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Opinion- What Does New National Security Law Mean For Future of business in HK

By Vahid Haghzare, Director Silicon Valley Associates Recruitment

One of the top IT Recruitment Agencies in Hong Kong, Shenzhen, Shanghai, Japan, Singapore, and Dubai, SVA Recruitment is an IT and employment agency that provides jobs, executive search, and recruitment services.

When it comes to successful recruitment in Hong Kong, businesses always know to scour the political, legal, and economic landscape for factors that might affect their operation - and their future resourcing needs.

One of the leading international stories of late concerns the new National Security Law. But what does it mean for the future of business in Hong Kong?

Some of our International Clients requested an explanation from us of what things are looking like on the ground in Hong Kong, and what our opinion and forecast were. We hope by sharing this opinion publicly, it would be of some value and interesting reading to you as well.

What is the new National Security Law?

Although the new National Security Law has been most heavily associated with protests and subversion, it is supposedly designed to legislate against terrorism, secession, and collusion with foreign bodies, along with subversion. Those who are convicted under the law could face up to life imprisonment.

Why is it controversial?

The Chinese law has been seen as a worrying attempt by China to curtail the freedoms of Hong Kong residents and businesses, and it has been denounced internationally by many countries led by Canada, the US, and the UK. At its heart, the new law allows China to have a stronger hold in managing HK criminal proceedings and to exert its authority. The Chinese government has itself said that the new law was created specifically to curb further incidences of anti-government protests, such as those which hit international news publications last year.

But because the provisions of the law are vague, critics fear that it could be used to lock up anyone deemed to be critical of the Chinese government. For example, damage to certain types of transportation vehicles is outlawed under the law, and penalties under this law can be extremely heavy. International human rights organizations have denounced the development as an attack on human rights.

What is Silicon Valley Associates Recruitment's position?

There is certainly a lot of concern and uncertainty at this stage, as Hong Kong adjusts to the law and seeks to understand what it will mean to freedoms and rights in practice and application.

But as it stands, HK remains a hugely vibrant, commercial, and successful place for global business and brands are seeking to get back to business after the first wave of the Coronavirus pandemic. Silicon Valley Associates Recruitment has witnessed a resurgence in demand for recruitment and jobs locally, which is positive from this perspective.

With Hong Kong's global position and power, whilst scarred but not terminally sick, Silicon Valley Associates Recruitment has the perspective that it should and is slowly becoming a case of business as usual once more. If the law is used cautiously and brings about the much yearned for stability, particularly by cracking down on the extremist elements, then markets and investors should eventually regain confidence, and things will finally return to normality. The new law would not damage the ability of businesses to function fully here as they have been doing previously, with all the advantages that come for foreign and Chinese firms to do business in this small part of the world.

Interesting Comparison

Singapore - which is, of course, a key regional competitor to Hong Kong and where Silicon Valley Associates Recruitment also provides services and clients- already has similar laws in place which protect it against any criticism of its government, and tight control of what its local media may report on or opinionate (Reporters Without Borders ranks the country 151st in the world for press freedom in 2017).

And yet, it continues to be an extremely successful market, wealthy and competitive economy with a powerful reputation on the world stage.

Worst Case Scenario

Of course, it is too early to say, but pragmatically speaking, things would sadly deteriorate in HK if in the severest case, the law does indeed go further.

Implementation of heavy-handed, Mainland China-style rules on free internet usage and social media enjoyed in HK, we believe that would be a game-changer in attracting or retaining most of the local and expatriate talent. Hong Kong would as a result thus become unattractive as a location for foreign investors and corporations to continue to be based or set up operations in, and possibly become just another tax-haven tropical style island only for foreign offshore entities. Companies would still set up offices and bases here, but it would become occupied almost completely by Mainland Chinese corporations and investors.

Bright Future

However, we do not believe such an application of the law will happen.

Chinese businesses are accelerating their use of Hong Kong as their major platform for international expansion or for listings.

Similarly, it is our view that foreign businesses and investors will continue to do the same, using Hong Kong as their route into entering mainland China, for regional operations, for tax-efficient structures, and most importantly utilizing the exceptionally intelligent, educated, hardworking and capable local talent Hong Kong has to offer.

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Silicon Valley Associates is ideally positioned to support the continual demand from tech companies and IT Departments looking to hire in Hong Kong, Asia, and Worldwide. Please let us know if you would further advise on the above topic or your hiring needs