A European parliamentarian during a bilateral meeting with China in a file photo. Image: AFP

Relations between the European Union (EU) and China – as well as the interests of the 2,300 companies and 350,000 people from Europe in Hong Kong – would be hurt if the EU Parliament did not stop interfering in Hong Kong’s internal affairs, according to a recent commentary published by China’s state media.

The warning came after the European Parliament passed a resolution on January 20 condemning the deterioration of human rights in Hong Kong, including severe restrictions on freedom of expression, freedom of association and press freedom.

Members of the European Parliament (MEPs) called on the European Commission and member states to review the EU’s support for Hong Kong’s seat at the World Trade Organization (WTO), in the light of the erosion of the autonomy the territory had under the “one country, two systems” model.

While Hong Kong and China’s central governments and state media described the European Parliament’s resolution as “a piece of rubbish paper,” some academics said the impact of potentially canceling Hong Kong’s seat at the WTO would be limited as the amount of Hong Kong-made goods directly exported to Europe was small.

Meanwhile, Stephen Phillips, the director-general of Investment Promotion at Invest Hong Kong, said on Monday that the number of foreign companies with regional headquarters in Hong Kong declined due to the pandemic and related economic challenges.

He added there was no evidence to prove the exodus was caused by the National Security Law, which was implemented in the city on June 30, 2020.

After hundreds of anti-extradition protests broke out on Hong Kong’s streets between June 2019 and January 2020, the Hong Kong government banned gatherings of more than four people outdoors for public health reasons.

After Beijing implemented the National Security Law in Hong Kong on June 30, 2020, more than 50 democratic politicians were accused of endangering national security by joining primary elections in July 2020.

Police lead Hong Kong pro-democracy media mogul Jimmy Lai, 72, away from his home after he was arrested under the national security law in Hong Kong on August 10, 2020. Photo: AFP / Vernon Yuen

Non-state media closed

Pro-democracy media Apple Daily and Stand News closed after their assets were frozen and senior executives and editors were arrested and some later jailed.

Last September, Frederik Gollob, the chairman of the European Chamber of Commerce in Hong Kong, told the BBC that some European companies were considering leaving Hong Kong due to the stringent quarantine measures as their employees could not travel overseas freely.

Gollob also said the National Security Law could be the cause for businesses leaving Hong Kong and relocating to other regions.

The Hong Kong government has not relaxed its quarantine rules but rather has tightened them to ensure the city would maintain “zero local infections” in order to bargain for the resumption of quarantine-free travel with mainland China.

Hopes for a “border reopening” vanished after cases of the Omicron variant were identified in Hong Kong in late December.

Last Thursday, the European Parliament passed a resolution on “violations of fundamental freedoms in Hong Kong.” It said the European Union continued to have deep concerns about the People’s Republic of China’s National Security Law for Hong Kong, which has far-reaching consequences for Hong Kong and its people, for EU and foreign citizens, for EU and international civil society organizations and for business confidence in Hong Kong.

It said the implementation of the National Security Law had increased the risks for EU citizens in Hong Kong.

Members of the European Parliament called on the Hong Kong government to release all political prisoners and to drop charges against all peaceful protesters arrested in recent years. They also urged Chinese authorities to repeal the National Security Law as they consider it a breach of China’s international commitments and obligations.

Hong Kong Police Force Senior Superintendent Steve Li Kwai-Wah during a press briefing outside Hong Kong Police headquarters on January 6, 2021, after the arrest of dozens of opposition figures under the National Security Law. Photo: AFP / Anthony Wallace

‘Slandering remarks’

“We express our deep regret and must rebuke politicians of Western countries in respect of their attempt to twist facts and issue slandering remarks on the enforcement actions taken in accordance with the law. Such acts violate international laws and constitute gross interference in the affairs of Hong Kong,” said a Hong Kong government spokesperson on January 21.

