Senator Chris Van Hollen, Democrat of Maryland, put forward the proposal, dubbed the Hong Kong Autonomy Act. The legislation was approved via unanimous consent, which is implemented to approve laws not considered controversial.
It comes after a Republican senator had obstructed the legislation on Wednesday, citing a demand by the White House for technical corrections.
The legislation is a response to plans by China to introduce a national security bill over Hong Kong.
Critics believe the legislation could bring all opposition moves in the city to a halt.
China has not revealed details of the bill, which it set to be approved before June 30.
The Hong Kong Autonomy Act involves penalties against citizens, as well as foreign financial bodies that knowingly carry out “significant transactions” – as described by the US Treasury – with the designated individuals.
Later changes to the bill involved requiring that the processes of identifying foreign people to be penalised be discussed with the secretary of the Treasury.
Additionally, the authority of identifying the foreign financial bodies is to be transferred from State Department to Treasury.
A Democratic Senate aide familiar with the subject said the changes matched those of previous penalty legislation.
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Despite the amendments involving some delay, the bill was passed by the Senate rapidly, just over a month after its proposal in May.
“The speed of this legislation was one thing that really caught my attention,” said Kurt Tong, who was the US consul general to Hong Kong and Macau before retiring a year ago.
“And then, of course, the secondary sanctions aspect, which has a lot of financial institutions worried about how they would be applied.”
“The Senate’s push to do this legislation very quickly reflects a sense that the National People’s Congress in China is pushing very very quickly to rush through the National Security Law in a rather extraordinary way both in terms of procedure and speed,” added Mr Tong.
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The House of Representatives are now to approve its own version of the bill.
It was proposed this month by California Democrat Brad Sherman and Florida Republican Ted Yoho.
Any differences between both versions are to be amended before it can be finalised via a signature of US President Donald Trump.
Speaking to the Senate on Thursday shortly before his legislation was approved, Mr Van Hollen admitted that the Trump administration already had the powers to penalise Chinese organisations.
However, he insisted that more pressure was needed from Congress to drive the administration to take action.
Analysts including Robert Daly, director of the Wilson Centre’s Kissinger Institute on China and the United States, questioned whether the Senate legislation would bring on any relevant changes in the way Trump or China are leading the bilateral relationship.
“The Hong Kong Autonomy Act, should it become law, will annoy, but not deter, Beijing,” Mr Daly said
“The scale of mutual annoyance between Washington and Beijing, furthermore, is oceanic, and an act of this sort won’t increase the size of the swells.
“Capitol Hill is expending a lot of energy calling out every odious policy of the [Chinese Communist Party],” he said.
“That’s a game of chase in which China will always be in the lead.