A woman poses for a photo in front the Hong Kong city skyline. Photo: AFP / Vernon Yuen / NurPhoto

Japanese companies in Hong Kong have expressed growing fears that the free flow of information and rule of law will deteriorate under the new National Security Law, a new survey shows.

About 56.5% of Hong Kong-based Japanese companies said they were concerned about the law, according to a July survey conducted by the Consulate-General of Japan in Hong Kong, the Japan External Trade Organization’s (JETRO) Hong Kong office and the Hong Kong Japanese Chamber of Commerce & Industry.

The figure was 50.8% in a similar survey in April.

The percentage of surveyed Japanese companies that said the National Security Law would have negative impacts on them rose to 15.5% in July from 6.4% in April. Those who responded it would have “no impact” declined to 60.3% from 68.6% for the same period. The rest said they had not seen any impact for the moment.

The percentage of Japanese companies that will expand their businesses in Hong Kong fell to 3.9% in July from 5.5% in April, while those planning to leave the city increased to 2.2% from 0.4%.

Meanwhile, the percentage of companies that said they will maintain the scale of their businesses in Hong Kong increased to 62% from 59.7%, thanks to the rising hope that quarantine-free travel will resume between the city and the mainland later this year.

There are currently 9,025 companies in Hong Kong with their parent located outside the city, according to a survey by the Census and Statistics Department last November. Mainland China ranks first with 1,986 companies, followed by Japan (1,398), the United States (1,283), the United Kingdom (665) and Singapore (453), the survey shows. 

There were about 10,000 Japanese nationals in Hong Kong, according to the last census in 2016. JETRO conducted its eighth quarterly survey on Japanese firms since the anti-extradition protests broke out in Hong Kong in June 2019.

In July 2020, the report started to ask companies how they feel about the National Security Law, which was imposed by Beijing in Hong Kong on June 30 last year. Initially, 81.4% of the surveyed companies said they were concerned about the new law.

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

The figure eased to 66.5% last October, 54.4% in January this year and 50.8% in April. During that period, many key democracy activists, including Agnes Chow who speaks fluent Japanese, were arrested.

However, in the latest survey conducted from July 2 to 9, more Japanese firms expressed their concern about the law than three months earlier. About 79.4% of those surveyed said the free flow of information in Hong Kong would be limited by the law, while 60% said the city’s rule of law and judicial independence might deteriorate.

About 58.1% said they would be affected by the brain drain in the territory.

The survey interviewed 607 Hong Kong-based companies, including 506 members of the Hong Kong Japanese Chamber of Commerce & Industry, 78 members of the Hong Kong Japanese Restaurant Association and 23 members the Wakyo Kai Hong Kong. The surveyed companies are mainly from the trading, financial, machinery and dining sectors.

Two recent developments could have escalated concerns among Japanese firms about Hong Kong’s business environment.

On June 26, the Asia Internet Coalition (AIC), a Singapore-based industry association with members including Facebook, Google and Twitter, submitted a letter to the Office of the Privacy Commissioner for Personal Data (PCPD) asking for a meeting to talk about proposed amendments to the Personal Data (Privacy) Ordinance.

Under the amended law, the Privacy Commissioner will be empowered to order ISPs to block access to overseas websites with doxxing content if deemed necessary. Doxxing is the act of publicly revealing previously private personal information about an individual or organization, usually through the internet. 

The commissioner can also apply for a warrant to enter and search premises and seize materials for a specified investigation in doxxing cases. In urgent circumstances, the commissioner may access an electronic device without a warrant.

The Wall Street Journal said on July 5 that Facebook, Twitter and Google had privately warned the Hong Kong government that they could stop offering their services in the city if the amendments were passed.

The Hong Kong government said it strongly opposed media reports that took matters out of context to mislead and confuse the public. It gazetted the bill on July 16. The Legislative Council held a first reading and commencement of the second reading debate on July 21.

A family pose for a photo before entering the departures hall for their flight to Britain at Hong Kong’s International Airport on July 18. Photo: AFP / Bertha Wang

Tens of thousands of Hong Kong people have left the city in each of the past few months. Most have moved to the United Kingdom with their British National (Overseas) status, while others left using their foreign passports.

Many said they emigrated to prevent their children from being “brainwashed” by Beijing’s national security-influenced education.

On February 4, the Education Bureau issued circulars to schools in Hong Kong to provide guidelines on school administration and education in relation to safeguarding national security. The guidelines include details about the implementation and teaching resources for national security education.

Hong Kong’s emigration wave has expanded since late June as students began their summer holidays. Long queues were recently seen at airport counters for flights bound for the UK.

On July 19, the Hong Kong Association of the Heads of Secondary Schools said in an open letter to Chief Executive Carrie Lam that many students were moving overseas. It expressed concern that a number of schools were losing talent, especially experienced teachers and those in middle management.

The medical sector also saw an exodus, according to the Hong Kong media.

In April, the JETRO survey showed that some Japanese firms had been affected by the human capital flight from Hong Kong. They said some of their staff had low morale and chose to leave the city, while their customers were also moving out.

In July, the survey said the exodus of staff continued, particularly those with school-age children. It also said some Japanese firms might leave Hong Kong due to information security concerns.

The major concerns raised by Japanese firms in Hong Kong were similar to their American peers.

Schools have been given guidelines on incorporating national security into their curriculum. Photo: Xinhua

Between May 5 and 9, the American Chamber of Commerce conducted a survey titled Should I stay or should I go? among 325 people, representing a quarter of its members. The survey showed that 58% of respondents had no plans to leave Hong Kong, while 42% said they were considering or planning to move away.

Of those who aimed to leave, 62% said the National Security Law had made them uncomfortable, while 36% had concerns about the quality of education for their children after the law was implemented.

On July 16, the US State Department issued a business advisory for Hong Kong-based American firms and set out different kinds of risk, including data privacy risks and risks regarding transparency and access to critical business information.

Read: US biz staying put but wants HK freedom guarantees