Hong Kong’s status as a leading place to do business could be in peril following the adoption of a national security law.
The legislation, which was approved on Thursday in Beijing, led US Secretary of State Mike Pompeo to say Washington will no longer treat Hong Kong, already reeling from anti-government protests and the pandemic, as autonomous from China.
The Chinese government has not given details of the law, which is aimed at suppressing secessionist and subversive activity in the former British colony.
Chinese leaders said the new legislation was needed to combat unspecified threats in the semi-autonomous region of seven million people.
But business groups, lawyers and financial analysts said potential repercussions range from loss of business for Hong Kong’s financial markets and law firms to a loss of professional talent in the city.
Global companies already were shifting some operations out of Hong Kong due to rising costs and uncertainty after prolonged, sometimes violent clashes between police and pro-democracy protesters.
Scott Salandy-Defour, founder of clean-tech startup Liquidstar, has been considering moving out of Hong Kong, and said the security bill is the “last straw”.
He added: “I don’t see how it gets any better from here.
“When we say we’re a Hong Kong-based company when talking to investors, it’s just not as attractive as it was as a year ago.
“We’re potentially cutting ourselves off from a lot of different funding avenues, like grants from the US government.”
China's proposed national security law for Hong Kong is in direct conflict with its obligations under the Joint Declaration. If enacted, this law would violate Hong Kong’s autonomy and freedoms. UK and 🇺🇸🇦🇺🇨🇦 are deeply concerned.
— Dominic Raab (@DominicRaab) May 28, 2020
The national security law has also added to worries that Hong Kong’s legal system is losing its independence.
The Hong Kong Bar Association said the method for enacting it is a threat.
China is circumventing the territory’s legislature by changing its mini-constitution, the Basic Law, to require its government and courts to enforce security measures, regardless of what local politicians decide.
Hong Kong’s leader Carrie Lam has tried to reassure companies and the public that its civil liberties will not be affected.
But critics said the law undermines the “high degree of autonomy” promised when Britain handed control to China in 1997.
That autonomy meant Washington and other governments have treated the city as a separate territory for trade, travel and other affairs.
Secretary of State Mike Pompeo said on Wednesday those changes are significant enough that Washington will no longer treat Hong Kong as autonomous.