The US has issued a warning to firms over the risks of doing business in Hong Kong after China imposed a replacement national security law there last year.
A new business advisory tells multinational firms that they’re subject to the laws by which their people might be arrested under them.
Other risks may include having to surrender data to Chinese authorities.
President Biden said on Thursday that “the situation in Hong Kong is deteriorating”.
Ahead of the business advisory being issued by the departments of State, Treasury, Commerce, and Homeland Security, the president warned: “The Chinese government isn’t keeping its commitment that it made, how it might affect Hong Kong”.
The national security law was introduced in Hong Kong last year after protests over an extradition law turned violent and evolved into a broader anti-China and pro-democracy movement. It makes it easier to punish protesters and reduces the city’s autonomy.
The advisory covers several other areas including freedom of the press, data privacy, and sanctions imposed by each side.
As a part of the update on Friday, the US also announced sanctions against seven Chinese officials over what it describes as an “erosion of the rule of law”.
Hong Kong security law: what’s it and is it worrying?
US Senate passes sweeping bill to counter China
US Senate passes bill to ban Xinjiang imports
Jeff Moon, a former assistant US trade representative who worked on Hong Kong policy during the Obama administration, told the BBC: “I think this is often quite serious.
“I think it is a reflection of the dramatic changes that have gone on in Hong Kong .”
He acknowledged that many American companies have a presence in Hong Kong. consistent with the American Chamber of Commerce within the city, about 280 companies have regional headquarters there.
It said during a statement that it had been aware “of an increasingly complicated geopolitical environment and its risks”.
“We are here to support our members to navigate those challenges and risks while also capturing the opportunities of doing business during this region,” it said.
Businesses with operations or staff in Hong Kong should consider potential reputational and legal risks, the advisory says.
Mr. Moon added that although Hong Kong is an incredibly valuable economic hub, the so-called “one country, two systems” principle which has come struggling means its appeal to foreign firms will have changed.
However, the advisory doesn’t recommend businesses withdraw from the world.
But Jamieson Greer, a world trade lawyer and former chief of staff to US Trade Representative Bob Lighthizer during the Trump administration, told the BBC that companies may consider leaving as a result.
“China and therefore the US is essentially now telling financial institutions, private equity, other financing institutions, that they’ll need to choose one side or the opposite,” he said.
That could end in a separation of monetary supply chains around the world, he warned.
Beijing said it might follow up with a “firm response” to any action taken by Washington.
“We urge the US side to prevent interfering within the Hong Kong issue and China’s internal affairs in any form,” Chinese Foreign Ministry spokesman Zhao Lijian told a press conference on Friday.
It comes several days after the US warned businesses about having links to China’s Xinjiang region, citing alleged abuses of the mostly Muslim Uyghur minority group and surveillance there.
American firms that also have supply chain and investment ties within the region were told they “could run a high risk of violating US law”, it said.
China has denied previous allegations that the region’s Uyghur population has been subjected to human rights abuses.