SIM REPORT: NORTHEAST ASIA, ISSUE 7

HONG KONG: HONG KONG’S FUTURE - PAWN OR CHIP?

It has been less than a month since parliament in Beijing approved plans to impose China's national security laws on Hong Kong. The decision triggered a response that continues to reverberate across the world as local and foreign companies try to assess how Beijing’s decision to openly undermine Hong Kong’s always fragile autonomy will affect their operations, and even future, in the territory.

Fast moving developments from many quarters have become routine as governments, many increasingly wary of China’s assertive and even aggressive foreign and economic policies, use the situation in Hong Kong as a proxy to confront Beijing.

China’s ruling communist party, in turn, has inflamed a growing number of international opponents with strident and often abusive attacks that render any likelihood of compromise or reconciliation remote to non-existent. Beijing has also clearly demonstrated that it will not risk weakening its own grip on power by permitting Hong Kong to serve as a symbol of an alternative political or economic model for China based on providing prosperity, efficient administration and global connectivity without overt repression and more subtle means of social control.

Caught between these forces, and the domestic opponents of the Beijing-backed local administration, Hong Kong now faces multi-dimensional challenges and threats to its established order and role as the financial, commercial, and legal hub that supports and facilitates much of the world’s economic ties with China. Beijing is now expected to impose the new laws, which would criminalise secession, subversion, terrorism and collusion with foreign and external influences as threats to national security, ahead of the 23rd anniversary of the end of colonial rule on 1 July. The draft law appears to have been amended to make almost any links with foreign nationals potentially suspect. According to local media reports, the wording from the original resolution has been altered from criminalising ‘intervention’ with foreign forces in Hong Kong affairs to ‘collusion’ with foreign forces.

Despite the efforts of local pro-Beijing legal experts and academics to argue that the security laws will only be used if China’s security is threated, many local and foreign companies and their staff are increasingly concerned that they may be vulnerable to prosecution due to the opacity and politicisation of the mainland’s legal system. Any removal of legal transparency and an accountable judiciary, coupled with the possibility of extradition to China in some undefined instances, will mark a profound change in how Hong Kong is viewed in terms as a commercial base

While the legal details of the security laws have yet to be revealed, the manner in which Beijing introduced – or imposed – them has greatly alerted the nature of the relationship between China and Hong Kong. This naturally has left many foreign companies and their staff concerned over how still evolving local and geo-political manoeuvring and posturing will impact their commercial interests and, potentially, even their security.

Different economic sectors, however, may have widely different tolerances to such risks, posing the question of whether the national security laws offer an advantage to foreign companies or serve as a threat. For example, at what may be seen as the tactical level the new laws can be viewed as a plus as they are likely to reduce the threat from violent or disruptive protests and bring at least the appearance of stability and a return to the status quo ante. However, this gain may be countered by the emergence of radical activists prepared to find other and more damaging and extreme means and actions to demonstrate opposition to the Hong Kong’s local administration and the central government in Beijing.

At the strategic level, Hong Kong’s relationship with many of its key global markets – notably the US, UK, EU, Australia, New Zealand and Canada - will be affected if the national security laws are used to suppress peaceful dissent, as they routinely are in China. Further, many foreign companies are certain to face the same level of often intrusive scrutiny and surveillance by Beijing’s state organs experienced in China, largely negating the purpose for remaining in Hong Kong.

The communist party has also made it abundantly clear that the price for retaining access to the Chinese market and operating in Hong Kong is for local and foreign commercial interests to demonstrate fealty with public displays of support for the security laws, and likely other policies in the future. A number of major foreign companies, notably two of the territory’s leading banks, have declared their support for the new security laws and been heavily criticised in Hong Kong and elsewhere for ‘kowtowing’ to Beijing.

As a growing number of Western powers and their Asian allies appear intent on creating a de facto bloc to challenge China’s military and geopolitical posturing and its efforts to acquire global influence through its ‘belt and road’ programme and soft loans, the imperative to choose sides is set to render business decision-making in Hong Kong and the mainland even more complex and fraught. Managing this crisis, which has been amplified by the coronavirus pandemic and is likely subject to further economic and political shocks, will test the capabilities and skill of all business leaders and their executive staff over the coming year.


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