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Why Article 23 Won’t Undermine Hong Kong’s Business Scene

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Last month, Hong Kong introduced a stringent new security law known as “Article 23,” in a move that critics fear will erode the city’s status as a global financial hub.

The leader of Hong Kong, John Lee, signed the law into force in March and said that the legislation is needed to guard against “potential sabotage and undercurrents that try to create troubles.” China’s Vice Premier, Ding Xuexiang, similarly said that the law would protect “core national interests.”

However, critics fear that the law will allow the Chinese authorities to clamp down further on civil liberties, which some believe were fundamentally weakened by the 2019 National Security Law.

Sarah Brooks, Amnesty International’s China Director, has said that “the rapid progression of legislation under Article 23 shows the government’s eagerness to further dismantle human rights protection and turn its back on its international obligations.”

The National Security Law, and now the Article 23, is seen by some as undermining Hong Kong’s status as a global financial hub. This is partly because of the way in which the laws give the government the power to intervene in practically any area of business or financial life should they declare that (broadly defined) national security issues are at stake.

Critics argue that this means all areas of finance and every economic activity potentially falls under the jurisdiction of this law – leaving businesses exposed to government intrusion into their affairs on no pretext.

This is not simply a theoretical risk. Last year, for example, the US-based consulting firm Capvision had its offices in Shanghai, Beijing, Suzhou, and Shenzhen raided by the authorities over allegations that the business had shared state secrets and critical intelligence. Bain & Co have also had staff in its Shanghai office questioned by the police, as has the corporate due diligence firm Mintz Group. The Chinese government has also announced a “security review” into memory chip maker Micron Inc.

Given this, some banks and other international firms operating out of Hong Kong are concerned about Article 23 and what the legislation means for the business environment.

Sanjeev Aaron Williams, a Hong Kong based lawyer who writes on geopolitical risk and digital economy, believes these fears are unfounded. “There are no signs of increased clampdown on civil liberties. If anything, Hong Kongers are constantly telling foreigners of the high degree of personal and professional freedoms, safety, and rule of low. We do not face arbitrary arrest,” he said.

“The Article 23 law has been received by businesses with cautious optimism. The consultations with the government on the legislation were amicable, frank, and productive, notwithstanding that the legislation was fast-tracked,” Williams added. “The government went out of their way to explain the legislation to the business community.” 

Despite the fact that some international businesses and banks are undoubtedly raising eyebrows about the new law, which they see as a step in an authoritarian direction, the move is unlikely to shake Hong Kong’s status fundamentally.

After all, the opportunities associated with markets in Hong King and China still remain significant. Beijing is channelling huge amounts of capital into manufacturing and the industries of the future. While coverage of Chinese markets is currently overwhelmingly negative in the Western media, the bull case for China is strong.

“Hong Kong is now recognized as a world leader in cryptocurrency regulation and digital economy. It is actively pursuing Web3 plus Innovation and Technology to diversify from its historical emphasis on finance,” Williams noted. “The initiatives have been well received thanks to the massive Hong Kong FinTech Week, promotions by InvestHK, the recent hosting of large financial events in March 2024 attended by sovereign wealth funds, hedge funds, and family offices, courting of Middle East investments, plus large scale crypto and Web3 events that attracted overseas visitors who openly stated there were investigating whether to move here.”
 
“The reality is that it would be difficult to write off HKG given its energy and resilience.”

Author: Harry Clynch

#HongKong #China #Article23 #Finance #Business

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