How Mike Pompeo's Announcement on an Autonomous Hong Kong Could Impact China's Policies

Mike Pompeo makes a strong declaration about rescinding Hong Kong's preferential trade status.
Mike Pompeo made a strong declaration Wednesday about rescinding Hong Kong's preferential trade status.(Getty)

The U.S. may be using Hong Kong's special status as leverage against Beijing's aggression, said Professor Ho-Fung Hung of Johns Hopkins University.

Amid China’s escalation of its control over Hong Kong, Secretary of State Mike Pompeo declared Wednesday that Hong Kong is no longer autonomous from China – and hinted that its new standing may lead to the United States’ withdrawal of Hong Kong’s preferential trade status with the United States.

"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. "I certified to Congress today that Hong Kong does not continue to warrant treatment under United States laws in the same manner as U.S. laws were applied to Hong Kong before July 1997.”

While Pompeo’s strong declaration appeared to undermine the long-established relationship between the United States and Hong Kong, many experts believe it signifies a hard line the U.S. is drawing in the face of Beijing’s aggression.

“It will create incentive for China [to consider] whether to change its policy towards Hong Kong,” Professor Ho-Fung Hung of Johns Hopkins University, an expert in Hong Kong and U.S.-China relations, told While the U.S. may not have taken such aggressive stances against China in the past when the two countries enjoyed a better relationship, “the U.S. will have more incentive to accurately use this card to revoke certification of Hong Kong autonomy as a kind of a leverage against Chinese policy on Hong Kong,” he said.

The statement directly addresses the United States-Hong Kong Policy Act, established in 1992, which states that the U.S. will pursue trade relations with Hong Kong independently of its relationship with China leading up to the 1997 Handover.

“Hong Kong has been the offshore financial center for China, and Hong Kong can play this role largely because of the U.S. certification,” Hung explained. “Foreign banks can freely operate in Hong Kong, but they cannot totally freely operate in Mainland China. China has capital control. Hong Kong doesn't have capital control. Money and foreign currency can move in and move out of Hong Kong freely.” Hung added that the privileges extend to foreign investment and how technology is traded. While forms of software and hardware don’t reach China because of American export laws, Hong Kong is exempt, Hung explained.

Today, more than 1,300 American companies with operations in Hong Kong, 85,000 U.S. citizens living in Hong Kong and $67 billion worth of goods traded between the U.S. and Hong Kong benefit from the policy, according to Reuters.

And while the benefits are extended to Hong Kong with the agreement that the U.S. has a separate policy with China, it’s an open secret that China also reaps many of these special allowances, Hung explained.

“High-tech companies in China can set up subsidiary companies in Hong Kong or collaborate with labs in universities in Hong Kong and use these outposts in Hong Kong as a kind of backdoor to import sensitive technology from the U.S. that they could otherwise cannot be doing it in their mainland Chinese office,” Hung explained, adding that some instances even involve the import of military grade equipment. “We see these kinds of reports every once in a while.”

But as widespread protests broke out in Hong Kong in 2019, the United States-Hong Kong Policy Act was revisited, and a new U.S. law requires the State Department to certify at least annually if Hong Kong retains enough autonomy from China to justify the favorable trading terms. Pompeo’s announcement on Wednesday appears to have declared that Hong Kong no longer passes, and therefore should no longer be given the preferential treatment.

“It has been expected that some form of this kind of statement will come along,” Hung explained, adding that the U.S. has made statements in the past about China’s exertion of power over Hong Kong. Most recently, the U.S. condemned the April arrests of key figures in Hong Kong’s fight for democracy, including 81-year-old Martin Lee, a barrister and founder of the Democratic Party, 71-year-old Jimmy Lai, a wealthy entrepreneur, and 72-year-old Margaret Ng, a former lawmaker and barrister.

The revoked special status also comes as China proposes a new national security law in Hong Kong, which would make illegal “splittism, subversion, terrorism, any behavior that gravely threatens national security and foreign interference,” essentially applying China’s criminal law to Hong Kong. It would make things like insulting China’s national anthem a criminal offense, the Financial Times reported.

“The national security law … is to outlaw any acts that is deemed a threat to Chinese national security in Hong Kong,” Hung explained. “People who are deemed to be collaborating with foreigners with the intention to subverting the Chinese government and things like that will be also deemed illegal.” He added that a major concern is that authorities from Mainland China would be sent to Hong Kong to enforce the law.

Another major difficulty is that the national security law would be legislated in Beijing and imposed in Hong Kong, which would mark the first time criminal law is introduced in Hong Kong’s legal code without undergoing Hong Kong’s legislatures and independent processes.

“It is a major step forward in canceling or destroying the ‘One Country, Two Systems,’” Hung explained, referencing the policy that allowed the unification of Hong Kong and China in 1997, while also allowing Hong Kong to operate an autonomous government, court system and legislative process.

But Hung says, even if United States continues with executive action to end Hong Kong’s special treatment, “It’s not the end of the story. We have the possibility that it will reinstate in the future if Hong Kong regains autonomy. It will create incentive for China to think about this.”