Context: Recently, the President of the USA has issued an order to end Hong Kong’s special status and signed the Hong Kong Autonomy Act, a legislation that would sanction banks doing business with Chinese officials.
What’s the issue?

• Until now the US has given Hong Kong – a global financial and trading hub – special status under US law.
• The provision dates from when the territory was a British colony and gives it favourable trading terms. 

Reasons Behind the Move

• China’s imposition of national security law in Hong Kong.
• USA’s blame on China for mishandling the Covid-19 pandemic and not informing the world about its severity.
• China's military buildup in the South China Sea and its treatment of Uighur Muslims.

Significance of Hong Kong Autonomy Act & Executive Order

• The law gives US administration powerful tools to hold responsible the individuals in the entities involved in extinguishing Hong Kong’s freedom.
• Hong Kong will now be treated the same as mainland China and no special privileges, no special economic treatment and no export of sensitive technologies.
• The executive order will hold China accountable for its oppressive actions against the people of Hong Kong.
• The Act will allow the Trump administration to levy sanctions against foreign individuals and banks for contributing to the erosion of Hong Kong`s autonomy.
• It imposes sanctions on entities that help violate Hong Kong's autonomy and financial institutions that do business with them.

Possible Outcomes

• The new law will force all but provincial Chinese banks to choose between assisting Beijing’s efforts in Hong Kong or being able to conduct transactions in USA dollars and operate in the world’s largest economy.
• It will have a devastating impact on Hong Kong as the financial gateway to Western markets.
• Completely ending Hong Kong's special treatment could prove self-defeating for the USA because it was the source of the largest bilateral US goods trade surplus last year, at USD 26.1 billion.
• Hong Kong is a major destination for USA’s legal and accounting services. Around 85,000 USA citizens lived in Hong Kong in 2018 and more than 1,300 USA companies operate there, including nearly every major financial firm.

China’s Response

• China has held that the Hong Kong Autonomy Act “maliciously slanders” its legislation in Hong Kong and has vowed to retaliate.
• It will make necessary responses to protect its legitimate interests and impose sanctions on relevant USA personnel and entities.

Impact of China's New Security Law for Hong Kong

• It criminalises four activities i.e. secession, subversion, organization and perpetration of terrorist activities, and collusion with a foreign country or with external elements to endanger national security.
• It includes some specific offences such as damaging government buildings and lobbying against the Chinese government.
• It also allows for a National Security Committee to investigate and prosecute.
• The Hong Kong Police are given extensive new controls to censor Internet content, track people online and seize electronic records.