A national security law proposed by China could imperil Hong Kong's status as one of the world's best places to do business.
The law, approved Thursday in Beijing, led Secretary of State Mike Pompeo to say Washington will no longer treat Hong Kong, already reeling from anti-government protests and the pandemic, as autonomous from Beijing.
Hong Kong is highly regarded for its skilled workforce, business-friendly legal system, Western-style free speech and ease of movement. But global companies already were shifting some operations out of Hong Kong due to rising costs and uncertainty after prolonged, sometimes violent clashes between police and pro-democracy protesters.
"We're potentially cutting ourselves off from a lot of different funding avenues, like grants from the U.S. government," he said. Critics say the law undermines the "high degree of autonomy" promised when Britain handed control to China in 1997. That autonomy meant Washington and other governments have treated the city as a separate territory for trade, travel and other affairs.
The financial sector would take a big hit if companies such as MSCI reclassify Hong Kong as an emerging market like Shenzhen and Shanghai instead of a developed market, Spencer said.Hong Kong's uncertain future is putting it at a disadvantage with other Asian destinations that are competing to attract foreign investment, such as Singapore and Tokyo.
Bob Broadfoot, managing director of Hong Kong-based research firm Political and Economic Risk Consultancy, said companies might shift legal work to Singapore or other countries.
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