HONG KONG (NYTIMES) - 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. 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.
On Tuesday (June 30), Beijing made good on its promise and passed the national security law, a far-reaching blueprint for the authorities and the courts to suppress the city's protest movement and for China's national security apparatus to pervade many layers of Hong Kong's society.
The law, which took effect immediately, lays out crimes for subverting the government or "colluding" with foreign governments or "external forces" to spy on or gravely harm China. Hong Kong's top official will 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.
But in the business world, many expect Hong Kong to remain a deeply profitable place for commerce, a perception bolstered by billions of dollars in new stock offerings and property deals made by Chinese companies in the past few weeks alone.
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 anti-government protests.
In Hong Kong's gleaming skyscrapers and wood-panelled conference rooms, many bankers and dealmakers 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 Mr Fraser Howie, an author and former banker who writes about China's financial system. "They have compartmentalised that, somehow, 'I do business, not politics'."
In retaliation for China's push for the new law, the Trump administration and some US lawmakers have threatened to revoke the trade privileges the US extends to Hong Kong. On Monday, hours before Chinese officials approved the law, the Trump administration put new restrictions on American exports of defence 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 US$3.9 billion (S$5.44 billion) last week by selling shares on Hong Kong's stock exchange. Just two weeks before, NetEase, a Chinese online game company, raised US$2.7 billion in its own Hong Kong offering.
Chinese renters have also helped the property market, which took a hit after the anti-government protests began a year ago. Alibaba, the e-commerce giant and JD.com rival, and ByteDance, parent company of video app TikTok, recently signed leases for expensive 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 US$5.4 billion for unbuilt property atop the high-speed train station in the city's West Kowloon district. That same month, Alibaba raised US$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 Mr 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 US 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 US$600 billion could flow into Hong Kong over the next year.
"As a direct result of the enforcement landscape in the US, a lot of Chinese companies are reorienting their business practices to raise money in Hong Kong," said Mr Shaun Wu, a partner at 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 criticised 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 per cent of these buildings are owned and occupied by Chinese firms, according to an estimate by Colliers.
Investment bankers and dealmakers say the continual flow of new Chinese money and other efforts have helped Beijing make its case that Hong Kong will remain competitive.
In June, officials in Hong Kong made public a pledge by Chinese regulators to support Hong Kong's currency if money suddenly fled the region, making explicit a guarantee that the financial world had only assumed to be true.
When Chinese officials outlined their plan in May 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.
US 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 US 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 US imposes on mainland China. But Hong Kong's status as a trade hub has declined, and bankers say US retaliation would have little effect 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 per cent 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 per cent, 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 in June 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 emphasises 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".