Jul 7, 2020

Axios China

Welcome back to Axios China — which for today has transformed into Axios Hong Kong. We're doing a special edition on Hong Kong's new national security law and what it means for the future of global free speech, for Hong Kongers, and for you.

🚨 Situational awareness: FBI director Christopher Wray today warns that China aims to become the "world's only superpower." Read more.

🎧 Check out this morning's "Axios Today," our new morning news podcast, to hear me talk with host Niala Boodhoo about China's new war on global activism. Listen here.

Today's newsletter is 1,811 words, a 7-minute read.

1 big thing: With new security law, China outlaws global activism

Illustration: Eniola Odetunde/Axios

The draconian security law that Beijing forced upon Hong Kong last week contains an article making it illegal for anyone in the world to promote democratic reform for Hong Kong.

Why it matters: China has long sought to crush organized dissent abroad through quiet threats and coercion. Now it has codified that practice into law — potentially forcing people and companies around the world to choose between speaking freely and ever stepping foot in Hong Kong again.

What's happening: Article 38 of the national security law states, "This Law shall apply to offences under this Law committed against the Hong Kong Special Administrative Region from outside the Region by a person who is not a permanent resident of the Region."

  • In other words, every provision of the law applies to everyone outside of Hong Kong — including you.

Several experts in Chinese and international law confirmed this interpretation of the law to Axios.

  • "It literally applies to every single person on the planet. This is how it reads," said Wang Minyao, a Chinese-American lawyer based in New York. "If I appear at a congressional committee in D.C. and say something critical, that literally would be a violation of this law."
  • This means that anyone advocating democracy in Hong Kong, or criticizing the governments in Hong Kong or Beijing, could potentially face consequences if they step foot in Hong Kong, or have assets or family members in Hong Kong.

What they're saying: "One of the main purposes of having the national security law is to quash the international front of the movement," said Nathan Law, a Hong Kong pro-democracy lawmaker, who spoke to Axios after he fled the city last week.

  • "For Hong Kong, we have to understand that it is the foreground of a very global fight, authoritarianism versus democracy."
  • He and other leaders of the pro-democracy movement, including Joshua Wong, have traveled the globe in recent years to promote their cause, including meeting with U.S. lawmakers — an activity that the new law prohibits.

The big picture: This marks a historically unprecedented expansion of extraterritoriality, meaning the application of a country's domestic laws abroad.

  • U.S. counterterrorism laws have a degree of extraterritoriality, but those laws are intended to fight actual violent terrorism — not free speech — and are not used to crush peaceful political organizing.

The new law codifies and extends to non-Chinese nationals the extraterritorial practices that the Chinese Communist Party has long applied to its own citizens abroad.

Beijing is also increasingly using market access as a form of leverage to silence foreign companies and organizations.

  • Hollywood movie studios make sure their films don't offend China's censors so they can retain access to China's massive domestic movie market.
  • After Beijing complained, Marriott fired an employee who used a company social media account to like a post about Tibet.
  • Until now, this was informal coercion. Now it's the law.

What's at stake: The point of the law isn't necessarily to immediately launch a sweeping global dragnet, but rather "to put the fear of God into all China critics the world over," Donald Clarke, a professor Chinese law at George Washington University, writes in an analysis of the law.

  • "It’s the obsession with seizing the narrative-setting power," says Alvin Cheung, a legal scholar at New York University.

What to watch: Hong Kong authorities may begin to detain or arrest people of any nationality upon entry to Hong Kong for their actions or speech elsewhere — or even issue extradition requests for major targets.

2. Nathan Law on the future of the pro-democracy movement

Nathan Law. Photo: Anthony Kwan/Getty Images

Nathan Law, a former lawmaker and prominent pro-democracy activist in Hong Kong, announced on July 2 that he had fled the city.

Why it matters: Law's departure represents the dire situation for pro-democracy activists in Hong Kong — and the hope they still have to continue their fight from afar.

Law spoke with me over the phone on July 3 about how he views the future of international advocacy, given the new security law's prohibitions.

On his decision to leave:

"For me it was definitely a tough choice. When you decide to leave, you commit to something that the Communist Party will definitely target. Doing international advocacy work means that I may have to risk that I will not be able to go back for years, and leave behind my family and my cat and all the connections I've built for the past two decades."

On the future of the pro-democracy movement:

"The Hong Kong movement is pretty much alive. If you look at the turnout rate of the rally on the very first day of the implementation of the national security law, the first of July, there were more than 100,000 people marching down the street regardless of the huge risk of being imprisoned for years. You can see the bravery and the tenacity inside the movement. I think we still have some grassroots and street movement. ... Even though the future is bleak, but we could see hope from the people that they are fearless."

On how the world should respond:

"We should join hands. We should form a coordinated alliance, a united front to contain the expansion of authoritarianism from China. And the world should have an agreement that we place human rights over business interests for the sake of our values, for the sake of democracy."
3. A swift Hong Kong decoupling looms

Illustration: Annelise Capossela/Axios

The new security law means that companies, international travelers, and governments around the world are now facing decisions about how much they need to extricate themselves from previously close ties to Hong Kong.

Why it matters: If Hong Kong remains a major international business hub, China could use it as a lever to significantly erode global free speech norms.

Here are a few areas we're watching:

1. Internet and social media: Facebook, WhatsApp, and Telegram have stopped complying with Hong Kong government data requests while they assess the impact of the national security law.

