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New world news from Time: The U.S. Might Revoke Hong Kong’s ‘Special Status.’ Here’s What That Means For Business in the Global Financial Hub

Secretary of State Mike Pompeo announced on Wednesday that Hong Kong was no longer sufficiently autonomous from mainland China — an assessment that could threaten the city’s trading relationship with the U.S. and deal a blow to both American and Chinese companies operating there.

The news comes following Beijing’s decision late last week to draw up a national security law for Hong Kong. The move came after Hong Kong’s Legislative Council failed in its obligations to enact such a law since the former British colony was handed back to China in 1997. Critics say, however, that the Chinese government’s bypassing of the local legislature undermines the “high degree” of autonomy promised to Hong Kong when China resumed sovereignty over the territory of 7.4 million.

“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Pompeo said in a statement.

That autonomy matters because Hong Kong’s trading privileges with Washington depend on it. It’s up to the White House to decide what action it will take following Pompeo’s assessment, but options include tariffs, visa restrictions, export controls and freezing the U.S. assets of Hong Kong and Chinese officials deemed to be aiding Beijing in its encroachment on Hong Kong’s freedoms.

Officials made clear that the move is not intended to target Hong Kong citizens. The U.S. will try “to ensure the people of Hong Kong are not adversely affected to the best we can,” David R. Stilwell, assistant secretary for East Asian and Pacific affairs, said during a media teleconference on May 27.

Businesses, however, are nervous. Almost 300 U.S. companies base their regional headquarters in Hong Kong and more than 1,300 have operations in the city — from 3M to Goldman Sachs to the insurer AIG. There are also an estimated 85,000 U.S. citizens living in Hong Kong.

An American Chamber of Commerce spokesperson spoke last week of a “fear factor developing in the business community.” Business confidence was already shaken by the six months of often violent protests sparked last year by a contentious extradition bill, in the wake of which some companies started making plans to shift their operations. Now experts say that Beijing’s growing control over Hong Kong, and potential trade restrictions by Washington, could further diminish business confidence and compromise Hong Kong’s importance as an international business center.

“Businesses will inevitably change their perceptions of Hong Kong as a gateway to China that is protected by rule of law,” says Benjamin Quinlan, CEO and managing partner of strategy consultancy Quinlan and Associates, who also sits on the board of a fintech association.

“If you remove [Hong Kong’s special status], there will be foreign companies that say ‘we’ll just enter China directly, I’ve got no one-up going via Hong Kong,’ or they’ll just exit China completely,” he tells TIME. “It doesn’t bode well for Hong Kong’s position as a global financial hub.”

What is Hong Kong’s ‘special status’?

Although Hong Kong is a part of China, under the terms of the Hong Kong Policy Act of 1992 the U.S. treats Hong Kong as distinct from the mainland when it comes to economic relations, applying a different set of rules from the rest of China on things like export controls, customs and immigration.

The continuance of this special status is predicated on Hong Kong remaining distinct from mainland China. The “one country, two systems,” framework, a political formula that has been in place since the 1997 handover, affords the city plenty of leeway to run its own affairs, including an independent judiciary and freedoms of assembly, the press and speech. The enclave has its own currency, Olympics team and seat at the World Trade Organization.

Business groups say that these characteristics are an important driver of the city’s commercial success. “It would be a serious mistake on many levels to jeopardize Hong Kong’s special status, which is fundamental to its role as an attractive investment destination and international financial hub,” the U.S. Chamber of Commerce said in a statement on Tuesday.

The Hong Kong Human Rights and Democracy Act—passed in November 2019 following months of protests in Hong Kong—requires the State Department to complete an annual assessment to determine if Hong Kong remains sufficiently different from China. That assessment is needed to justify Hong Kong’s unique treatment under U.S. law.

What happens next?

Scott Kennedy, senior adviser and trustee chair in Chinese business and economics at the Washington D.C.-based Center for Strategic and International Studies (CSIS) tells TIME that while President Trump “has a menu of things he could choose to do” it was “an a la carte menu as opposed to on or off.”

According to Kennedy, it’s likely that things like export controls on sensitive technologies would be adopted first, with more punitive measures like tariffs coming later on.

In his May 27 teleconference, Stilwell said actions would be “as targeted as possible to change behavior.”

