Hong Kong
CNN
 — 

Hong Kong has become a center for money laundering and sanctions evasion under the tightening grip of Beijing, US lawmakers have warned, calling for a re-evaluation of America’s close business relationship with the Asian financial hub.

In a letter to US Treasury Secretary Janet Yellen Monday, bipartisan leaders of the House Select Committee on China demanded greater scrutiny from Washington of Hong Kong’s much prized financial sector, a pillar of the economy that’s home to many big US banks and accounts for more than one-fifth of the Chinese territory’s gross domestic product.

Hong Kong has become a “global leader” in illicit practices, it said, including in the export of controlled Western technology to Russia, the creation of front companies to buy Iranian oil and the managing of “ghost ships” that engage in illegal trade with North Korea.

Since Beijing imposed a national security law on the city in 2020, “Hong Kong has shifted from a trusted global financial center to a critical player in the deepening authoritarian axis of the People’s Republic of China, Iran, Russia, and North Korea,” the lawmakers said.

“We must now question whether longstanding US policy towards Hong Kong, particularly towards its financial and banking sector, is appropriate,” they added.

CNN has reached out to the US Treasury Department and the Hong Kong government for comment.

In 2020, then-President Donald Trump revoked the special treatment Hong Kong had long enjoyed under US law, to punish Beijing for imposing the national security law on the once-outspoken city. The executive order effectively ended the city’s separate customs treatment from mainland China by suspending a 1992 law granting Hong Kong special economic status.

Since then, dozens of Hong Kong-based companies have been hit by US sanctions for evading extensive measures imposed on Russia in response to its invasion of Ukraine, including the supply of critical dual‑use goods such as semiconductors.

Hong Kong officials have previously said the city has no obligation to implement unilateral sanctions imposed by other countries – including when a mega yacht linked to a Russian oligarch sanctioned by the US, the European Union and the United Kingdom dropped anchor in the city in October 2022.

The committee’s letter cited research published this year that shows nearly 40% of goods shipped from Hong Kong to Russia between August and December 2023 were high-priority items that are likely fueling Moscow’s production of military goods such as missiles and aircraft.

The lawmakers asked Treasury Department officials to brief the committee on “the current status of American banking relationships with Hong Kong banks, how our policies have shifted to account for the changes in Hong Kong’s status and posture, and the measures the Treasury plans to implement to address these risks.”

The letter, signed by Republican Rep. John Moolenaar, who chairs the committee, and Rep. Raja Krishnamoorthi, the panel’s top Democrat, highlights the growing scrutiny on Hong Kong in the escalating great power rivalry between the US and China.

It comes as Trump is poised to return to the White House with a cabinet stacked with China hawks, including Marco Rubio, who has been named secretary of state.

Rubio, a fierce critic of Beijing’s crackdown on Hong Kong, has sponsored legislation that sanctioned Chinese and Hong Kong officials for alleged human rights violations in the city. He has also proposed a bill now being considered in Congress to let the secretary of state strip certification from Hong Kong’s economic and trade offices in the US.

Trump has also named hedge fund executive Scott Bessent as his treasury secretary.

Isaac Stone Fish, CEO of Strategy Risks, a business intelligence firm that focuses on China, said even if Yellen declines to act upon the letter, Bessent – who in a recent interview described Beijing as a “despotic regime” – is expected to take a more hawkish approach to China.

“In fact, it appears like he’ll be the most hawkish Treasury Secretary since the 1970s. This has massive implications for US businesses with big exposure to Hong Kong,” Fish said.

“Sadly, the idea of Hong Kong as autonomous from China is now a farce … US companies need to understand that their Hong Kong operations will likely fall under increased scrutiny.”

After more than two weeks of grueling deliberations at this year’s U.N. climate summit in Baku, Azerbaijan—known as COP29—the world’s wealthiest nations agreed to triple their climate finance commitments to developing nations. 

For the world’s poorest countries, which are responsible for a minuscule share of global greenhouse gas emissions, securing the necessary financing to cope with a changing climate and shift away from fossil fuels is essential. But how much money they should receive and who should pay are contentious questions that sparked a bitter fight in Baku. 

After more than two weeks of grueling deliberations at this year’s U.N. climate summit in Baku, Azerbaijan—known as COP29—the world’s wealthiest nations agreed to triple their climate finance commitments to developing nations. 

For the world’s poorest countries, which are responsible for a minuscule share of global greenhouse gas emissions, securing the necessary financing to cope with a changing climate and shift away from fossil fuels is essential. But how much money they should receive and who should pay are contentious questions that sparked a bitter fight in Baku. 

Wealthy nations ultimately agreed to commit at least $300 billion in climate finance annually by 2035. That amount eclipses their existing pledge of $100 billion per year, which they had already struggled to meet. Yet it is nowhere near the $1.3 trillion target that developing countries had been pushing for—and even that value likely falls short of their total financial need in confronting climate change. 

The resulting agreement drew little fanfare—and in some cases outright dismissal—from developing nations and climate experts, although many said it moved the needle in the right direction. 

“The poorest and most vulnerable nations are rightfully disappointed that wealthier countries didn’t put more money on the table when billions of people’s lives are at stake,” said Ani Dasgupta, the president of the World Resources Institute (WRI), a global research nonprofit, but “this deal gets us off the starting block.”

While the negotiation over money was always expected to make this year’s COP difficult, the past two weeks sparked chaotic and often heated debates, heightening fears that this summit could be the first since 2009 to fail to reach an agreement. 

