Hong Kong for international business

Say what you will about the Chinese Communist Party (CCP) but, when it comes to repressing Hong Kong’s democratic aspirations, it means business. Having concluded local authorities were not up to the task of ruling Hong Kong by its iron-fisted standards, Beijing made short work of the “one country, two systems” framework and imposed a national security law (NSL) that formalized its direct intervention in Hong Kong’s policing. See Requiem for Hong Kong for the NSL’s dystopian details.

Not that things were hunky-dory before the NSL. The new law is simply speeding up a process of overall deterioration in Hong Kong, which is hitting its business sector very hard. Exactly one year ago, in Hong Kong for International Business: Stick a Fork in It, we wrote that “Hong Kong as an international business and financial center is no more” and predicted much of what we are seeing today (and, yes, COVID-19 has exacerbated some of the problems):

  1. Companies reducing their hiring in Hong Kong.
  2. Companies moving personnel from their Hong Kong office to other Asia offices.
  3. Fewer contracts being drafted with Hong Kong as the venue for arbitration.
  4. Companies moving their Hong Kong bank accounts elsewhere.
  5. Travelers choosing somewhere other than Hong Kong as their Asia stopover.
  6. Many Hongkongers going elsewhere.

The new state of affairs under the NSL will kick these trends into overdrive. Far from “symbolically asserting its authority over the city,” the CCP is acting out its deepest authoritarian fantasies. Within hours of the NSL’s enactment, the Hong Kong public security bureau police were out arresting people for carrying flags with pro-independence (gasp!) slogans. Since then:

A sense of fear and uncertainty has taken hold in Hong Kong, where anything seen to provoke hatred against the Chinese government is now punishable with up to life in prison. Some people have redacted their social media posts and erased messaging app histories. Journalists have scrubbed their names from digital archives. Books are being purged from libraries. Shops have dismantled walls of Post-it Notes bearing pro-democracy messages, while activists have resorted to codes to express protest chants suddenly outlawed.

Despite this immediate chilling effect, Beijing is just getting started. On August 10, Hong Kong’s finest arrested media mogul Jimmy Lai, “one of the most outspoken critics of Beijing,” for “colluding with foreign forces.” Two of Lai’s sons, not involved in his media business, were also arrested. Later in the day, pro-democracy activist Agnes Chow Ting was arrested on charges of “inciting secession.” Also picked up were freelance journalist Wilson Li and activist Andy Li.

These are all terrible developments. Journalists and activists arrested. Their family members arrested. Snide assurances of compliance with legal niceties by the police. Regime toadies and mouthpieces voicing support. Textbook authoritarianism.

Yet Hong Kong’s descent into an authoritarian nightmare, dramatic as it is in the city’s context, is simply bringing it in line with Mainland China. As we noted when we first decried the travesty of the NSL, “the reality is that from Beijing to Xinjiang to Tibet to Hong Kong there is now one system of repression.”

What’s happening in Hong Kong is just one manifestation of a much larger China problem, at the root of which is the CCP desire to reshape the world, not quite in its image and likeness, but into a place that goes along with its designs—or else. If Uyghurs and other ethnic groups get in the way of the CCP’s identity-based appeals for legitimacy, well, they’ll need to get with the program, even if that means herding them into camps and forcefully cutting down birth rates. If certain natural resources are desirable, then it’s okay to draw an absurd line deep into international waters and bully weaker neighbors. The Taiwanese overwhelmingly don’t want to be ruled by a Communist regime? Too damn bad. If a Chinese national finds herself in a foreign court, and the CCP isn’t happy about it, then retaliatory hostage-taking is fine. IP theft? No problem.

Recently, in The World Needs to Grow a Pair to Stop China, an anonymous guest writer posited the following on this blog:

It is a fundamentally mistaken policy to impose measures designed to mitigate the theft and forced labor organized and committed by the Chinese government itself. For cyber-insecurity, it is wrong even to explore using techno-geek measures to fend off Chinese government hackers. For forced labor/concentration camps, it is wrong to explore using measures to try to ensure that a particular supply chain is free of forced labor, moving three/four layers down the chain in a desperate attempt to prove there is no infection. One even has to ask whether the companies doing this believe in their task or are doing it merely to be able to claim to consumers that “we are not directly aiding and abetting a genocide.” But is not the better question whether the funding provided by these companies aids and abets a genocide and is not the answer to that a resounding yes? Is there no line which we will not cross for an extra dollar or two?

For some people, the answer is clear: “There is no line we will not cross. We will gladly acquiesce with the CCP’s vision for the world in the name of profit.” Fair enough.

But for those who consider this to be an unacceptable answer, hard choices lie ahead. Yes, in an ideal world, companies would be able to set up firewalls to keep their supply chains free of contamination by forced labor. But what if it becomes clear it is not possible to avoid getting entangled in the forced labor web? Worse, what if the system is designed to force everyone’s hands to get dirty, like in cop movies? At some point, governments will need to decide if they can square laws that prohibit the importation of forced labor goods with unchecked sourcing from a marketplace irretrievably tainted by such labor.

Similarly, what is the point of placing our national faith on “agreements” with a counter-party with no respect for legal commitments? Look at the way China cast aside the Joint Declaration made with the United Kingdom, which among other things promised Hong Kong a “high degree of autonomy.” Look at the mockery it has made of the Basic Law, decreed by China, which promises “Hong Kong residents … freedom of speech, of the press and of publication; freedom of association, of assembly, of procession and of demonstration; and the right and freedom to form and join trade unions, and to strike” in Article 27. Consider China’s “poor” record of compliance with its WTO commitments. As for the much vaunted Phase One trade deal, “it’s on life support.”

There’s little to be done about the CCP’s actions in Hong Kong, beyond extending a welcome to fleeing Hongkongers. The free world’s focus should now be on avoiding an extension of China’s repressive apparatus outside its borders. Standing with Taiwan is an obvious start, as is rejecting ongoing attempts to present a fait accompli in the South China Sea. Much harder lines should be taken against CCP infiltration of universities and other institutions overseas. Its ability to intimidate the Chinese diaspora must be curbed. And a much steeper “China price” must be exacted from businesses that benefit from CCP policies that violate fundamental human rights.

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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.