In broadside against China, Trump moves toward ending Hong Kong privileges

[WASHINGTON/HONG KONG] President Donald Trump on Friday ordered his administration to begin the process of eliminating special US treatment for Hong Kong to punish China, but stopped short of an immediate end to the territory's cherished privileges that have helped it remain a global financial centre.

In making the announcement, Mr Trump used some of his toughest rhetoric yet against China, saying Beijing had broken its word over Hong Kong's autonomy by moving to impose new national security legislation and the territory no longer warranted US economic privileges.

At a White House news conference, Mr Trump called this a tragedy for the people of Hong Kong, China and the world, having already attacked Beijing's handling of the coronavirus pandemic, which began in the Chinese city of Wuhan. Mr Trump said China's "malfeasance" was responsible for massive suffering and economic damage worldwide.

"We will take action to revoke Hong Kong's preferential treatment as a separate customs and travel territory from the rest of China," Mr Trump said, adding that the United States would also impose sanctions on individuals seen as responsible for "smothering - absolutely smothering - Hong Kong's freedom".

He did not name any of the potential sanctions targets. Mr Trump said his announcement would "affect the full range of agreements we have with Hong Kong," from the US extradition treaty to export controls on dual-use technologies and more "with few exceptions".

"Our actions will be strong, our actions will be meaningful," Mr Trump added.

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China's state-run Global Times newspaper called Mr Trump's move towards erasing Hong Kong's privileges "recklessly arbitrary".

Mr Trump gave no time frame for the moves, suggesting he may be trying to buy time before deciding whether to implement the most drastic measures that have drawn strong resistance from US companies operating in the territory.

He also said he was issuing a proclamation on Friday to better safeguard vital university research by suspending the entry of foreign nationals from China identified as potential security risks.

Sources, including a current US official, told Reuters on Thursday that the latter move, which had been expected, could affect 3,000 to 5,000 Chinese graduate students.

US stocks finished mostly higher on Friday after the market viewed Mr Trump's announcement as less threatening to the US economy than investors had feared.

REVVED-UP RHETORIC

Mr Trump's revved-up rhetoric against China comes in the midst of a 2020 re-election campaign in which opinion polls show US voters increasingly embittered toward Beijing, especially over the novel coronavirus.

However, Mr Trump may be mindful that a more serious rupture with Beijing could upend his hard-fought Phase One trade deal with the world's second-largest economy, which he has counted on for economic benefit in major US farm states.

Mr Trump also will have to take into account the effect on the more than 1,300 US firms that have offices in Hong Kong and provide about 100,000 jobs.

Daniel Russel, the top US diplomat for East Asia until early in Mr Trump's administration, said Mr Trump's Hong Kong provisions remained "fairly vague" and added that "it remains to be seen how quickly and extensively they are implemented".

But Mr Russel said there is a risk that removing Hong Kong's special status might inadvertently accelerate its loss of autonomy.

"Beijing clearly calculated that the collateral damage to their overall interests from US retaliation would be manageable," Mr Russel added.

While Mr Trump gave no time frame for moves, two people familiar with the matter said that among the options under consideration were to set a deadline of a year from now for China to ease the political situation in Hong Kong, or else face full revocation of its special status.

Such a deadline would buy time to avoid a major rupture in relations ahead of the Nov 3 US election. By the end of that period, however, Mr Trump might no longer be in office to make the final decision.

Mr Trump's announcement came two days after Secretary of State Mike Pompeo declared that China's erosion of Hong Kong's autonomy meant the territory no longer warranted special treatment under US law.

Earlier, Hong Kong's Beijing-backed government told Washington to keep out of the debate over the national security legislation being imposed by China, and warned that withdrawal of the financial hub's special status could backfire on the American economy.

"Any sanctions are a double-edged sword that will not only harm the interests of Hong Kong but also significantly those of the US," it said in a statement late on Thursday.

It said that from 2009 to 2018, the cumulative US trade surplus of US$297 billion with Hong Kong was the biggest among all US trading partners.

In the latest assertion of Beijing's authority over Hong Kong, China's Ministry of Public Security (MPS) said it would "direct and support Hong Kong police to stop violence and restore order".

Chinese authorities and Hong Kong's government say the legislation poses no threat to the city's autonomy and the interests of foreign investors will be preserved.

REUTERS