The United States’ decision to revoke preferential treatment for Hong Kong will have “little impact” on the city’s economy, according to Financial Secretary Paul Chan Mo-po.
He said Hong Kong was experienced in handling financial challenges, had anticipated a fallout from worsening China-US trade friction, and had nothing to be afraid of.
Given US action targeting the city and restricting exports of high-technology products, he said Hong Kong should aim to strengthen ties with other trading partners, including countries in Europe and Japan.
He said this in an interview with Global Times, a nationalist tabloid affiliated with the Communist Party mouthpiece People’s Daily, hours before President Donald Trump’s official announcement on Friday that the US would begin eliminating Hong Kong’s special policy exemptions.
Earlier, amid concern over Beijing’s decision to draft a national security law tailor-made for Hong Kong, US Secretary of State Mike Pompeo declared that the city no longer maintained a high degree of autonomy from the mainland.
Chan told the mainland tabloid that Hong Kong products made for export to the US “accounted for less than 2 per cent of the city’s overall manufacturing”, worth about HK$3.7 billion, and were less than 0.1 per cent of the city’s overall exports.
“We have been preparing for all the different scenarios,” he added.
He reiterated the government’s position that Hong Kong’s status as a special administrative region (SAR) of China was enshrined in its mini constitution, the Basic Law, which has been in place since Britain returned the city to Beijing in 1997.
Referring to the World Trade Organisation, he said: “The law permits Hong Kong to join the WTO as Hong Kong, China, showing that the SAR’s independent tariff zone is granted by the mainland, not by any foreign country.”
Hong Kong enjoys a “special status” as a separate customs territory with zero-tariff trade with various other trading partners, and since 1997 had low or no tariffs with the US, unlike other mainland cities.
Given Trump’s latest moves and tightened restrictions on tech exports from the US, Chan said Hong Kong should strengthen trade relations with trading partners in Europe and Japan, which could provide alternatives to products from the US.
He was confident the measures imposed by the US would have little impact because Hong Kong’s economy was dominated by the services sector.
He also assured the city’s business sector that the proposed national security law would not result in restricted capital flows or foreign exchange control.
“When we talked with foreign business representatives last year, many raised the same concern about Hong Kong's investment environment: the city's security, which had been severely affected by the social unrest,” he said, referring to the months of increasingly violent anti-government protests triggered by an unpopular extradition bill which was withdrawn.
As for foreign investors in the city, he said: “As long as foreign investors are not engaged in activities relevant to national security matters, they have nothing to worry about.”
He added that there had been no palpable outflow of capital according to banking and asset management business representatives, but stressed that the city’s authorities remained “highly cautious” over security of the financial markets.
“Two years ago when China-US trade friction began, the Hong Kong SAR studied the situation, forecasting that confrontations might spread from trade to other sectors, likely finance. We've prepared for it,” he said.
“We have confidence and experience dealing with challenges as the financial market in Hong Kong has gone through a lot. With support from the whole country, we have nothing to be afraid of.”
A fool isn’t someone who is wrong, a fool is someone who is afraid of being wrong.