Fear-mongering over national security law unfounded
Legislation to ensure stability, capital flight fears dismissed
by GT staff reporters
Aerial photo taken on June 27, 2017, shows the scenery on both sides of the Victoria Harbour in Hong Kong, southern China. (Xinhua/Lui Siu Wai)
Many foreign officials and media outlets have rushed to claim Hong Kong's status as a global financial hub has ended due to the impending National Security Law, with unsubstantiated reports of capital flight, but the move of the legislation is actually a boost to the business environment in the long-run.
In interviews with the Global Times, many foreign investors and business representatives in Hong Kong hold favorable attitudes toward the upcoming new National Security Law as they shared a consensus that with specific targets, the legislature would put an end to street violence, helping the once-prosperous Asian financial hub restore peace and stability, which, they say, will guarantee long-term business confidence.
Many pointed out that there are widespread misinterpretations of the legislation among some Western officials and media outlets, with some even raising questions about whether the law would end the "one country, two systems," ignoring the fact that the law is only targeting a narrow category of actions that jeopardize national security.
Washington has threatened to impose sanctions over the law, including revoking special trading status for the city, but economists and business representatives said that the so-called punitive measures would have little effect, as the city's prosperity has been largely dependent on the mainland rather than foreign capital. Potential sanctions from the US would also see it shoot itself in the foot, since many US businesses will be affected as well, analysts said.
"The actions taken by the National People's Congress (NPC) have no impact on the daily lives, human rights and freedoms of the residents of Hong Kong as well as all types of investment and business activities," Jonathan Choi Koon-shum, a member of the 13th National Committee of the Chinese People's Political Consultative Conference, the top advisory body, and chairman of the Chinese General Chamber of Commerce in Hong Kong, told the Global Times on Sunday. noting that national security is the backbone for development and guarantees social peace and prosperity.
"Hong Kong can no longer continue to be in chaos," he said.
Wang Chen, vice chairman of the Standing Committee of the National People's Congress (NPC), speaks at the opening meeting of the third session of the 13th NPC at the Great Hall of the People in Beijing, capital of China, May 22, 2020. Wang read an explanatory document on the draft civil code to deputies attending the third session of the 13th NPC and explained the draft decision on establishing and improving the legal system and enforcement mechanisms for the Hong Kong Special Administrative Region (HKSAR) to safeguard national security to the session. (Xinhua/Shen Hong)
Misunderstandings and concerns
The American Chamber of Commerce in Hong Kong was quoted as saying in recent media reports that this law could undermine the city's status as a business hub and worsen risks it already faces from the economic war between China and the US, however, such claims have been widely rejected by a group of foreign entrepreneurs and business representatives who have lived in the city for years, as they take this new law as an effective way of tackling deep-rooted problems of continued social unrest -- including illegal foreign meddling and secessionist activities that jeopardize the business environment.
There is no reason to be afraid of this new law if people are not taking part in acts such as splitting up the country, treason and subversion, organizing terrorist activities and colluding with foreign forces to interfere in the internal affairs of Hong Kong, Tung Chee-hwa, former chief executive of the Hong Kong SAR, was quoted as saying in media reports on Monday.
"We can't let Hong Kong become a shortcoming within the country's national security framework and allow it to turn into an anti-China base," Tung said.
"The business community working in Hong Kong holds favorable views toward laws that bring back order…Business can always prosper in an orderly society, so this step for me is welcome," Fabrizio Goldoni, an Italian businessman who works in sourcing business in the city by helping export mainland-made products to the world since 1993.
This continued social unrest created problems for customers visiting Hong Kong, who had bad feelings scaring off investors, which was even more unstable compared to the days before Hong Kong returned to the motherland in 1997, he noted.
The city is facing its worst recession in history, even worse than the Asian financial crisis in 1997 and 1998, Hong Kong Financial Secretary Paul Chan Mo-po was quoted as saying in media reports in April, as it has been struggling in the US-China trade war, anti-government protests and later the coronavirus outbreak.
"It is important to understand that it will mainly cover acts of: sedition, treason and terrorism that would put in danger China's sovereignty over Hong Kong… and I think it will be essential to clarify that this law will have no impact on individual freedoms," Angelo Giuliano, a Swiss business representative who has been working in M&A-related business in Hong Kong, told the Global Times.
