What if Hong Kong loses its special status?

Value of something isn't more than it's perceived value. If a special status leads to significant benefits, it is certainly valuable and might be better off than lumped with the rest of Mainland. But with countries in a geopolitical warfare, this value needs to be cross analyzed with another value which is global dominance and influence. Seems there are no clear winners.

United states considers Hong Kong a semi-autonomous part of China under it's United States-Hong Kong policy act of 1992. This semi-autonomous status means it is treated differently than mainland China in terms of Trade, Commerce, Finance, travel etc. Now, in case US revokes this special status and club Hong Kong with the rest of mainland China, that would effectively mean treating the global financial hub no differently than any other Chinese city.

This policy rests on the mercy of the president of the united states of America, who has the power to suspend it with just an executive order which recently was clubbed with another requirement of having the secretary of state certifying to congress "if Hong Kong remains sufficiently autonomous" from China for it to justify it's unique status. Now considering these tumultuous times there are news of the secretary of state already briefing the congress of Hong Kong having no political independence from China. It has sparked debates of the special status of Hong Kong being revoked and it's consequences.

This could on a level start multiple proceedings against Hong Kong like visa restrictions, asset freezes for top officials in US, tariffs on goods and services out of Hong Kong etc. It depends on the current US dispensation on what measures they want to put and how fast. While these are smaller measures compared to revoking of special status, it would be interesting to know what would the revocation of special status mean for Hong Kong and most importantly China?

There will be some loss to China in case Hong Kong is lumped into Mainland China particularly by the US but not to the same extent as in the past. Hong Kong remains a key gateway for the Mainland and the rest of the world, it matters far less than it once did. 12% of China's exports went through Hong Kong or to Hong Kong, significantly down from 45% in 1992. However, in the financial market the open capital account and adherence to international standards of governance are unmatched by any mainland Chinese city. This makes it an important base for Banks and trading firms in Asia. The special status revocation would have significant impact on the financial markets and it's inflows.

This revocation not only does damage to Hong Kong and China but it will have some impact on US as well. Hong Kong offers US companies a relatively safe way to access the Chinese market which is the reason for HKD and USD to be pegged. It also gives Hong Kong access to US financial system. Many US companies have regional headquarters in Hong Kong. So US has a fair amount of it's own eggs in that basket.

While, this may further strain US-China relationship and make matters worse in an already cold war like situation. This is a necessary step as far as US and some pro democracy supporters say. Their idea remains, China can have Hong Kong by force and by manipulating laws but then they will not get the Jewel that they want but would rather get it in the form of a worthless stone.

Conclusion:

Hong Kong losing it's special status would certainly make some waves in the financial markets and China can be on the receiving end of it, but the impact would not be as much as it used to be in the past. In that scenario China has done well in developing other financial hubs and reduced it's interdependence on Hong Kong. Seems, they were aware a time like this may come. But Hong Kong still remains the front for China when it comes to access to western financial system. It is a gateway for Mainland Chinese companies to raise capital from the west through IPOs and debt market etc. This has been possible due to it's stability and adherence to international standards. China remains at the risk of losing all this with Hong Kong's special status but it seems China has accepted this reality and will go ahead even at this cost.