Washington’s decision not to renew Executive Order 13936 was not a concession to Beijing or a gesture tied to renewed U.S.–China trade talks. After six years of Hong Kong’s eroding autonomy, rising compliance costs for American financial institutions, and growing integration with mainland China, the order had become largely symbolic. Trade talks simply offered a convenient moment to retire an instrument that no longer served U.S. strategic interests.
The order was issued on July 14, 2020, after Beijing’s crackdown on Hong Kong’s 2019 Anti-Extradition Movement and the rollout of the National Security Law. Backed by the Hong Kong Autonomy Act and the Hong Kong Human Rights and Democracy Act, EO 13936 suspended Hong Kong’s preferential treatment under U.S. law, sanctioned officials involved in the crackdown and declared a national emergency related to threats posed to Hong Kong’s autonomy. It was renewed annually without controversy until July 14, 2026, when Washington quietly let it expire. The move immediately drew criticism that the Trump administration was easing pressure on Beijing to advance trade negotiations.
However, it was unlikely from the start that sanctions would force Beijing to change course. Beijing views Hong Kong’s governance, security architecture, and political order as non-negotiable parts of its own national sovereignty. Research has shown that sanctions are least effective against authoritarian governments, which can absorb economic pressure and shield political priorities. But perhaps more importantly, they are even less effective when aimed at sovereignty issues.
So, despite the sanctions, repression in Hong Kong continued, and then Article 23 was enacted. Jimmy Lai received a 20-year sentence under national security charges. Forty-seven pro-democracy figures were convicted. Independent bookstores were raided. These developments underscored a basic reality: the sanctions regime sought to influence behaviour in an area where Beijing’s tolerance for external pressure is effectively unlimited.
Beijing also adapted quickly to the broader sanction regime. Hong Kong deepened financial integration with the mainland through the Greater Bay Area Initiative and the 15th Five-Year Plan. Cross-boundary Wealth Management Connect, Bond Connect, and Stock Connect all expanded after 2020, while the weighting of mainland firms in Hang Seng Index grew from 57.8% in 2020 to roughly three-quarters by mid-2026. China and Hong Kong expanded economic ties with Central Asia and the Middle East to reduce reliance on Western markets. These moves signalled a structural shift in Hong Kong’s financial system. As Hong Kong relied more on mainland liquidity, corporates and settlement channels, its exposure to U.S. sanctions declined.
Markets adjusted to this shift as well. Following the introduction of the EO and other extraterritorial measures, financial institutions effectively raised their internal risk ratings for Hong Kong, triggering additional due diligence and enhanced compliance requirements across the sector. But banks absorbed the added costs while maintaining profitable business with mainland clients, as offshore wealth management continued and cross-border capital flows remained steady. Foreign financial institutions have also expanded operations into Hong Kong given that it has remained a primary offshore gateway for Chinese capital. So, instead of isolating Hong Kong, sanctions accelerated its evolution into a financial hub with closer ties to mainland China.
The order faced classic diminishing returns where rising compliance burdens for American firms did not result in any change in Beijing’s political behaviour. Banks faced heavier screening, Hong Kong Autonomy Act checks and reporting duties as the sanctions’ leverage faded. Beijing adapted, markets internalised the risk and implementation costs persisted after the sanctions’ impact faded. EO 13936 became a political symbol rather than an effective pressure tool. Trade talks did not drive the policy shift, but they offered a convenient moment to retire a measure that had lost its utility. Ending the order was not an olive branch to Beijing; it was an acknowledgment that the tool had run its course without offering strategic leverage.
Importantly, the expiration does not signal a broader U.S. retreat. Washington adjusted one instrument but kept its overall Hong Kong policy intact. Although nine individuals were removed from the sanctions list, its broader legal framework remains unchanged. Unlike an executive order, which can lapse at the discretion of the president, the Hong Kong Autonomy Act and the Hong Kong Human Rights and Democracy Act are congressional statutes that remain in force unless amended or repealed by Congress. Under Section 202 of the US-Hong Kong Policy Act, the president must assess Hong Kong’s autonomy each year. The 2026 report again found Hong Kong insufficiently autonomous, meaning its preferential treatment cannot be restored. Hong Kong’s status will not return to its pre-2019 position.
With bipartisan consensus on China still strong, the Hong Kong Autonomy Act and the Hong Kong Human Rights and Democracy Act remain the backbone of U.S. sanctions policy. These laws authorise measures against individuals and entities undermining Hong Kong’s autonomy and ensure Hong Kong is treated within the broader U.S. framework toward China. The expiration of EO 13936 is a tactical adjustment, not a strategic reversal.
EO 13936 ended not because Washington softened its stance, but because the order had become more symbolic than coercive. The sanctions regime failed to deter Beijing’s crackdown, increased costs for American firms and accelerated Hong Kong’s integration with mainland China. Washington retired a tool that no longer served its purpose while keeping the broader policy structure in place. The expiration of EO 13936 highlights a broader lesson for policymakers. When sanctions fail to change political behaviour while imposing persistent implementation costs, they eventually become candidates for policy recalibration rather than renewal.
This lesson extends beyond Hong Kong. The sustainability of a sanction hinges on whether the benefits to the sender continue to outweigh their implementation cost. If a sanction aims to alter certain behaviours of a target state, whether the targeted state is resilient enough to adapt to the sanction without changing its behaviours determines its benefits. As mentioned previously, authoritarian regimes are resilient enough to absorb external political pressure without changing core sovereign policies, given this reality, the expected benefits of sanctions diminish over time. Once that balance reverses, the sanction-imposing state would recalibrate its sanction policy. In this case, the US chose to let the executive order lapse as a policy adjustment.
C. F. Legrand is an independent researcher with a Master of Philosophy in Political Science. Her work examines how states wield economic tools as instruments of coercion, with particular attention to the deepening rivalry between the United States and China. She has conducted various research on great-power competition, sanctions policy, and international political economy. This article has been written under a pseudonym.
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