US Secretary of State Mike Pompeo said he had certified on Wednesday that Hong Kong no longer warrants special treatment under US law in the same way as when it was under British rule, a potentially big blow to its status as a major financial hub.
Pompeo's certification to the US Congress follows China's announcement of a plan to impose new national security legislation on Hong Kong which has triggered new street protests in the territory, with police firing tear gas and water cannon.
It now falls to President Donald Trump to decide to end some, all, or none of the US. economic privileges which the territory enjoys now.
Trump, already at odds with Beijing over trade and the novel coronavirus pandemic, said on Tuesday the United States was working on a strong response to the national security legislation that would be announced before the end of the week.
In a statement, Pompeo said China's plan to impose the new legislation was "only the latest in a series of actions that fundamentally undermine Hong Kong’s autonomy and freedoms."
"No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground," he said.
He said he certified to Congress that Hong Kong no longer warrants treatment under U..laws "in the same manner as US laws were applied to Hong Kong before July 1997," when Britain ended administration of the territory and returned control of it to China.
"It is now clear that China is modeling Hong Kong after itself," Pompeo said.
The "Hong Kong Human Rights and Democracy Act" approved by the US Congress and Trump last year requires the State Department to certify at least annually that Hong Kong retains enough autonomy to justify the favorable US trading terms that have helped it remain a world financial center.
Under it, officials responsible for human rights violations in Hong Kong could be subject to sanctions, including visa bans and asset freezes.
China's security proposal, unveiled in Beijing last week, was followed by the first large street protests in Hong Kong for months.
The United States, European Union, Britain and others have expressed concern about the legislation, widely seen as a possible turning point for China's freest city.
Specific details of the security bill remain unclear, and will not be enacted until later. It is aimed at tackling secession, subversion and terrorism after large street protests last year, and could see Chinese intelligence agencies set up bases in Hong Kong.