Hong Kong’s multinational companies worry about the impact of the new law

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Hong Kong Update

As tensions between the United States and China intensify, multinational companies in Hong Kong have been struggling to avoid tripping on the tricky diplomatic path that keeps the two countries aside.

Now, foreign companies in Hong Kong worry that this task will become more difficult.

According to official Chinese media reports, a new law designed to punish Western companies that comply with US sanctions may be expanded this year to include operations in Asian financial centers.This might make the company Wedge Between complying with U.S. regulations or being sued in a Chinese court.

Such a move will follow other China’s regulatory changes have frightened global capital. Beijing’s regulatory changes in the technology and education industries in recent weeks Lower valuation China’s top Chinese companies make investors nervous.

The earlier national security law that China imposed on Hong Kong in the middle of last year was interpreted by some as prohibiting banks from complying with U.S. orders designed to punish China for its harsh response to anti-government protests in 2019.However, Hong Kong prosecutors and The regulator did not explain The law is like this.

So far, the bank has closed the accounts of a handful of Hong Kong officials who have been sanctioned by the United States because of Beijing’s severe political repression on Chinese territory without strong opposition from China.Most senior managers can Tell The worried analysts on the earnings call, they mastered geopolitics and moved on.

It can be said that the United States has also maintained its firepower for fear of harming its own companies and banks in the process, or causing chaos in the global financial system. For example, no bank has been hit by secondary sanctions for still dealing with sanctioned Hong Kong officials under Trump-era laws.

Recently, the Biden administration Business advisory issued Warn banks and companies of the dangers of doing business in Hong Kong. But it did not impose any new legal obligations on them.

This The new anti-sanctions law passed by Beijing in June Outline a broad legal framework that not only prohibits companies and individuals from imposing sanctions on Chinese companies, but also allows affected companies to sue Western companies for compensation.

It also allows countermeasures against companies, executives, and their families, such as freezing property and canceling visas, and deporting people from China.

Extending this to Hong Kong will definitely make the business more complicated. Daniel Tannebaum, a partner at Oliver Wyth Consulting, said: “Anytime you see this kind of regulation in a large and complex currency center, you obviously feel worried.”

Benjamin Kostrzewa, a sanctions expert at Hogan Lovells in Hong Kong. He added: “The new private litigation rights in China’s anti-foreign sanctions law will definitely make many companies nervous.” He said that companies should actively check their connections with any companies that may be sanctioned by the United States.

But because Chinese laws are often vague, companies must wait until they see any signs of enforcement before they can figure out how far apart they are between the West and China. Hong Kong companies have not panicked yet.

A bank executive said: “We expect China to be pragmatic, not so much biting, as barking.” “Many U.S. companies have imposed sanctions by the U.S., haven’t we, we haven’t seen them being affected by China.” Sanctions.”

Tannebaum stated that the law “may be a way of governing the country to some degree” rather than something that will have a major impact on companies. Of course, Hong Kong officials have voiced in recent days to try to calm international business, saying that if China continues to extend the law to Hong Kong, it must enact local legislation, which may make its implementation more nuanced.

It can also encourage China to exercise caution in order to maintain the flow of foreign investment. Kostrzewa said: “China may strike a balance between the broad language of the law and the narrower scope of enforcement.”

Either way, Western companies must realize that they are in uncharted territory. As the past few weeks have shown, for regulatory and political reasons, China is much less hesitant to interrupt capital flows.

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Twitter: @primroseriordan

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