Asia Politics

'It's a sad day' for Hong Kong protesters, but analyst says new law probably won't hurt investors

Key Points
  • This new draft law, first announced at China's parliament – the National People's Congress – last week, would target acts of secession, ban foreign interference and acts of terrorism, according to Hong Kong's Chief Executive Carrie Lam.
  • "Even after this law, if enacted, Hong Kong is very likely to maintain the significant advantages it has enjoyed over the last several decades in the Asia Pacific region, compared to its would-be rivals like Singapore or Shanghai, as the main regional, business and financial hub," said Gabriel Wildau, senior vice president at Teneo Risk Advisory.
  • Despite the law, the bad news for businesses is: the protests could continue for years yet, according to Wildau.
Demonstrators at a protest against a planned national security law, at a shopping mall in Hong Kong, on May 25, 2020.
Roy Liu | Bloomberg | Getty Images

China's new proposed security law for Hong Kong is terrible news for pro-democracy activists, but it's unlikely to have a significant impact on foreign companies and investors, according to an U.S.-based risk consultancy.

This new draft law, first announced at China's parliament — the National People's Congress — last week, would target acts of "secession and ban foreign interference and acts of terrorism, according to Hong Kong's Chief Executive Carrie Lam.

The move has sparked concerns that it will give Beijing more control over the Asian financial hub and reduce the rights and freedoms Hong Kongers enjoy but which are denied to mainland Chinese. It's seen inciting further pro-democracy protests, after months of increasingly violent demonstrations last year.

Even after this law, if enacted, Hong Kong is very likely to maintain the significant advantages it has enjoyed over ... its would-be rivals like Singapore or Shanghai.
Gabriel Wildau
senior vice president, Teneo Risk Advisory

But Gabriel Wildau, senior vice president at Teneo Risk Advisory, told CNBC on Tuesday that it's unlikely to affect businesses operating in the city much.

"If you're part of the protest movement, you're very concerned right now. It's a sad day for political activists, for pro-democracy activists in Hong Kong," he said.

But many of his clients are CEOs of global multinational companies, or major asset managers investing in mainland Chinese markets, who are likely to see little impact, he said.

"For those kind of clients they may see relatively little impact because the kind of legal disputes they get involved in, and where they take advantage of Hong Kong's highly independent and high quality judiciary, are not the kind of disputes where Beijing tends to intervene and wield its heavy hand because there's not any particular political implications to those disputes," Wildau said. "For those groups, they can rest easier."

"Even after this law, if enacted, Hong Kong is very likely to maintain the significant advantages it has enjoyed over the last several decades in the Asia Pacific region, compared to its would-be rivals like Singapore or Shanghai, as the main regional, business and financial hub," he added.

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China's Foreign Commissioner in Hong Kong, Xie Feng, said on Monday that the legislation is meant to, among other goals, "alleviate the grave concern among local and foreign business communities about the violent and terrorist forces attempting to mess up Hong Kong."

Months of protests had crippled the city last year, over a since-suspended extradition bill that would have made it legal for people arrested in the city to be sent for trial in mainland China. The demonstrations had forced businesses to shut, severely hit tourism, and dented investor sentiment.

News of the proposed law hit financial markets on concerns of the city's status as a financial hub. Hong Kong's Hang Seng index closed down 5.6% on Friday, its largest daily percentage drop since July 2015, according to Reuters.

Hong Kong, a former British colony that returned to Chinese rule in 1997, is governed under the "one country, two systems" principle which is meant to guarantee a high degree of autonomy. Critics say that principle is being degraded by Beijing.

Protests likely to go on 'for many years'

Despite the law, the bad news for businesses is: the protests could continue for years yet, according to Wildau.

"The protest movement is not going away, they've shown incredible resilience, and public opinion is on their side to a large extent ... Protests (are) able to persist for many years," he told CNBC.

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