In addition to wealthy nations’ $300 billion pledge, the final deal includes vague language that calls on “all public and private sources” to work together to secure $1.3 trillion in climate financing by 2035. But most of that money, if it comes at all, will likely come from private sources—not the kind of public finance or grants that are preferred by developing countries, many of which are worried about taking on more debt. 

U.N. Secretary-General António Guterres expressed disappointment in the agreement but said it laid the groundwork for more robust climate action going forward. “I had hoped for a more ambitious outcome—on both finance & mitigation—to meet the scale of the great challenge we face, but the agreement reached provides a base on which to build,” he wrote in a post on X. 

Few developing countries celebrated the outcome. Frustrations continued to flare after COP29 President Mukhtar Babayev announced the deal, with the Nigerian delegation’s representative slamming the final text as a “joke” and “an insult to what the [U.N. Framework Convention on Climate Change] says.” Anger was also palpable from the Bolivian negotiator, who said the agreement “enshrines climate injustice” and “consolidates an unfair system.” 

Some of the most scathing remarks came from Indian representative Chandni Raina, who railed against the agreement’s “paltry sum” and what she characterized as a “stage-managed” process. 

“India opposes the adoption of this document,” she said, which she described as “nothing more than an optical illusion.” “We seek a much higher ambition from the developed countries,” she added. 

Beyond the finance targets, one of the most contentious issues during the negotiations was what responsibility major emitters that still qualify as developing countries—such as China and Saudi Arabia—should have to funnel funds to poorer, lower-emitting nations.

China, which came under pressure from the United States, stood by its long-held stance that only developed countries should be obligated to contribute finance. However, the Baku deal includes an option for developing countries to contribute money voluntarily. That was seen as a compromise because it maintains the division between developed and developing countries while also opening the door to new contributions from the latter. 

China has provided substantial sums of climate finance to poorer countries in recent years on its own terms, outside the auspices of the United Nations. Recent studies estimate that China’s climate finance flows have reached some $4 billion a year over the last decade, roughly 5 percent of the developed country total, although much of it is in loans, not grants.  

China, while still far poorer than Western nations on a per capita basis, exceeded the European Union to become the second-highest cumulative emitter of carbon emissions last year, so it is increasingly under pressure to shoulder more of the burden of climate change. Shuang Liu, WRI’s China finance director, said Beijing sent positive signals about maintaining its commitment to the global energy transition at this year’s COP. “China does not see itself as part of the $300 billion” sum that wealthy nations pledged. “But,” she added, “China is willing to [provide] support with climate-related finance to other countries.”

While China came under pressure from the United States, U.S. negotiators didn’t have much ground to stand on at this year’s COP. The talks occurred under the shadow of the reelection of former U.S. President Donald Trump, who has long dismissed climate change as a hoax and whose team has signaled that he will again yank the United States out of the Paris climate accord. During his first term, Trump also cut off U.S. funding for the Green Climate Fund, a U.N. program that serves as one of the main climate finance channels. 

The United States is “the world’s largest historical emitter and the second-largest emitter after China now,” said Alice Hill, who served as a special assistant to U.S. President Barack Obama and senior director for resilience policy on the National Security Council. “Its position matters as to how much climate change occurs going forward.”

COP29 offered a glimpse into what international climate diplomacy could look like in the years to come, in a world where Washington has again withdrawn from global climate change efforts. 

“Despite some blockers intent on disrupting the process, this deal shows that the majority of countries remain committed to multilateralism and tackling the climate crisis,” said Cosima Cassel, a program lead at E3G, a research organization. “We have seen strong leadership from countries such as the U.K. and Brazil, as well as Colombia and Kenya, to push this deal to fruition.”

The world, which has already warmed around 1.3 degrees Celsius above preindustrial levels, is currently on track to heat up by 3.1 degrees Celsius above preindustrial levels by the end of the century, according to the United Nations. That’s more than double the key 1.5-degree target that was set under the 2015 Paris agreement, and scientists stress that every additional increment of warming raises the risks of the severe weather increasingly sweeping the world. 

Despite its frustrating outcome, COP29 has, importantly, shaped public perceptions of wealthier nations’ climate finance responsibilities, experts said. 

“COP29 has helped mainstream the simple fact that rich countries have a historic obligation to help poorer countries cut emissions and cope with extreme weather, and that doing so will benefit every country on Earth,” said Michael Wilkins, the executive director of the Centre for Climate Finance & Investment at Imperial College London.

Trading house Itochu Corp. is considering helping finance the potential buyout of Seven & i Holdings Co. by its management, responding to a request from the founding family of the Japanese retail giant, sources close to the matter said Monday.

Itochu, the parent of convenience store chain operator FamilyMart Co., is apparently in the initial phase of the study, the sources said. The move could complicate the around 7 trillion yen ($45 billion) buyout offer by Canada’s Alimentation Couche-Tard Inc. toward Seven & i.

The Seven & i founding family, which anticipates a management buyout worth 9 trillion yen, has also contacted some banks and investment funds, according to the sources.

Alimentation Couche-Tard, the operator of Circle K convenience stores, has raised its buyout offer from the initial offer of around 6 trillion yen.

With its possible participation, Itochu may expect some synergies between FamilyMart and Seven-Eleven, two of the leading convenience store chains in Japan. But it could also cause antitrust issues because of their dominance in the industry, and Itochu may need to keep its investment ratio low, the sources said.

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