Sanctions on Chinese officials or entities could damage the ability of Chinese companies to transact in the city, which in turn impacts China’s ability to do international business in U.S. dollars. But the Hong Kong government warned in a May 28 statement that, “any sanctions are a double-edged sword that will not only harm the interests of Hong Kong but also significantly those of the U.S.”

Eswar Prasad, a professor of economics and trade policy at Cornell University and the former head of the IMF’s China Division tells TIME that the revocation of Hong Kong’s special status will have a significant negative impact on trade and financial flows between the U.S. and Hong Kong. In 2018, U.S. foreign direct investment in the territory was $82.5 billion and U.S. goods and services traded with Hong Kong totaled an estimated $66.9 billion. Hong Kong is one of the few jurisdictions to maintain a trade surplus with the U.S., to the tune of $26.4 billion in 2019.

Key to Hong Kong’s success is the rule of law, but its longevity is doubted many businesspeople say. “If the Chinese legislature can start doing things like this and overriding Hong Kong legislature, can they start doing similar things on issues other than national security?” asks Kevin Yam, a financial regulatory lawyer based in Hong Kong.

A lawyer at one global law firm tells TIME that she has received inquiries from nervous clients over the last few days who want to move commercial contracts away from Hong Kong law.

“For U.S. businesses and financial institutions operating in Hong Kong this would herald a period of great uncertainty,” says Prasad, “especially as they can no longer count on Hong Kong’s much-touted rule of law and at least modest independence from China.”

Kennedy believes that companies with operations in Hong Kong will likely leave if the situation continues to deteriorate.

“If Hong Kong loses its independent judiciary, freedom of the press, and all those things it has treasured, then Hong Kong is not going to be seen as a safe harbor within China and the region for American companies to base their regional headquarters, have most of their capital and large staff, and base their contracts there,” he says.

One Hong Kong hedge fund executive tells TIME that he is “definitely concerned” about the news. His firm started considering alternative office locations in Asia because of events in Hong Kong last year, but hadn’t made any meaningful decisions. Depending on how the situation pans out, it may “speed up,” the process of getting a contingency plan in place.

Better for business?

Hong Kong officials have attempted to allay the concerns of international investors, saying that national security legislation is needed to ensure there is no repeat of the mass demonstrations that paralyzed Hong Kong for the second half of 2019. The protests plunged Hong Kong into its first recession in a decade. Protests raged in the financial district for several weeks late last year.

During lunchtime on Wednesday, riot police fired pepper balls to dispel a crowd that had gathered to protest the national security law in the Central area, which is home to the headquarters of several international banks and law firms.

“As the implications of China’s recent direction on Hong Kong start to sink in, there is a growing possibility that investors will lose confidence in Hong Kong’s unique legal construct, of British law operating on Chinese soil,” says Kurt Tong, the former U.S. Consul General in the territory, who is now a partner at consultancy the Asia Group. “As that happens, the movement of people and money out of Hong Kong could start to snowball.”

Others say that it may take a while to see the consequences the national security law has on business in the city. Some are even guardedly optimistic.

“If the process is purely confined to addressing mass protests and what not,” Quinlan says, “then you could argue the opposite point, that businesses will see this as a better place to do business, particularly ones that will be more impacted by protest movements like retail or restaurants.”

New world news from Time: Queen Elizabeth’s Letters, Which Could Address Controversial Dismissal of Australian Government, to Be Made Public

(CANBERRA, Australia) — Australia’s highest court ruled on Friday to make public letters between Queen Elizabeth II and her representative that would reveal what knowledge she had, if any, of the dismissal of an Australian government in 1975.

The High Court’s 6-1 majority decision in historian Jenny Hocking’s appeal overturned lower court rulings that more than 200 letters between the monarch of Britain and Australia and Governor-General Sir John Kerr before he dismissed Prime Minister Gough Whitlam’s government were personal and might never be made public.

The only-ever dismissal of an elected Australian government on the authority of a British monarch created a crisis that spurred many to call for Australia to sever its constitutional ties with Britain and create a republic with an Australian president. Suspicions of a U.S. Central Intelligence Agency conspiracy persist.

Hocking, a Monash University academic and Whitlam biographer, said she expected to read the 211 letters at the National Archives of Australia in Canberra next week when a coronavirus lockdown is lifted.

She described as absurd that communications between such key officials in the Australian system of government could be regarded as personal and confidential.

