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Hong Kong's extradition bill could plunge it into the US-China trade war

Theron Mohamed , Business Insider US
 Jun 13, 2019, 01:54 PM
HONG KONG, HONG KONG - JUNE 13: Lawmakers Claudia
Lawmakers Claudia Mo Man-ching and Gary Fan Kwok-wai on their way to Government House along with 14 lawmakers on June 13, 2019 in Hong Kong China. Hong Kongs Legislative Council delayed a second reading of the controversial extradition on Thursday after police and protesters clashed outside government buildings as tensions continue over the bill that would allow suspected criminals to be sent to the mainland. An estimated 1 million people took to the streets against the bill on Sunday as clashes between demonstrators and the police erupted after the peaceful march in Hong Kong while many believe the proposed amendment would erode the citys legal protections, placing its citizens at risk of extradition to China. (Photo by Anthony Kwan/Getty Images)
  • Hong Kong lawmakers are considering a bill that would allow extradition of residents to mainland China.
  • Passing the law could lead to the US revoking Hong Kong's special commercial status, potentially exposing it to tariffs on Chinese goods.
  • It could also lead foreign companies to flee Hong Kong rather than risk ending up in China's legal system.
  • However, America may hesitate to clamp down on trade with Hong Kong, as it ran a surplus of nearly R504 billion with the territory in 2018.
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Hong Kong lawmakers are considering a bill that would allow extradition of residents to mainland China. Passing the law could lead to the US revoking the territory's special commercial status, potentially exposing it to tariffs.

Crowds of protesters gathered to oppose the legislation this week, fearing it would open the door to political opponents, journalists, and others being slapped with bogus charges, carted off to face justice in the Chinese legal system, and being forced to hand over private information and corporate secrets.

The US treats Hong Kong as a "non-sovereign entity distinct from China" under its "One Country, Two Systems" framework, according to the State Department. The agency has expressed "grave concern" about the extradition bill, warning it could erode Hong Kong's independence, business environment, and "long-standing protections of human rights, fundamental freedoms and democratic values," according to Bloomberg.

If Hong Kong passes the law and begins handing over Americans and corporate documents to the Chinese government, it could put at risk its "long-established special status in international affairs," said the state department, according to Reuters. Without it, Hong Kong could be subject to US tariffs on Chinese goods, which may rise to 25% across the board if a trade deal isn't struck soon.

Foreign companies might also flee to other countries such as Singapore, said Michael Every, head of Asia-Pacific financial markets research for Rabobank in Hong Kong, according to Forbes.

However, America may think twice about stripping Hong Kong's special status given the pair's trade relationship. It exported $50.6 billion (R750 billion) in goods and services to the territory in 2018, and imported $16.7 billion (R247 billion), meaning it ran a trade surplus of nearly $34 billion (R504 billion), according to the US Trade Representative. A trade war could lead to US companies paying significantly more to trade items such as electrical machinery and diamonds.

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