(Bloomberg) -- The U.S. is considering a range of sanctions to punish China for its crackdown on Hong Kong, people familiar with the matter said, as the Trump administration weighs whether to declare the former colony has lost its autonomy from Beijing.
The Treasury Department could impose controls on transactions and freeze assets of Chinese officials and businesses for implementing a new national security law that would curtail the rights and freedoms of Hong Kong citizens. Other measures under consideration include visa restrictions for Chinese Communist Party officials, according to two of the people.
Inter-agency discussions are ongoing and no decision has been made on whether or how to employ the sanctions, said the people, who spoke on condition of anonymity because the moves are still under consideration.
President Donald Trump, asked about the possible sanctions at the White House on Tuesday, said his administration is “doing something now” that he will unveil later this week.
“It’s something you’re going to be hearing about over the next -- before the end of the week,” Trump said. “Very powerfully, I think.”
A Treasury Department spokeswoman declined to comment.
China warned that it would retaliate if the U.S. put sanctions on the country or interfered in its affairs.
“If anyone insists on harming China’s interests, China is determined to take all necessary countermeasures,” foreign ministry spokesman Zhao Lijian told reporters on Wednesday. “The national security law for Hong Kong is purely China’s internal affair that allows no foreign interference.” Zhao said it was too early to elaborate on specific responses and that he wouldn’t address hypothetical questions.
Asian stocks were mixed in the wake of the latest Sino-American flare-up, and China’s yuan slipped. Contracts on the three main American equity gauges pointed to gains later on Wall Street.
Beijing regularly threatens to hit back against the U.S. for placing restrictions on its companies or organizations, though it has yet to say how it would target America specifically over the Hong Kong issue.
The Global Times, a hardline Communist Party tabloid, earlier suggested China could place U.S. companies on a so-called “unreliable entities list” in response to new curbs placed on some firms including Huawei Technologies Co. Ltd. this month. China announced it was preparing the blacklist in mid-2019 at the height of the trade war with the U.S., but never said who was on the list or detailed the consequences.
The State Department is to certify Hong Kong’s autonomy under the Hong Kong Human Rights and Democracy Act that Trump signed into law last year -- and a negative determination could see the U.S. reconsider Hong Kong’s special trade status. A senior administration official said the certification announcement could come within a week and said it was doubtful that the U.S. could certify Hong Kong’s autonomy under current circumstances.
Under the U.S.-Hong Kong Policy Act of 1992, Washington agreed to treat Hong Kong as fully autonomous for trade and economic matters even after China took control. That means Hong Kong is exempt from Trump’s punitive tariffs on China, can import certain sensitive technologies and enjoys U.S. support for its participation in international bodies like the World Trade Organization.
Hu Xijin, the editor-in-chief of the Global Times, tweeted on Wednesday that removing Hong Kong’s special status would not be a “powerful” response, and Trump would be bluffing unless he actually sent troops into the city.
Sanctioning individual Chinese officials and entities would leave in tact the broader trading relationship, which serves the interests of hundreds of American companies with regional headquarters in Hong Kong. The U.S. wants to maintain influence among Hong Kong residents in order to promote democratic freedoms in the city, which are still more advanced than any territory under China’s control.
The Trump administration is under increased pressure from Republicans and Democrats in Congress to respond firmly to China’s plans to assert more control over Hong Kong. Yet the U.S. faces a challenge in hitting back at China because any harsh penalties aimed at Beijing would likely also harm both Hong Kong -- and the U.S.
The business and investor community has been anxiously watching tensions rise in recent days. The U.S. Chamber of Commerce on Tuesday called on the Chinese government to preserve Hong Kong’s “One Country, Two Systems” framework and on the Trump administration to continue to pursue a constructive relationship between the U.S. and Hong Kong.
“It would be a serious mistake on many levels to jeopardize Hong Kong’s special status, which is fundamental to its role as an attractive investment destination and international financial hub,” the business group said in a statement.
White House Press Secretary Kayleigh McEnany said Tuesday that the president is “displeased” with China’s efforts and “that it’s hard to see how Hong Kong can remain a financial hub if China takes over.” She declined to elaborate about specific actions the president was considering.
(Updates with Chinese foreign ministry comment in seventh paragraph.)
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