, the European Union and the United Kingdom dropped anchor in the city in October 2022. <\/p>\n
The committee\u2019s letter cited research published this year that shows nearly 40% of goods shipped from Hong Kong to Russia between August and December 2023 were high-priority items that are likely fueling Moscow\u2019s production of military goods such as missiles and aircraft. <\/p>\n
The lawmakers asked Treasury Department officials to brief the committee on \u201cthe current status of American banking relationships with Hong Kong banks, how our policies have shifted to account for the changes in Hong Kong\u2019s status and posture, and the measures the Treasury plans to implement to address these risks.\u201d <\/p>\n
The letter, signed by Republican Rep. John Moolenaar, who chairs the committee, and Rep. Raja Krishnamoorthi, the panel\u2019s top Democrat, highlights the growing scrutiny on Hong Kong in the escalating great power rivalry between the US and China. <\/p>\n
It comes as Trump is poised to return to the White House with a cabinet stacked with China hawks, including Marco Rubio, who has been named secretary of state. <\/p>\n
Rubio, a fierce critic of Beijing\u2019s crackdown on Hong Kong, has sponsored legislation that sanctioned Chinese and Hong Kong officials for alleged human rights violations in the city. He has also proposed a bill now being considered in Congress to let the secretary of state strip certification from Hong Kong\u2019s economic and trade offices in the US. <\/p>\n
Trump has also named hedge fund executive Scott Bessent as his treasury secretary. <\/p>\n
Isaac Stone Fish, CEO of Strategy Risks, a business intelligence firm that focuses on China, said even if Yellen declines to act upon the letter, Bessent \u2013 who in a recent interview described Beijing as a \u201cdespotic regime\u201d \u2013 is expected to take a more hawkish approach to China. <\/p>\n
\u201cIn fact, it appears like he\u2019ll be the most hawkish Treasury Secretary since the 1970s. This has massive implications for US businesses with big exposure to Hong Kong,\u201d Fish said. <\/p>\n
\u201cSadly, the idea of Hong Kong as autonomous from China is now a farce \u2026 US companies need to understand that their Hong Kong operations will likely fall under increased scrutiny.\u201d <\/p>\n<\/p>\n
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