Two of the people confirmed that one of the risks is the Chinese government's ability to gain access to data stored in Hong Kong by foreign companies.

Three people familiar with the matter said the US will issue a warning to American companies this week about the rising risks of doing business in Hong Kong, as Washington seeks to increase pressure on Beijing over its crackdown on the financial center.

Two of the people confirmed that one of the risks is the Chinese government's ability to gain access to data stored in Hong Kong by foreign companies. According to the people, the warning will come in the form of a business advisory, as first reported by the Financial Times.

An alert like this from President Joe Biden's administration would highlight how Washington's concerns about the former British colony have grown since Beijing cracked down on local democracy protests in 2019.

A fourth US official said the territory's national security measure, which was passed last year, undermined the rule of law, which has allowed Hong Kong's business community to thrive. The law, according to US officials, has weakened the boundaries between China and Hong Kong, which has been run as a "Special Administrative Region" with its own governing and economic system since the British colony was handed over to China in 1997.

According to the people, the US is also concerned about a new law that allows Beijing to retaliate against anyone who complies with anti-China sanctions. The White House has remained silent on the subject.

The US business advisory comes after the Trump administration's decision last year to revoke special trade privileges granted to Hong Kong in exchange for China's promise to give the city a "high degree of autonomy" from Beijing.

When Biden took office in January, relations between the United States and China were already strained over issues such as tariffs and the origins of the Covid-19 pandemic. Relations have only deteriorated since then, and while Biden has met with counterparts from Europe, Russia, Japan, and South Korea in person, he has yet to meet with Chinese President Xi Jinping.

On Friday, the president of the United States is expected to participate in a virtual meeting of the Asia-Pacific Economic Cooperation forum, which includes China. Deputy Secretary of State Wendy Sherman plans to visit Beijing later this month, according to two people familiar with her plans. Biden and Xi could meet in person in late October in Rome at a Group of 20 meetings.

Despite deteriorating ties between the world's two largest economies, trade between the US and China has continued to grow, fueled by consumer spending during the pandemic's recovery.

Data on Trade

China's merchandise exports to the United States have reached a new high so far this year, according to Chinese data, while US figures show a rate well above 2020 but below prior years. Meanwhile, US shipments to China are at or near all-time highs.

China's Foreign Ministry reaffirmed its opposition to what it sees as US interference in Hong Kong's affairs in response to the reports on Tuesday. According to Zhao Lijian, a spokesman for the Ministry of Public Security, the city has become more stable since the implementation of the security law.

Those comments came before the US updated its business advisory warning US companies about the dangers of supply chain links to the Xinjiang region, where China is accused of a wide range of human rights violations against Uyghurs.

“Through a whole-of-government effort and in close coordination with the private sector, our allies, and partners, the United States will continue to promote accountability for the PRC's atrocities and other abuses,” Secretary of State Antony Blinken said in a statement, referring to the People's Republic of China.

China denounced Treasury Secretary Janet Yellen's call for a "united front" against China on Tuesday, adding to the rising tensions.

Yellen referred to the post-World War II partnership and "rules-based international order" during a visit to Brussels earlier this week, before naming three countries she said threatened that order.

In remarks to EU finance ministers on Monday, Yellen said, “Together, we must counter threats to the principles of openness, fair competition, transparency, and accountability.”

“These challenges include China's unfair economic practices, malign behavior, and human rights violations; the Lukashenko regime's ongoing abuses in Belarus; and Russia's continued and growing malign behavior,” she said, in some of her harshest criticisms of Moscow and Beijing to date.

“China strongly condemns and rejects Treasury Secretary Yellen's remarks,” Zhao said at a regular press conference in Beijing on Tuesday.

According to people familiar with the plans, the latest developments occurred as White House officials discuss proposals for a digital trade agreement covering Indo-Pacific economies.

Details of the potential trade agreement, which is part of a Biden administration effort to curb China's regional influence, are still being drafted, but it could include countries like Australia, Canada, Chile, Japan, Malaysia, New Zealand, and Singapore, according to one of the people who asked not to be identified because the process isn't open to the public.

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