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Read an excerpt from this week’s edition of The Lens below as you prepare your business for coming changes.
The passage of this legal proposition marks a hardening of Beijing’s stance on Hong Kong. In the short term, leading up to the enaction of the national security law and Hong Kong’s legislative council elections, this is likely to trigger further social unrest and protests in Q3. In the medium to long term, this move will raise serious questions about Hong Kong’s rule of law. If Beijing is seen as encroaching on the semi-autonomous territory’s institutions and eroding its unique advantages compared to other Chinese cities, Hong Kong’s appeal as a center for international business is likely to diminish.
In the short-term, although Hong Kong will remain an irreplaceable financial hub connecting China to international capital markets, increasing political instability and loss of special trade status with the US is likely to significantly impact demand in sectors such retail, tourism, and logistics. Looking to the future, companies that are active in Hong Kong should take stock of their exposure. There is a real risk that Beijing will prioritize political control over the territory’s economy and business environment. With this in mind, firms should create contingency plans to mitigate potential impacts from rising political and economic risks.
Boyang Xue, Analyst for Northeast Asia