China's parliament on Thursday approved plans to impose a security law on Hong Kong, which critics say will hurt the city's promised freedoms.
The vote by the rubber-stamp National People's Congress came hours after the US revoked the special status conferred on Hong Kong, paving the way for the territory to lose trading and economic privileges.
US Secretary of State Mike Pompeo said the status had been withdrawn because China was no longer honouring its handover agreement with Britain to allow Hong Kong a high level of autonomy.
"No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China," Mr Pompeo said.
China made the security law a top priority at its annual Congress session, after huge pro-democracy protests rocked the financial centre for seven months last year.
The law would punish secession, subversion of state power, terrorism and acts that endanger national security, as well as allow mainland security agencies to operate openly in Hong Kong.
On Thursday, the final day of the congress, delegates endorsed plans for the law, with a higher body now given the task of formulating the specific legislation.
"It's the end of Hong Kong," pro-democracy politician Claudia Mo said.
"We know that they are cutting off our souls, taking away the values which we've always embraced – values like human rights, democracy, rule of law.
"From now on Hong Kong just becomes another Chinese city. It's demoralising."
The Congress's standing committee Vice Chairman, Wang Chen, last week said Hong Kong's delays in implementing its own security law had forced the Chinese leadership to take action.
"More than 20 years after Hong Kong's return [to China], relevant laws are yet to materialise due to the sabotage and obstruction by those trying to sow trouble in Hong Kong and China at large, as well as external hostile forces," Mr Wang said.
Under a law passed last year aimed at supporting Hong Kong's pro-democracy movement, the US administration must certify that Hong Kong still enjoyed the freedoms promised by Beijing when it negotiated with Britain to take back the colony.
Washington's decision on Wednesday, that Hong Kong does not enjoy those freedoms, means it could lose trading privileges including lower tariffs than the mainland.
US President Donald Trump will ultimately decide what action to take, said David Stilwell, the top State Department official for East Asia.
"The steps will be considered and they will be as targeted as possible to change behaviour," Mr Stilwell said.
But he acknowledged that it was unlikely Beijing would change course.
Mr Stilwell said the US did not want to hurt the people of Hong Kong.
"This decision was made by the government in Beijing and not by the US," he said.
Washington's move came after new protests broke out in Hong Kong on Wednesday, this time over another controversial law that punishes "insults" to the national anthem with up to three years in jail.
Police surrounded the city's legislature where the bill was being debated, fired pepper ball rounds at protesters and arrested more than 300 people, mostly for unlawful assembly.
"It's like a de facto curfew now," said Nathan Law, a prominent pro-democracy advocate.
"I think the government has to understand why people are really angry."
Under the "one country, two systems" model agreed on before the city's return from Britain to China, Hong Kong is supposed to be guaranteed certain liberties until 2047 that are denied to those on the mainland.
The mini-constitution that has governed Hong Kong's affairs since the handover includes an obligation for the territory's authorities to enact national security laws.
But an attempt to do so in 2003 was shelved after huge protests by Hong Kong citizens.
China is motivated by concern for a younger Hong Kong generation that "does not agree with the political system of the Communist Party", said Hua Po, an independent political commentator in Beijing.
"If they lose control over Hong Kong, the impact on the Chinese mainland will be huge," Mr Hua said.
Beijing has been infuriated by Hong Kong residents, especially football fans, booing the national anthem to show their dissatisfaction with China.