HONG KONG (AFP) - China's new security law has sent fear coursing through many Hong Kong residents, but the city's commercial community has largely embraced it as a way to get back to doing business.
The controversial legislation has granted mainland Chinese authorities unprecedented control as they seek to end the pro-democracy protests that plunged Hong Kong into turmoil last year.
Despite warnings from rights groups and legal analysts that it could be a fatal blow to the city's legal autonomy and political freedoms, many in the business community have welcomed the law as a way to restore stability.
The Hong Kong General Chamber of Commerce described the passing of the law earlier this week as "instrumental in helping to restore stability and certainty to Hong Kong, which has been severely impacted by the social unrest since last year".
"We need a stable environment, which the (security law) aims to provide."
British banking giants HSBC and Standard Chartered - both with a major presence in Hong Kong and on the mainland - joined other firms in publicly backing the law last month.
Analysts and members of the business community have said the law could add to the risk and complexity of doing business in Hong Kong, but it is unlikely to spark a mass exodus of foreign firms.
Hong Kong stocks rallied almost three per cent on Thursday (July 2), led by property firms, with investors betting that the law will restore stability to the city.
"By and large, the mindset of business people is always to try and carry on as if nothing has changed, and try and avoid the political risks," said Mr Ben Bland, a political analyst at the Lowy Institute, an Australian think tank.
"So I'm not surprised by the sort of reactions we've seen."
Mr Jes Staley, the CEO of Barclays, told Bloomberg News it was a "very difficult political situation". He added: "We're not going to get involved in the politics of Hong Kong."
The text of the law has set off alarm bells with its broad phrasing of offences and the supremacy of the mainland's Communist Party-controlled courts over Hong Kong's.
The city transformed itself into a global financial hub thanks to the reputation of its independent judiciary, becoming a centre for settlements and arbitration - especially with mainland firms.
That legal autonomy - among other freedoms for its residents - was guaranteed for 50 years under the "one country, two systems" agreement that saw Britain hand over the colony to China in 1997.
It created a firewall between the city and China's opaque legal system - and also helped Hong Kong act as a gateway to the mainland for foreign firms.
The new law has undermined that system, and the Hong Kong Bar Association said it was "gravely concerned".
The law threatens protections including fair trials, fundamental rights and freedom of expression, the organisation said in a blistering critique on Wednesday.
While there is unlikely to be an overnight flight, analysts said the risks are likely to grow in the future.
"In the long run, the law will most likely embolden Beijing and local allies to put greater political pressure on companies and their employees to closely adhere to... Beijing's agenda," Mr William Nee of Amnesty International told Bloomberg.
Analysts have pointed to how firms have been targeted by Beijing on political issues, most notably the backlash last year against Hong Kong airline Cathay Pacific over its staff allegedly supporting pro-democracy protesters.
HSBC also faced pressure from a pro-Beijing former Hong Kong chief executive before its show of support for the law, and analysts said companies would be keen to avoid that fate.
But Hong Kong's status as a gateway to the riches of mainland China - the world's second-largest economy - is likely to remain the top consideration for investors, analysts said.
The city's equity and property markets have been flooded with mainland billions in recent years.
By the end of 2019, mainland companies made up 73 per cent, or US$3.4 trillion (S$4.73 trillion), of the market capitalisation in Hong Kong, according to the Hong Kong Trade Development Council.
Some of China's biggest state-owned and private companies are listed in the city.
Most recently, Chinese e-commerce giant JD.com raised almost US$4 billion last month in what was the world's second-biggest IPO this year.
"I do feel this will add to the complexity of working in Hong Kong or operating out of Hong Kong," Ms Jun Bei Liu of Tribeca Investment Partners told Bloomberg.
"But I think Hong Kong is still very, very relevant and it is the hub to have access to China, which is an enormous market."