“That they could be seen as personal is quite frankly an insult to all our intelligence collectively —– they’re not talking about the racing and the corgis,” Hocking told The AP, referring to the queen’s interest in horse racing and the dog breed.

“It was not only the fact that they were described quite bizarrely as personal, but also that they were under an embargo set at the whim of the queen,” she added.

The archives said it would release a statement on the court finding later on Friday.

Kerr dismissed Whitlam’s government and replaced him with opposition leader Malcolm Fraser as prime minister to resolve a month-old deadlock in Parliament. Fraser’s coalition won an election weeks later.

The archives had held the correspondence, known as the Palace Letters, since 1978. As state records, they should have been made public 31 years after they were created.

Under an agreement struck between Buckingham Palace and Government House, the governor-general’s official residence, months before Kerr resigned in 1978, the letters covering three tumultuous years of Australian politics were to remain secret until 2027. The private secretaries of both the sovereign and the governor-general in 2027 still could veto their release indefinitely under that agreement.

A Federal Court judge accepted the archives’ argument that the letters were personal and confidential.

An appeals court upheld that ruling in a 2-1 decision.

The archives’ lawyers argued the records were created with the “strong conception” that their character was private, and they were received by the archives under those conditions.

The convention across British Commonwealth nations is that communications between the queen and her representatives are personal, private and not accessible by the executive government, they argued.

Buckingham Palace and Government House have previously declined The AP’s requests for comment on the case and did not immediately respond to renewed requests on Friday.

Hocking has been fighting since 2016 to access the letters written by Kerr to the queen through her then private secretary Martin Charteris.

“I’m absolutely delighted by the decision,” she said. “We can’t possibly know our history and write the complete and accurate history if we don’t have access to the original documents that reveal it to us.”

The British royal family is renowned for being protective of their privacy and keeping conversations confidential.

The family went to considerable lengths to conceal letters written by the queen’s son and heir, Prince Charles, in a comparable case in Britain that was fought through the courts for five years.

Britain’s Supreme Court ruled in 2015 that 27 memos written by Charles to British government ministers could be made public despite objections that their publication might damage public perceptions of the future king’s political neutrality.

Years of dogged research by journalists and historians have pieced together answers to many of the questions surrounding how and why Whitlam’s government was dismissed and who was behind it.

Kerr, who died in 1991, rejected in his memoirs media speculation that the CIA ordered Whitlam’s dismissal over fears that his government would close the top secret U.S. intelligence facility that still exists at Pine Gap in the Australian Outback.

In the 1985 Hollywood spy drama “The Falcon and the Snowman,” a CIA plot to oust Whitlam motivated a disillusioned civilian defense contractor played by Sean Penn to sell U.S. security secrets to the Soviet Union.

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Gough Whitlam dismissal: Australian court grants access to Queen's letters

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George Floyd: National Guard deployed after Minneapolis clashes

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Minneapolis unrest continues

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New world news from Time: Lawmakers Ejected From Hong Kong Debate on Chinese National Anthem Bill

HONG KONG (AP) — Three pro-democracy lawmakers were ejected from Hong Kong’s legislative chamber Thursday morning, disrupting the second day of debate on a contentious bill that would criminalize insulting or abusing the Chinese national anthem.

The legislature’s president, Andrew Leung, suspended the meeting minutes after it began and ejected Eddie Chu for holding up a sarcastic sign about a pro-Beijing lawmaker that read “Best Chairperson, Starry Lee.”

A second pro-democracy lawmaker was ejected for yelling after the meeting resumed, and then a third after rushing forward with a large plastic bottle in a cloth bag that spilled its brownish contents on the floor in front of the president’s raised dais.

“We have wanted to use any method to stop this national anthem law getting passed by this legislature, which is basically controlled by the Chinese Communist Party, because the law is just another way of putting pressure on Hong Kong people,” Chu said outside the chamber.

In Beijing, China’s national legislature was set to ratify a proposal later Thursday to impose a national security law on Hong Kong, a Chinese territory that is supposed to have a high degree of autonomy under a “one-country, two systems” framework.

The city’s pro-democracy opposition sees both the security legislation and the anthem law as assaults on that autonomy, and the U.S. has called on China to back off on the security law.

U.S. Secretary of State Mike Pompeo notified Congress on Wednesday that the Trump administration no longer regards Hong Kong as autonomous from mainland China, setting the stage for the possible withdrawal of the preferential trade and financial status the U.S. accords the former British colony.

