Global banks risk being caught between Beijing-backed penalties and sanctions being debated in the US as Hong Kong’s autonomy becomes a volatile point of friction between the two superpowers.
The vast scope of the new security legislation imposed on the territory has taken businesses by surprise, but perhaps no part is more worrying for global lenders than its Article 29. It forbids sanctions, blockades or hostile activities against the territory and China at a time when the US is inching closer to enacting rules that would require banks to comply with sanctions against Chinese officials and entities.
Running afoul of the legislation put companies at risk of fines or losing their license to do business.
Illustration: Yusha
There is concern on the “risk of becoming a political football,” said Tamer Soliman, a Washington-based partner and global head of the Export Control & Sanctions practice at law firm Mayer Brown.
“We’re currently advising a number of clients who are concerned with how broadly certain aspects of the National Security Law could be construed, and how that may come into play in local implementation of the HKAA generally,” he said, referring to the US’ Hong Kong Autonomy Act.
Article 29 is part of a package of legislation enforced by Beijing to rein in criticism of its rule. The legislation is upending how justice is administered in the territory, and has further raised tensions between the US and China.
Hong Kong was returned to China in 1997 on a “one country, two systems” framework to maintain its freedom of expression, capitalist financial system and independent judiciary for at least 50 years.
The crackdown in Hong Kong has drawn criticism from Washington, including the legislation that provides for sanctions against financial institutions working with Chinese officials who are determined by the US to be interfering with Hong Kong’s limited autonomy.
“This is designed to target officials in the government of China or others who’re collaborating in undermining democracy in Hong Kong,” US Senator Chris Van Hollen, who co-sponsored the bill, said in a Bloomberg Television interview.
The bill “will also then sanction any banks who do business with those individuals. The idea being that those individuals who are complicit, we want to cut off their financial lifeline,” he said.
Banks, including Citigroup, Goldman Sachs Group and JPMorgan Chase & Co, are walking a tightrope between the two world powers given their operations in Hong Kong and ambitious plans for China this year.
HSBC Holdings is especially under fire in the US after it voiced support for China’s security legislation, and under pressure from China because of its dominant role in Hong Kong.
HSBC shares declined 1.9 percent in Hong Kong trading on Friday, extending this year’s loss to 40 percent.
Spokespeople at the banks all declined to comment on Article 29 and the sanctions.
Bankers and their lawyers from Hong Kong to Washington are poring over the legislation to reconcile how they can dodge major consequences, said people familiar with the matter who asked not to named discussing internal deliberations.
Banks are assessing ways to mitigate the risks of a potential breach of Hong Kong’s security legislation and how to implement potential US sanctions without exposing staff in the territory, including having offshore entities rather than local units implement the sanctions, the people said.
Still, that could bring little relief, as the Hong Kong legislation also claims extraterritorial rights, which is likely to be one main point of legal contention.
Retail and corporate banks with a big presence in Hong Kong, such as Citigroup and HSBC, could be more exposed to the risks from the bills especially on sizeable transactions done through local units, one of the people said.
Another issue causing concern among the banks is Article 29’s provision on state secrets, which they could breach if they provide information to a foreign government on high-level clients, two of the people said.
Global banks are reviewing their client base to identify people who might be exposed to sanctions under the US act and looking over agreements to make sure that they have clauses that allow them to ditch customers without penalty.
The US sanctions bill is awaiting the signature of US President Donald Trump, who has not indicated whether he will sign it or not. The bill was passed with broad veto-proof support in the US Senate and the US House of Representatives.
Still, the initial fallout might be limited to the most senior Chinese officials, as the US is unlikely to take action that will significantly disrupt trade or hurt the global economy, said bank executives, who asked not to be identified discussing internal analysis.
China’s response would also be guided by its desire to maintain Hong Kong as a global financial center, a status that would be eroded if foreign companies are put in a bind by a heavy-handed implementation of the legislation.
Article 29 also focuses on the country and territory level, so implementing sanctions against individuals might not constitute a breach, one of the people said.
If the US enacts its bill, the US Department of State has 90 days to submit a report on whether any individuals or companies merit sanctions. Reports on financial institutions must be submitted within 60 days after that. The US president has the leeway to wait one year before imposing sanctions.
US authorities are also mulling a move that would punish banks and destabilize Hong Kong’s currency peg to the US dollar, with HSBC named as a specific target after drawing the ire of US Secretary of State Mike Pompeo, sources said earlier.
A move to strike against the peg is part of broader discussions among advisers to Pompeo and has not been elevated to the senior levels of the White House, suggesting that it has not gained serious traction yet, the people said.
“This is part of a broader trend of potential conflicts of law between the US sanction measures and potential Chinese countermeasures,” Soliman said. “It puts companies who view the US and China as important to their long-term business in a very difficult position.”
We are used to hearing that whenever something happens, it means Taiwan is about to fall to China. Chinese President Xi Jinping (習近平) cannot change the color of his socks without China experts claiming it means an invasion is imminent. So, it is no surprise that what happened in Venezuela over the weekend triggered the knee-jerk reaction of saying that Taiwan is next. That is not an opinion on whether US President Donald Trump was right to remove Venezuelan President Nicolas Maduro the way he did or if it is good for Venezuela and the world. There are other, more qualified
China’s recent aggressive military posture around Taiwan simply reflects the truth that China is a millennium behind, as Kobe City Councilor Norihiro Uehata has commented. While democratic countries work for peace, prosperity and progress, authoritarian countries such as Russia and China only care about territorial expansion, superpower status and world dominance, while their people suffer. Two millennia ago, the ancient Chinese philosopher Mencius (孟子) would have advised Chinese President Xi Jinping (習近平) that “people are the most important, state is lesser, and the ruler is the least important.” In fact, the reverse order is causing the great depression in China right now,
This should be the year in which the democracies, especially those in East Asia, lose their fear of the Chinese Communist Party’s (CCP) “one China principle” plus its nuclear “Cognitive Warfare” coercion strategies, all designed to achieve hegemony without fighting. For 2025, stoking regional and global fear was a major goal for the CCP and its People’s Liberation Army (PLA), following on Mao Zedong’s (毛澤東) Little Red Book admonition, “We must be ruthless to our enemies; we must overpower and annihilate them.” But on Dec. 17, 2025, the Trump Administration demonstrated direct defiance of CCP terror with its record US$11.1 billion arms
The immediate response in Taiwan to the extraction of Venezuelan President Nicolas Maduro by the US over the weekend was to say that it was an example of violence by a major power against a smaller nation and that, as such, it gave Chinese President Xi Jinping (習近平) carte blanche to invade Taiwan. That assessment is vastly oversimplistic and, on more sober reflection, likely incorrect. Generally speaking, there are three basic interpretations from commentators in Taiwan. The first is that the US is no longer interested in what is happening beyond its own backyard, and no longer preoccupied with regions in other
RSS