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June 29, 2020

US/CHINA/HONG KONG: Limited impact from US sanctions over Hong Kong, Xinjiang

BY Gabriel Wildau

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( 4 mins)
  • The US State Department announced on 26 June that it will impose visa restrictions on current and former Chinese officials alleged to be complicit in undermining Hong Kong’s autonomy.
  • The State Department action appears designed to preempt congressional action that could force US President Donald Trump to take even tougher action.
  • Visa restrictions and even asset freezes targeting individual officials would mark another incremental deterioration in the bilateral relationship but are unlikely to threaten the trade deal.

The State Department announced new visa restrictions on an unnamed group of Chinese officials and their families. The wording of the statement suggests that the restrictions target mainland figures but not Hong Kong government officials such as Chief Executive Carrie Lam.

A day earlier, the US Senate unanimously approved the Hong Kong Autonomy Act (HKAA), which empowers the president to impose sanctions on individuals and companies implicated in curtailing Hong Kong’s autonomy. The sanctions include visa bans and asset freezes. The bill – which appears likely to pass the House of Representatives and be signed by Trump – would also penalize financial institutions that service the sanctioned individuals or entities. These financial sanctions are so-called “secondary sanctions” and fall far short of the so-called “nuclear option” because they are designed narrowly to enforce the primary sanctions on individuals and entities, rather than to affect the banks’ broader operations.

In the days prior to the Senate action, the White House had signaled concern that the HKAA excessively curtailed the president’s freedom to decide on sanctions, resulting in some last-minute tweaks. The version of the bill passed by the Senate requires the president to identify complicit individuals and entities but grants him discretion to waive sanctions. However, the bill also lets congress override a presidential waiver by passing a “disapproval resolution”, which would, at least in principle, result in sanctions being imposed over White House objections.

Recent evidence suggests that even if HKAA becomes law, Trump may be reluctant to impose sanctions beyond what the State Department already announced. Trump recently confirmed revelations by former National Security Advisor John Bolton that Trump rejected a Xinjiang sanctions plan in late 2018 to avoid disrupting ongoing trade negotiations with China. On 17 June, Trump signed the Uyghur Human Rights Policy Act (UHRPA), which, like the HKAA, requires the White House to identify Chinese officials involved in repression but allows the president to waive sanctions at his discretion. Even with this loophole, Trump issued a “signing statement” accompanying the UHRPA stipulating that he would not be bound by a provision of the law requiring him to notify congress at least 15 days in advance if he chooses to waive sanctions.

US legal scholars disagree on the legality of signing statements, which assert a president’s right to ignore or override legal statute. The statements are typically based on a president’s assertion that a statute represents congressional encroachment on constitutional authorities reserved for the president. In the case of the UHRPA, the signing statement asserted the president’s constitutional authority to conduct diplomacy with foreign officials who might otherwise be prohibited by sanctions from entering the US.

When the president signs the HKAA, he could issue a similar signing statement refusing to abide by a congressional override of his decision on sanctions. The State Department’s latest visa restrictions may also be an attempt to preempt the HKAA by positioning Trump to claim that he has already taken significant action against Chinese encroachment on Hong Kong, even without the asset freezes envisioned by the HKAA. Even without a signing statement, Trump could simply refuse to execute congressionally mandated sanctions, as he has done with supposedly mandatory sanctions against Russia for interference in the 2016 presidential election.

Finally, even if further sanctions are imposed against Chinese officials involved in Xinjiang and/or Hong Kong, the overall impact on US-China relations is likely to be modest. Such sanctions have been widely expected and do not materially affect China’s economy or national security. At a recent meeting in Hawaii Chinese foreign policy chief Yang Jiechi reportedly warned US Secretary of State Mike Pompeo that if the US crossed “red lines” on sovereignty issues such as Hong Kong and Taiwan, the phase 1 trade deal could be at risk. But Beijing is unlikely to consider visa restrictions and asset freezes on individual officials such a red line.

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