US warns firms about risks of doing business in Hong Kong amid China's new security law

A new national security law was passed last year in Hong Kong, which prompted the Biden administration to advise US businesses of possible risks to their operations and activities there. The Departments of State, Treasury, Commerce and Homeland Security have issued a warning to firms in Hong Kong that they are subject to the territory's regulations, notably the national security statute, which has resulted in the detention of foreign citizens, including one US citizen.

According to the report, Businesses face hazards from electronic surveillance without warrants and the handing over of company and customer data to authorities.

Chinese intervention in compliance between companies and foreign sanctions

Chinese authorities may retaliate against individuals and companies who comply with foreign and US sanctions. Individuals and businesses should be aware of the potential implications of engaging with sanctioned individuals or entities. The warning comes just over a year after former President Donald Trump ordered the termination of Hong Kong's special status under US law, blaming China for "oppressive activities" against the former British colony. Businesses should examine the reputational, economic, and legal risks of having a presence or workforce in Hong Kong, according to the guidance, and do due diligence.

Several recent developments in Hong Kong pose substantial operational, financial, legal, and reputational dangers to international corporations, according to a senior Biden administration official. He also stated that the PRC government and the Hong Kong government both maintain policies of political and economic dictatorship that hinder the ability of individuals and businesses to operate in a free and predictable manner.

The warning comes just days after the US increased its cautions to corporations about the growing risks of having a supply chain and investment ties to China's Xinjiang region, citing forced labour and human rights violations there. The administration put 14 Chinese corporations and other entities on its economic blacklist last week in response to alleged human rights violations and high-tech surveillance in Xinjiang.