Hong Kong's business hub status imperiled by security law

A national security law proposed by China could imperil Hong Kong's status as one of world's best places to do business.

law, approved Thursday in Beijing, led Secretary of State Mike Pompeo to say Washington will longer treat Hong Kong, alrey reeling from anti-government protests and pandemic, as automous from Beijing.

Chinese government has t given details of law, which is aimed at suppressing secessionist and subversive activity in former British colony.

After 11 months of protests, Chinese leers say it's needed to combat unspecified threats in semi-automous region of 7 million people. But business groups, lawyers and financial analysts say potential repercussions range from loss of business for Hong Kong's financial markets and law firms to a loss of professional talent in city.

Hong Kong is highly regarded for its skilled workforce, business-friendly legal system, Western-style free speech and ease of movement. But global companies alrey were shifting some operations out of Hong Kong due to rising costs and uncertainty after prolonged, sometimes violent clashes between police and pro-democracy protesters.

Scott Salandy-Defour, founder of clean-tech startup Liquidstar, has been considering moving out of Hong Kong, and security bill is last straw," he said.

I don't see how it gets any better from here." When we say we're a Hong Kong-based company when talking to investors, it's just t as attractive as it was as a year ago," said Salandy-Defour, whose company provides sustainable battery rental and charging services for developing countries.

We're potentially cutting ourselves off from a lot of different funding avenues, like grants from U.S. government, he said.

Hong Kong's leer Carrie Lam has tried to reassure companies and public that its civil liberties won't be affected. But law shows Chinese President Xi Jinping is determined to tighten control.

Hong Kong is riskier than it used to be, said Tara Joseph, president of AmCham Hong Kong. re is a big worry that re are two buses careening towards each or, and that's U.S. and China, and that this could have a profound impact in Hong Kong, Joseph said.

Critics say law undermines high degree of automy promised when Britain handed control to China in 1997. That automy meant Washington and or governments have treated city as a separate territory for tre, travel and or affairs.

Secretary of State Mike Pompeo said Wednesday those changes are significant eugh that Washington will longer treat Hong Kong as automous.

Washington could revoke its promise to exchange Hong Kong dollars for U.S. dollars, potentially disrupting city's financial system, Deutsche Bank ecomist Michael Spencer said in a report.

financial sector would take a big hit if companies such as MSCI reclassify Hong Kong as an emerging market like Shenzhen and Shanghai inste of a developed market, Spencer said.

A very large share of capital invested in Hong Kong market will have to leave, he said.

Hong Kong's uncertain future is putting it at a disvant with or Asian destinations that are competing to attract foreign investment, such as Singapore and Tokyo.

Over time, people get nervous, and think that this place may t be, my money may t be, as safe as it once was, and I'm going to think about going somewhere else, said William Reinsch, senior viser at Center for Strategic and International Studies. It sends a signal that Hong Kong is longer a safe and reliable place to put your money or to do business.

national security law has ded to worries that Hong Kong's legal system is losing its independence. Hong Kong Bar Association says method for enacting it is a threat: China is circumventing territory's legislature by changing its mini-constitution, Basic Law, to require its government and courts to enforce security measures, regardless of what local lawmakers decide.

Beijing has shown little regard for such considerations, said Reinsch.

China is t a rule-of-law state, it's a state where party makes decisions about what's going to happen, those are arbitrary decisions, and if that's what's going to happen in Hong Kong, it doesn't bode well for ecomy or for people, he said.

Bob Brofoot, managing director of Hong Kong-based research firm Political and Ecomic Risk Consultancy, said companies might shift legal work to Singapore or or countries.

Singapore's going to get more business as a dispute resolution center, said Brofoot. Its legal system, which is a bigger earner, will benefit from Hong Kong's problems.

Hong Kong's troubles and broer global ecomic uncertainty due to pandemic also may make it harder for businesses re to attract and retain talent.

Still, some experts believe concerns over a possible loss of Hong Kong's special status are overblown.

Many big companies have sizable operations in both mainland and Hong Kong, and most of Hong Kong's manufacturing base shifted to China years ago, said Nicholas Lardy, a fellow at think tank Peterson Institute for International Ecomics.

real ecomic consequences are fairly limited," Lardy said.

Hong Kong is still an attractive base for many companies, said Andrew Bishop, a partner with Signum Global visors, a risk visory firm.