Hong Kong activist Joshua Wong, who rose to prominence as a student leader during 2014 pro-democracy demonstrations, applauded the U.S. announcement.

Sanctions or the freezing of Hong Kong’s special economic status would “let Beijing know it is a must to completely withdraw and stop the implementation of the national security law,” Wong said.

China blocked a U.N. Security Council meeting to discuss the legislation Wednesday, with China’s U.N. Ambassador Zhang Jun tweeting that Hong Kong is “purely China’s internal affairs.”

Chinese foreign ministry spokesperson Zhao Lijian said ahead of Pompeo’s announcement that China would take necessary steps to fight back against any “erroneous foreign interference in Hong Kong’s affairs.”

Chu, the ejected Hong Kong lawmaker, said the legislature’s president had objected to his placard calling Lee an “illegal chairperson” during Wednesday’s first day of debate, so he made a new one that called her the best chairperson instead.

Lee was recently elected chair of a key committee that sent the anthem bill to the full legislature for consideration. Her election, which the pro-democracy opposition contends was illegal, ended a monthslong filibuster that had prevented the committee from acting on the bill and other legislation.

Chu was carried out by security guards, even as fellow pro-democracy lawmakers protested his removal and tried to stop it.

After the meeting restarted, pro-democracy lawmaker,Ray Chan started yelling as Leung explained his decision to remove Chu, and the legislative president suspended the meeting again and ordered Chan ejected, too.

Other pro-democracy lawmakers surrounded Chan, who then hid under a table, as security officers tried to remove him. He eventually was carried out the officers.

A longer suspension followed the ejection of Ted Hui, who kicked the plastic bottle toward the president’s dais after security officers tussled with him and it fell from his hands.

Members left the chamber, security guards sprayed disinfectant and cleaning workers arrived to wipe the carpet. Then a group of firefighters in full protective gear entered and collected evidence. They appeared to take samples from the floor using swabs.

Hui later described the contents as a rotten plant, and said he wanted Leung to feel and smell the rotting of Hong Kong’s civilization and rule of law, and of the “one country, two systems” framework that democracy activists feel is under attack by China’s ruling Communist Party.

“I wanted him to taste it, unfortunately it (fell) on the ground because I was hit by security guards,” he said.

Hui rushed toward Leung as pro-democracy lawmakers were demanding that the legislature’s president explain which rules of procedure banned sarcastic placards, and then all held up or displayed the same “Best Chairperson, Starry Lee” sign.

New world news from Time: ‘It’s a Sad Result.’ Mixed Feelings in Hong Kong Over U.S. Announcement on City’s Autonomy

Secretary of State Mike Pompeo said Wednesday that Hong Kong was no longer sufficiently autonomous from mainland China, following Beijing’s announcement that it plans to implement a national security law for the territory.

The proposed law, which sparked a fresh round of protests in the city, targets secession, sedition, terrorism and foreign interference in the enclave. It bypasses Hong Kong’s own legislature, which has not met its obligation to pass such a law since the territory was retroceded to China in 1997 after 156 years as a British colony.

“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Pompeo said in a statement. “The United States stands with the people of Hong Kong as they struggle against the [Chinese Communist Party’s] increasing denial of the autonomy that they were promised.”

The Hong Kong Human Rights and Democracy Act—passed in November 2019 following months of protests in Hong Kong—requires the State Department to complete an annual assessment to determine if Hong Kong remains sufficiently different from China. That assessment is needed to justify Hong Kong’s unique treatment under U.S. law.

Under the terms of the Hong Kong Policy Act of 1992, Hong Kong’s special status means Washington treats it as distinct from the rest of China when it comes to matters like trade and economic relations. Although the U.S. hasn’t yet set out what actions it will take following Pompeo’s announcement, the options include imposing immigration restrictions, export controls, and tariffs as well as sanctions on officials and individuals deemed to be aiding China in its encroachment on Hong Kong’s freedoms.

Eric Lai, the vice convener of the pro-democracy group the Civil Human Rights Front (CHRF), said Pompeo’s announcement meant the international community no longer believed Hong Kong’s rule of law and judicial independence were reliable safeguards against Beijing. He told TIME that the Chinese government would “pay a substantive price” for its actions in Hong Kong.

