US business wants Hong Kong to succeed, but companies need clear details about national security law to allay fears

An op-ed by AmCham President Tara Joseph

This is a seminal moment for Hong Kong and its 23-year experiment with “one country, two systems”. The drafting of the national security law in Beijing, bypassing the Hong Kong legislature, sends a worrying signal to the international community at large, along with the international business community.The reaction from the United States is also likely to be swift and hard. Hong Kong has now truly become a lightning rod in rising geopolitical tension. Calm heads need to prevail or this gem of a city will lose its stature.

Nobody wants to see Hong Kong fail as a key commercial city, including US companies. Hong Kong serves a unique and valued purpose as a gateway between East and West.

Over 1,300 US companies have offices here, providing around 100,000 jobs for Hong Kong residents and making a large contribution to key sectors of the economy: finance, real estate, law, trade and accounting. Hong Kong has one of the most efficient infrastructures in the world, it is a connecting point and it has attracted a strong pool of skilled talent.

But those positive factors could start to take a back seat if details of the national security law for Hong Kong remain opaque. Details of the legislation are crucial for the international business community to be able to make better-informed decisions about whether they can comfortably maintain their presence in this once-freewheeling business hub.

Important details include ways in which foreigners will be tried if they are seen to be overstepping the national security parameters; an outline of the parameters of free speech; what happens if a financial researcher says something less than complimentary about a Chinese state-owned enterprise listed in Hong Kong; a description of how Chinese state security agents will live and work in the city; whether company offices could be searched without a warrant in the name of national security.

The list is very long and should not be glossed over. Instead, open and honest dialogue with international business is necessary.

The enactment of the national security law should also not be glossed over by Hong Kong officials. Senior government servants are well aware that the international business community is nervous. Helping to ensure that dialogue remains open and robust, and that opinions and views are taken into consideration, can build trust in the government that has been steadily decreasing.

So far, simple statements, such as “there’s no need to worry”, have only raised concern. Instead, the government could help offer a post-Covid-19 vision for Hong Kong and take swift action to implement it.

A second concern is how failure to provide details and dialogue will stir a robust and bitter US response to the national security legislation. Already, international business is facing the pressure of increased tension between the US and China, but the enactment of China’s security law for Hong Kong could take the tension to a whole new level.

No US company wants to be caught between a rock and a hard place in a cold war between the US and China, especially in Hong Kong which serves as a bastion of free trade and cooperation. A US response to China could come in several forms. On Wednesday the State Department declared that it believes Hong Kong is no longer sufficiently autonomous to justify its unique trade treatment under US law – something that may ultimately lead to trade restrictions on the city. The recently passed Hong Kong Human Rights and Democracy Act also opens the door for sanctions against officials deemed responsible for human rights abuses.The nuclear response would be for President Donald Trump to terminate the US’ special trade relationship with Hong Kong, or the Hong Kong Policy Act, with an executive order. What once seemed nearly impossible is now an area of focus for people trying to understand how this would affect their business.

No matter what the course of action, the draft national security law, the protests of 2019 and the arrest of pro-democracy activists in recent weeks all send worrying signals to the international business community, which is akin to chipping away at Hong Kong’s value proposition.

Along with the painful effects of the Covid-19 pandemic, companies and families are sure to be making backup plans and coming up with strategies to spread the risk. This is show time for Hong Kong. All parties need to be aware that the risk premium is rising when it comes to working and living in this city.

This is the time for everyone to act in favour of holding up Hong Kong as the city that is too special to fail.