Hong Kong: A Storm Shifting To the US From 8,000 Miles Away

Written by Katie Leung

As one of the top three global financial hubs, Hong Kong is known for its hustle and bustle. Yet, the city was partly forced to a standstill by nearly two million protestors on June 16th, 2019. Hong Kong citizens took to the streets following earlier protests against a controversial extradition bill which threatens to erode the autonomy and legal transparency in the SAR (Special Administrative Region). Following the June 16th protests, Hong Kong’s situation intensified with violence against alleged police brutality and “white terror”. As demonstrations enter their 21st consecutive week, Hong Kong has seen a slew of responses from the West. From the House passing of the Human Rights and Democracy Act to American companies taking a stance on the conflict, Hong Kong’s crisis is proving to be an economic force that reaches far beyond its borders. Many are left wondering: what global economic impacts have emerged from this conflict? 

On October 16th, the Hong Kong Human Rights and Democracy Act was passed by the United States House of Representatives. The law, though proposed prior to the eruption of protests this year, directly addresses the United States-Hong Kong Policy Act of 1992, which granted the region its special trade status. This status has spared much of Hong Kong from the effects of the ongoing China-US trade war and instilled investors with a greater sense of trust in its stock markets compared to that of mainland-China’s. The Democracy Act would require annual evaluation of Hong Kong’s autonomy, which was promised in the signing of the Sino-British Joint Declaration. Most importantly, the US continues to have worries regarding the region’s suitability for its special American trade privileges. 

Congress has stated that the extradition bill can have “significant risks to US national security and economic interests”. In terms of economic relations, the US has more than 1,300 firms present in the island territory. In addition, the US has the largest trade surplus with Hong Kong, amounting to $32.6 Billion in 2017. To date, the United States also remains the largest origin for foreign investments into the city. With the backdrop of support for the pursuance of democracy and human rights, it is not hard to understand the American interests that are behind the passing of the Democracy Act. However, the Chinese government has reacted harshly and negatively to the bill, responding that the US should expect “forceful fightback” and further repercussions should the bill be passed. With trade talk tensions with China already running high, US lawmakers’ stance could further jeopardize a trade conflict that has cost more than $10 Billion to date. Richard Harris, CEO of asset management firm Port Shelter Investment Management, believes that “if there is major action by Chinese forces in Hong Kong, that will certainly be included in terms of the trade deal”. Furthermore, US Commerce Secretary Wilbur Ross expressed that no matter how much of an impact Hong Kong has on the US, there will definitely be significant influence on China. The semi-autonomous region still operates as one of the country’s main international trading hubs, which would further complicate hopes of reaching a trade deal. 

US companies have also not been spared from the repercussions of rising tensions between Hong Kong and mainland-China. NBA Houston Rockets General Manager Daryl Morey was heavily condemned by China after tweeting and deleting a message supporting the Hong Kong protests. Chinese sponsorships and advertising cancellations are expected to cost the team $25 Million this season, which could extend into future losses. LeBron James responded with disappointment and claimed that Morey was not “educated” enough to understand the Hong Kong situation, which drew intense criticism and boycotting from fans in the US. Around the same time, Blizzard, a well-known developer for games such as World of Warcraft, disqualified a pro-player from a tournament after he expressed support for the protests in an interview. Though the company has lightened their punishment since, Blizzard still faces backlash as players rush to delete its games, cancel pre-orders, and call for boycotts of the company’s products. Other major American firms have also been drawn into the Hong Kong controversy, such as Apple, Vans, Google, Viacom, and Tiffany and Co. The fine line between balancing Chinese and American values has suddenly left corporate giants and their investors at stake. 

From trade talks to fluctuations in revenue for major American companies, the US is deeply ensnared by the Hong Kong movements 8,000 miles away. Within NYU, prevailing sentiment among some students is that Hong Kong’s turmoils will have no major foreseeable impact on the US, economically and financially. Despite minor disruptions in consumption patterns from Americans, some believe that it is “largely political change”. However, CAS junior Catherine Hodgson, who majors in Politics and Economics, offered a different perspective on the situation. 

“I think some people are dismissing the Hong Kong situation because they are only focused on the consumer side – and US consumers haven’t at this point made major financial impact.” She argues that along with ongoing trade talks, this can make companies question their financial and manufacturing security in China. The situation in Hong Kong, as Hodgson explains, has only shown American companies that the peace and prosperity they have enjoyed in China may not be here to stay. As a result, it may instead be more profitable and stable to move manufacturing elsewhere. She concluded, “Boycotts of goods have shown to be a kind of fad. But companies analyzing the risk of doing business in a country – that’s something that really needs to be looked into more closely.”

While the protests give no indication that they will end any time soon, there is no doubt that American investors should be keeping a close eye on this seemingly distant minor disruption. With the passing of the Democracy Act, Hong Kong will likely be brought to a new economical low following its recent official entry into recession. The Act was passed in the name of maintaining human rights and leaves the US as an ally of the protests, but the underlying intent still mostly revolves around safe-guarding American interests. There is no way to determine the extent of escalation of the conflict in Hong Kong. However, the intricate ties between the US, Hong Kong, and China may mean that the financial interests of each economy will not be spared by clashes in the region.

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