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Analyzing the U.S. business advisory for Hong Kong and how it could affect global finances

The United States government Friday warned Americans about the risks of doing business, studying, or investing in Hong Kong. The U.S. also sanctioned Hong Kong officials, accusing them of eroding the city’s freedoms as China continues to force its will on Hong Kong. Nick Schifrin reports with Michael Hirson, the China lead for the Eurasia Group, an international business consulting firm.

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  • Judy Woodruff:

    For the first time, the United States government today warned American companies and individuals about the risks of doing business, studying, or investing in Hong Kong.

    The Biden administration also sanctioned Hong Kong officials and accused them of eroding the city's freedoms, as the Chinese government continues to force its will on Hong Kong.

    Here's Nick Schifrin.

  • Nick Schifrin:

    Judy, today's business advisory says, because of the 2020 national security law that Beijing imposed on Hong Kong, Americans are at risk of arrest, and businesses are at risk of electronic warrantless surveillance, restricted access to information because of a crackdown on the media, and Chinese legal consequences if they comply with American sanctions.

    Also today, the U.S. sanctioned seven officials in the Chinese Communist Party's primary office in Hong Kong.

    For more on all of this, we turn to Michael Hirson, the China lead for the Eurasia Group, an international business consulting firm.

    Michael Hirson, welcome back to the "NewsHour."

    How significant ask it that the U.S., for the first time, has issued this advisory about Hong Kong?

  • Michael Hirson:

    Well, I don't think the findings in the advisory are going to be anything new or shocking to the business community.

    It does represent, I think, something of a deterioration in Hong Kong's business environment. And it also shows you that the Biden ministration is quite willing to push the envelope, essentially, on this issue, even though it's quite sensitive to China.

  • Nick Schifrin:

    You talk to businesses in Hong Kong. What are they saying? Are they planning on any changes because of this business advisory?

  • Michael Hirson:

    I don't think the advisory is going to lead to any kind of rapid change in terms of how businesses view Hong Kong.

    I think, for financial services companies, Hong Kong is really still important as a capital gateway to China. But I think there are other companies who have maybe used Hong Kong as a Asia regional hub for whom this is going to matter. It's going to play in conversations, for example, with their board, where there's a diversity of views as to whether or not it makes sense to be in Hong Kong.

    And now that the State Department has put out this advisory, I think it does give a further color to those conversations.

  • Nick Schifrin:

    Let me Zoom into the final warning in the warning today, and that American businesses could face Chinese legal consequences just for following American sanctions.

    That actually hasn't happened yet. But are businesses worried about it?

  • Michael Hirson:

    It's a serious concern.

    It means that this — essentially this two-way political risk that companies face is not just about values issues, like how you talk about Hong Kong or Taiwan or Tibet, but it's really about policies. It is actually becoming feasibly — excuse me — illegal to implement U.S. sanctions, U.S. laws in Hong Kong.

    Now, I think the reality is going — likely to be a bit nuanced here, because I think Hong Kong authorities are going to be careful not to disrupt Hong Kong's role as a financial center. But it is an area that is, I think, fairly new for firms. And just given the sweeping nature of some of these Chinese laws, it's certainly a possibility.

  • Nick Schifrin:

    We recently talked to a Hong Kong resident and activist, Glacier Kwong, who moved to Europe, because, after the national security law was imposed, she didn't feel safe in Hong Kong.

    Let's take a listen to what she said.

  • Glacier Kwong:

    I think one of the most visible changes I see is people self-censoring themselves. Like, people are afraid to talk about things, like — because, under the law, a lot of things are not allowed.

    The freedom of the press is no longer existing. The freedom of speech, the freedom of expression, the freedom of peaceful assemblies, these are all gone.

  • Nick Schifrin:

    Do businesses share those concerns?

  • Michael Hirson:

    They do.

    So, the canary in the coal mine here are the sectors that are most sensitive to the information environment. And that's technology companies and media companies. And several of those firms have already announced that they're leaving Hong Kong.

    Something like financial services is a bit of a more nuanced area. They're less directly exposed. And so they're worried about it, but it's not yet the kind of factor that would lead them to leave Hong Kong.

  • Nick Schifrin:

    For many years, Hong Kong has been one of, if not the financial hub in Asia.

    Bottom line, has that already changed?

  • Michael Hirson:

    It has changed.

    Essentially, what's happening is, Hong Kong is transitioning from being a global business hub, even an Asian business hub, to more of a capital gateway to China. So, ironically, Hong Kong's importance to the financial sector has actually increased because of U.S.-China financial tensions.

    So Hong Kong is now the place where Chinese companies are going public. It's where U.S. and other investors go to gain exposure to those companies. And it's where financial services firms need to be.

    But the notion that Hong Kong is kind of an all-purpose hub, it's where you would put your data center or where you would put your technology or media operations, I think that's already changed.

  • Nick Schifrin:

    Michael Hirson, thank you very much.

  • Michael Hirson:

    Thank you.

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