White House national security adviser Robert O'Brien said on NBC's "Meet the Press" Sunday that the U.S. government will likely impose economic sanctions on Hong Kong and China if Beijing moves ahead with a proposed national security law for Hong Kong that could constrain the special region's autonomy.

Why it matters: O'Brien said the U.S. could revoke a special status that allows Hong Kong to function as an international financial hub, stating that it's "hard to see" how the financial community can remain in the city if the law is enacted.

The backdrop: The Chinese Communist Party proposed an amendment to Hong Kong's independent legal system last week that would prohibit acts of sedition, subversion and secession, as well as foreign interference, though Beijing tends to define those crimes broadly.

What he's saying: "It's hard to see how Hong Kong could remain the Asian financial center that it's become if China takes over," O'Brien said.

  • "I just don't see how [the financial community] can stay. One reason that they came to Hong Kong is because there was the rule of law there, there was a free enterprise system, there was a capitalist system, there was democracy and local legislative elections. If all those things go away, I'm not sure how the financial community can stay there."
  • O'Brien said he believes the law would create a "brain drain" for the city as Hong Kongers "seek refuge other places."
  • "They're not going to stay in Hong Kong to be dominated by the People's Republic of China and the Communist Party."

Asked whether China would be threatened by sanctions, O'Brien responded: "China is dependent on capital from the rest of the world, to build their economy and grow their middle class. They're dependent on liquidity in financial markets. If they lose access of that through Hong Kong, that's a real blow to Xi Jinping and the Chinese Communist Party. "

  • O'Brien also refused to say that President Trump's decision not to stand up for pro-democracy protestors in Hong Kong during U.S.-China trade negotiations was a "mistake."
  • "We want good relations with China and with the Chinese people. But unfortunately, we're seeing just action after action by the Chinese Communist Party that makes it difficult."

Driving the news: Thousands of protesters marched through Hong Kong on Sunday in the largest gathering since Beijing's encroachment on the city's independent legal system sparked protests last year.

Go deeper: U.S.-China rivalry chips away at global order

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New Hong Kong law sets harsh penalties for broadly defined political crimes

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What it says: The law defines crimes such as terrorism and sedition broadly, but mandates harsh sentences — in many cases life imprisonment — for those found to have committed them. It will be enforced by a National Security Committee, headed by Hong Kong's chief executive, without any input from the judiciary.

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What they're saying: Johnson accused China of a "serious breach" of the terms under which the U.K. returned the city in 1997. China pledged to maintain Hong Kong's independent legal system and political freedoms for a period of 50 years.

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Hong Kong police make first security law arrest

Riot police deploy pepper spray as protesters rally against the new national security law in Hong Kong on Wednesday. Photo: Dale De La Rey/AFP via Getty Images

Hong Kong police announced on Wednesday their first arrest under the new security law as officers used pepper spray to break up a rally by pro-democracy protesters elsewhere in the city, images from the scene show.

Why it matters: The law, passed by Chinese lawmakers Tuesday, is a further encroachment on Hong Kong's independent legal system and the autonomy the territory had retained since the former British colony was returned to China in 1997.