‘Made in China’ label ruling hits a raw nerve in Hong Kong

So, after the United States determined that Hong Kong no longer had autonomy under its “one country, two systems” formula, U.S. Customs and Border Protection ruled Tuesday that imports from Hong Kong must be labeled “Made in China.”

Those three words sent Hong Kong officials into a collective tailspin.

At a media briefing Thursday, a member of Hong Kong’s ruling cabinet delivered a message that, from the mouth of a pro-democracy activist or political opponent, could put them behind bars: The former British colony is not, in fact, China.

Labeling Hong Kong products as “Made in China” would be “telling a lie,” said Commerce Secretary Edward Yau Tang-wah. He compared the U.S. measure, which will take effect after a 45-day transition period, with “a Canadian product labeled as U.S.-made, or a Mexican one,” adding that it would cause “chaos” and confuse American consumers.

Coming a month and a half after Beijing’s security law made calling for an independent Hong Kong punishable by life in prison, and just weeks after teenagers were arrested over social media posts advocating just that, the Hong Kong government’s sudden attempt to distance itself from China sparked ridicule online.

“Does Secretary Yau think Canada and Mexico are ‘inalienable parts’ of the U. S.?” asked one Twitter user, while others accused him of having violated the security law.

Some lay charges of doublespeak against the government, pointing to the arrest of a pro-democracy activist in May for distributing masks labeled “Not Made in China,” a claim that officials said could not be made if the products were manufactured in Hong Kong, and therefore violated trade laws.

While Yau argued that Hong Kong remains a separate customs territory and a member of the World Trade Organization, the U.S. ruling portends trouble for Hong Kong as countries recognize the city’s changed circumstances. In response to the security law, President Trump in July signed an executive order suspending Hong Kong’s preferential economic treatment. Other countries could follow.

But the apparent paradox in Hong Kong’s response is in fact “the original essence of the one country, two systems” formula that guided Hong Kong’s handover from British to Chinese sovereignty in 1997, according to Ma Ngok, an associate professor of local politics at the Chinese University of Hong Kong.

Citizens accepted this framework at the time, Ma said, because it promised them a high level of both economic and political autonomy, allowing the historical trading post turned international finance hub to use its unique status to maximum advantage.

Hong Kong continues to enjoy economic autonomy, Ma said, retaining separate memberships in international bodies and its own customs, shipping and aviation regimes — even as the space for political autonomy is rapidly narrowing.

As Beijing tightens its grip on the city, the terms of this deal have changed to keep Hong Kong’s economic autonomy but throttle its political and judicial independence. This continues to serve China’s elite but has prompted a counterargument from the United States, Ma said: If Hong Kong no longer enjoys political autonomy, Washington will no longer afford it the privileges of economic autonomy. Hong Kong cannot have one without the other.

The “Made in Hong Kong” label was ubiquitous during a low-cost manufacturing boom in the 1960s and ’70s. But for a city that climbed the value chain and transitioned to real estate and finance, analysts say any harm the ruling inflicts on local production will be negligible.

While shipping and logistics remains Hong Kong’s biggest sector, few to no local shipowners have vessels that leave port laden with purely Hong Kong cargoes, said Bob Rust, China correspondent for the industry publication TradeWinds.

Rust said that shippers have received many customer inquiries about how the national security law will affect their business, but what they truly fear are sanctions on financial transactions rather than cargo origins.

Even China’s state-owned banks in Hong Kong are taking precautions to comply with U.S. sanctions, declining to open new accounts for the 11 officials that Washington accused of being “directly responsible for implementing Beijing’s policies of suppression of freedom and democratic processes.”

This uncertainty from lenders trickles down to every company — especially shippers, who due to their international nature are especially aware of the risk of signing contracts with entities that might face U.S. sanctions.

“We likely won’t see much of an actual economic impact” from the “Made in Hong Kong” edict itself, said Nick Marro, lead analyst for global trade issues at the Economist Intelligence Unit in Hong Kong. “The U.S. has clarified that Hong Kong-made goods won’t be hit by the trade-war tariffs, while the Chinese goods re-exported through the city are already technically in the firing line.”

With concerns more sharply focused on fallout from the coronavirus pandemic, Marro believes the clash over “Made in Hong Kong” is more political in nature, as both mainland and Hong Kong authorities try to reassure the world that “one country, two systems” is alive and well, despite growing evidence to the contrary.

“The U.S. moves — even if more symbolic than anything else — uncomfortably challenge that narrative, and there’s likely a fear that if the U.S. moves, other countries will follow,” he said.