HONG KONG (Reuters) - Hong Kong's government warned Washington that withdrawing its special U.S. status, which has underpinned the city as a global financial hub, could be a "double-edged sword" and urged the United States to stop interfering in internal affairs.



The statement came as U.S. President Donald Trump is due to announce later on Friday his response to the Chinese parliament's advancement of national security legislation for Hong Kong, which democracy activists and Western countries fear could erode the city's freedoms.


The former British colony enjoys a high degree of autonomy under a "one country, two systems" formula since it returned to Chinese rule in 1997.


"Any sanctions are a double-edged sword that will not only harm the interests of Hong Kong but also significantly those of the U.S.," the city's government said late on Thursday.


It added that from 2009 to 2018, the U.S. trade surplus with Hong Kong was the biggest among all its trading partners, totalling $297 billion of merchandise and 1,300 U.S. firms are based in the city.


Beijing says the new legislation will tackle secession, subversion, terrorism and foreign interference in the city. It could see Chinese intelligence agencies set up bases there.


The plan has ignited the first big protests in Hong Kong for months, as thousands of people took to the streets this week, prompting police to fire pepper pellets in the heart of the city's financial district to disperse crowds.


The U.S. Department of State said in a report on Thursday it could "no longer certify that Hong Kong continues to warrant (differential) treatment" from Beijing.


Trump's top economic adviser Larry Kudlow warned that Hong Kong, which has enjoyed special privileges under U.S. law based on its high degree of autonomy from Beijing, may now need to be treated like China on trade and other financial matters.


In a separate statement on Friday, published in several local newspapers, Hong Kong leader Carrie Lam urged "fellow citizens" to "join hands to pursue our dreams while putting aside our differences".


She said the legislation was needed because of a "terrorist threat" and because organisations advocating "independence and self-determination" have challenged the authority of Beijing and local governments and pleaded for foreign interference.


The five demands of last-year's pro-democracy protest movement included universal suffrage and an independent inquiry into police handling of the protests, but not independence. A minority of protesters waved "Hong Kong independence" flags.


Independence is anathema for Beijing.


The security legislation, along with a bill to criminalise disrespect for China's national anthem, are seen by protesters as the latest attempt by Beijing to tighten its control on the city.


The security legislation, expected to be enacted before September, was condemned also by Britain, Australia, Canada and others. Britain said it will give greater visa rights to British national overseas passport holders from Hong Kong unfewer China suspends its plans.