The United States should pass a law to impose tougher scrutiny of Hong Kong’s American dollar-backed international transactions and exports, a US advisory panel on China policy has recommended to the country’s Congress in a sweeping annual report.

The US-China Economic and Security Review Commission, which released the report on Tuesday, also suggested turning an existing Hong Kong-focused executive order, which includes suspending the city’s special trade status, into law to address “Beijing’s dismantling of Hong Kong’s autonomy and the erosion of fundamental freedoms”.

The 733-page report comes as Beijing and Washington have improved ties after a recent meeting between Chinese President Xi Jinping and his US counterpart Donald Trump, in which the world’s two largest economies agreed on extending a tariff truce and de-escalated tensions on other fronts.

“Although Hong Kong officials maintain a pretence of independence in order to court international investment, the expansion of ‘national security’ into all domains and pressure on private firms to operate in line with Beijing’s political objectives make Hong Kong’s system increasingly indistinguishable” from mainland China’s, it said.

The report said the Hong Kong government’s ongoing crackdown on dissidents, which included using the national security laws to silence them, “has eliminated a once vibrant civil society and created an atmosphere of repression comparable to mainland China”.

Hong Kong marked the fifth anniversary of the Beijing-imposed national security law in June, while the city enacted its own national security legislation in March last year in accordance with Article 23 of the Basic Law, the city’s mini-constitution.