Hong Kong Policy Act Report

Bureau of East Asian and Pacific Affairs
May 11, 2016

In 1993, annually from 1995 through 2007, and in 2015, the Department of State submitted reports to Congress, pursuant to the Hong Kong Policy Act of 1992, as amended (the Act). This report responds to the requirement in Senate Report No. 114–79, accompanying S. 1725, the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2016. The following highlights key developments from April 2015 through February 2016.


The United States has longstanding interests in Hong Kong. Cooperation between the U.S. and Hong Kong Governments (HKG) remains broad, effective, and mutually beneficial. Our relationship is based on the framework of “one country, two systems,” enshrined in Hong Hong’s Basic Law, which serves as a de facto constitution. Under this system, Hong Kong is empowered to exercise autonomy in all areas except foreign policy and defense affairs.

Hong Kong participates independently in a range of multilateral organizations and agreements such as Asia-Pacific Economic Cooperation (APEC) and the World Trade Organization (WTO), with trade policy objectives that generally align with our own. The United States recognizes Hong Kong as a separate customs territory. Hong Kong’s strong traditions of rule of law, low levels of corruption, and high levels of public safety make it a preferred choice for U.S. businesses in the region. The United States also enjoys academic, cultural, educational, and scientific exchanges with Hong Kong’s people and government. Our bilateral law enforcement cooperation is on par with many of our closest allies.

Hong Kong maintains a comprehensive strategic trade controls system that follows multilateral export control regimes, and our governments work closely to prevent illegal diversion of controlled items. There were no suspensions under section 204(a), terminations under section 204(d), or determinations under section 201(b) of the Act during the period covered by this report.

Since the issuance of the last report, Hong Kong has maintained a sufficient degree of autonomy under the “one country, two systems” model to justify continued special treatment by the United States for bilateral agreements and programs. Events over the past year, however, raised concerns that greater Central Government influence and interference are eroding Hong Kong’s autonomy.

U.S. - Hong Kong Relations

The United States has a long history of good bilateral relations with Hong Kong and is committed to its continued stability and prosperity. We support democratic development in Hong Kong in accordance with the Basic Law and the aspirations of the Hong Kong people. The United States maintains strong interests in Hong Kong's continued autonomy; protection of civil liberties; respect for the rule of law; and distinct common-law traditions under “one country, two systems.”

There are more than 1,400 U.S. businesses operating in Hong Kong, drawn in part by Hong Kong’s openness, transparency, and strong rule of law. An estimated 85,000 U.S. citizens live there, and more than one million U.S. citizens visited or transited Hong Kong in 2015. It is America’s 9th-largest export market for manufactured goods and 7th-largest export market for agricultural goods. The United States is Hong Kong’s second-largest trading partner after mainland China.

The United States and Hong Kong have a robust law enforcement relationship. Since 2013, an average of 14 U.S. Navy ships per year made quality-of-life port calls in Hong Kong. U.S. and Hong Kong educational institutions hold extensive exchanges, including short-term visits by U.S. faculty, summer programs for students, and multi-year exchanges of faculty and staff. Hong Kong is the fourth largest per capita source of foreign students who study in the United States.

Significant Developments

On April 22, 2015, the HKG released its universal suffrage proposal for the election of the Chief Executive and submitted it for the Legislative Council’s (LegCo) approval. The proposal, which adhered closely to the National People’s Congress Standing Committee (NPCSC) decision of August 31, 2014, would have limited voters to a choice of two or three candidates. Each candidate would have been required to receive majority support of a 1,200 person Nominating Committee modeled on the current Chief Executive Election Committee, which has historically been dominated by pro-Beijing representatives. Only then would each candidate have faced Hong Kong’s voters, who have never been given the opportunity to vote for a Chief Executive.

On June 18, 2015, all 27 pan-democratic legislators in the 70-seat LegCo opposed the proposal, denying the bill a two-thirds majority required to pass under Hong Kong’s Basic Law. All but eight of the 43 pro-establishment legislators missed the vote while attempting to prevent a quorum and delay the vote. Because the proposal did not pass, Hong Kong will maintain the existing process whereby a predominantly pro-Beijing Chief Executive Election Committee chooses the next Chief Executive in 2017, without direct voter input. HKG and Central Government officials have said it is unlikely Hong Kong will restart the universal suffrage reform process until at least after the next Chief Executive takes office.

The universal suffrage debate, which garnered worldwide attention during the 2014 “Occupy” protests, further polarized Hong Kong’s political environment. While individual LegCo members have little power to propose or move legislation under the Basic Law, several pan-democratic legislators filibustered a number of measures during the last session.

For the first time since the 1997 handover, Hong Kong voters on November 22, 2015 directly elected all of their local District Councilors, representatives who advise the HKG on the effect of policies on local constituents but who do not have the power to pass laws. This makes the District Councilors Hong Kong’s only elected officials chosen entirely through universal suffrage.

