7 March 2023 – Today the Atlantic Council released a new report titled, Fractured Foundations: Assessing Risks to Hong Kong’s Business Environment. Since the Chinese Communist Party’s (CCP) implementation of the National Security Law in June 2020, Hong Kong’s legal and political structure has been fundamentally transformed. Judicial independence has been threatened, data security has been compromised, and the commercial operating environment has been jeopardised.
The report assesses Hong Kong’s future as a global financial hub, detailing how Hong Kong’s diminishing political independence affects the business sector. Citing the negative impact of the Beijing-imposed National Security Law on Hong Kong, the report says: “The National Security Law has been used to target multiple institutions seen as politically challenging to Beijing, including independent newspapers, media outlets, and pro-democracy politicians. It also has limited activities of the press, the publication and distribution of books and films, and the flow of information in other formats, including those essential to the operation of a modern commercial and financial system.”
The report highlights the press crackdowns and the shutting of media outlets which have negatively impacted the free flow of information that is needed for Hong Kong to remain an international financial centre. The report also exposes the Hong Kong authorities’ possible shift from Hong Kong’s US currency peg to the Chinese renminbi peg.
At the report launch, Thomas Kellogg, Executive Director of Georgetown University’s Center for Asian Law, highlighted the controversy over Tim Owen, the prominent UK barrister who was prevented from defending British businessman, Jimmy Lai.
The report’s recommendations include urging businesses to recalibrate the risk-reward assessment regarding where they place their investments and outlines the potential compliance risks for financial institutions that are caught between the US and China’s conflicting regulatory laws.
Rhodium Group Director of China Markets Research and author of the report, Logan Wright, said:
“The legal and institutional framework of Hong Kong used to overwhelmingly depend on British common law, but now depends on a system that is reinforced by Beijing’s political norms under the National Security Law. Rather than norms being set by authorities in Hong Kong, norms are being set by Beijing itself. The concern is the political structure in which Hong Kong’s independent institutions operate.”
The Committee for Freedom in Hong Kong (CFHK) Foundation’s President, Mark Clifford, said:
“Foreign businesses must be wary of the increased risks of doing business in Hong Kong, where the erratic policies of the Chinese Communist Party have upended the city’s freedoms. It’s not just that free press, free speech, and other freedoms are gone. The National Security Law has put employee safety and data security at risk. What was once a flourishing global business hub is increasingly mirroring the Chinese mainland.
“The CFHK Foundation urges US and UK corporate and government leaders to heed warnings in the Atlantic Council’s report of the potential risks of doing business in an centre whose destruction of basic civil rights also threatens company profits.”