Jack Lange and Tara Joseph warn that Hong Kong could easily have faced heavier sanctions from a U.S. that no longer clearly sees its distinctions from the mainland. So it is vital for the government and business community to emphasise what makes it unique
The escalating trade hostilities between the United States and mainland China pose a variety of risks to Hong Kong. But the sharpened focus on U.S.-China relations also creates an opportunity for Hong Kong’s government and business community to draw attention to the city's unique values and strengths.
At this juncture – when the U.S.’ appreciation of the distinctions between mainland China and Hong Kong is more important than ever, but shows signs of dimming in the fog of conflict – we cannot let that opportunity pass.
U.S. policy is not being driven solely by the wilfulness of Donald Trump. A consensus has developed in the U.S. that the U.S.-China economic relationship has become severely unbalanced, and the reset button needed to be pushed. This largely results from cumulative impatience with the lack of progress on market access issues, and what is viewed as an intolerable disequilibrium in flows of advanced technology.
Trade surpluses and deficits dominate headlines but are just part of the story. Grievances about the lack of reciprocity in treatment of foreign investment, and both economic and national security concerns relating to technology transfers, absorb comparable amounts of attention in Washington, and are in many ways more complex and intractable.
There are widespread objections to Trump’s use of tariffs to address these issues. But the issues themselves are deep, structural and will not be resolved soon – even if Trump declares victory and moves on.
Prolonged U.S.-China trade tensions will affect Hong Kong. Declining trade volume and deal flow between the U.S. and China already affect many businesses and professional service providers. Supply chains are being disrupted. Exchange rate fluctuations and yuan depreciation hurt many Hong Kong businesses, and the uncertainties and dislocations are already weighing down the stock market.
So far, Hong Kong has not been directly drawn into the web of U.S. government measures targeting China. But one option presented by the U.S. Commerce Department on tariffs on imports of aluminium earlier this year was to impose high tariffs on mainland China, Russia, Venezuela, Vietnam … and Hong Kong. That set off alarm bells in government and business circles.
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