HONG KONG MONITOR 11 June 2021

11 june 2021

Recent developments over the monitoring cycle (4-10 June), has brought to the fore the viability of keeping Hong Kong an attractive market for foreign businesses. Various international firms, including some highly recognisable brands such as Timberland, Sony and L’Oréal, among others, have either fully or partially divested their respective interests in the regional economic hub. While these drawdowns represent a willingness to protect their respective business interests from prevailing coronavirus-related business risks and from an increasingly constricting political environment, it will be greater degradation in the latter that will continue to shape the operational sustainability for multinational companies in the territory.

Another significant factor influencing these decisions has been the continual erosion of the independence of the Hong Kong judiciary as well as the crowding out of oppositional forces within the legislature and the administration. In the British government’s bi-annual report on the status of Hong Kong, there were several warnings about the potential loss of protections in commercial rights and contracts for foreign companies related to the departures of British judges and solicitors, citing growing concerns over politicisation of the judiciary under the ruse of national security. One notable upcoming departure is that of Baroness Hale of Richmond – the first female president of the UK Supreme Court – who announced on 3 June that she would not renew her term in the Hong Kong Final Court of Appeal once it expires on 1 July. Her inevitable departure will likely have a cascading effect, leaving a considerable vacuum in Hong Kong’s judicial space, and should serve as a contemporary warning to organisations considering market entry or withdrawal.

An equally effective and potentially lethal warning has been the rising threat of ‘homegrown terrorism’ in the territory. Senior superintendent of Hong Kong’s Inter-departmental Counter Terrorism Unit, Leung Wai-ki, warned that anti-government subversives were ‘going underground’ to organise their activities, and remained a credible threat to public security. There is no doubt that NSL and pandemic-related measures have been instrumental in contracting patterns of activities within the movement and potentially blunting the influence of propaganda campaigns. Despite this and the fact there are less defined details of the threat, there is broad speculation that hard-line pro-democracy activists are mobilising for a violent campaign against the government after the pandemic situation is fully under control and mobility restrictions are lifted. Though attacks, including physical and online sabotage campaigns, are more likely to target government-linked individuals and locations, collateral damage to foreign businesses and staff cannot be ruled out.

 

GEOPOLITICS AND LOCAL IMPLICATIONS

Government surveillance and data privacy came to the fore of reporting on Tuesday (8 June), when Facebook confirmed that it had refused to hand over the details of its users to the Hong Kong government. The social media company said that it had received 202 user information requests soon after the national security law (NSL) was enacted in 2020. The requests pertained to users of Facebook’s other platforms including Instagram, Messenger, WhatsApp, and Oculus.

Hong Kong was among 21 other countries, including Iraq, Malawi, Russia and Sri Lanka, that did not comply with similar requests from the Hong Kong government. According to reports, Facebook received the requests between July and December 2020. In the 12 months prior (July 2019-June 2020), Facebook, Apple, Google and Twitter received around 1,400 user data requests, with these companies reportedly granting ‘hundreds’ of them. A turning point was reached after the NSL was enacted, with these social media giants largely refusing subsequent NSL-related data requests. It is uncertain if Facebook incurred any legal or financial liabilities due to non-compliance with these NSL-driven requests post-enactment. Any violation can be punishable with a fine of up to HKD10,000 (USD13,000) per incident. While these global tech firms have the resources and market dominance to mitigate any potentially damaging legal risks, SMEs should take heed and ensure that they are compliant with data privacy laws and regulations, and understand the legal mechanisms in place to protect the business and customers. 

Meanwhile, foreign companies are reconsidering their presence in Hong Kong in light of political uncertainty, Beijing’s crackdown on pro-democracy movements and protests, and the COVID-19 pandemic, according to a Wall Street Journal (WSJ) report on Monday (7 June). International businesses such as Timberland owner VF Corp, Japanese digital entertainment company Sony Interactive Entertainment, European luxury goods firm LVMH, and French cosmetics company L’Oréal have either partly or fully relocated personnel out of the territory, according to the report. European Chamber of Commerce in Hong Kong Chairman Frederik Gollob said many firms are ‘for the first time’ deliberating over whether to remain in Hong Kong.

