Hong Kong Leader Supports Local Implementation of Sanctions Law
Hong Kong Chief Executive Carrie Lam said she supports adding China’s anti-foreign sanctions law to Hong Kong’s constitution, a move that would potentially add more challenges for global companies trying to navigate U.S. sanctions compliance and China’s business environment.
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Lam, speaking with reporters Aug. 10, said the Hong Kong government is conducting “consultations” about whether the island should implement the law. But she made clear the move would have strong support. “We support the inclusion of this national law,” Lam said, according to an unofficial translation of a press conference transcript. She said the government will “clarify the legal framework and legal procedures for the implementation” of the law in Hong Kong. “We must have the ability to counteract” what she called “unreasonable” foreign sanctions. “The final decision lies with the Standing Committee of the National People's Congress.”
The law, passed in June (see 2106150030), is expected to give Beijing broad discretion to penalize companies for obeying U.S. and other countries' restrictions against China, and could create compliance challenges for multinational companies that will be forced to choose between obeying China's laws or adhering to U.S. sanctions (see 2107080057). Lam’s comments have now extended those same worries to U.S. companies operating in Hong Kong, said Doug Barry, spokesperson for the U.S.-China Business Council.
“Caught in the middle of a trade war between the world’s largest economies, the results could have dire consequences for U.S. banks and other companies that have operated in China for decades,” Barry said in an Aug. 10 email. “At the very least it will increase costs, uncertainty, and risk of doing business there.” But Barry added that it remains unclear how “aggressively” China will enforce the sanctions law. “China knows that heavy-handed pressure on foreign companies risks killing the goose that lays golden eggs,” he said. “But these laws are in part a reflection of China’s self-confidence and may include a willingness to suffer losses” as it prioritizes “its security and its primacy over everything else.”
Despite Lam’s comments and the passage of the law earlier this year, Barry said USCBC members continue to show “little interest” in leaving China. He said the USCBC urges both the U.S. and China to resume negotiations. “Our members are revising their risk mitigation strategy. None has told us they’re leaving,” he said. “But the situation is very worrying and could get worse, not only for the companies involved but for the global economy.”