US Mulls New Sanctions on China

Great power rivalry escalates over Hong Kong

On 28 May, delegates of China’s National People’s Congress broke into applause after voting through a draft bill imposing new national security laws on Hong Kong. The legislation – which will ban any acts deemed to endanger Chinese national security – is intended to break the cycle of disruptive protests that have roiled Hong Kong since March 2019.

China’s president Xi Jinping has consistently adopted a harsh line towards any challenges to Communist Party rule, and is understood to be frustrated with the ineffective response of the Hong Kong authorities in reacting to the protests. The new security measures Xi has introduced have been interpreted as a major step towards undermining the freedoms the semi-autonomous city was granted under the terms of the 1997 handover agreement between the UK and China.

Condemnation in the West

Beijing’s move has been widely condemned by Western democracies, as well as by demonstrators within Hong Kong itself, where thousands have taken part in protests against the security bill. The city’s police once again deployed tear gas, rubber bullets and water cannons to dispel the demonstrators, and hundreds of activists have been arrested. The UK government has taken the unprecedented step of offering the several million Hong Kong residents eligible for a British National Overseas passport a “route” to British citizenship, in a step which China has labelled “gross interference”.

In the US, the day after lawmakers in Beijing passed the Hong Kong bill, Donald Trump unveiled a raft of measures aimed at China. These included plans to restrict Chinese nationals with ties to China’s armed forces from obtaining student and work-exchange visas, increased scrutiny of Chinese companies listed on US stock exchanges, and the end to some of the trade privileges the US currently grants to Hong Kong.

In addition, Trump suggested that his administration would impose sanctions on Chinese and Hong Kong officials involved in undermining the city’s freedoms. This measure followed the earlier introduction of a bipartisan bill in the US Senate, that would punish Chinese companies involved in implementing the security measures in Hong Kong, as well as complicit government officials. The bill, drafted by Republican senator Pat Toomey and Democrat Chris Van Hollen, would also impose secondary sanctions on banks that do business with those entities. The potential scope of the Toomey-Van Hollen bill is unclear, but raises the possibility that – if enacted – it could force global financial institutions to sever ties to major Chinese and Hong Kong businesses.

At the same time, the US is expanding its sanctions targeting companies and officials linked to China’s ongoing repression of the Uighur ethnic group and other Muslim minorities in the country’s Xinjiang region. The US has already imposed sanctions on dozens of Chinese companies deemed to be complicit in human rights violations in Xinjiang, and in May both houses of Congress voted overwhelmingly to enact additional measures directly targeting senior Communist Party officials responsible for persecuting the Uighur population.

Trump has yet to indicate whether he intends to sign the new Xinjiang legislation, and his administration has not clarified the scope of any sanctions it intends to impose in relation to Beijing’s crackdown in Hong Kong. Nonetheless, the proposed measures highlight how – in the face of China’s growing influence and assertiveness in global affairs – sanctions policy remains one of the preferred weapons of American foreign policy.

Will sanctions be unilateral or multilateral?

The potential effectiveness of US secondary sanctions was highlighted by their use against Iran, which led to numerous European firms severing or declining to open financial ties to the country. Some lawmakers have, however, raised fears that sanctions imposed unilaterally by the US would be markedly less effective than a multilateral approach – although it is unclear if the Trump administration, which has generally eschewed multilateralism, would be willing to reach an agreement with America’s allies in Europe and elsewhere on sanctioning Chinese and Hong Kong parties.

Support for Hong Kong’s autonomy remains one of the few areas of bipartisan consensus in Washington, and in an election year Trump appears keen to scapegoat China in a bid to deflect criticism of his handling of the coronavirus pandemic and the downturn in the US economy. The months ahead may therefore see the US pass impactful sanctions targeting China, although it seems unlikely that Beijing – having already committed to enact the new national security powers – will consider backing down, irrespective of any international pressure.

In the meantime Hong Kong’s residents and businesses, who find themselves caught in the crossfire of great power rivalry, prepare for further unrest.