Several prominent voices, including Republican senator Marco Rubio and veteran diplomat Richard Haass, have already called on the US to revoke Hong Kong’s special status. Such a move would be “less about punishing China and more about being honest about the unavoidable consequences of Hong Kong no longer being different from the rest of China, if that becomes the case,” said Patrick Chovanec, an advisor at Silvercrest Asset Management and an expert on the Chinese economy.

China has threatened the US with countermeasures if Washington decides to punish Beijing for its plans to enact the national security law, saying other countries have no right to interfere with Hong Kong’s internal affairs. Some Hong Kong politicians, including the pro-Beijing lawmaker Regina Ip, have tried to dismiss the prospect of US sanctions by saying they wouldn’t affect the local economy very much. Daniel Fung, a Hong Kong barrister and a national delegate to the Chinese People’s Political Consultative Conference, said“it’s premature to talk about revocation of status or to elevate this to the level of an iconic crisis.” 

Others think the US is bluffing. “Last I checked, the US is enjoying a $31 billion trade surplus [in merchandise trade] with Hong Kong, so any serious disruption such as the revocation of trade status will harm the US more,” said Songnian Chen, a professor of economics at the Hong Kong University of Science and Technology. Though Hong Kong would be badly hurt if it were to lose its special status, he added, China would just come out stronger. “As long as there are profits [in China] to be made, capital is a lot smarter than politicians and opinion leaders, and will find its way there.”

That might be an optimistic outlook, given that Hong Kong continues to be an important part of China’s economy. While the size of Hong Kong’s economy is equivalent to less than 3% of that of China’s, its unique legal and financial systems means it plays an outsize role in attracting international capital to China. More than 60% of all foreign direct investment in China was channelled through Hong Kong as of 2018, according to China’s national statistics. The city is also a big depository of assets, with Chinese banks holding more assets in Hong Kong than lenders from any other region, according to data from the Hong Kong Monetary Authority.

Any sudden disruption to this set-up could unleash unpredictable ripple effects across China’s financial system.  But Chovanec pointed out that even without the US imposing sanctions, China’s undermining of Hong Kong’s autonomy is already enough to destroy global confidence in the city’s legal and financial systems.  “Beijing is killing the goose that lays the golden eggs,” he said. “Its own goose, not a US goose.”

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