The End of Hong Kong

Whatever the Chinese Communist Party waxworks expected after the Hong Kong handover, the massive July 1, 2003 protest against proposed “national security” legislation was surely a warning about the limits of Hongkongers’ tolerance of authoritarian rule. The proposed legislation was the Hong Kong government’s response to Article 23 of its Basic Law, which requires the city to

enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organizations or bodies from conducting political activities in [Hong Kong], and to prohibit political organizations or bodies of [Hong Kong] from establishing ties with foreign political organizations or bodies.

As CNN noted back in 2003, Hong Kong’s “normally apolitical middle class [was] spurred into action by fear the new law [would] give the government similar powers to suppress dissent that exist in mainland China.” The proposal was scrapped, and it’s probably no coincidence the following decade was characterized by a relatively soft touch by Beijing (with the flip side being a largely conciliatory attitude from Hongkongers). For a while, it appeared that the CCP was heeding this warning, made by a pro-democracy legislator in 2003:

If they are not listening this time, the next demonstration will be more hostile, the anger has been demonstrated. There may be riots in the future.

It is against this backdrop that the National People’s Congress’ (NPC) announcement that it plans to impose “national security” legislation on Hong Kong must be viewed. Not only is Beijing about to touch Hong Kong’s most electrified third rail, but it will do so in the most provocative way possible, at a time when tensions are running higher than ever. Rather than “just” having Hong Kong’s legislature enact a Hong Kong law on the subject (as Article 23 requires), the NPC will impose a “tailor-made” Chinese law on Hong Kong, by adding it to the annex of Chinese laws that apply in the territory. As China’s Global Times helpfully explains, this approach “needs no approval by Hong Kong’s Legislative Council” (though we may still see another push to have Hong Kong pass its own legislation).

By the way, keep in mind that the NPC’s annual meeting is taking place — in parallel with the Chinese People’s Political Consultative Conference’s (CPPCC) annual meeting — as the COVID-19 emergency is still subsiding. The meetings (collectively known as the Lianghui) were originally scheduled for March, but were postponed because of the public health crisis. Admittedly the Lianghui are a big deal, and China is also keen to project an image of post-coronavirus normalcy. However, it cannot be ruled out that the CCP moved things along a bit faster than it would have otherwise in order to send its message to Hong Kong sooner rather than later.

That message is a crystal-clear warning to Hongkongers regarding their behavior. As a mainland source cited in the SCMP said, the CCP “can no longer allow acts like desecrating national flags or defacing of the national emblem in Hong Kong.” The NPC’s move makes it clear that Beijing is ready to intervene more directly if things in Hong Kong don’t go the way it wants.

Here is a taste of what the new law could bring to Hong Kong, courtesy of Article 15.2 of China’s National Security Law:

The state shall prevent, frustrate, and legally punish any conduct that betrays the country, splits the country, incites rebellion, subverts or incites the subversion of the people’s democratic dictatorship . . . and prevent, frustrate, and legally punish any penetration, destruction, subversion, and secession activities of overseas forces.

A sweeping mandate like this will give Chinese authorities and their Hong Kong lackeys plenty of legal cover to go after pro-democracy protesters, irrespective of whether the protests are peaceful or not. Currently, Hong Kong protesters must be accused of an underlying offense, such as rioting or unlawful assembly. But in the dystopian Hong Kong that is to come, any protest in favor of democracy will by definition be unlawful. Indeed, any statement calling for democracy in Hong Kong is, at its core, a call to subvert the dictatorship.

Hongkongers are rightly seeing this development as the existential threat that it is. If they were concerned about the possibility of being extradited to China, imagine how they feel about the prospect of China’s repressive apparatus coming to them. As pro-democracy legislator Tanya Chan poignantly put it, this “is the saddest day in Hong Kong history.”

Yet, as sad as it was, the days ahead could be much sadder. In all likelihood, the NPC’s announcement will spur at least some of Hong Kong’s protesters to go back to the streets. A popular slogan during the ongoing protests has been, “It was you who taught me that peaceful marches are useless.” The NPC’s move does nothing to dispel that view. Moreover, the more militant elements within the protesters have surely envisioned and prepared for renewed strife, and may be well be ready to raise the ante.

