City's multinationals face financial risk, caught in US-Beijing tug of war

HONG KONG -- China is preparing to apply an anti-sanctions law on Hong Kong, local news reports say, laying the groundwork to punish foreign financial groups in the territory that comply with Western sanctions.

The Standing Committee of China's National People's Congress will deliberate amendments to the basic laws of Hong Kong and Macao during a four-day session through Aug. 20, state-owned Xinhua News Agency said. The report stopped short of specifying the legislation under debate.

Hong Kong news outlets including the Sing Tao Daily newspaper said the committee will make the law, enacted last month and designed to counter foreign sanctions, applicable nationwide -- including in Hong Kong and Macao.

The law authorizes retaliation against individuals and groups involved in issuing and carrying out sanctions against China. The measures include denial of visas, deportations and seizure of assets located in China. Wilbur Ross, the former U.S. commerce secretary, is one target of the anti-sanctions law.

Applying the legislation to Hong Kong could impact financial institutions in the city that comply with U.S. sanctions. China's law orders organizations and individuals not to cooperate with foreign sanctions, and it gives those harmed by the sanctions the right to sue for damages.

The U.S. responded to Beijing tightening its political grip on the territory by issuing sanctions against Chinese and Hong Kong officials. It is believed that Western financial institutions and Chinese state-owned banks have abided by the American sanctions.

Steve Vickers and Associates, a Hong Kong risk advisory firm, says the anti-sanctions law leaves companies with the difficult task of navigating competing and contradictory rules from the U.S. and China. Any attempts by the U.S. to impose further sanctions may trigger unforeseen consequences, according to the firm.

President Joe Biden's administration sent a written advisory to American businesses this month outlining the risks of doing business in Hong Kong. The text calls on the companies to abide by U.S. sanctions and cites the potential for retaliation by China.