HONG KONG — The business world has largely fallen in line behind China’s campaign to tighten its grip on Hong Kong, including its support for a new national security law that many residents fear will hurt the former British colony’s status as a laissez-faire, freethinking city.
Beijing twisted some arms to win that support, hinting that it could use its huge clout to punish any global company or local tycoon who crosses it. But China has also won over some business hearts and minds — and a big new inflow of Chinese money into the territory has helped it make its case.
The money, totaling billions of dollars in new stock offerings and property deals by blue-chip Chinese companies in the past few weeks alone, have bolstered perceptions in the business world that Hong Kong will remain a deeply profitable place to do business for years to come. Some business leaders and bankers even endorse Beijing’s argument that the new law will help Hong Kong’s status as a business hub by helping the police crack down on sometimes violent antigovernment protests.
In Hong Kong’s gleaming skyscrapers and wood-paneled conference rooms, many bankers and deal makers discussed their views only on condition of anonymity — less for fear of angering Beijing, and more out of concern about wading into a broader geopolitical showdown between the United States and China.
“The business community is a cheerleader,” said Fraser Howie, an author and former banker who writes about China’s financial system. “They have compartmentalized that, somehow, ‘I do business, not politics.’”
Chinese lawmakers in Beijing passed the law early on Tuesday, though by midday its text still had not been released publicly. Officials have indicated that it will allow a security agency to be placed in Hong Kong to put out any signs of dissent in the territory. Hong Kong’s top official will also be given the power to appoint judges to hear certain security-related cases, raising alarms about the erosion of Hong Kong’s once coveted independent judiciary.
In retaliation, the Trump administration and some American lawmakers have threatened to revoke the trade privileges the United States extends to Hong Kong. On Monday, hours before Chinese officials approved the law, the Trump administration put new restrictions on American exports of defense equipment and some high-technology products to Hong Kong.
Hong Kong residents who broadly oppose Beijing’s clampdown have waited nervously for weeks to find out what the law says. In that period, new Chinese deals have reassured many in the business world that Hong Kong will remain a great place to make a deal.
JD.com, the Chinese e-commerce retailer, raised $3.9 billion last week by selling shares on Hong Kong’s stock exchange. Just two weeks before, NetEase, a Chinese online game company, raised $2.7 billion in its own Hong Kong offering.
Chinese renters have also helped the property market, which took a hit after the antigovernment protests began a year ago. Alibaba, the e-commerce giant and JD.com rival, and ByteDance, the parent company of the video app TikTok, recently signed leases for pricey new office space, according to industry insiders, who asked to remain anonymous because such deals are typically private. The companies did not respond to requests for comment.
Those deals follow others in previous months that amounted to endorsements by China Inc. in Hong Kong’s future. In November, when the protests reached a dramatic climax, Ping An, a state-controlled Chinese insurance giant, paid $5.4 billion for unbuilt property atop the high speed train station in the city’s West Kowloon district. That same month, Alibaba raised $11.2 billion in its own Hong Kong stock offering.
“It is true that some Chinese companies are making moves and expanding in Hong Kong, and I think this trend will continue,” said Nelson Wong, head of research at Jones Lang LaSalle, a commercial real estate services company.
There is little evidence that the money flows represent a targeted, Beijing-led charm offensive to make the national security law more palatable. Chinese state-owned companies and others from the mainland have been increasing their Hong Kong investments for years, eclipsing international money and local tycoons alike.
Chinese companies are selling shares in Hong Kong in part because regulators and lawmakers in the United States have taken a harder line on Chinese efforts to sell shares on Wall Street after a spate of accounting scandals. With Chinese companies looking elsewhere to raise money from international investors, Jefferies, the investment bank, has predicted nearly $600 billion could flow into Hong Kong over the next year.
“As a direct result of the enforcement landscape in the U.S., a lot of Chinese companies are reorienting their business practices to raise money in Hong Kong,” said Shaun Wu, a partner at the law firm Paul Hastings.
More broadly, China in recent years has encouraged its homegrown corporate champions to return home. Hong Kong regulators recently issued new rules that make it easier for Chinese companies to list in the city and give more control to the companies. Shareholder activists have criticized the moves as undermining Hong Kong’s legal and corporate governance system.
Big Chinese investors have replaced local tycoons and British trading houses as owners of iconic skyscrapers that dot Hong Kong’s skyline. Today, around 5 percent of these buildings are owned and occupied by Chinese firms, according to an estimate by Colliers.
Investment bankers and deal makers say the continual flow of new Chinese money and other efforts have helped Beijing make its case that Hong Kong will remain competitive.
This month officials in Hong Kong made public a pledge by Chinese regulators to support Hong Kong’s currency if money suddenly fled the territory, making explicit a guarantee that the financial world had only assumed to be true.
When Chinese officials outlined their plan last month to force Hong Kong to adopt a security law, the panic drove its stock market to its steepest fall in five years. Since then it has regained lost ground, with some help from Chinese investors. An analysis by Bloomberg News showed mainland investment flows into the market have surged this year and accelerated after plans to impose the national security law were announced.
American retaliation remains a question mark. Hong Kong’s status as a financial hub depends on its access to the global financial system. Any move by Washington to limit Hong Kong’s access to American dollars could irreparably damage the territory.
So far, Trump administration warnings have focused instead on trade. Removing Hong Kong’s special status would subject goods moving through the territory’s ports to the same high tariffs and other barriers the United States imposes on mainland China. But Hong Kong’s status as a trade hub has declined, and bankers say American retaliation would have little impact on their work.
Business support for the new law is not full-throated. Much of it is still motivated by fear of Beijing.
Pro-Beijing politicians in Hong Kong and China’s state-controlled media have warned HSBC, the London-based bank with a history in Hong Kong that dates back to the Opium Wars, that Chinese banking customers could go elsewhere if it does not accede to Beijing’s wishes. It has warned Cathay Pacific, Hong Kong’s biggest airline, and global accounting firms that they need to keep their employees from joining the pro-democracy movement.
Some in the business world still worry that the law will ultimately put them in danger and have sped up their plans to move regional headquarters in the coming years. In one poll by the American Chamber of Commerce, about 40 percent of business people said they would consider moving in light of China’s national security law.
Some are already in the process of leaving. Luxury brands have shrunk their presence, scaling back both retail space and office space. The vacancy rate for commercial office space is 7.4 percent, its highest in Hong Kong since the depths of the global financial crisis in September 2009, according to Jones Lang LaSalle, the real estate group.
To assuage fears and stem a possible exodus, local financial authorities renewed a push this month to woo foreign investors. The Hong Kong Monetary Authority, the territory’s central bank, updated a so-called pitch book that it gives to global financial industry players that are considering moving to the city. The 17-page pamphlet emphasizes Hong Kong’s “common law system familiar to international investors.”
Among the top features authorities have promoted in the pamphlet is Hong Kong’s access to the mainland’s deep pool of money.
Hong Kong, it tells prospective investors in the city, is “by far the dominant gateway to China opportunities.”