Hong Kong Approves New National-Security Law That Worries Foreign Executives
The city’s officials say domestic legislation covering state secrets and foreign interference is necessary and won’t affect normal businesses
HONG KONG—Hong Kong lawmakers passed a bill that includes heavy punishments for foreign interference endangering national security and criminalizes the possession or disclosure of state secrets, measures that some foreign executives say could make the city less attractive for international business.
The city’s legislature, overhauled by Beijing in recent years to shut out opposition, passed the new law which outlines offenses such as espionage and treason, and widens the meaning of national security to include economic matters. The law, known as Article 23, also expands the range of material considered state secrets, such as those concerning social and technological developments.
The definitions bring Hong Kong more in line with mainland China, where a crackdown on business due-diligence firms has unnerved some foreign companies. It supplements a national-security law that Beijing imposed on Hong Kong in 2020 in the wake of mass antigovernment protests.
The new law has drawn strong criticism from Western governments who say it risks further undermining freedoms in the city, and a group of U.S. lawmakers sent a letter to Secretary of State Antony Blinken last week saying it raised the risks for American citizens and businesses.
On the ground, foreign business groups and corporate lawyers are more measured, but some say they are concerned that some parts of the bill are so vaguely worded they raise the perception of risk-and-compliance costs for businesses.
“Part of the unique value Hong Kong has for Western stakeholders is the openness of the city and we feel the balance between openness and the desire for security needs to be well calibrated,” said Johannes Hack, head of the German Chamber of Commerce in Hong Kong.
Hong Kong’s Chief Executive John Lee said earlier this month that he had asked the legislature to scrutinize and pass the bill at full speed, so that the city “can then focus its efforts on developing the economy.” A spokesman for Hong Kong’s government said that the bill “targets an extremely small minority of people who endanger national security” and that normal business operators won’t be affected by the legislation.
Confidence in Hong Kong among foreign businesses and executives has been shaken in recent years amid social unrest, strict pandemic rules, China’s sputtering economy and a national-security crackdown. A range of multinational companies have left, moved regional executives or downsized their operations in Hong Kong, including a number of firms that gather business intelligence.
The number of regional headquarters of firms based outside Hong Kong continued to fall in 2023, including those from the U.S., U.K. and Switzerland, according to data from the Census and Statistics Department.
Several foreign business leaders in Hong Kong say that while they don’t see a second national-security law as a reason to rethink their presence in the city, it reinforces existing concerns about the city’s appeal as a global financial center and hinders attracting global talent.