  • The legislation requires individuals working at internet firms to hand over data and comply with censorship requests, or else face up to a year in jail and large fines.
  • Hong Kong protesters used numerous social media and messaging platforms to organize protests and other activities that are likely now illegal under the new law.
  • My thought bubble: Because the security law applies to speech and organizing anywhere in the world, the global future of digital free speech may hinge in part on what tech companies with operations in Hong Kong decide over the coming weeks.

2. Extradition: Because of its formerly independent judiciary, Hong Kong has extradition treaties with more than a dozen countries around the world, including the U.S., Australia and Germany.

  • But the security law subverts Hong Kong's judicial system, replacing it with specially appointed judges and in some cases funneling suspects directly into mainland China's court system, where convictions and harsh sentences for political crimes are all but guaranteed.
  • Future extradition requests from Hong Kong authorities could target people for political crimes.
  • Canada just announced it was suspending its extradition treaty with Hong Kong.

3. Aircraft: The new law states it applies aboard all Hong Kong-registered aircraft, such as Cathay Pacific.

  • "The big question is if and how other countries would recognize or maybe even participate in what the national security law tries to achieve in international air traffic to and from Hong Kong," Jakob Wert, the editor-in-chief of aviation news site International Flight Network, tells Axios.
  • Alvin Cheung, a legal scholar at New York University, had a different take. "What that means is, don’t fly Cathay," he says.
4. The 53 countries supporting China's crackdown
Note: The U.S. has been highly critical of China over the law, but withdrew from the UN Human Rights Council in 2018; Map: Danielle Alberti/Axios

China's Foreign Ministry and state media declared victory after 53 countries backed Beijing's new national security law for Hong Kong.

  • Just 27 criticized the law, which imposes harsh penalties for vaguely defined political crimes and is widely viewed as the death knell for Hong Kong's autonomy.

The big picture: This is one of the clearest indications to date of which countries are challenging a rising superpower, at least on human rights, and which are lining up behind it, Axios' Dave Lawler writes.

The breakdown: China's critics are concentrated in Europe and also include major democracies like Australia, Canada and Japan. All 27 are considered "free" in Freedom House's global ratings.

  • China is backed by an assortment of "not free" and "partially free" countries, including many of the world's most brutal dictatorships — North Korea, Saudi Arabia and Syria.
  • Three small “free” countries did back Beijing: Antigua and Barbuda, Dominica, and Suriname.
  • All three, and at least 40 of the other signatories, have signed onto China’s Belt and Road infrastructure project.
  • Many of the African signatories, meanwhile, are trying to renegotiate debt payments to China amid sharp pandemic-related downturns.

Keith Harper, who served as America's representative to the council from 2014 to 2017, says America's absence is one major reason why the balance tipped so dramatically in China's favor.

My thought bubble: China's massive investments are bearing fruit, as Beijing has effectively leveraged the UN Human Rights Council to endorse the very activities it was created to oppose.

5. China's security law reins in private equity hopes

Illustration: Sarah Grillo/Axios

The romance between private equity and Hong Kong may be over, before it even had a chance to begin, Axios' Dan Primack writes.

The state of play: Hong Kong officials in February announced plans to introduce a new carried interest tax scheme that is expected to be one of the world's most generous.

  • This came on top of Hong Kong's existing effort to implement a limited partnership fund regime — all of which could make the city a more viable alternative to the Cayman Islands, particularly for Asia-focused funds.
  • But Beijing's new security law in Hong Kong increases the likelihood that foreign nationals, including fund managers, could be arrested for vaguely defined offenses and sent to mainland China to stand trial.

What's next: We're still awaiting specifics of Hong Kong's new carried interest tax treatment. In the meantime, expect rival jurisdictions like Singapore, and maybe even Japan, to wine and dine private equity executives.

The bottom line: Private equity isn't a full-fledged avatar for global business, but it may become one of the first to loudly signal whether the new security rules overwhelm the city's financial benefits.

6. What I'm reading

Fear reigns: Hong Kong, changed overnight, navigates its new reality (New York Times)

  • "Ms. Lam wondered if she should hide a print displayed on the piano that reads 'Liberate Hong Kong, Revolution of Our Times,' a slogan that the government says could be considered subversive. The boys loved singing 'Glory to Hong Kong,' the unofficial anthem of the protest movement. She worries that the neighbors will hear it."

Future British citizens: Chinese ambassador warns U.K. over "interference" (BBC)

  • Chinese Ambassador Liu Xiaoming said Britain's plan to allow millions of Hong Kong residents a potential path to U.K. citizenship was "gross interference" in China's internal affairs.

Tomorrow Taiwan: The Hong Kong security law could be China’s blueprint to deal with the "Taiwan problem" (Washington Post)

  • “We will learn how to control Taiwan by experimenting with this law on Hong Kong,” Li Su, a prominent hardliner in Beijing, declared. “From the experiment on Hong Kong, we will tell the people on Taiwan that after we forcibly unite with you, we will have a way to deal with you.”
7. 1 clever thing: Protesters find ways around censorship

Protesters hold up blank papers during a demonstration in a mall in Hong Kong on July 6. Photo: Isaac Lawrence/AFP via Getty Images

After the Hong Kong government announced a ban on popular protest slogans last week, The Guardian reports Hong Kongers have started holding blank signs and putting up blank sticky notes in a reference to the "Lennon walls" that became a hallmark of the pro-democracy protests.

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