A billboard referring to the incoming National Security Law, seen beyond a Chinese national flag held up by a pro-China activist during a rally outside the US Consulate in Hong Kong. Photo: AFP/Anthony Wallace

SINGAPORE – China’s top legislature formally approved a controversial national security law for Hong Kong on Tuesday (June 30) that will provide Beijing with enforcement powers to prohibit and punish acts of secession, subversion, terrorism and foreign interference in the Chinese-ruled special administration region.  

International opprobrium has mounted against Beijing with critics of the far-reaching new law, which was not fully disclosed to the public prior to its unanimous passage by the Standing Committee of China’s National People’s Congress, saying it will effectively criminalize dissent and stifle the city’s freedoms and semi-autonomous status.

The legislation puts Beijing further at odds with Western governments and will further strain US-China relations, which have already sunk to their lowest point in years. The US announced last month that it would begin removing Hong Kong’s special trade status under US law on grounds of China bypassing the city’s legislature to impose the new law.

China’s lawmakers fast-tracked the bill, passing it on the last day of a special three-day session that began on Sunday. It is expected to come into effect on July 1, marking the 23rd anniversary of the city’s handover to China from British colonial rule. The city’s Chief Executive Carrie Lam admitted she had not seen a preliminary version of the law prior to its passage.

“From every signal that we’ve received so far, the law is going to work within Hong Kong common law system and will cater to Hong Kong’s special needs,” said Bernard Chan, convenor of Hong Kong’s Executive Council (ExCo), a top policy-making body that advises the city’s chief executive, in an interview with Asia Times ahead of the bill’s approval.

Pro-democracy lawmakers and activists in Hong Kong have voiced fears that the bill could introduce indefinite detention without trial or charge and allow for extradition to mainland China. Before the law’s passage, Beijing had said its state-security agencies must be able to exercise jurisdiction over the most serious national security cases.

At a Tuesday morning media briefing, Lam said she would not answer questions about the new law until its contents are listed into Annex III of the Basic Law and promulgated. “It would be inappropriate for me to answer any questions and explain at this stage,” she remarked. “What I can say is that when the law has been approved.”

Hong Kong’s Chief Executive Carrie Lam speaks during a briefing at the Hong Kong SAR office during her visit in Beijing on June 3, 2020. Photo: AFP/Nicolas Asfouri

Hong Kong’s leader asserted that threats from the US or other foreign governments to impose sanctions over the matter “would not scare Hong Kong”, and that her government would “fully cooperate” with any potential countermeasures, including sanctions, introduced by the central government in Beijing.  

Chan said that while segments of the city’s business community and wealth managers regard the new law as “good news” for stability after last year’s sometimes violent anti-government protests, the threat of US sanctions and other punitive measures are giving pause to some firms in the city.

The US Senate unanimously passed a bipartisan bill on June 26 as a response to Beijing’s tough national security law. The Hong Kong Autonomy Act would require sanctions on individuals that have “materially contributed” to China’s perceived failure to comply with treaty obligations of the 1984 Sino-British Joint Declaration and the city’s Basic Law.

“I’m still hopeful that this is more political posturing than actual sanctions. Many of the financial services here are operated by American companies. It will hurt them as much as they hurt Hong Kong. Some American companies are now looking at options in case the US is putting pressure on them to leave. It will be a lose-lose situation,” said Chan.  

The new US bill also includes secondary sanctions against any foreign financial institution that knowingly conducts “significant transactions” with designated individuals, raising the prospect that Hong Kong banks and Chinese lenders could be prevented from accessing the US dollar payment system in what would mark a major escalation of punitive deterrence.  

“If the US really wants to kill the US dollar’s dominance in the world, then they can do this kind of nuclear overkill,” said Victor Gao, a chair professor at China’s Soochow University. The Chinese-ruled city is Asia’s premier financial hub and one of the world’s largest currency trading centers, ranking third globally for US dollar transactions.

It isn’t clear which individuals or financial institutions may be designated for US sanctions. The Hong Kong Human Rights and Democracy Act, legislation signed last November by US President Donald Trump, provides for sanctions against officials responsible for human rights abuses in Hong Kong, though no Chinese entities have so far been targeted.

Police enter a shopping mall to disperse people attending a lunchtime rally in Hong Kong on June 30, 2020, as China passed a sweeping national security law for the city. Photo: AFP/Anthony Wallace

The Hong Kong Autonomy Act, by contrast, describes the sanctions as “mandatory”, though the legislation provides the US president with authority to waive sanctions under certain circumstances, making its potential impact difficult to assess. To become law, the legislation must also pass the House of Representatives and be signed by the president.

Gao, vice president of the Center for China and Globalization (CCG), sees Washington as “bluffing strategically” to win leverage over Beijing as bilateral tensions run high and US officials such as Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer raise the specter of economic decoupling.

Hours before China’s legislature approved the security law, US Secretary of State Mike Pompeo announced that the US would stop exporting defense equipment and dual-use technologies to Hong Kong, which the city was previously able to import without obtaining licenses required for the same items when sold to mainland China.

