China approves new Hong Kong security law, risking US anger

China’s top legislative body approved a landmark national security law for Hong Kong, a sweeping attempt to quell dissent that drew fresh U.S. retaliation and could endanger the city’s appeal as a financial hub.

The National People’s Congress Standing Committee voted unanimously to approve the law on the former British colony as a three-day meeting began to wrap up Tuesday in Beijing. Hong Kong’s sole representative to the body, Tam Yiu-chung, confirmed the vote in a news briefing, saying more procedural steps were needed before the full statute could be released.

Hong Kong’s business community, democracy activists and Beijing-appointed leaders alike were largely observers as Chinese lawmakers completed the carefully orchestrated rollout of legislation that will shape the city’s future. Hong Kong Chief Executive Carrie Lam said earlier Tuesday that she couldn’t confirm whether the law had been approved, although she acknowledged residents’ concerns about its impact.

“The National People’s Congress is still in a meeting and on the agenda today there’s the relevant national security law for Hong Kong,” Lam said. “At this moment it is inappropriate for me to respond to any questions or give any explanations.”

The measure to punish acts of secession, subversion, terrorism and collusion with foreign forces comes on the eve of the anniversary of Hong Kong’s return to Chinese rule in 1997. The organizer of an annual July 1 march that drew more than half a million people last year is making a last-minute appeal to hold the event after being denied permission by police, who cited coronavirus risk and the potential for violence.

Some in the pro-democracy camp vowed to march regardless of the decision, despite the risk of arrest. Prominent activists, including former student leaders Joshua Wong and Agnes Chow, cut ties with political groups Tuesday in an apparent bid to avoid implicating each other. Tam, the Chinese lawmaker, said the legislation wouldn’t include the death penalty, as some had feared.

The new law put limits on civil liberties and Hong Kong’s independent judicial system, which has helped attract hundreds of international companies to Hong Kong. President Donald Trump warned last month the U.S. would start rolling back Hong Kong’s preferential trade status, while the U.K. and Taiwan have offered new paths to residency for the city’s 7.5 million inhabitants.

The Trump administration on Monday made it harder to export sensitive American technology to Hong Kong, suspending regulations allowing special treatment to the territory over dual-use technologies like carbon fiber used to make both golf clubs and missile components.

Lam on Tuesday called the impact of the move “minimal” and rejected the U.S. accusation that such sensitive items could make it to the mainland. “Sanctions will not scare us,” she said. “We are fully prepared and I believe China will also take countermeasures when needed.”

Hong Kong’s markets appeared largely unfazed by the developments, although gains were more modest than elsewhere in Asia. The benchmark Hang Seng Index rose 0.9% in morning trading.

The law brings yet more uncertainty as Hong Kong faces its deepest recession on record after last year’s protests and the global pandemic. Unemployment has risen to a 15-year high, while investors are putting money elsewhere. Some expatriates and Hong Kong residents have said they’re considering leaving the city.

Hong Kong’s freedoms have become increasingly tenuous as President Xi Jinping grows more confident in China’s ability to withstand foreign pressure and Hong Kong protesters embrace more radical positions such as independence. Beijing’s steady moves to better integrate the city boiled over into historic and sometimes violent protests last year, after Lam attempted to pass a bill allowing extraditions to the mainland.

Chinese officials have said the security law is necessary to ensure peace following last year’s chaos, which included vandalism of subway stations, regular use of Molotov cocktails and a brief occupation of Hong Kong’s international airport. China has also said that only an “extremely small” number of people will be affected by the law.

Surveys show a majority of Hong Kong residents oppose the law. The American Chamber of Commerce in Hong Kong said more than 80% of the companies it surveyed were concerned or very concerned about the legislation—although some companies have begun to endorse the law after HSBC Holdings Plc came under pressure for remaining silent and backed it.

Opposition lawmakers have expressed concern the law will be used to bar them from seeking office in an upcoming legislative election in September. Those fears were elevated after Tam said that candidates who opposed its passage should be disqualified.

China didn’t publish the full draft law or allow a public debate, which is required under the Basic Law, Hong Kong’s mini-constitution. The process also bypassed Hong Kong’s elected Legislative Council. Even Lam acknowledged last week that she hadn’t seen a full draft.

The new law goes further toward revising the “one country, two systems” framework designed to protect Hong Kong’s liberal institutions and Common Law legal system. The legislation will let Chinese security agents operate in Hong Kong, allow China to prosecute some cases and give Lam the power to pick judges to hear national security matters.

“You have in Hong Kong the Common Law system and imposing on it what passes as the law in China will produce chaos which will be intolerable for the people of Hong Kong and eventually will be intolerable for business, as well,” Chris Patten, the territory’s last colonial governor, told Bloomberg Television on Monday. “Hong Kong represents all those aspects of liberal democracy which Xi Jinping so hates.”