The WSJ report further highlights the diminishing attractiveness of Hong Kong as a destination for foreign investment and desirable location for foreign firms. Numerous companies in the Asia-Pacific region have considered excluding Hong Kong from legal contracts, including governing law and arbitration clauses, over threats to the territory’s judicial independence. Concerns around such threats are likely to have deepened in the wake of the recent sweeping changes to Hong Kong’s Legislative Council severely reducing democratic representation in the territory. Businesses should factor increasing relocation out of Hong Kong into their strategic and investment planning.

The future role of British judges occupying senior positions within Hong Kong’s judicial system was raised in a bi-annual UK government report released on Thursday (10 June) and within that country’s parliament a day earlier. The government’s trial report on Hong Kong until end 2020 raised many issues regarding China’s actions in the territory, in particular the imposition of its NSL, while noting ‘it is essential that the Hong Kong judiciary is able to operate independently and free from political interference.’ While the report accepted that British judges serving in the territory’s courts are responsible for their ‘own decisions regarding their continued service’ in Hong Kong,’ on Wednesday (9 June) British legislators called on them to end their ties with Hong Kong as a result of China’s use of the NSL to suppress peaceful and previously legitimate and opposition.

The future of Hong Kong’s independent and internationally recognised legal system is of key concern to all local and foreign companies operating in the territory due to its role in protecting commercial rights and contracts. The departure of foreign judges, many of whom serve at the appellate level of the judiciary where complex legal cases are resolved, raises concerns they may be replaced by individuals who through choice or compulsion issue judgments aligned to China’s perceived interests and priorities. This would further undermine international confidence in the territory’s role as a key regional commercial and financial centre. To date a number of UK lawyers and judges have chosen to withdraw from any legal role in Hong Kong, most notably Baroness Hale, who will not renew her term in the Hong Kong Final Court of Appeal once it expires on 1 July. Other foreign judges can be expected to leave in the coming months. Finding credible replacements will become increasingly difficult.


COVID-19 vaccination programme poster in Hong Kong, 11 June 2021 / Olivier Chouchana-Gamma-Rapho / Getty Images


PUBLIC HEALTH AND SAFETY: COVID-19

The COVID-19 Alpha variant detected in a Hong Kong teenager may stem from a ‘overlooked’ imported cases, according to Dr Gilman Siu from the Polytechnic University’s Department of Health Technology and Informatics in a RTHK radio broadcast on 7 June. The Alpha variant was first identified in the UK. The remark came after the government ruled out ties to the Shenzhen cluster and prior cases of mutant variants recorded locally. The infection in the teenager reported on Saturday (5 June) marked the end of 42 consecutive days in Hong Kong with no cases of unknown origin. The teenager’s mother was among the seven new infections reported on Sunday (6 June). Siu warned that, should the source of infection not be rapidly identified, further local transmission could spark a fifth wave of infections.

The development underscores persisting public health and operational hazards posed by COVID-19 in Hong Kong despite largely successful suppression of the virus. At this stage, identification of the source of the infection will be paramount in ensuring that Hong Kong does not experience renewed and commercially disruptive community transmission. Should the source of infection indeed be confirmed as tied to imported cases, then this will likely prompt authorities to further tighten already stringent travel restrictions. Businesses should monitor local government announcements for updates on the COVID-19 situation and factor these into their operational planning. Remind staff to exercise elevated personal hygiene protocols to mitigate the risk of infection and minimise non-essential social interactions. Anticipate reduced staff mobility should imported cases be the source of the infection.

On 8 June, the Centre for Health Protection (CHP) reported three new imported coronavirus (COVID-19) cases, including two from Colombia and one from Indonesia. The latter case was asymptomatic, and the individual quarantined upon arrival from Indonesia at the Iclub MA Tau Wai Hotel in To Kwa Wan, Kowloon.


