US warns companies of risk to Hong Kong operations, says threat on par with Chinese firms

Washington DC [US], September 7 : US government agencies have issued an advisory warning American companies that the risks to their operations in Hong Kong are becoming on par with those in China due to the city state's new national security law introduced earlier this year.
"Businesses should be aware that the risks they face in (China) are now increasingly present in Hong Kong," the US State Department said in a statement on Friday in an updated business advisory for the region jointly released by along with five government departments including agriculture, commerce, homeland security and treasury.
These laws further erode fundamental freedoms and protections for human rights in Hong Kong, the advisory stated.
Many of these risks stem from the implementation of the Law of the People's Republic of China (PRC) on Safeguarding National Security in the Hong Kong Special Administrative Region, also known as the National Security Law (NSL), and the March 2024 Safeguarding National Security Ordinance (SNS Ordinance or "Article 23").
The NSL, the SNS Ordinance, and actions by China and Hong Kong authorities, such as the imposition of bounties, may negatively affect businesses' staff, finances, legal compliance, reputation, and operations, the US State Department said.
The business advisory was first issued in the year 2021, said the State Department, which said that the updated advisory provides companies operating in Hong Kong with information that can assist them in making informed business decisions and properly assessing risk.
As per the advisory, firms operating in Hong Kong face potential legal, regulatory, operational, financial, and reputational risks, including of increased scrutiny, potential financial penalties, and legal actions for perceived violations of the NSL or the SNS Ordinance.
It further said that businesses operating in Hong Kong may face conflicting jurisdictional requirements and liability in connection with sanctions compliance efforts. Failure to adhere to US sanctions can result in civil and criminal penalties under US law, it said.
Although Hong Kong is part of China, Hong Kong maintains a separate common law legal system for commercial and civil litigation. Hong Kong maintains the Hong Kong International Arbitration Centre (HKIAC), which offers alternative dispute resolution services for commercial disputes.
It also maintains a separate currency and separate regulatory structures to supervise companies operating in the territory. Hong Kong continues to exercise independent authority in the implementation of commercial agreements, administers a separate customs territory, sets a monetary policy autonomously from the PRC, and has maintained its own representation in many international organisations and multilateral entities, including the Asia-Pacific Economic Cooperation, the Financial Action Task Force, and the World Trade Organization.
However, China's imposition of the NSL in Hong Kong in June 2020 led to major structural changes that the US State Department noted "significantly reduced Hong Kong's autonomy and undermined human rights and fundamental freedoms."
Businesses operating in Hong Kong may face retaliation and countermeasures in China for adhering to sanctions imposed by the United States and other countries. Hong Kong authorities officially recognize UN sanctions, but not US sanctions, and Hong Kong's financial sanctions regime is governed by its two ordinances on UN sanctions and UN anti-terrorism measures.