US warns businesses in Hong Kong of heightened legal risks

The US said businesses operating in Hong Kong could fall afoul of national security legislation and also faced heightened legal and regulatory risks — including violating US sanctions — in an alert issued by the Biden administration on Friday.

The advisory said the additional danger was posed by China’s March implementation of the Article 23 security legislation in Hong Kong, which the US has warned could further erode human rights protections and be used to prosecute routine business activities.

American authorities are concerned that lobbying, market analysis relying on government data, publishing media analysis or commentary, or engaging with reporters, think tanks, or nongovernmental organizations could all be classified as threats to national security, according to the bulletin.

“Businesses should be aware that the risks they face in the People’s Republic of China are now increasingly present in Hong Kong,” State Department spokesman Matthew Miller said in a social media post.

The advisory also warned US companies that Russia was increasingly using Hong Kong as a midway point to evade sanctions and export controls imposed because of its invasion of Ukraine, and that the city also served as a hub for chemical and pharmaceutical companies helping to supply precursor chemicals for the production of fentanyl. 

Moreover, Hong Kong is a primary pathway to circumvent export controls related to Chinese semiconductor manufacturing, the US warned.

As a result, US firms should take special care to avoid doing business with individuals or entities that could be subject to sanctions, the bulletin said.

The advisory updated a warning first issued in 2021, shortly after Beijing imposed an initial National Security Law on Hong Kong, and was altered in part to account for changes passed by the city’s Safeguarding National Security ordinance in March. 

Hong Kong authorities have downplayed the significance of the provisions, saying they are similar to security laws in other countries. But the government’s imposition of the new security laws has led to the departure of some international companies anxious about tightening ties to China.