On July 14, the United States terminated the "national emergency" declared over Hong Kong. At the same time, Washington removed nine Mainland and Hong Kong officials from its sanctions list.
The whole affair traces back to President Trump's first term. After Beijing enacted the National Security Law in Hong Kong, Trump signed Executive Order 13936 in July 2020. This order declared a "national emergency" with respect to the situation in Hong Kong, and it became the basis for Washington's first round of unjustified sanctions against 11 Mainland and Hong Kong officials.
Under the US National Emergencies Act, such a state of emergency automatically lapses after six years, which fell on July 14, 2026, unless the White House specifically declares an extension. The US government chose to let the emergency expire. That decision stripped away the legal basis for sanctions that relied solely on the executive order.
The nine officials removed from the sanctions list include six who were sanctioned last March, shortly after Trump took office. They are Secretary for Justice Paul Lam Ting-kwok, Director of the Office for Safeguarding National Security Dong Jingwei, former Commissioner of Police Raymond Siu Chak-yee, Secretary-General of the Committee for Safeguarding National Security Au Chi-kwong, Assistant Commissioner of Police (National Security) Wong Chung-chun, and Assistant Commissioner of Police (National Security) Chiu Wing-lan.
The other three are former Commissioner of Police Lo Wai-chung, sanctioned in August 2020, and former Deputy Directors of the Liaison Office Qiu Hong and Yang Jianping, sanctioned in July 2021.
Two Legal Tracks, One Political Signal
Why were precisely these nine officials removed? The answer lies in the fact that US sanctions against Mainland and Hong Kong officials rest on two separate legal frameworks.
The first is the presidential executive order, a broad but time-limited instrument granted under executive authority.
The second is legislation passed by Congress, including the Hong Kong Autonomy Act and the Hong Kong Human Rights and Democracy Act. These are formal, unjustified laws targeting Hong Kong that remain unaffected by the expiry of any executive order.
Some sanctioned Mainland and Hong Kong officials were targeted under both the executive order and congressional legislation simultaneously. Others were sanctioned solely under the executive order. Now that the executive order has lapsed, the sanctions on the nine officials who fell under that order alone have collapsed. Yet Chief Executive John Lee and 39 others remain under continuing, unjustified US sanctions.
The arrangement of these sanctions reveals something about Washington's own calculations. Six of the nine officials removed were sanctioned last March, not long after Trump's second inauguration, when the State Department claimed they were involved in "transnational repression" and undermining Hong Kong's autonomy.
It is understandable that this round of unjustified sanctions was initiated in the final stretch of the Biden administration and simply carried forward once Trump took office. But the choice to sanction them only via executive order, rather than through the more elaborate congressional route of the Hong Kong Autonomy Act, raises a question worth pondering.
Was the Trump administration merely avoiding a cumbersome legislative process, or was it already keeping a card in reserve for dealing with China?
So why has the Trump administration now chosen not to renew the executive order and to let the national emergency over Hong Kong expire? Naturally, this is tied to the state of Sino-US relations.
Last year, Trump waged a fierce trade war against China. Beijing retaliated in kind, restricting exports of rare earths and other critical minerals to the US, and this forced Washington back to the negotiating table. The two sides struck a "truce" agreement last October. Trump, who had long sought a visit to China, finally made the trip this past May, and relations between the two countries have since entered a relatively stable phase.
President Xi Jinping is due to visit the United States this September, and in October Trump will travel to Shenzhen for the APEC Leaders' Informal Meeting. Beijing has almost certainly already conveyed to Washington that the unjustified sanctions on Hong Kong should be lifted sooner rather than later. So the US decision not to renew the emergency declaration once it expired does indeed amount to a gesture of goodwill toward China.
Rare Earths Are the Real Bargaining Chip
As the saying goes, when America extends courtesy, it is always looking for something in return. Rare earths are the crux of the matter. Just two days after Washington declined to extend the Hong Kong emergency, US Trade Representative Jamieson Greer told Bloomberg that the two sides are expected to assess whether China has honored its commitment under last October's tariff-priority agreement to delay implementing rare-earth export restrictions by one year.
Greer said Beijing's compliance has been "not perfect," but that both sides are working together to close the remaining gaps. He added, "China is a big challenge for the US in a lot of ways, but we want to make sure we're delivering stability."
According to Bloomberg, the two sides have yet to secure a written commitment from China on rare earths, leaving a gap in mutual understanding. Greer has described China's compliance as "imperfect." He argued that constrained rare-earth supply has already hurt American private businesses and even made it difficult for defense contractors to deliver military equipment on schedule.