The opposition groups have been working hard on "depicting Beijing as suppressor of individual freedoms, so communication will be very important," he said.
Such intentions of distorting the incoming national security law have been an old-fashioned tactic of pan-democracy lawmakers and activists in sabotaging and obstructing Article 23 of the Basic Law - which shall prohibit any act of treason, secession, sedition or subversion against the Chinese central government.
Reuters also cited some headhunters and bankers in a recent report claiming that the new law prompted concerns over freedoms, some worry that it could lead to capital flight.
"Since the decision has just been announced it 's unlikely to see any impacts in a day or two. Though there have been some impacts on the Hong Kong stock market, capital retreat will not be so fast," Wang Tao, UBS chief China economist, told reporters in an interview on Monday.
And even if some capital might leave due to concerns, there will be an inflow of other capital, Wang said, noting that as the US is tightening up regulations for Chinese companies listed in the US and even pushing for their delisting, some will choose to be listed in Hong Kong.
Following tightened legislation passed by the US Senate on Wednesday concerning audits and regulations about listings on US exchanges, more Chinese firms have been preparing for their secondary listings on the Hong Kong exchange. For instance, two tech giants - NetEast and JD.com are eyeing off on listings in June, injecting fresh momentum into the local market.
The market will be under pressure for now, and the worst-case scenario might be that the Hang Seng index would fall below 20,000 points, but that is unlikely, Hong Hao, managing director and head of research at BOCOM International, told the Global Times on Sunday.
"Those who are leaving are the ones you don't want to keep. So if they are leaving, farewell to them," Hong said. "And there will be new money coming in. And I believe it's just a matter of time and it will compensate for near-term outflows."
Hong Kong residents from all walks of life collect online signatures and hold a gathering on Sunday morning to show their support for the draft bill to safeguard the national security law to be implemented in the Hong Kong Special Administrative Region. The legal agenda was announced on Thursday night. Photo: cnsphoto
Back to prosperity
When some senior economists in Hong Kong look into oral threats made by Robert O'Brien, a White House national security advisor, who said Sunday that the US will likely sanction China if it approves the national security law, Francis T. Lui, professor emeritus of the Hong Kong University of Science and Technology, one of the most widely acclaimed economists who had unforgettable experiences during the Asian Financial Crisis, noted he would not see US sanctions having any significant impact on Hong Kong's prosperity.
"Maybe 30 or 40 years ago, Hong Kong had been closely correlated with the US as it used to be a manufacturing hub. Now it's a hub of transition by connecting trade and business between the mainland and the US," he said, noting that the majority of investment in Hong Kong is made up by companies from the mainland, not from the West.
The city's finance chief Paul Chan Mo-po told the Global Times in a previous interview last September that close connections to the mainland is effectively one of Hong Kong major advantages, take the Hong Kong exchange as example, over half of the over 2,000 listed companies are from the mainland and nearly 80 percent of transactions belong to them every day.
Commenting on O'Brien's remarks, Zhao Lijian, a spokesperson for the Chinese Foreign Ministry, said China would take "all necessary measures" to firmly counter and retaliate against the US' threatened sanctions over the new security law, lambasting the US for blatant interference in China's internal affairs.
"Hong Kong is China's. Hong Kong affairs are purely China's internal affairs. What legislation the Hong Kong Special Administrative Region makes, and how and when [it is implemented] are entirely within China's sovereignty. The US has no right to point fingers and interfere," Zhao said
Whether the US is mulling on revoking special trading status for Hong Kong or attacking Hong Kong by financial means again like what US billionaire George Soros did back in the Asian Financial Crisis decades ago by shot selling stocks and causing market turmoil, which was defeated by local authorities with the firm support of the central government, the White House is not believed to want to launch a reckless financial war against China on Hong Kong issue.
"If it makes any fuss on Hong Kong's unique linked exchange rate regime which ensures its monetary base is backed with US dollars, how big would the US lose when global investors lose faith in US-denominated assets, which are considered as lifeline for the US economy," Lui said.
When it comes to the new national security law, China's top legislators are committed to pushing forward it smoothly, in spite of how hard foreign forces have been trying to pressure China on the matter. The US should not underestimate the central government's determination in defending its sovereignty and national security, some observers said, like what it did in protecting both financial market security in Hong Kong and the mainland two decades ago.
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