US revocation on Hong Kong: Big symbolism, less certain effect

President Donald Trump's administration has taken the major step of revoking Hong Kong's special status under US law, but even US officials acknowledge the move is unlikely to sway Beijing.

Here are some of the key questions following Secretary of State Mike Pompeo's certification to Congress on Wednesday:

Pompeo made the determination hours before China's rubber-stamp parliament, the National People's Congress, approved plans to move forward on a new security law that has sparked fresh protests in Hong Kong.

The law would punish subversion and other perceived threats to China's control over Hong Kong, to which Beijing promised autonomy for 50 years under a deal forge before it regained control of the territory from Britain in 1997.

The US Congress last year approved a law meant to back Hong Kong's pro-democracy movement that required the administration to certify if the financial hub still deserved the separate status under US law it has enjoyed since the time it was a British colony.

"No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China," Pompeo said.

The decision comes amid soaring tensions between the world's two largest economies, with President Donald Trump seeking to blame Beijing for the COVID-19 pandemic that has killed more than 100,000 people in the United States.

Trump, who has toughened the tone on China as he prepares for November elections, will decide what action to take on Hong Kong.

At the most drastic, he could abolish all special commercial privileges and treat the financial hub, which traded nearly $67 billion with the United States in 2018, as any other Chinese city.

He could alternatively take small steps such as restricting visas for Hong Kong officials.

David Stilwell, the top State Department official for East Asia, said the measures would be "as targeted as possible" and acknowledged that the United States did not want to be seen as punishing the people of Hong Kong.

Pompeo's certification could ultimately mean nothing in practical terms, said Jahangir Aziz, head of emerging market economics at JP Morgan Global Research.

But if Trump chooses to apply the finding widely, "it could cause extensive damage" to trade, Aziz said.

"We can even think about, what does the legal treatment of business contracts signed under Hong Kong law mean, what is the status of the Hong Kong dollar as a recognized legal currency," he said.

But Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, noted that Hong Kong is no longer a major manufacturing center, with the vast majority of goods it exports to the United States originally coming from elsewhere in Asia.

"Pompeo's just grabbing at the nearest thing he can do, trying to catch a headline of who is being tough on China," Lardy said.

Lardy saw the move as part of the administration's strategy of "imposing costs" on China in their rising areas of disagreement.

"But the cost that we would be imposing on China because of this is very, very small," he said.

"To the extent that we are imposing a cost, it is on the Hong Kong people and foreign businesses, especially US businesses."

Chinese President Xi Jinping has clamped down hard on any signs of dissent within the communist nation and is seen as eager to crush a growing separate identity among young people in Hong Kong, which saw months of massive and sometimes violent protests last year.

Stilwell, the assistant secretary of state, said Pompeo's certification was aimed at dissuading China on the security law but conceded: "We're not hopeful that Beijing will reverse itself."

Representative Chris Smith, a Republican and longtime campaigner on human rights in China, urged Trump to follow through on sanctions to force Beijing's hand.

"After years of human rights admonishment and cheap rhetoric devoid of any meaningful penalties, Xi has concluded that the West is all talk, no action," Smith said.

Representative Eliot Engel, a Democrat who heads the House Foreign Affairs Committee, said that Hong Kong's pro-democracy movement enjoyed bipartisan support -- but questioned the administration strategy, saying it needed to be clear and decisive.

"US policy toward Hong Kong should not be a pawn in whatever games Secretary Pompeo or President Trump is playing with Beijing," Engel said.