Hong Kong leader Carrie Lam said the national security law was "absolutely necessary" to ensure Hong Kong's stability.
In an interview with CNBC on Friday, Lam said: "Looking back, I think the enactment and implementation of a national security law, as well as the subsequent improvements to the electoral system, are absolutely necessary to ensure Hong Kong's continuous stability and prosperity."
"And if I may just add, stability is extremely important for Hong Kong to maintain and enhance status as an international financial center," Hong Kong's chief executive told CNBC's Emily Tan and Martin Soong.
Lam also said the exodus of expatriates and foreigners from Hong Kong in recent months was not due to the newly enacted national security law — seen by some as Beijing's tightening of its grip over the city — but as a result of the the strict pandemic controls and measures that "make people very impatient."
"Sometimes you need the difficult situations [protests] to weaken people, this is something that we needed to do. The enactment of the national security law and subsequent improvements to increase stability," Lam said on CNBC's "Street Signs Asia."
"Stability is important to maintain enhanced Hong Kong as a financial center. Now that stability has been assured."
Hong Kong's national security law came into effect on June 30, 2020, before midnight on the eve of Hong Kong's July 1 anniversary marking its handover from British to Chinese rule. The city was gripped by months of protests ahead of the controversial law aimed at prohibiting secession, subversion of state power, terrorism activities and foreign interference.
'One country, two systems'
After the reunification of Hong Kong with mainland China in 1997, laws were put in place to guarantee the practice of "one country, two systems" principle for 50 years — or until 2047.
When people complain there's no freedom, this is not the situation in Hong Kong. Hong Kong is as free as ever.Carrie LamHong Kong chief executive
Lam insisted that Hong Kong's freedoms and autonomy remained intact and had not expired ahead of 2047, despite propaganda pushed by some Western media outlets.
"I sometimes find it very disturbing that a lot of Western media try to portray Hong Kong as just another Chinese city and have no proper recognition or understanding of 'one country, two systems,'" she said.
She said mainland Chinese officials believed that the "one country, two systems" principle was the "best institutional arrangement to ensure Hong Kong's stability and prosperity."
Alongside Beijing, Lam said she looked forward to the "continuation of what is in the Basic Law, including the upholding of the individual rights and freedoms, the practice of Hong Kong's capitalist system, and all the high degree of autonomy that has been given to Hong Kong."
"When people complain there's no freedom, this is not the situation in Hong Kong. Hong Kong is as free as ever, whether it's in the freedom of expression, in the freedom of assembly, in the media, and so on."
National security law
Despite the protests and riots, the implementation of the national security law and the earlier extradition bill were needed for Hong Kong to find its feet around the right laws to protect national interests, Lam said.
She said this was crucial as Hong Kong had yet to establish its own institutions and legal systems to protect national interests, security and sovereignty more than two decades after the handover to China.
Freedoms are not absolute. Freedoms have to be sort of restrained, where there is a public interest. And no public interest could be more superior than national interest.Carrie LamHong Kong chief executive
Growing pains were part of this emancipation as seen with other protests before 2019, including the 79-day Occupy Central movement in 2014 when demonstrators demanded direct, universal suffrage to select the city's leader, Lam said.
"Freedoms are not absolute," Lam told CNBC. "Freedoms have to be sort of restrained, where there is a public interest. And no public interest could be more superior than national interest."
"So every place should have rules and laws in place to safeguard national sovereignty, security and development interests of the nation. Before the enactment of the national security law, Hong Kong was a vacuum insofar as those institutions and laws are concerned."
On Covid and sanctions
Ahead of the two-year anniversary of the enactment of the national security law, the city continues to suffer increasing departures of foreign talent and international operations, but Lam said it was a temporary blip.
Hong Kong's resilience is on full display with the number of people traveling to the city on the rise since the relaxation of quarantine periods to one week and the lifting of the ban on travelers from nine countries including the UK and the U.S. on April 1, Lam said.
Daily arrivals at Hong Kong international airport multiplied ten-fold to 3,000 a day compared to 300 when the full suite of restrictions were in place before April, according to Lam.
... in order to perform our duty of loyalty, we must not be intimidated — whether it is by abuse, by force, by sanctions or other means.Carrie LamHong Kong chief executive
Hong Kong's strict Covid-19 containment strategies were needed to protect Hong Kong's key travel corridor into the mainland, Lam said, but denied they were just a copy of the mainland's China's zero-Covid approach that has led to entire cities such as Shanghai shut down and economically crippled.
"The Hong Kong SAR government has a high degree of autonomy in determining how to tackle a public health crisis. But the reality is, our people need to travel to the mainland, but at the same time, we need a very strong international connectivity," she said.
"That's why throughout the last two and half years, we have been trying to strike a balance that will enable us to meet both objectives."
In some of her last parting words before she leaves office to make way for new Hong Kong leader-in-waiting John Lee on July 1, Lam says she will be shrugging off the sanctions the U.S. laid on her and other senior in 2020 over the handling of the city's protests over freedoms.
"I think those who impose sanctions on other people, on other places, have to reflect upon using this instrument to achieve their objective(s)," she said.
"I and 11 other officials in Hong Kong [were] aggressively and unreasonably sanctioned by the U.S. government, but they will not intimidate us. I have no regrets and I have no problem with that."
"I would also give this piece of advice to my successor and other senior officials: That in order to perform our duty of loyalty, we must not be intimidated — whether it is by abuse, by force, by sanctions or other means."