The Biden administration issued a blanket advisory last Friday warning about the risks of doing business in Hong Kong as China continues to clamp down on political and economic freedoms in the territory.
Many of the risks highlighted by the U.S. government stem from the implementation of China’s controversial National Security Law (NSL) that was enacted last year, along with other recent actions taken to restrict the autonomy of Hong Kong. These developments “present clear operational, financial, legal, and reputational risks for multinational firms,” the advisory warns.
Risks to U.S. Businesses
“Businesses should be aware that the risks faced in mainland China are now increasingly present in Hong Kong,” according to the administration, which highlights the following examples:
- Businesses operating in Hong Kong, as well as individuals and businesses conducting business on their behalf, are subject to the laws of Hong Kong, including the National Security Law. Foreign nationals, including one U.S. citizen, have been arrested under the NSL.
- Businesses face risks associated with electronic surveillance without warrants and the surrender of corporate and customer data to authorities.
- Businesses that rely on a free and open press may face restricted access to information.
- Individuals and entities should be aware of the potential consequences arising from certain types of engagement with sanctioned individuals or entities.
- Businesses operating in Hong Kong may face heightened risks and uncertainty related to China’s retaliation against companies that comply with sanctions imposed by the U.S. and other countries.
A State Department fact sheet recommends that “[i]n order to mitigate reputational and other risks, businesses should apply industry due diligence policies and procedures to address applicable and identified risks.”
China’s foreign ministry branch in Hong Kong reportedly said new U.S. sanctions on Chinese officials and its updated business advisory on the city are “extremely rude” and “extremely unreasonable” bullying acts with “despicable intention.”
A spokesperson for the Commissioner of China’s Ministry of Foreign Affairs in Hong Kong strongly condemned the U.S. actions, saying they were blatant interference in Hong Kong and China’s internal affairs.
“(U.S.) worries about Hong Kong’s business environment are fake; its attempt to destroy Hong Kong’s prosperity and stability, endanger China’s national security, and hamper China’s development is real,” the government spokesman said.
Need More Information?
Companies with questions about their sanctions compliance obligations should contact Treasury’s Office of Foreign Assets Control at email@example.com or 1-800-540-6322.