The American Chamber of Commerce has said US businesses in Hong Kong should reassess their operations and decide if the risks are worth the reward.

The president of the chamber in Hong Kong, Tara Joseph, said businesses there are caught in the middle of deteriorating relations between the US and China.

On Friday, the US government issued an advisory warning companies about business risks in the former British colony due to its shifting legal landscape and tighter control by the communist ruled government in Beijing.

Relations between the US and China have been badly affected by a trade war and mounting tensions over Chinese moves to curb political dissent in Hong Kong.

“The business landscape has certainly become more complex than it used to be – we’re definitely in a ‘new normal’ as far as business goes, here,” Ms Joseph said.

“What is concerning overall, not just with this advisory, would be a constant tit-for-tat between US and China when it comes to Hong Kong … (which) in many ways is caught right in the middle.”

The US government advisory said operating in Hong Kong could lead to reputational and legal damage and data privacy risks.

Hong Kong authorities slammed the advisory as “unfounded fear-mongering”, accusing the US of hypocrisy and double standards.

Beijing has been walking back freedoms promised for 50 years to Hong Kong when Britain handed the colony over in 1997.

The imposition of a sweeping national security law last June has led to the arrests of more than 100 pro-democracy supporters, including Jimmy Lai, whose Apple Daily pro-democracy newspaper was forced to close after authorities arrested at least seven of its staff and froze millions of dollars in assets.

Over the past year, Hong Kong authorities have amended electoral laws, arrested most of the city’s most prominent pro-democracy activists and banned large-scale protests citing public health risks from the pandemic, despite months of few coronavirus infections.

Those moves have drawn criticism from the US and other western governments.

China has hit back, saying Hong Kong matters are part of China’s internal affairs and other governments should not interfere.

The American Chamber of Commerce in Hong Kong represents US business interests in the city. It has doubled down on that commitment, buying a new office to facilitate its work, the organisation said last week.

Ms Joseph said the Biden administration’s advisory might influence the perspectives of US companies not already operating in Hong Kong. But the city remains an important hub for doing business with mainland China.

Hong Kong has a separate customs territory and ostensibly an independent judicial system, though the recent trend to designate many issues as falling under the National Security Law has experts worried that the city’s famed “rule of law” is being undermined.

“Right now, rule of law is what makes businesses really tick here in an international environment. Commercial law at this point seems very sound and that’s very important to the business community,” Ms Joseph said.

“But any signs of that being unwound or any real changes taking place there could cause a lot of concern.”

She said she hopes Hong Kong will manage to maintain those global standards.

“So anything that takes away from that can make it harder for Hong Kong to maintain its role, but we hope that there will be an increased understanding and a recognition that it’s a win-win for people to maintain their businesses here and for Hong Kong to maintain its position as a gateway,” she said.