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Explainer: How ending Hong Kong’s ‘special status’ could affect U.S. companies

Catherina Ploumidakis

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Explainer: How ending Hong Kong's 'special status' could affect U.S. companies

WASHINGTON (Reuters) – New Chinese national security restrictions imposed on Hong Kong could draw a U.S. revocation of the former British colony’s “special status” under U.S. law, a move that would have far-reaching trade and investment implications.

U.S. businesses oppose any change in Washington’s recognition of Hong Kong as a sufficiently autonomous city, where major U.S. companies enjoy access to China and Southeast Asia, and where bilateral trade flourishes across various parts of the economy, from wine to financial services.

A new U.S. law requires the State Department to certify at least annually that Hong Kong, which experienced widespread protests last year over China’s extradition plans, retains enough autonomy to justify favorable U.S. trading terms. President Donald Trump warned on Thursday that Washington could react “very strongly” to China’s new restrictions.

Here is a look at some of the consequences of a change in that status.

CORPORATE HEADACHES

A revocation of the special status would cause problems for the more than 1,300 American companies with business operations in Hong Kong, including nearly every major U.S. financial firm. The State Department said 85,000 U.S. citizens lived in Hong Kong in 2018.

Visa-free travel access to Hong Kong could revert to strict Chinese visa rules, impeding business travel and work visa approvals.

As of 2018, the stock of U.S. foreign direct investment in Hong Kong stood at $82.5 billion, an increase of $1.2 billion that year, according to U.S. Commerce Department data. Hong Kong’s investment in the United States rose $3.5 billion in 2018 to $16.9 billion.

Hong Kong’s autonomy, civil liberties, rule of law and access to China make it attractive to international companies, and a change in that status could push some U.S. firms into costly moves elsewhere in the region.

“Numerous American companies invest in Hong Kong because of its special status, its geographic location and market-based economic system,” the U.S.-China Business Council said in a statement. “Any change to this status quo would irreparably damage American global business interests.”

TRADE

Some $67 billion in annual Hong Kong-U.S. trade of goods and services could be put at risk as Hong Kong would lose its preferential lower U.S. tariff rate.

Hong Kong is treated separately from mainland China’s more managed economy, and its exports to the United States are treated differently. Hong Kong has a zero tariff rate on imports of U.S. goods, which also could be at risk.

Hong Kong was the source of the largest bilateral U.S. goods trade surplus last year, at $26.1 billion, based on U.S. Census Bureau data.

According to Hong Kong’s Trade and Industry Department, the former British colony in 2018 was the United States’ third-largest export market for wine, its fourth-largest for beef and seventh-largest for all agricultural products.

BROADER U.S.-CHINA RELATIONS

A U.S. revocation of Hong Kong’s special status would be viewed by Beijing as interfering with its sovereignty, and China has previously threatened to “take strong countermeasures.”

Activists march against new security laws, near China’s Liaison Office, in Hong Kong, China May 22, 2020. REUTERS/Tyrone Siu

Eswar Prasad, a trade professor at Cornell University and a former head of the International Monetary Fund’s China department, said Hong Kong is a “hot-button” economic and political issue for China, much like U.S. sanctions on Chinese telecoms giant Huawei Technologies Co Ltd HWT.UL.

A precarious U.S.-China trade truce, already strained by Trump’s anger at China over the coronavirus pandemic and a slow start to Beijing’s purchases under the Phase 1 trade deal between the two countries could collapse into new tariffs and counter-sanctions, he said.

The United States also maintains export control offices and academic exchanges in Hong Kong separate from mainland China.

Reporting by David Lawder; Editing by Paul Simao

Catherina previously worked as a journalist for several local newspapers until she realized the potential of internet for news reporting. She joined the team as a contributor which provided her a platform to dedicate her experience and knowledge for a wider range of audience. She excels in curating business news for the website.

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Citi Field hit with ‘junk’ rating over debt fears

Erin Fox

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Citi Field hit with 'junk' rating over debt fears

Citi Field, which has been closed due to the coronavirus, has been slapped with a “junk” rating amid fears that it won’t be able to pay its debts.

