China seeks to reassure investors rattled over HK security law

China has sought to reassure international investors that a proposed national security law that critics say gravely threatens Hong Kong’s autonomy would instead improve the business environment in the Asian financial hub. 

Speaking a day after pro-democracy protesters returned to the streets of Hong Kong following a hiatus during the coronavirus outbreak, Xie Feng, China’s foreign ministry commissioner in Hong Kong, said the proposed legal changes would restore calm following a year of unrest.

“The legislation will alleviate the great concern among the local and foreign business communities about the violent and terrorist forces attempting to mess up Hong Kong,” said Mr Xie. “[It] will create a more law-based, reliable and stable business environment for foreign investors.”

The speed of Beijing’s announcement last week that it planned to impose the new legislation caught many investors by surprise and has raised concerns over the city’s future as a global financial hub.

The proposal to draft the law is expected to be passed by China’s rubber-stamp legislature on Thursday. It would prohibit secession, subversion, foreign interference, terrorism and permit China’s state security services to maintain a formal presence in the semi-autonomous territory.

Under the ‘One Country, Two Systems’ framework Beijing has granted civic freedoms and a high degree of autonomy to Hong Kong until 2047. According to the Basic Law, the city’s mini-constitution, Hong Kong is required to implement an anti-subversion law to replace colonial legislation which was revoked when the United Kingdom handed over the territory to China in 1997.

Hong Kong’s first chief executive Tung Chee-hwa, tried to pass national security legislation in 2003 but withdrew it after it triggered mass protests. His three successors never attempted to reintroduce similar laws, despite increasingly strident warnings from Beijing that Hong Kong was obliged to do so.

Critics say Beijing’s plan to instead impose the law threatens to undermine rule of law in the territory. On Sunday, police fired tear gas and arrested about 180 people among the thousands who marched to protest.

The Hong Kong Bar Association, the territory’s top legal body representing the city’s barristers, said on Monday that the new legislation may violate the Basic Law and the International Covenant on Civil and Political Rights, which is entrenched in the Basic Law. 

It also raised concerns about the lack of public consultation and questioned whether the financial hub’s independent judiciary would be undermined.

Mr Xie told a gathering of Hong Kong’s diplomats, foreign business chambers and journalists that the proposed legislation would improve the state of Hong Kong’s economy which fell into recession for the first time in a decade last year. 

Xie Feng, commissioner of China’s ministry of foreign affairs in Hong Kong © James Pomfret/Reuters

“Only in this way can Hong Kong strengthen its status as an international financial, trading and shipping centre and can Chinese and foreign business here have a more profitable future,” Mr Xie said. 

Hong Kong’s financial secretary Paul Chan claimed that the law did not impact investor sentiment, only the “misunderstanding” of it might. 

But investors are scrambling to figure out the implications of China’s moves. The hub’s benchmark Hang Seng index dropped 1.8 per cent on Monday morning, before recovering to close 0.2 per cent higher.

“We are concerned about how this legislation is being decided and also its impact including on ‘One Country, Two Systems’,” Carmen Cano de Lasala, head of the European Union Office to Hong Kong and Macau, said at Mr Xie’s briefing. The process “seems to exclude democratic debate, or any debate, in Hong Kong’s institutions”.

Mr Xie declined to provide details about the scope of the law, when the legislation would be enacted and whether it would have retroactive effect. 

Hong Kong’s security and police chiefs came out in support of the bill and warned of growing “terrorism” in the territory, echoing comments from Hong Kong’s chief executive Carrie Lam who has also given her “full support” of the proposed law. 

The US has threatened to impose sanctions on Hong Kong and China if the law is implemented. China’s foreign ministry spokesman Zhao Lijian said China would respond if the US undermined its interests in Hong Kong.

Taiwan may also revoke the special status it has granted to Hong Kong if the law is passed, which would make it harder for people from Hong Kong to travel to Taiwan and would likely anger Beijing.

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