Reflecting official views in Beijing, the Chinese academic and lawyer firmly rejected the basis for the US punitive action. As the highest form of government in China, the National People’s Congress “absolutely has its sole discretion” the power to interpret and amend the Basic Law, the city’s the mini-constitution, to incorporate the new security law, Gao said.

Article 23 of the Basic Law requires Hong Kong to enact its own national security legislation prohibiting acts of “treason, secession, sedition, or subversion.” An attempt to introduce such a law was made in 2003 but ultimately shelved in the face of mass protests. No local administration has tried to introduce a security bill since. 

Tens of thousands of pro-democracy protesters march in Hong Kong on January 1, 2020. Photo: Yat Yeung / NurPhoto / AFP

Michael Swaine, a senior fellow with the Asia Program at the Carnegie Endowment for International Peace, believes the Trump administration should have engaged Beijing to “encourage a delay in the drafting and implementation” of the national security law until after Legislative Council (LegCo) elections slated to be held in September.

That would open the way for a new Hong Kong government “to take up the issue again, thus possibly eliminating the need for Beijing to step in.”

“But the Trump Administration doesn’t really negotiate. It issues dicta and demands in the mistaken belief that these will somehow cause Beijing to back off when in fact they will just more likely cause it to harden its position,” said Swaine, who is opposed to the sweeping security law.

“Any actions that Washington takes will disproportionately hurt Hong Kong over the mainland without moving it an inch closer to preserving its freedoms.”

Other proponents of the new national security legislation interviewed by Asia Times see the bill as a prerequisite for stabilizing Hong Kong following sustained social unrest throughout 2019. Western governments’ attempts to use legal means and economic leverage to dissuade China from enforcing the new legislation are unlikely to succeed, they said.

“We are talking about sanctions to stop a country from exercising its sovereign rights and its sovereign prerogatives to enact a national security law with respect to a particular region within that country. You’re going to sanction them for doing this? That doesn’t sound to me logical or even reasonable,” said barrister and pro-establishment lawmaker Martin Liao.

“If they want to use those threats, they are free to do so. But I don’t think it would deter China…It will only invite retaliation.”

Beijing, mirroring arguably symbolic punitive measures taken by Washington, leveled visa restrictions against US officials with “egregious conduct on Hong Kong-related issues” on June 29 without specifying which officials would be targeted. The US unveiled similar visa restrictions against unidentified current and former Chinese officials two days earlier.

Pro-China supporters display Chinese and Hong Kong flags during a rally near the government headquarters in Hong Kong on June 30, 2020, as China passed a sweeping national security law for the city. Photo: AFP/Anthony Wallace

Liao sees the legislation as being “good for Hong Kong in the long run” and a means through which to “achieve some semblance of stability” that would allow for social dialogue and efforts to “rebuild Hong Kong as a financial and economic center.” He concedes, however, that the security law is likely to bring “chaos” in the short-term.

Hong Kong police have prohibited an annual pro-democracy march from going ahead on July 1, citing social-distancing rules brought about by the coronavirus pandemic that prohibit gatherings of more than 50 people. The Civil Human Rights Front, the organizer of the march, said it will appeal against the decision and continue its planned assembly.

In recent weeks, most demonstrations in the city that went ahead without police permits have reportedly seen smaller turnouts amid fears of steeper penalties soon entering force. Calls for the city’s independence – which national security legislation explicitly aims to punish – have, though, become a more prominent rallying cry among democracy activists.

A survey conducted by the Hong Kong Public Opinion Research Institute between June 15 to 18 showed that a majority 49% of respondents were strongly opposed to the new national security regulation, while support for the legislation added up to 34%, with 7% “somewhat” opposing it and the rest remaining indifferent or undecided.

The same survey found that 20% of respondents supported of the idea of Hong Kong independence, regarded as anathema by Beijing, while opposition to the idea grew to 60% in June from 56% in March.  

China’s President Xi Jinping voting on a proposal to draft a security law on Hong Kong during the closing session of the National People’s Congress at the Great Hall of the People in Beijing on May 28, 2020. Photo: AFP/Nicolas Asfouri

Martin Jacques, a British academic and author of the acclaimed book When China Rules the World: The End of the Western World and the Birth of a New Global Order, said that Beijing is likely to find itself in “a trickier situation than it’s been in so far” with Hong Kong as the central government moves to deter purported separatists and independence advocates.

“It depends exactly on how the Chinese apply it. If they’re smart, they won’t overreach and they’ll apply it effectively. If they apply it to certain extreme elements, in terms of their behavior or maybe in terms of their political positions as well, that can have a demonstrative effect. On the evidence so far, they’ve not been smart,” he said.

“I can see the need for a national security law. What happened in Hong Kong last year was that it got out of control and it became unacceptable. My argument is that they have to reform Hong Kong. They need a socio-economic reform program. If they just engage in a kind of law and order position, that’s not going to win hearts and minds.

“China’s problem is that it has not found a way to develop a more constructive relationship with Hong Kong,” said Jacques. “Beijing is going to need to be a lot more creative and much more reform-minded. It needs to be rethought in a very profound way. So far, I’m not convinced with China’s ability to find a way.”

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.