China parliament approves Hong Kong security bill as tensions with U.S. rise

U.S. Secretary of State Mike Pompeo said on Wednesday Hong Kong no longer qualified for special treatment under U.S. law, potentially dealing a crushing blow to its status as a major financial hub.

The proposed security law was "only the latest in a series of actions" undermining Hong Kong freedoms, he told Congress.

"No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground," he said.

The security law could see Chinese intelligence agencies set up bases in the city.

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Relations between the two superpowers have been tense over China's claims in the South China Sea and trade. The coronavirus pandemic has also become an issue of acrimony.

"Already, international business is facing the pressure of increased tension between the U.S. and China, but the enactment of China's security law for Hong Kong could take the tension to a whole new level," said Tara Joseph, president of the American Chamber of Commerce in Hong Kong.

"This is show time for Hong Kong," Joseph said in a commentary in the South China Morning Post.

U.S. President Donald Trump has promised action over Hong Kong, with an announcement at the end of the week. More than 1,300 U.S. companies have offices in the city, providing about 100,000 jobs.

China said it would take necessary countermeasures to any foreign interference into what it insists are its internal affairs.

Hong Kong stocks led losses in Asia, dropping more than 2%.