In turn, an emboldened Beijing’s countermove to escalation by protesters could make Hongkongers’ worst nightmares come true . There have been concerns about overt intervention by Chinese security forces for some time now, but yesterday the risk of that happening greatly increased. Up until now, the CCP could point to the constraints imposed by the “One country, two systems” governance model in the face of domestic calls to quash Hong Kong “traitors.” Going forward, it will be hard to square any hesitation with the NPC’s fighting words. Moreover, the proposed law provides for the overt presence of Chinese security organs in Hong Kong, which would facilitate repression and incite new tensions.

Back in August, in Hong Kong for International Business: Stick a Fork in It, my colleague Dan Harris warned about a series of changes for the worse the city could expect. Among those changes, he predicted the following, all of which have already come to fruition and are expected to accelerate:

  • Companies will move their Hong Kong bank accounts elsewhere: Just today, our China team discussed the sudden, en masse decampment to Singapore banks by Chinese companies with whom our clients deal.
  • Travelers will choose somewhere other than Hong Kong as their Asia stopover: Even before COVID-19, Hong Kong airlines like Cathay Pacific were seeing their numbers slip.
  •  Companies [will] decrease or eliminate their hiring in Hong Kong: The unrest was one of the factors that led to the closure of my erstwhile local bookstore, part of a Singaporean chain.

As tension increases in Hong Kong, the time for foreign businesses and individuals to act is now, as difficult as that might be given the continuing restrictions due to COVID-19. In August, we suggested the following:

(1) consider places like Singapore and Bangkok as your Hong Kong replacement, (2) implement plans for evacuating your Hong Kong personnel, (3) cease using Hong Kong arbitration clauses (except with Hong Kong companies), and (4) avoid going there unless truly necessary. If corporate responsibility or data protection are at the core of your business your Hong Kong decisions are more pressing.

Even more urgently now, contingency plans that envision unrest not seen in Hong Kong since World War II must be developed. Imagining PLA troops patrolling Nathan Road may be hard for some, but as I lived through the euphoria of democrat Anson Chan’s election victory in 2007, I could not have imagined walking down a blocked-off Nathan Road just seven years later, let alone witnessing the takeover of the Legislative Council chamber 12 years later.

Things are going to get ugly. More than ever before, I hope my prediction is way off. But hope is not a strategy and the strategy for most companies should be to leave.

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Photo of Fred Rocafort Fred Rocafort

Fred is a former diplomat who joined Harris Bricken after more than a decade of international legal experience, primarily in China, Vietnam, and Thailand. His wide range of experience includes starting and operating his own business in Asia, working as an in-house counsel…

Fred is a former diplomat who joined Harris Bricken after more than a decade of international legal experience, primarily in China, Vietnam, and Thailand. His wide range of experience includes starting and operating his own business in Asia, working as an in-house counsel for a Hong Kong-based multinational, as well as many years as a State Department official, providing a client-centric perspective to his legal work. Fred co-hosts Harris Bricken’s weekly Global Law and Business podcast, which covers legal and economic developments in locales around the world to decipher global trends in law and business with the help from international guests.

Fred began his career overseas as a U.S. vice-consul in Guangzhou, China, adjudicating thousands of visa applications and advocating for fairer treatment of American companies and citizens in China and for stronger anti-counterfeiting enforcement. After entering the private sector, Fred worked at a Shanghai law firm as a foreign legal advisor and later joined one of the oldest American law firms in China. He also led the legal team at a Hong Kong-based brand protection consultancy, spending most of his time out in the field, protecting clients against counterfeiters and fraudsters from Binh Duong to Buenos Aires.

Fred is an ardent supporter of FC Barcelona—and would be even in the absence of Catalan forebears who immigrated to Puerto Rico in the mid-1800s. An avid explorer of Hong Kong’s countryside, he now spends much of his free time discovering the Pacific Northwest’s natural charms.