On Tuesday, an order out of Beijing instituted a sweeping national security law in Hong Kong, one that was promised over a month ago and delivered on the 23rd anniversary of the transfer of power in Hong Kong from British to Chinese hands.
Now, 23 years later, the law’s passing makes clear the extent of China’s reach not just within Hong Kong but throughout the global community.
What the law says
The law, which upset Hong Kong residents by threatening Hong Kong’s culturally separate status and drew criticism from free-speech activists, criminalizes “acts of secession, subversion of state power, terrorist activities, and collusion with foreign or external forces to endanger national security,” and carries a maximum sentence of life in prison.
On Wednesday, the first arrests under the new law were made, during a flood of protests from pro-democracy residents who have been decrying Chinese influence since last year’s Fugitive Offenders bill sought extradition to mainland China.
But despite facing political opposition from several international governments—including the Trump administration, which imposed trade restrictions between the U.S. and Hong Kong hours before the law was passed—China has been able to smoothly move forward with its squeeze on Hong Kong, helped by its sway in the business world. While some global tycoons were concerned the law might hurt Hong Kong’s profitability as a financial capital in Asia after its stock market plunged last month, their fears were eased as China poured billions of dollars in stock offerings and property deals into the city, assuring business dealers it would remain as lucrative as ever.
As The New York Times notes, in the last three weeks, Chinese e-commerce company JD.com raised $3.9 billion by selling shares on the Stock Exchange of Hong Kong, and Chinese online gaming company NetEase raised $2.7 billion. And in November, retail giant Alibaba raised $11.2 billion in Hong Kong’s largest offering since 2010. Alibaba also signed a lease for expensive office space in Hong Kong, propping up the city’s property market along with Chinese insurer Ping An, which spent $1.45 billion to purchase space atop the West Kowloon district’s high-speed rail station.
The risk of not toeing the line
Striking another tone, China has warned that businesses that do not fall in line with Beijing’s orders risk negative financial repercussions, as China controls one of the world’s biggest consumer markets.
In May, former Hong Kong chief executive and current Chinese political advisor Leung Chun-ying called for a boycott of HSBC after it failed to express support for the promised national security act, writing on Facebook, “HSBC’s businesses in China can be replaced overnight by banks from China and from other countries.” And last year, China put pressure on accounting firms PwC, Deloitte, KPMG, and Ernst & Young to investigate and fire employees who allegedly paid for a pro-democracy advertisement in a Hong Kong newspaper.
Should I stay or should I go?
But that businesses need to be careful to limit association with the pro-democracy movement in Hong Kong has caused some firms to worry that remaining there puts them in danger. According to a poll by Hong Kong’s American Chamber of Commerce, 30% of American and international firms said they were considering relocating their regional offices out of the city due to the national security law, and 37% of firm workers said they would relocate.
While the full effects of the national security law are still to be seen, it’s increasingly clear that China’s position as an economic and industrial powerhouse allows it to stretch its arms further across the globe. As a result, companies that do business in Hong Kong may find themselves increasingly forced to choose between freedom-of-speech values and the bottom line.