China: U.S. Will ‘Draw Fire Against Itself’ if It Curbs Hong Kong Investments

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U.S. Treasury Secretary Steven Mnuchin told reporters on Thursday that he was working on “a variety” of capital markets responses to China’s new Hong Kong National Security law, which included some actions that would restrict the flow of U.S. capital through the city, the Nikkei reported.

Chinese Foreign Ministry spokeswoman Hua Chunying responded to the secretary’s statement on Friday at a regular press briefing:

The U.S. has very deep and direct interests in Hong Kong – a large number of American residents, many financial companies, and a huge trade surplus with the HKSAR [Hong Kong Special Administrative Region] … The U.S. will end up damaging its own interests if it harms Hong Kong.

Hua suggested that China was ready to reject any foreign intervention in what it considers its internal affairs with Hong Kong.

“The [possible] U.S. action seriously violates international law and the basic norms of international relations,” she said.

Last month, China passed a draft national security law that will put an end to Hong Kong’s limited autonomy, which it has enjoyed since 1997 after it was handed back to China from Britain post-colonial rule. In response, the U.S. government said it will revoke Hong Kong’s special status under U.S. law, which sees Hong Kong treated separately from China in terms of trade export and economic control.

As part of this withdrawal of special treatment, U.S. President Donald Trump ordered a U.S. Treasury-led panel last week to recommend actions within 60 days that would protect U.S. investors from the failure of Chinese companies to abide by U.S. accounting standards and comply with disclosure rules.

In a virtual press briefing on Thursday, Secretary Mnuchin was asked if the U.S. Treasury was considering measures to restrict U.S. capital flows through the Hong Kong economic market.

“We are,” he replied. “I don’t want to prejudge what the report will be, but we will come back with a variety of recommendations.”

Mnuchin said that the President’s Working Group on Capital Markets – an interagency group of U.S. financial regulators of which he is the chair – will analyze “accounting issues related to Chinese companies” to produce a thorough report with recommendations “that strikes the right balance between protecting our capital markets and dealing with this situation as well.”