“Today’s China has long since bid farewell to the humiliating era of being slaughtered and bullied, and Hong Kong has long since ended the history of foreign colonial rule. If there are still people who think that they can order China about by gesture, or intimidate and threaten it, they are over-confident of their power,” said a spokesperson for the Hong Kong and Macao Affairs Office (HKMAO) of the State Council.

“We would advise those European politicians to wake up from the old dream of colonialism.”

“The clamor of sanctions from the European Parliament will only further arouse our high fighting spirit and common hatred,” said the spokesperson, adding that the European Parliament’s resolution about Hong Kong was “a piece of rubbish paper” and “a joke.”

A commentary published by the state-owned Wen Wei Po newspaper said Monday that China would not back down from “empty threats” by the European Parliament, which called for a review of Hong Kong’s seat at the WTO.

It said the parliament tried to use “democracy” as a weapon to undermine Hong Kong’s international status.

“It’s a general trend for China and the EU to cooperate and have developments. The prosperity and stability of Hong Kong also concerns the interests of more than 2,300 EU companies in Hong Kong and 350,000 EU citizens in Hong Kong,” Wang Ping, a columnist at the People’s Daily, the official mouthpiece of the Communist Party of China, wrote on Monday.

“Some European politicians will shoot themselves in the foot sooner or later if they indulge in self-deceiving political performances.”

Wang also said since the implementation of the National Security Law, Hong Kong’s business environment had improved significantly, with a strong economic recovery. He said the number of overseas parent companies and mainland companies in Hong Kong had grown 10% to 9,049 last year from 8,225 in 2017.

A number of foreign companies have left Hong Kong. Photo: iStock

Decline in foreign firms

Last October, the Census and Statistics Departments said in a report that the number of regional headquarters of US companies in Hong Kong fell 10% to 254, the lowest in 18 years, while Japanese companies decreased 7% to 210 in the year ended June 1, 2021.

Stephen Phillips of the InvestHK said Monday that the decline of the number of foreign firms’ regional headquarters in Hong Kong was probably caused by the pandemic and some merger and acquisition activities.

He said he could not see any abnormal situation in the city as the number of foreign and mainland companies in Hong Kong recorded a high at 9,049. He added that more mainland companies would raise funds and get listed in Hong Kong.

On June 29, 2020, the US began eliminating Hong Kong’s special status under US law, halting defense exports and restricting the territory’s access to high technology products, in response to Beijing’s move to implement the National Security Law in Hong Kong.

Two months later, the US announced that all Hong Kong products exported to the US had to be labeled “made in China,” not “made in Hong Kong.”

Hong Kong’s Secretary for Commerce and Economic Development Edward Yau said at the time that US demands were inconsistent with WTO and international rules. He said they ignored Hong Kong’s status as a member of the WTO, causing unnecessary confusion and difficulties.

China’s state media said the impact of the US’ new requirements on Hong Kong was limited as only 1.2% of Hong Kong’s total exports went to the US, which amounted to US$39 billion in 2019, and were actually made in Hong Kong.

It remains unclear if the European Union would adopt the European Parliament’s call to review Hong Kong’s WTO membership status.

Hui Ching, research director at the Hong Kong Zhi Ming Institute, said if the EU stopped doing business with Hong Kong, the city would suffer from a few percent drop in its external trade. Hui said Hong Kong could only face a devastating blow if it lost the mainland market, not the US and EU ones.

In 2020, bilateral merchandise trade between Hong Kong and the EU fell 12% to 54 billion euros ($61.1 billion) from 2019, according to the Trade and Industry Department.

Germany, the Netherlands and France were Hong Kong’s top three merchandise trading partners among EU member states during the year, representing 23%, 17% and 16% of Hong Kong’s total merchandise trade with the EU, respectively.

Hong Kong-origin goods exported to the EU accounted for 2.6% or 100 million euros of Hong Kong’s total domestic exports in 2020.

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