Police arrest Wang Yi-chan in Tung Chung, Lantau Island, for illegal assembly and inciting public gathering, 11 June 2021 / Roe Junhao / Instagram


LOCAL POLITICAL AND SECURITY DEVELOPMENTS

On 8 June, the Hong Kong Monetary Authority (HKMA) issued separate public alerts about a fraudulent mobile application and a phishing SMS related to The Bank of East Asia (BEA) and The Hongkong and Shanghai Banking Corporation (HSBC), respectively. In the latter case, the phishing SMS suggests that the recipient may have added a new payee to their bank account. They were then instructed to click on the link if they had not. According to the HKMA, there are attempts at targeting BEA customers to download a fraudulent app, and then asking them to update their personal information. BEA warned customers that any apps not downloadable from Apple’s App Store or Google Play are not legitimate and not affiliated with BEA.

Homegrown terrorism is a threat in Hong Kong and is showing signs of ‘going underground’, according to a Leung Wai-ki, senior superintendent of Hong Kong’s Inter-departmental Counter Terrorism Unit. Leung said that the public should be alert to the threat of terrorism, which he blamed on the 2019 pro-democracy protest movement. The remarks underscore the continuing potential for hardline elements of the pro-democracy movement to resort to violent attacks to support their cause. The risk of such attacks will likely increase as the COVID-19 pandemic wanes and gathering restrictions are eased. Attacks may be triggered by further moves by Beijing and Hong Kong authorities against key pro-democracy figures, as well as further clear indications that peaceful protests will not be tolerated even as public health risks posed by COVID-19 wane.


THE WEEK AHEAD

For the immediate phase of the current monitoring period (11-17 June), there are credible indicators and warnings about potential mass anti-government rallies at Causeway Bay, Hong Kong Island and Mong Kok district in Kowloon over the weekend of 12-13 June.

At least 2,000 police officers are being deployed in response to calls by activists to mark the second anniversary of clashes on 12 June 2019 outside the territory’s Legislative Council (LegCo) building. The 2019 clashes are widely viewed as a key moment in the evolution of the territory’s pro-democracy, anti-China protest movement. Activists, using social media, have called for what they term ’gatherings’ on the evening of 12 June from 1900 local time at Causeway Bay on Hong Kong Island and in Mong Kok in Kowloon. The messages emphasise the need for participants to be prepared for direct confrontation with the police, who have announced they will use force to ensure compliance with laws regarding adherence to coronavirus (COVID-19) restrictions on gatherings and relating to unsanctioned protests.

While small-scale incidents are possible in the two locations and elsewhere in the territory there is little likelihood the anniversary will result in any serious disruption to business or travel within Hong Kong over the weekend. The threatened employment of NSL, which mandates long prison sentences for even minor displays of dissent, can be expected to reduce any actions to either symbolic and fleeting events or a few acts of defiance quickly contained by the police. Nevertheless, all staff are strongly advised to avoid Causeway Bay and Mong Kok during the evenings of 12-13 June given the potential for escalating violence both the activists and the police.

Depending on the relative success of these planned rallies, they could serve as galvanising forces for additional mobilisations in the week ahead.


UPCOMING PROTESTS 4-10 June

Upcoming significant dates in the pro-democracy calendar are likely to draw out small numbers of activists for memorial gatherings, including of deceased pro-democracy activists:

15 June: Memorial for Marco Ling-kit Leung

Saturday 12 June – Sunday 13 June

1900: Pro-democracy activists intend on rallying at Causeway Bay, Hong Kong Island and Mong Kok district, Kowloon.

 

PROTEST CHRONOLOGY 28 May – 3 June  

Tuesday 8 June

2000: There were numerous small and ad hoc events memorialising the 2019 death of pro-democracy activist, Tsz-lok Chow, throughout the territory, including individuals who had visited the Sheung Tak Estate car park, Tseung Kwan O, New Territories, where Chow died.

Wednesday 9 June

1700-2300: An individual pro-democracy activist held a protest titled ‘Dinner with you’ at Maritime Square shopping centre, Tsing Yi Island, New Territories. The demonstration was held to commemorate the second anniversary of the first mass rally on 9 June 2019 against the extradition bill, in which over one million people participated. The activist frequently protests in shopping centres, given the public visibility they provide. There was no significant disruption to local area businesses and travel in relation to this demonstration.