“The Hong Kong government and the mainland government have destroyed ‘one country, two systems,'” pro-democracy lawmaker Wu Chi-Wai told TIME, referring to the political formula under which Hong Kong was promised significant freedoms under Chinese sovereignty. “It is a sad result…It won’t do any good to Hong Kong people, but it reflects the situation that Hong Kong is no longer a place that can honor ‘one country, two systems.'”

Speaking to the media via a teleconference, David R. Stilwell, assistant secretary for East Asian and Pacific affairs, said that the U.S. will do its best “to ensure the people of Hong Kong are not adversely affected to the best we can.”

During a press conference on Thursday morning, pro-democracy activist Joshua Wong said that he didn’t think ordinary citizens would be impacted. “But I think for the ones serving the interests of Beijing, acting as the loyalists of the communist regime, of course they might face some of the results that might be negative for themselves. That’s the damage that they’ve done and the result that they need to bear.”

Jimmy Lai, a 71-year-old media tycoon who is among a group of prominent pro-democracy leaders in Hong Kong facing charges for their roles in the mass demonstrations that paralyzed much of the city throughout the second half of 2019, thanked Pompeo on Twitter. “The world will be a much better and peaceful place when #CCPChina is contained and #Hongkong is free,” he said.

Thank you @SecPompeo for standing with us #HKers. The world will be a much better and peaceful place when #CCPChina is contained and #Hongkong is free. https://t.co/qccuiFw5SX

— Jimmy Lai (@JimmyLaiApple) May 27, 2020

China has repeatedly warned the U.S. not to interfere in what it deems its internal affairs, and experts say that it’s unlikely that any actions the U.S. takes will change Beijing’s plans to implement the national security law.

“The Communist Party has been moving steadily down the road toward tightening control over Hong Kong for years now, and Xi Jinping is determined to project an image of himself as a strongman leader who can stand up to pressure from foreign powers,” Jeffrey Wasserstrom, historian and author of Vigil: Hong Kong on the Brink, told TIME.

“I don’t think that China will change its mind,” said Jean-Pierre Cabestan, a political-science professor at Hong Kong Baptist University. “There is not much room for changing the gist of the law.”

Pro-democracy politician Eddie Chu told TIME that the revocation of Hong Kong’s autonomous status alone won’t be enough to spur Beijing into action. “I think if the U.S. really wants to push back [against] China on this issue of the national security law, it needs to include Taiwan in the game,” he says. “The only thing that can frighten [Chinese President Xi Jinping] is to warn about reestablishing diplomatic relationship with [Taiwan].”

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New world news from Time: Japanese Police Arrest Suspect in Anime Studio Arson That Killed 36 People

(TOKYO) — Japanese police on Wednesday arrested a suspect in the deadly arson at a Kyoto anime studio last year after he recovered enough from his own severe burns to respond to the police investigation.

Kyoto police said they arrested Shinji Aoba, 42, on murder and arson allegations, 10 months after obtaining the warrant because they had to wait for Aoba to recover. Police also reportedly waited to arrest him until Japan’s coronavirus emergency was fully lifted this week.

Aoba is accused of storming into Kyoto Animation’s No. 1 studio on July 18 last year, setting it on fire and killing 36 people. The attack shocked Japan and drew an outpouring of grief from anime fans worldwide.

Police, quoting witnesses to the attack, have alleged Aoba arrived carrying two containers of flammable liquid, entered the studio’s unlocked front door, dumped the liquid and set it afire with a lighter.

About 70 people were working inside the studio in southern Kyoto, Japan’s ancient capital, at the time of the attack.

One of the survivors, an animator, told Japanese media he jumped from a window of the three-story building gasping for air amid scorching heat after seeing a “a black mushroom cloud” rising from downstairs.

Many others tried but failed to escape to the roof, fire officials said. Many died of carbon monoxide poisoning.

Aoba sustained severe burns on his face, torso and limbs, and was unconscious for weeks. He reportedly still cannot walk or feed himself without assistance.

Japanese television footage Wednesday showed Aoba, his face scarred and eyebrows lost apparently from the fire, strapped to a stretcher as he was carried into a police station.

Police have said Aoba told them he set the fire because he thought ”(Kyoto Animation) stole novels.”

Prosecutors are expected to seek formal criminal charges against him in a few weeks.

The fire was Japan’s deadliest since 2001, when a blaze in Tokyo’s Kabukicho entertainment district killed 44 people in the country’s worst known case of arson in modern times.

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