China prepares new anti-sanction laws for Hong Kong and Macau

Beijing plans to introduce new laws that will punish Hong Kong companies that comply with US and European bans.

Companies in Hong Kong risk being caught in the middle between China and the US as they clash over the former British colony

China’s government is planning to introduce new laws in Hong Kong and Macau that could bar foreign entities and individuals in the cities from complying with sanctions against China, according to people familiar with the discussions.

The new laws are expected to mirror China’s own “anti-foreign sanctions law,” which Beijing rushed through in June in response to sanctions imposed on the country by the US and Europe, the people said.

China’s official Xinhua News Agency reported on Tuesday that the country’s legislature was scheduled to add provisions to the mini-constitutions of Hong Kong and Macau during a four-day session beginning August 17, though it didn’t specify what changes would be made.

The introduction of the law in the two Chinese territories, especially in the financial hub of Hong Kong, could leave many companies and their employees caught in the middle as China and the US clash over the future of the former British colony.

“The real conflict, which is what people are really concerned with, are cases where companies are obliged to follow a sanction and there is a prohibition against complying with it in Hong Kong,” said Nicholas Turner, a lawyer at Steptoe & Johnson LLP who specialises in economic sanctions.

Hong Kong’s Constitutional and Mainland Affairs Bureau didn’t immediately respond to a request for comment. Calls to the Hong Kong and Macao Affairs Office of the State Council went unanswered outside of business hours.

Earlier this month, the Biden administration cautioned American businesses and individuals working for them about the risks of operating in Hong Kong, where Beijing has imposed a sweeping new national security law.

The White House also added seven officials working in China’s main government office in Hong Kong to a sanctions list, and warned American businesses they could face retaliation for complying with US sanctions.

The new Chinese law mandates that Beijing respond to foreign sanctions with countermeasures against the entities or individuals involved in imposing them. The countermeasures include denying and revoking visas or expulsion, seizing and freezing assets within China, blocking transactions and co-operation with Chinese individuals and entities, as well as “other necessary measures” that aren’t specified.

The law also allows Chinese companies to file lawsuits in Chinese courts against foreign business partners who cut ties to comply with foreign sanctions.

It couldn’t be determined which of the Chinese law’s provisions would be added to the new laws in Hong Kong and Macau or how they would be applied.

Steptoe & Johnson’s Mr Turner said these uncertainties made it difficult to precisely assess the law’s impact on Hong Kong. Chinese government ministries don’t ordinarily have legal authority in Hong Kong and the work of interpreting and providing guidance about the law will likely fall on somebody in Hong Kong, he said.

Cases handled under the common law system of Hong Kong — which is known for its independent judiciary — could lead to very different outcomes than in mainland China, Mr Turner added. But the courts could face pressure from authorities to apply the new law in ways that could be seen as compromising their independence.

“So that’s a concern for the business community,” he said.

Over the past year, the US and EU have imposed sanctions on an ever-expanding list of businesses and individuals in China whom they accuse of unfair industrial practices, carrying out forced assimilation against ethnic minorities in the remote Xinjiang region, and suppressing civil liberties in Hong Kong.

Beijing has denied the allegations and promised retaliation, depicting the sanctions as violations of its sovereignty.

China made use of its new law last week when it sanctioned seven Americans, including former commerce secretary Wilbur Ross, in tit-for-tat response to the latest US penalties. The announcement was made days before US Deputy Secretary of State Wendy Sherman met China’s foreign minister in the Chinese port city of Tianjin.

“Beijing has chipped away at Hong Kong’s reputation of accountable, transparent governance and respect for individual freedoms,” Secretary of State Antony Blinken said in a statement about the advisory to American businesses.

The Chinese Communist Party’s mouthpiece People’s Daily said in a commentary following the announcement of counter-sanctions that China’s determination to resist US interference in Hong Kong’s affairs was indestructible.

“The US should wake up from its fantasy and delusion,” it said. “The US should understand that when it imposes sanctions on Hong Kong issues, China’s antiforeign sanctions law will be enacted and will be truly aggressive.”

The Wall Street Journal