Ratings agency Standard & Poor’s on Thursday downgraded Citi Field from an investment grade “BBB” rating to “BB+”, or junk status, saying it may need to tap its debt reserve to make a $22 million payment due in December — and warning that it could run out of money next year if there’s a baseball strike.

Citi Field makes two $22 million payments annually to the New York City Industrial Development Agency, which issued $612 million in bonds to build the stadium, completed in 2009 as home to the Mets.

The Wilpon family-owned Mets are technically separate from the stadium, which is paid for through sales of luxury suites, party suites, club seats, concessions and merchandise.

S&P says the Mets may seek to help the stadium make the December payment to keep its lease intact.

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Retailers beef up security as looting fears continue to rise

Erin Fox

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Retailers beef up security as looting fears continue to rise

It might be safer to rob a bank.

Retailers across the country are boosting their defenses to protect against looting, including by hiring armed guards, planting scouts to keep watch out front and securing storefronts with barbed wire, The Post has learned.

As The Post reported on June 2, iconic department store Saks Fifth Avenue has fortified its New York City flagship with a razor wire-topped fence and security guards outfitted with attack dogs.

But sources say the trend is becoming more widespread and even hitting the normally peaceful suburbs.

Security professional Michael Sapraicone, head of Squad Security, says he’s received multiple requests by retailers looking to protect against a spate of high-profile ransackings by people looking to take advantage of nationwide civil unrest. Some of the requests are too risky to even consider, he said. “We are turning down the calls we are getting to put armed guards inside unopened stores at night,” Sapraicone told The Post.

The former NYPD detective has, however, agreed to station a security officer outside the posh Americana Manhasset shopping center in Manhasset, NY, in a parked car at the request of one of its retailers, which he declined to name.

Americana Mall in Manhasset.
People walk their dog in the empty parking lot of Americana Mall in Manhasset.Getty Images

“We are there as a deterrent and to record whatever might happen,” Sapraicone said.

This week, stores inside the tony Long Island shopping center, which boasts tenants like Tiffany & Co., Gucci, Fendi and Chanel, boarded up their windows while the shopping center’s entrances were blocked off by the Nassau County police. Restaurant operators are instructing customers to pick up their meals before 7:30 p.m., when the center now closes, including for curbside pick-up.

For shoppers, the increased security can make for an eerie day at the mall. One Orlando, Fla., resident told The Post she popped into the posh Mall at Millenia on Monday only to be met with emptied-out stores. Luxury retailers like Tiffany, Cartier and Chanel were shuttered and their merchandise yanked, said the shopper, who asked not to be named. The Chanel store had a security guard stationed inside, she added.

It’s unclear whether these stores were cleared out due to fears of looting or the coronavirus pandemic, however, and the mall didn’t immediately respond to a request for comment.

Back in the Big Apple, one large retailer that asked not to be identified has quietly planted scores of armed guards inside its perfumed halls in case of a break-in, a source with direct knowledge told The Post.

But security professionals warn this approach can be risky, especially if it costs lives.

“It’s a terrible idea to have armed security in your stores,” said Anthony Roman, president of Roman & Associates, a risk management firm. “The risks to personnel are too high, with security becoming a target if people get inside the building.”

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Business

Adweek magazine sold to Shamrock Capital

Erin Fox

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Adweek magazine sold to Shamrock Capital

Adweek has a new owner, its fourth in six years.

Shamrock Capital, which traces its roots back to the family of Roy Disney, wrapped up an acquisition of the print, Web and events business from Toronto-based buyout firm Beringer Capital.

“Beringer came in with guns blazing and big plans for expansion, but once they realized how hard the business was, they turned into sellers,” said a source familiar with the company. Adweek has quietly been on the block for the past year, the source added.

Jeff Litvack is expected to remain as Adweek chief executive, as are Stephanie Paterik, executive editor, and Lisa Granatstein, editor and SVP of programs.

“We look forward to working with Adweek to continue to drive strong growth, both organically and through acquisitions.” said Laura Held, Partner at Shamrock Capital.

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