China’s sweeping plans to strip Hong Kong of democratic autonomy spell the “death knell” for the enclave’s special trading and financial status and will have grave economic consequences for China itself, Washington has warned in a dramatic shot across the bows. The draft law bans “treason, secession, sedition and subversion” in Hong Kong, eviscerating the zone’s ‘One Nation, Two Systems’ status and violating the Sino-British Joint Declaration of 1984, a commitment lodged at the United Nations. Mike Pompeo, the US secretary of state, said that if Beijing presses ahead with the “disastrous proposal” and openly flouts its international treaty obligations, the US will be forced to revoke Hong Kong’s unique privileges. At stake are the essential legal exemptions that allow it to function as a global hub. The escalating showdown between the two global superpowers – and the lack of any obvious diplomatic “off-ramp” – has begun to rattle financial markets. The Hang Seng index tumbled 5.6pc and the Shanghai Composite was off almost 2pc. Brent crude fell 4pc. The Cold War clash overshadowed the announcement of a massive Chinese stimulus plan on Friday, equal in economic scale to the post-Lehman credit boom in 2009. Premier Li Keqiang rolled out a fiscal package of bonds, loans, and direct spending worth over 4pc of GDP and vowed to open the monetary flood-gates, hoping to turbo-charge recovery from Covid-19. But China’s structural problems run much deeper today than they did a decade ago and hidden unemployment risks becoming a curse. Bowing to the inevitable, Li dropped the annual growth shibboleth for the first time in the modern era, a figure universally disbelieved by investors in any case. “We have not set a specific target this year. Our country will face factors that are difficult to predict due to the pandemic and the world trade environment,” he said. It is a symbolic moment, an admission that the era of artificial uber-growth is over. Global commodity markets can no longer count on breakneck Chinese demand. Chris Patten, the last governor of Hong Kong, said the draft security law is a “comprehensive assault” on the rule of law and fundamental freedoms of Hong Kong agreed in the Joint Declaration.