Tightened National Security Law in Hong Kong: Why HK Businesses Move to Singapore?

Vadim Krasovskiy Business News, Immigration and Visas

In light of recent developments surrounding Hong Kong’s introduction of a new security law, known as Article 23, concerns have been raised about its potential impact on civil liberties and the business climate in the region. This blog post aims to delve into the details of Article 23, its historical evolution, and the implications it holds for businesses operating in Hong Kong. We’ll delve into the provisions of the law, evaluate its effects on the local business environment, and shed light on why businesses are contemplating relocation abroad, with a particular focus on Singapore as a viable alternative.

Understanding Article 23: Changes to Hong Kong’s Security Law

Article 23 is an article of the Hong Kong Basic Law. It states that Hong Kong “shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies.” Since 1997, when the Basic Law came into force, the law required by Article 23 has not been implemented. 

On March 23, 2024 Hong Kong’s leader, John Lee, signed the Safeguarding National Security Ordinance implementing Article 23 into force. He has said it is necessary to guard against “potential sabotage and undercurrents that try to create troubles”. China’s Vice Premier Ding Xuexiang has said it would protect “core national interests” and allow Hong Kong to focus on economic development.

The new law allows for closed-door trials and gives the police rights to detain suspects for up to 16 days without charge. Organizations and companies can be banned from operating in Hong Kong, should they be found “working for foreign forces”.

Article 23 expands on the Beijing-imposed national security law, which already criminalizes secession, subversion, terrorism and collusion with foreign forces. Other offenses it covers include:

  • Theft of state secrets and espionage: The law has a broad definition of “state secrets”. It includes “major policy decisions”, “economic or social development” and Hong Kong’s “external affairs”, among other things. The wording in this section of the law is almost identical to China’s state secrets law, which Beijing is looking to broaden.
  • Sabotage endangering national security: This is a new offense that targets people who endanger national security either intentionally or by “being reckless”. It also wants to criminalize computer-related acts that harm national security. Doxxing – the malicious act of publishing people’s personal information online – of police officers was cited in the consultation paper as a possible example of such an offense.
  • External interference: This new offense targets acts of collaborating with “external forces” to influence or interfere with national and local authorities. Examples include receiving financial support or direction from these “external forces”, which could include foreign governments, political organizations or individuals.
  • Insurrection: This targets acts such as assisting an armed force – or the organization to which the force belongs – in an armed conflict against China. Authorities have repeatedly cited unrest due to the months-long pro-democracy protests in 2019 as grounds for legislating this new offense.
  • Treason: In addition to treason, which includes offenses such as levying war against China, the new law seeks to criminalize unauthorized military drilling and “misprision of treason”, committed by someone who has knowledge of treason but does not report it. Those found guilty of treason, insurrection, inciting a member of the Chinese army to mutiny, or colluding with an external force to damage or weaken public infrastructure could be sentenced to life imprisonment.

The Evolution of Hong Kong’s Article 23: A Brief Historical Overview

Hong Kong’s national security law has been in the making for decades, with its roots tracing back to the early 2000s. Article 23 of Hong Kong’s constitution, which came into force after the 1997 handover of the territory from British to Chinese rule, obliges the government to enact domestic national security legislation. But an attempt in 2003 to enact it was met with opposition, leading to massive protests involving half a million Hongkongers and over 90,000 public submissions during a three-month consultation period. The strong backlash ultimately forced then-chief executive Tung Chee-hwa’s administration to withdraw the legislation, resulting in the resignation of security minister Regina Ip.

In 2020, the central government of China imposed a separate national security law on Hong Kong, citing the city’s delay in acting on Article 23. That law was quickly used to further crush dissent and target figures of the pro-democracy movement. The law radically expanded the powers of the Chinese special services in Hong Kong and limited the personal freedoms of Hong Kong residents. It will remain in Hong Kong law, taking precedence over the new one when there is crossover. 

Critiques and Concerns: Assessing the Controversy Surrounding Article 23

Article 23 has been met with widespread criticism from rights groups and some foreign governments, who argue that it marks the onset of a “new era of authoritarianism” in Hong Kong. The law’s broad and vaguely defined provisions have raised concerns about its potential impact on fundamental rights and freedoms, with critics warning of a crackdown on dissent and political opposition.

The growing influence of China over Hong Kong has intensified apprehensions among residents regarding eroding freedoms and autonomy. Beijing’s intervention in interpreting the Basic Law and its involvement in Hong Kong’s national security affairs have fueled anxieties about diminishing democratic space and civil liberties. The arrest of prominent figures like media tycoon Jimmy Lai on charges of “sedition” and “collusion with foreign forces” exemplifies the government’s crackdown on dissent, casting a shadow over Hong Kong’s once-vibrant political landscape.

