HONG KONG – China’s Foreign Ministry has accused the top US official in Hong Kong of discrediting the city’s business reputation after he warned of diminishing confidence in its rule of law, the latest sign of frayed relations over the troubled Asian financial hub.

Mr Gregory May, who took over as United States consul-general in September, warned that companies in Hong Kong face heightened risks – including to their staff, finances and legal compliance – after Beijing imposed a sweeping national security law in 2020.

He also blamed the rules for worsening a brain drain in the city throughout the Covid-19 pandemic. 

“Hong Kong’s position as a free global financial centre will suffer as a result of this outflow,” he said on Wednesday at a virtual event hosted by the Centre for Strategic and International Studies, a Washington-based think-tank.

His comments mark an escalation in fraught US-China ties, in which Hong Kong has become a flashpoint over diminishing freedoms and the jailing of pro-democracy activists.

Last month, the Standing Committee of China’s legislature decided that Hong Kong’s leader and an oversight committee should approve the use of an overseas lawyer in national security cases – a development that Mr May warned could further undermine judicial independence in the city.

He estimates that about 15,000 US citizens – or 20 per cent of Americans in the city in 2019 – have left Hong Kong in the last two years.

Strict Covid-19 restrictions, including travel bans and mandatory hotel quarantines, led many foreign businesses to relocate staff to other regional hubs such as Singapore and Seoul during that period.

China’s Foreign Ministry hit back, with the Commissioner’s Office calling the remarks an “ill-intended plot” to damage the reputation of Hong Kong and further US interests.

Mr May “vilified Hong Kong’s rule of law and freedom, showed support for anti-China forces in Hong Kong, and talked down Hong Kong’s development prospects, which only exposed his sinister intention of disrupting Hong Kong and containing China”, a spokesman said in a statement.

It is not the first time tension has flared between the two offices. The Chinese Foreign Ministry in July accused Mr Hanscom Smith, former US consul-general to Hong Kong and Macau, of trying to “infiltrate and subvert Hong Kong” after he warned that the metropolis’ role as an Asian business hub was eroding under Beijing’s watch. 

Washington imposed sanctions on top Hong Kong and mainland Chinese officials, including former chief executive Carrie Lam and current leader John Lee, in 2020 over their involvement in the crackdown on civil liberties in the city. BLOOMBERG