China appears to be backing away from requiring financial institutions in Hong Kong to comply with its sanctions of foreign individuals and organizations, imposed in retaliation for U.S. and other countries' sanctions of its officials linked to rights violations in Xinjiang and Hong Kong.
Tam Yiu-chung, who represents Hong Kong on the NPC standing committee, told journalists that the vote was originally slated for Friday, but had been postponed.
But the committee will continue to study the matter, Tam told reporters on Friday.
The Hong Kong government issued a statement in support of the move.
"As the highest state organ, the National People's Congress and its standing committee make decisions on Hong Kong matters based on the interests of the city," the statement said. "The Hong Kong Special Administrative Region (HKSAR) government fully supports and executes any such decisions."
"The HKSAR government also welcomes overseas enterprises to continue to leverage Hong Kong's advantages," it said.
The NPC had been due to deliberate adding China's Anti-Foreign Sanctions Law to an annex of Hong Kong's mini-constitution, the Basic Law, meaning the legislation would take immediate effect in Hong Kong.
Exodus feared
The delay comes after economists and financial analysts warned that more than 80 percent of banks with operations in Hong Kong are foreign, so requiring them to comply with sanctions against foreign individuals could trigger their departure from the city.
Foreign-funded companies are already starting to reduce their investment in Hong Kong, moving the bulk of their operations to other cities in the region, like Singapore or Tokyo.
China announced on July 23 that it it would impose "counter-sanctions" on individuals in the U.S., including former commerce secretary Wilbur Ross under the law, which took effect in June 2021.
The ruling Chinese Communist Party (CCP) also imposed unspecified "counter-sanctions" on current and former representatives of a number of organizations, including the Congressional-Executive Commission on China, Human Rights Watch (HRW), and the Washington-based Hong Kong Democracy Council (HKDC).
Chinese political scholar Chen Daoyin said it was highly unusual for the NPC standing committee to postpone a vote on an item already added to the agenda.
"Any decision, whether it is to add the law [to Basic Law Annex III] or to call a halt to it, must have come from the highest ranks of the CCP Central Committee," Chen said. "That means at least the Politburo or the Politburo standing committee."
"For it to be added to the agenda on a Tuesday, and postponed by the following Friday is highly unusual," he said. "It has to do with recent developments in China's economic situation."
Tit-for-tat PRC reaction
Hong Kong current affairs commentator Johnny Lau said the addition of the foreign sanctions law to Hong Kong's statute book had generated concern in the financial community.
"Doing this would have fueled concerns among foreign investors," Lau said.
"If it is imposed on Hong Kong, it will force foreign financial institutions to choose between the mainland Chinese market and the rest of the world."
"That would scare them away, and Beijing appears to have taken that into consideration, and put the proposal on the back-burner for now," he said.
China passed its tit-for-tat law allowing targeted sanctions against foreign individuals and organizations on June 10, 2021. The move followed a slew of sanctions targeting CCP and Hong Kong officials over human rights abuses in Xinjiang, Tibet and Hong Kong.
Earlier that month, the Biden administration banned U.S. investment in around 60 companies in China’s defense or surveillance technology sectors in a bid to limit the flow of money to firms that undermine U.S. security or “domestic values,” which allows listings for human rights abuses.
And on March 22, the European Union, U.S., Canada, and the U.K. sanctioned Chinese officials and security entities as part of a multilateral approach to hold to account those responsible for Beijing’s policies of oppression against Uyghurs in the Xinjiang Uyghur Autonomous Region (XUAR).
Translated and edited by Luisetta Mudie.