The United States has expressed deep concern over the enactment of national security legislation under Article 23 of the Basic Law by Hong Kong authorities. The law’s vaguely defined provisions, including those pertaining to “sedition,” “state secrets,” and interactions with foreign entities, raise alarm about potential abuses and curtailment of freedom of speech. There are apprehensions that the new legislation could be applied extraterritorially, leading to transnational repression and intimidation of foreign citizens. The US is concerned that implementing the new law and its opaque provisions could undermine Hong Kong’s high degree of autonomy and the “One Country, Two Systems” framework, tarnishing the city’s reputation as an international business hub. 

How the New Law Affects Hong Kong Business Climate

The passage of Article 23 is poised to have a significant effect on Hong Kong’s business climate, potentially deterring foreign investment and eroding the city’s status as one of the global financial hubs. The legislative crackdown on dissent and international collaboration, coupled with the broad and vaguely defined provisions of the new law, has sparked concerns among businesses and investors about the future of Hong Kong’s economy.

Once heralded as a premier business gateway to China, Hong Kong now faces mounting challenges as the door to its international standing appears to be closing. Critics have warned that the law’s implementation could deter international business and investment, making Hong Kong dangerous and difficult for foreign businesses and workers to operate in, thereby undermining the city’s efforts to attract global capital.

Foreign governments and rights groups have voiced apprehensions about the impact of the new law on Hong Kong’s long-term attractiveness as an international business hub. Concerns have been raised about the law’s potential to curtail freedom of speech, limit the free flow of information, and restrict the activities of chambers of commerce and economic research groups. Moreover, the broad definitions of state secrets and espionage have raised red flags among business groups and legal experts, further exacerbating uncertainties about conducting business in Hong Kong.

The European Union and the United Kingdom have expressed reservations about the new law’s implications for Hong Kong’s business environment. The EU warned that the law could significantly affect the work of its office in the city, while the UK foreign secretary cautioned that it would make it harder for individuals and businesses to operate in Hong Kong. Foreign media outlets, particularly those covering dissenting voices, are also at risk of leaving Hong Kong due to concerns about the law’s impact on press freedom and freedom of expression.

Despite the government’s assurances that the national security law will enhance security and stability, critics argue that the rushed implementation of Article 23 and the lack of consultation raise questions about its legitimacy and effectiveness. The exodus of foreigners, finance, and locals from Hong Kong underscores the growing discontent with the government’s alignment with Beijing’s priorities, further undermining confidence in the city’s future as an international business center.

As Hong Kong grapples with balancing security concerns and maintaining its international status, businesses and investors are closely monitoring developments and considering alternative options. The enactment of Article 23 signals a pivotal moment for Hong Kong’s business climate, with the law’s impact likely to reverberate across industries and sectors in the months and years ahead.

Hong Kong Businesses Relocating to Singapore

The political and economic uncertainties stemming from the implementation of Article 23, coupled with concerns about eroding freedoms and autonomy have led a growing number of businesses to explore relocation options, with Singapore emerging as a favored destination for many.

In recent years, Singapore has actively courted foreign businesses, offering incentives and support programs to attract investment and talent. The government’s proactive measures to enhance Singapore’s competitiveness as a global business hub have resonated with Hong Kong businesses facing uncertainty and upheaval. As a result, an increasing number of companies are considering or already in the process of relocating their headquarters, operations, or key personnel to Singapore.

The exodus of businesses from Hong Kong to Singapore reflects broader trends in the region, with multinational corporations and financial institutions reassessing their presence in light of geopolitical shifts and regulatory developments. 

Singapore’s appeal as a regional business hub has been underscored by its ability to attract a substantial number of multinational corporations to establish their headquarters in the city-state. Hosting 4,200 regional headquarters in 2023, compared to 1,336 in Hong Kong, Singapore has firmly established itself as the premier business destination in Asia, surpassing Hong Kong by a substantial margin. The presence of renowned companies such as FedEx Corp., Microsoft Corp., Google, Rolls-Royce, and General Motors Co. underscores Singapore’s status as a global business hub.

How We Can Help

If you’re contemplating relocating your business to Singapore, our team at CorporateServices.com is here to assist you every step of the way. Our specialists can provide valuable insights to help you evaluate whether such plans align with your business goals. If relocation seems viable, we can assist you with incorporating a Singapore company and facilitate the smooth execution of your move to Singapore. Get in touch with us today to explore your options and make informed decisions about your business expansion.

About CorporateServices.com

Headquartered in Singapore, CorporateServices.com, empowers global entrepreneurs with information and tools necessary to discover Singapore as a destination for launching or relocating their startup venture and offers a complete range of company incorporation, immigration, accounting, tax filing, and compliance services in Singapore. The company combines a cutting-edge online platform with an experienced team of industry veterans to offer high-quality and affordable services to its customers. Contact Us if you need assistance with setting up a new Singapore company or if you would like to transfer the administration of your existing company to us.

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