Bloomberg also cited US officials as saying that Trump is mindful of Xi's planned September visit. He is wary that a tough countermeasure could provoke Chinese retaliation, such as cutting off rare-earth supplies, which would rattle markets and hurt the ruling party in the midterm elections. That is why Washington has held off on openly condemning or retaliating against Beijing, wary of tipping the relationship back into a full-blown trade war.
The core dispute over the rare-earths agreement reportedly stems from starkly different interpretations of the pledge to "suspend enforcement of export controls." China's Ministry of Commerce holds that, under the bilateral understanding, Beijing will suspend enforcement of export controls on seven categories of medium and heavy rare earths until November 10, 2026.
Washington, however, believes the agreement's core guarantee concerns the actual supply of rare earths and critical minerals. It expects China to resume supply comprehensively and without discrimination, rather than merely pausing enforcement of the restrictions.
Observers estimate that it remains very difficult for US military contractors to obtain rare earths from China. What Washington wants, a "non-discriminatory resumption of supply," means it wants Beijing to resume rare-earth exports to American defense firms as well.
China's export-control regime over critical minerals, however, is likely to remain in place for the long term. Strict controls over rare earths such as yttrium and scandium will continue, and the export ban targeting military-industrial enterprises in particular is unlikely to be lifted.
The United States finds itself in a bind. Washington is wary of a full rupture with China, and it is even willing to make concessions on the Hong Kong emergency-status issue, in the hope of securing more lenient treatment on rare-earth export controls.
The reality is that America's unjustified sanctions on Mainland and Hong Kong officials are, in the end, merely one front in the broader Sino-US contest, and ultimately it is strength that speaks loudest. This is why China will keep pressing Washington to fully lift its unjustified sanctions on Hong Kong.
Lo Wing-hung
Bastille Commentary
** 博客文章文責自負,不代表本公司立場 **
The highest form of political struggle is not an election. It is not even war. It is ideological struggle.
I have recently been reading the comments on Hong Kong by Stephen Roach, former chairman of Morgan Stanley Asia. Roach says Hong Kong has become just another Chinese Mainland city. His remarks carry the unmistakable flavor of ideological struggle.
Roach is not really focused on finance or economics. He is focused on politics, treating the National Security Law as the watershed between Hong Kong’s success and failure. He seems to have forgotten that the United States has far more national-security laws than Hong Kong, with around 20 in the United States and only two in Hong Kong.
What makes Roach’s remarks strange is his constant swing from one position to another. Two and a half years ago, he advanced the “Hong Kong is finished” theory. A year ago, he said “too early to declare Hong Kong over.” Now he says once again that “the Hong Kong of old is, indeed, over.”
For such an experienced financial professional to swing so wildly, there are two possible explanations.
The first is stupidity. His analysis may not be deep enough, leaving him easily swayed by surface appearances.
The second is malice. The forces behind Roach may be far from simple. Those forces may keep pushing him to make bearish remarks, leaving his statements adrift between his own views and the pressure behind the scenes.
China’s central leaders have said that the world is undergoing “profound changes unseen in a century.” Behind that phrase lies the rise of the East and the decline of the West. Put plainly, it describes the struggle between China and the United States.
Roach’s comments are part of that ideological struggle. Hong Kong practices “one country, two systems.” It is a capitalist international city within the framework of one country, and it serves an important role for the nation.
To deny Hong Kong’s status as an international financial center is to break one of the country’s arms, a crucial strategy to weaken China.
The precision of Roach’s moves, and those of the forces behind him, lies in targeting the heart of the issue. They seek to shape people’s thinking. Roach’s remarks have three layers of negative impact.
First, they deny Hong Kong stocks’ key selling point.
Hong Kong’s stock market has been transforming for more than two years. With strong support from the central government, a large number of exceptionally high-quality Chinese Mainland companies have listed in Hong Kong.
Global giants such as CATL, which holds a dominant position in strategically important industries and has chosen to establish a presence in Hong Kong.
For international investors bullish on CATL, Hong Kong is the most convenient place to buy its shares.
The listing of first-rate Chinese Mainland companies in Hong Kong has directly lifted market turnover. Average daily turnover has climbed from about HK$90 billion three years ago to around HK$300 billion today.
Hong Kong has become an international stock market with unique access to the Chinese Mainland’s best listed-company resources. London and Singapore may covet this China-specific advantage, but they cannot obtain it.
