Senate sends Hong Kong sanctions bill to Trump

The Senate on Thursday finalized passage of a sanctions bill to penalize China for its new national security law for Hong Kong that U.S. lawmakers say effectively ends the island’s autonomous legal status.

What happened: The Senate voted Thursday to finalize the Hong Kong Autonomy Act to penalize individuals, banks and other entities that enable China’s security law. The Senate approved a nearly identical bill earlier this week, but a final vote was necessary Thursday after the House made minor changes to the sanctions proposal when it passed unanimously Wednesday night.

What’s next: The bill now heads to President Donald Trump, who is expected to sign it. Prior to the first Senate vote, key lawmakers reached an agreement with the White House to support the bill.

What’s in it: The bill charges the Treasury Department with identifying the individuals and financial firms that enable the Chinese government to enact its new security law. If they do not relent, they will be subject to sanctions, including visa limitations on senior executives and restrictions on dollar transactions.

Unlike past Chinese sanction bills, the restrictions will apply not just to individuals, but the banks that employ them. And it will apply not just to Chinese-owned banks, but subsidiaries of American companies operating in the country.

“If a Chinese bank decides they value doing business with the oppressors more than they value access to the U.S. dollar … then they can make that decision,” Sen. Pat Toomey (R-Penn.), who led the bill with Sen. Chris Van Hollen (D-Md.), told reporters after passage. “For a Chinese bank that has little or no U.S. dollar business, they might make that decision, but the bigger banks are going to have a much harder decision to make if they are persistent offenders and therefore subject to the sanctions.”

What’s at stake: U.S. lawmakers and legal experts say China’s new national security law effectively ends Hong Kong’s separate legal system, in place since China took control of the territory from Britain in 1997.

"Beijing’s so-called national security law … signals the death of the one country, two systems principle," House Speaker Nancy Pelosi said Wednesday prior to House passage of the bill.

Experts say China’s new national security law will reach far beyond the government’s previous attempts to alter Hong Kong’s legal system, which sparked a massive, ongoing protest movement on the island. Approved this week, the law sets up parallel police and legal systems for the city that are loyal to Beijing and not accountable to local authorities. The Chinese government will also be able to take complete jurisdiction of legal cases and remove them from the Hong Kong legal system at the request of Communist Party officials.

Chinese response: Foreign Ministry spokesman Zhao Lijian said China “deplores and rejects” the sanctions bill in a news conference ahead of its passage and said attempts to thwart the new security law are “doomed to fail.”

“We urge the U.S. side to grasp the situation, abide by international law and basic norms of international relations, stop interfering in Hong Kong affairs in any means, stop pushing the negative bill or even signing it into law or implementing it,” Zhao said. “Otherwise China will react strongly and the U.S. shall bear all consequences.”

Context: The White House has also taken some action unilaterally, like halting shipments of defense products and related technologies to Hong Kong and restricting the visas of certain former and current Chinese Communist Party officials. It also is considering other moves to end preferential trade treatment for Hong Kong over concerns its government is coming more under the control of Beijing.

But the administration has balked at more severe measures that could spook financial markets and threaten the president’s reelection, like pulling out of the recently signed U.S. trade deal with China or imposing more tariffs on Chinese goods. And some Democrats have criticized the administration’s implementation of previous sanctions laws on China.

“We passed the Hong Kong Human Rights Act last year which gives the Secretary of State the authority to designate individuals who have violated the human rights of individuals in Hong Kong. They’ve taken very tepid steps under that authority,” said Van Hollen. “It is absolutely imperative that the president and State Department fully use the [new] provisions. They are mandated.”