Why Hong Kong is no longer safe for business

16 August 2021

Since April, Hong Kong authorities have introduced new legislation that strengthens China’s tightening grip on Hong Kong, further eroding its autonomy and cracking down on any perceived push for democracy. On 28 April, local authorities passed a new immigration bill that includes powers to prevent people from entering or leaving the city; no court order is required and there is no recourse for appeal. Both pro-democracy activists and international businesses have good reason to fear these mainland China-style "exit bans" as the language in the immigration bill is purposefully vague, not unlike the National Security Law (NSL), which was implemented earlier this year. The NSL law criminalises behaviour deemed to engage in or encourage separatism, subversion, terrorism, and collusion with foreign powers.

However, since these terms are arbitrarily defined and could be applied to anything and anyone, regardless of location, the law is highly likely to be used in politically motivated prosecutions with maximum penalties of life imprisonment. Furthermore, the law asserts jurisdiction globally, regardless of nationality or location; accused foreign nationals in Hong Kong could be deported to mainland China for alleged crimes against national security. While Hong Kong authorities claim the purpose of the immigration law is to screen illegal immigrants, the vague wording could be deployed against anyone leaving or arriving in Hong Kong. The NSL and immigration bill has alarmed foreign firms operating in the city by increasing the threat of arbitrary detentions, diminishing human rights protections, and denying due process. People’s Republic of China (PRC) officials frequently use exit bans against individuals perceived as challenging the Party line or are deemed a threat to national security in mainland China.

Bilateral disagreements over trade and extradition policies are likely to worsen China’s relations with the US and Canada, which will likely increase the threat of hostage diplomacy and arbitrary detentions for American and Canadian travellers in Hong Kong.

Although these laws are primarily used against political activists in Hong Kong and China, Beijing has also targeted business travellers from third countries, especially when embroiled in tit-for-tat diplomatic disputes with other nations. In retaliation for Canada’s detainment of a Huawei executive in December 2018, China arrested two Canadian business travellers as they attempted to leave the country, accused them of "espionage", and held a secret trial in May 2021. In August 2021, a Chinese court sentenced one of the Canadian detainees to 11 years in prison. The likelihood of Hong Kong authorities using the immigration law to detain or prevent Western business travellers from leaving Hong Kong is increasingly high due to the ongoing sanctions from the US, Canada, and European Union.

New cybersecurity law undermines internet freedoms for business users

Chinese authorities implemented a new cybersecurity law in June, mandating police censorship and covert digital surveillance, which increased uncertainties and risks for foreign firms operating in Hong Kong. The new law allows the Office of the Privacy Commissioner for Personal Data (PCPD) to carry out anti-doxxing investigations with doxxing defined as when “an individual posts another person’s information online without their consent and causes psychological harm to the person or their family members”. Hong Kong officials can ask internet companies to remove ‘doxxing’ content, and failure to comply could result in two years’ imprisonment. On 25 June, several high-tech Silicon Valley firms, including Facebook, Twitter, and Alphabet, privately warned the government that this new cybersecurity law could prevent the firms from investing and offering services in Hong Kong.

This law also empowers authorities to arrest a foreign employee based in Hong Kong if the company fails to give user data on someone based overseas whom Chinese authorities deem a national security threat. Apart from arrests, the new law could even be used to punish any non-compliant company with fines, equipment and proprietary data seizures, termination of services, and loss of market access. Due to these threats, Hong Kong is becoming an increasingly undesirable place to do business for multinational firms. One of the only ways to insulate employees from arrest is to move their data servers out of Hong Kong. In May, 42 per cent of the membership of the American Chamber of Commerce in Hong Kong reported considerations or plans to leave the city, expressing pessimism over the territory’s outlook. In June, Hong Kong authorities claimed that Apple Daily — the media outlet — had violated the NSL, and therefore detained Apple Daily’s chief editor, other executives, freezing all company assets. The operation signalled an escalatory assault on media outlets in Hong Kong, with authorities bent on silencing any dissident voices. Hong Kong officials arrested Apple Daily’s employees charging them with "collusion with a foreign country or with external elements to endanger national security".

While the closure of one media outlet does not pose an overall threat to foreign firms operating in Hong Kong, the low tolerance for any perceived threats by mainland China gives cause for alarm as the erosion of free speech could result in someone being labelled an enemy of the Chinese state. Furthermore, this closure sends a message to the business community in Hong Kong that Beijing will not tolerate anyone exercising previous freedoms, and such transgressions will not go unpunished. Perhaps it is no surprise then that in July, the Biden administration published an advisory warning American firms about the increasing risks of operating in Hong Kong as business conditions continue to deteriorate.

Farewell to the Hong Kong we once knew

In the last eighteen months, Chinese authorities have aggressively assaulted Hong Kong’s autonomy, disrupted free-flowing information, undermined local rule of law, and created an atmosphere of fear and instability for foreign firms. Beijing’s push for increased participation in Hong Kong politics will likely only worsen as the National Security Law is used to silence dissent. Beijing wants the international community to know that Hong Kong is a part of the People’s Republic of China and no longer party to the former “One Country, Two Systems” principle.

This push is particularly problematic for Western powers as it does not align with their notion of liberal democracy. A clash of Western and Eastern ideologies is taking place right now in the form of tit-for-tat geopolitical retaliation; foreign travellers and businesses are only the latest victims. International firms, particularly Canadian and American organisations, are highly likely to face additional harassment and censorship, administrative hurdles, and a general lack of cooperation given the rise of tensions with China, especially since the Canadian detention of a Huawei executive in December of 2018. Bilateral disagreements over trade and extradition policies are likely to worsen China’s relations with the US and Canada, which will likely increase the threat of hostage diplomacy and arbitrary detentions for American and Canadian travellers in Hong Kong.

DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.

Author biography

Jennine Liu holds a double Master of Science in International Affairs from the London School of Economics and Peking University and has written about Chinese foreign policy as an intelligence analyst for the US Department of Defense and in the private sector. All views expressed here are her own. Image credit: Flickr/Studio Incendo.