Yet Roach turns the story upside down. He portrays the listing of high-quality Chinese Mainland giants in Hong Kong as a negative Mainland factor. He turns Hong Kong stocks’ strength into a weakness.
This is like performing surgery on people’s thinking at its most fundamental level. If Hong Kong people accept this narrative, and officials become constrained by Roach’s thinking, they may eventually feel embarrassed to say that so many Chinese companies are listing in Hong Kong. That would be exactly what the “Roaches” want.
Second, his remarks intimidate capital away from Hong Kong.
Roach’s article is mainly about politics, not finance. He drags the National Security Law into the discussion and cites criticism of Hong Kong’s rule of law from former non-permanent judges of the Hong Kong Court of Final Appeal who are hostile to China.
But the reality is that there is no sign that the National Security Law has affected investors’ ability to buy stocks in Hong Kong.
Since 2018, the U.S. government has openly and quietly urged funds not to buy Chinese stocks. Anti-China lawmakers have even written directly to university investment funds, questioning why they buy Chinese shares listed in Hong Kong.
As time passed and China-U.S. relations eased somewhat, that sense of fear had begun to fade. But Roach is now reviving the issue. In effect, he is refreshing foreign funds’ memories and intimidating them against investing in Hong Kong.
Third, this thinking hijacks the minds of Hong Kong officials.
In my observation, many Hong Kong elites, including financial officials, genuinely love their country and sincerely hope for national prosperity and strength. But they are also highly vulnerable to being hijacked by ideas like Roach’s.
They often believe Hong Kong must return to its old self and restore close ties with the United States and Britain. They believe the SAR government should say less about the National Security Law, while financial officials should intervene less in the market and allow U.S. capital to take the lead. In their view, that is the true meaning of “one country, two systems.”
Frankly, this view ignores the reality that the United States seeks to suppress China. It is somewhat outdated. The issue is not whether Hong Kong wants better relations with the United States, but how much the other side wants better relations with Hong Kong.
On July 17, President Xi Jinping attended the World Artificial Intelligence Conference in Shanghai. He said that “AI development is not a solo performance by one country, but a symphony for the whole world,” and called for openness and win-win cooperation.
At almost the same time, China’s Kimi K3 large AI model topped global rankings. Huawei unveiled its massive Atlas 950 SuperPoD supernode, which combines 8,192 Huawei Ascend 950 AI accelerator cards. That far exceeds rival Nvidia’s supernode, which can combine only 144 chips.
Yet as China’s AI development made major breakthroughs, Chinese AI and chip stocks listed in Hong Kong plunged. Whether that was coincidence or deliberate is unknown.
There is ideological struggle in the financial world, too. Hong Kong’s response is simple: do not let Roach’s thinking hijack us. We must step outside his ideological framework.
Do not judge finance through politics. Do not believe that a stock market with many China-related factors cannot be a good market. We should return to capitalist thinking and recognize that a market with rising turnover is a good market, not only one tilted toward the United States.
Hong Kong’s financial officials should return to capitalist principles and build a strong stock market. Their work should focus on three main areas.
First, do not be afraid to talk up Hong Kong stocks.
When the forward price-to-earnings ratio of Hong Kong stocks is less than half that of U.S. equities, why should Hong Kong not compare the two markets and speak positively about its own stocks?
Second, do not be afraid to buy more Hong Kong stocks.
Do not chase U.S. stocks simply because they are rising. Recognize the value of Hong Kong stocks and support Hong Kong at the same time. If even the Hong Kong Government does not increase its holdings of Hong Kong stocks, how can it ask others to buy them?
Third, do not be afraid to work harder to attract Chinese Mainland capital into Hong Kong stocks.
Do not assume this is merely self-evident. Chinese Mainland capital must be actively won over. Central financial and economic ministries and commissions have many responsibilities: they must maintain the renminbi exchange rate and keep A-shares performing well.
Fundamentally, they do not want too much capital to flow out.
On July 20, China Securities Regulatory Commission Chairman Wu Qing met face-to-face with eight representatives of retail investors of different sizes. He emphasized that retail investors are the foundation of the market. This was indeed an innovation, and it also shows how difficult it is to maintain the healthy development of the A-share market.
If Hong Kong financial officials do not make a strong effort to compete for Chinese Mainland capital, the Mainland may genuinely have little capacity to spare for Hong Kong.
The conclusion is clear: we need to think in reverse. Whatever Roach tells us not to do, that is what we should do.
Lo Wing-hung