Five men affiliated with Mighty Current Publishing House and the Causeway Bay Bookstore, known for distributing and selling books critical of the Chinese Communist Party and its leaders, disappeared between October and December of 2015, according to international news reports and family statements. According to the press, Mighty Current co-owner Gui Minhai, a Swedish citizen, was last seen in Thailand in October 2015. Bookstore manager Lam Wingkei, general manager Lui Bo, and business manager Cheung Jiping were reportedly last seen in the Mainland around the same time, though some reports suggest Lam may have disappeared from Hong Kong. Media reported that Lee Bo, who holds UK and Chinese citizenship and is a Hong Kong permanent resident, was last seen in Hong Kong on December 30, 2015. Many Hong Kong residents and international observers expressed deep concern that Mainland security services had abducted Lee across the border against his will.

These cases have raised serious concerns in Hong Kong and represent what appears to be the most significant breach of the “one country, two systems” policy since 1997. HKG officials, including the Chief Executive, Secretary for Justice, and LegCo President said publicly that under the Basic Law, external law enforcement agencies are not permitted to operate in Hong Kong without authorization. In February 2016, the United Kingdom said Lee Bo was likely involuntarily removed from Hong Kong and for the first time declared a breach of the Sino-British Joint Declaration.

Hong Kong's highly developed rule of law and respect for individual rights have long been pillars of its high degree of autonomy. For many in Hong Kong, Lee Bo’s disappearance suggests the Central Government is increasingly willing to side-step Hong Kong’s professional law enforcement agencies, in the process denying Hong Kong residents due process. Apparently coerced video and written confessions by the publishers transmitted via China's state-controlled media sowed further doubts about the publishers’ fate and the consequences for Hong Kong’s promised high degree of autonomy through 2047. Some Hong Kong bookstores decided in early 2016 to remove books banned on the Mainland, raising concerns about decreasing press freedom and freedom of expression in Hong Kong.

Chinese e-commerce giant Alibaba announced December 11 it would purchase the South China Morning Post. Alibaba’s senior management publicly discussed the “compelling business case” for the move and pledged to maintain SCMP’s editorial independence. However, Alibaba’s Executive Vice Chairman said Alibaba aimed to counter “negative” coverage of China in international media.

Hong Kong authorities in summer 2015 charged several pro-democracy activists with obstructing police during a June 2014 protest and with unlawful assembly at the September start of the 2014 “Occupy” demonstrations. The activists’ trials are scheduled for the first half of 2016. A Hong Kong court on February 18 acquitted another activist on separate charges of assault in connection with the Occupy protests; the magistrate said the prosecution had not proven its case beyond a reasonable doubt. Because charges were filed nearly a year after the protests, some said they were politically motivated; Hong Kong’s Department of Justice maintained political considerations did not factor into its decision.

Hong Kong residents and local media have also raised concerns about developments threatening academic freedom. On September 29, the University of Hong Kong (HKU) Council voted against confirming former law school dean Johannes Chan to a senior university position, a move that many observers regarded as a reaction to Chan’s scholarly work on pro-democracy issues and association with pro-democracy activists. On December 31, 2015, the Chief Executive appointed former Education Secretary Arthur Li to serve as the HKU Council’s Chair despite widespread opposition from students, faculty, and alumni.

An inspection of unlicensed food vendors by Hong Kong food and health inspectors in the densely populated Mongkok district on the first night of the Lunar New Year descended into chaos as violent crowds clashed with police for over ten hours February 8-9, 2016. Over 120 people suffered injuries, including 90 police officers. Police arrested over 60 people and have charged at least 36 with rioting. “Localist” groups acknowledged mobilizing supporters to participate in what they described as a protest in support of street vendors representative of Hong Kong’s unique culture and under threat from the HKG. The Chief Executive described the incident as a “riot” and promised a thorough investigation, while a broad spectrum of Hong Kong society, including leading government officials and politicians, roundly condemned the violence.

Export Controls

The United States enjoys excellent cooperation with Hong Kong on strategic trade control and counter-proliferation initiatives. The HKG actively implements United Nations sanctions and acts quickly to detain and investigate suspect controlled shipments. As part of a longstanding dialogue on strategic trade controls, the United States and Hong Kong held joint seminars for industry groups, published due diligence guidance to raise industry awareness about the risks inherent in transshipment, and cooperated on on-going enforcement investigations.

Bilateral Agreements and Multilateral Forums

Hong Kong continues to participate actively and independently in multi-lateral forums, including the WTO, APEC, the Financial Action Task Force, and the Financial Stability Board. In December 2015, a Memorandum of Understanding on the cooperation and exchange of information in the supervision of cross-border covered entities went into effect between the U.S. Commodities and Futures Trading Commission and the Hong Kong Securities and Futures Commission. Hong Kong is engaged in the Trade in Services Agreement negotiations with the United States and 21 other economies. There are more than a dozen U.S.-Hong Kong bilateral agreements currently in force. However, Hong Kong’s legal requirement for the Central Government’s "sovereign assent" to some forms of international liaison has at times hindered cooperation.

Treatment Under Hong Kong Policy Act

There were no suspensions under section 202(a), terminations under section 202(d), or determinations under section 201(b) of the United States-Hong Kong Policy Act of 1992, as amended, during the period covered by this report.