5 things to know about US-China tensions over Hong Kong

U.S. and Chinese relations are sinking even lower as President TrumpDonald John TrumpKimberly Guilfoyle reports being asymptomatic and 'feeling really pretty good' after COVID-19 diagnosis Biden says he will rejoin WHO on his first day in office Lincoln Project offers list of GOP senators who 'protect' Trump in new ad MORE moves to punish Beijing for a controversial law that seeks to exercise more control over Hong Kong.

China’s proposed National Security Law has drawn condemnation from the U.S. and the international community by threatening Hong Kong’s autonomy, which has operated for over two decades under the “one country, two systems” agreed to during the British handover of the territory.

China's action and Trump's response now risk further straining already fraught tensions over the spread of the coronavirus pandemic and over trade.

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Both U.S. and Chinese businesses have benefited from Hong Kong’s “special status” that has allowed it to grow into a global financial hub, but concerns over eroding freedoms in the territory are throwing into question the future of U.S. relations.

Here are five things to know about the latest brewing conflict between China and the U.S.

What is Hong Kong’s status and why is it important?

Hong Kong’s official title is the “Hong Kong Special Administrative Region,” comprising a city-territory on the southeast tip of mainland China. Semi-autonomous from Beijing, it enjoyed for years an independent legislature and guaranteed freedoms of speech, the press and assembly not enjoyed by the majority of Chinese citizens.

The city was under British rule until 1997 when it was transferred to Beijing. Its special status is supposed to be protected until 2047, under the terms of the Sino-British Joint Declaration and Hong Kong's Basic Law, which is described as a mini constitution for the territory.

These rights and freedoms have allowed a level of transparency and accountability to develop in the territory that have made it a top destination for foreign investors and businesses.

“There’s a lot of things [companies] cannot do in mainland China that they can do in Hong Kong,” said Ho-Fung Hung, professor in political economy at the School of Advanced International Studies at Johns Hopkins University.

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This includes a more open system for transferring money and other trade relations among foreign and Chinese companies that would otherwise be subject to currency exchanges and strict regulations under the central government in Beijing.

What is the National Security Law?

The law proposed by China would prohibit acts in Hong Kong that would undermine the central Chinese government, which were described as acts of treason, secession, sedition and subversion.

The Hong Kong legislature, which has been increasingly under Beijing control since Britain's handover, attempted to pass the law in 2003 but was met with massive popular protests. Nearly half a million people took to the streets of Hong Kong to oppose that as well as other efforts seen as rolling back democratic freedoms.

Protests against Beijing’s control over the territory flared up again in June 2019 over a proposed law that would have allowed extradition to mainland China for criminal offenses, and have morphed into general opposition to the central government’s increasing attempts to exert control on the territory.

The widening divisions between pro-democracy protesters and Beijing authorities prompted China’s legislature, the National People’s Congress, to take up the National Security Law this year.

Beijing’s draft copy makes vague references to taking measures against “secession, subversion and terrorism,” but is being widely criticized as infringing on the rights of Hong Kong and violating the “one country, two systems” rule.

The final language is expected to be finalized over the coming weeks and implemented in September. The U.S., U.K., Canada and Australia issued a joint statement criticizing the legislation as being in direct conflict with China’s “international obligations under the principles of the legally-binding, UN-registered Sino-British Joint Declaration.”

And pro-Democracy protests against Beijing have taken on new urgency. Approximately 300 people were arrested Wednesday during protests where police fired pepper pellets to disperse crowds.

How has the Trump administration responded?

President Trump on Friday announced he will revoke Hong Kong’s “special treatment,” leaving open the possibility of imposing restrictions on travel, trade and customs, in addition to sanctions on Chinese and Hong Kong officials “directly or indirectly involved in eroding Hong Kong's autonomy.”

He added that he was directing the State Department to increase the travel risk warning on Hong Kong “to reflect the increased danger of surveillance and punishment by the Chinese state security apparatus.”

“China claims it is protecting national security,” the president said. “But the truth is that Hong Kong was secure and prosperous as a free society. Beijing's decision reverses all of that.”

Stronger measures against Beijing are generally supported by both Republicans and Democrats, who have passed legislation directing federal agencies to certify Hong Kong’s autonomy from Beijing and impose sanctions on those that violate internationally recognized human rights.

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House Speaker Nancy PelosiNancy PelosiSupreme Court expands religious rights with trio of rulings Congress must act now to fix a Social Security COVID-19 glitch and expand, not cut, benefits Democrats see victory in Trump culture war MORE (D-Calif.) called China’s proposed National Security Law “excessive” and said it “brazenly accelerates Beijing’s years-long assault on Hong Kong’s political and economic freedoms.”

“The next step is now for the Administration to work with Congress on an appropriate response. We must consider all tools available, including visa limitations and economic penalties,” she said in a statement Thursday.

What does this mean for U.S. and Hong Kong relations?

Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies, said Trump’s actions are likely to have little effect on Beijing’s bottom line and more of a direct impact on Hong Kong residents.

“Many of the actions Trump announced against Hong Kong will undoubtedly hurt average people in Hong Kong and will not likely deter Beijing from enacting the national security legislation,” she said.

The Hong Kong government, which is pro-Beijing, has taken issue with U.S. steps to hold Beijing accountable, saying efforts by Trump to impose restrictions on the territory will be a “double-edged sword” for bilateral relations.

“The threat of sanctions to achieve the purpose of interfering with the policy of another place is a violation of international law and international practice,” the government wrote in a statement late Thursday evening. “Practically, in Hong Kong–US relationship, any sanctions are a double-edged sword that will not only harm the interests of Hong Kong but also significantly those of the US.”

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What does this mean for U.S. and China relations?

Chinese officials have threatened unspecified counter-measures against the U.S. if Trump moves ahead with actions against Beijing and Hong Kong.

Trump's tough talk on Hong Kong adds to the already fraught relations between the U.S. and China over the spread of the coronavirus, with President Trump on Friday claiming the “malfeasance of the Chinese government” allowed the disease to spread all over the world.

Glaser said the latest confrontations show that “U.S.-China relations continue on a downward spiral, with no end in sight.”

“Trump appears to have given up on his personal relationship with Xi Jinping, opting instead to emphasize his determination to ‘vigorously defend American interests’ from Chinese threats. The race to the bottom continues,” she said, referring to China's leader.

What appears preserved at the moment is the Phase One trade deal between the U.S. and China signed in January, although Cailin Birch, global economist at the Economist Intelligence Unit, said the rising rhetoric shows how difficult any further cooperation between the countries is likely to be.

“We expect the US-China rivalry to increasingly shift away from merchandise trade and into other areas, including investment restrictions, targeted export bans such as those in place on Huawei, and human rights issues,” she said in a statement. “There is no end in sight for US-China tensions.”