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US Secretary of State Mike Pompeo has certified to Congress that Hong Kong no longer merits special treatment under US law.
The declaration could have far-reaching implications for US-Hong Kong trade.
“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” he said in a statement.
It comes hours before Beijing is expected to impose a controversial new security law on the territory.
Hong Kong police have arrested hundreds of people amid new anti-mainland unrest.
What is the significance of Pompeo’s statement?
Until now the US has given Hong Kong special status under US law, a provision that dates from when the territory was a British colony. The special status gives it favourable trading terms.
But special status is conditional on the US secretary of state certifying each year that Hong Kong maintains sufficient autonomy from mainland China.
If the secretary of state fails to certify this, the US Congress can revoke Hong Kong’s special trade status.
This would mean Hong Kong would be treated the same as mainland China for trade and other purposes.
That could jeopardise billions of dollars worth of trade between Hong Kong and the US and dissuade people from investing there in the future.
What is the security law about?
Beijing has proposed imposing it in Hong Kong.
It would ban treason, secession, sedition and subversion and China says it is needed to combat violent protests that have grown in the territory.
The anti-mainland sentiment was fuelled last year by a proposed – and later scrapped – bill that would have allowed criminal suspects to be extradited to China.
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Protesters in the city’s Mong Kok district on Wednesday
Critics say the security law is a direct attempt to curtail the freedoms given Hong Kong in the mini-constitution that was agreed when sovereignty was handed back to China in 1997.
Hong Kong’s Chief Executive Carrie Lam has denied that the law, which is set to go to a vote this week and could be in force as early as the end of June, will curtail the rights of Hong Kong residents.
A group of 200 senior politicians from around the world have issued a joint statement criticising China’s plan.
On Tuesday, President Donald Trump said the US would announce a “very powerful” response to the proposed legislation before the end of the week. China’s plans had already been condemned by Secretary of State Mike Pompeo, who described them as a “death knell” for the city’s freedoms.
The UK, Australia and Canada have also expressed their “deep concern”.
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