SinoInsight 1
Oct. 10
The Hong Kong government submitted a revised list of draft legislation to be deliberated and passed in the current legislative session. Noticeably removed from the revised list was a bill on “safeguarding national security” (維護國家安全條例) that would see the government enact Article 23 of the Hong Kong Basic Law by December 2022. The removal of the national security bill meant that Hong Kong’s Legislative Council will not pass Article 23 during this legislative year (before September 2023).
Junius Ho, a pro-establishment lawmaker who has been vigorously promoting the passage of Article 23, told Hong Kong media that he was disappointed in the government’s postponement of the national security legislature. Ho said, “How come [the PRC] enacted the four great laws (Hong Kong National Security Law) in five weeks, but [Hong Kong] has taken two-and-half-years without progress [in passing Article 23]?”
Ho slammed claims that the Hong Kong government could not pass Article 23 this year as it had to focus on epidemic prevention work as being “completely rubbish.” He said that he does not believe that the government lacks sufficient manpower to do epidemic prevention work and enact Article 23 because epidemic prevention is the job of the health department and other law enforcement departments, but Article 23 legislation comes under the purview of the justice department.
According to the South China Morning Post, a Beijing loyalist politician said that Article 23 was put on hold because “the government is expecting more instruction from Beijing after the 20th Party Congress in Beijing later this month.”
Oct. 11
Hong Kong chief executive John Lee answered reporter questions before an Executive Council session about the removal of the “safeguarding national security” bill from the updated draft legislation list.
Lee said that the Basic Law stipulates that enacting Article 23 is Hong Kong’s constitutional responsibility and that the city should come out with the legislation as soon as possible. However, the Hong Kong authorities need to conduct “more comprehensive research” before passing Article 23 in considering the “many different methods of endangering national security.”
Per Lee’s explanation, “National security risks are ever-changing. Coupled with dramatic geopolitical changes, there are many means that were previously unimaginable that could be used as weapons to attack another country and jeopardize national security. Therefore, Article 23 must be effective and can deal with extreme circumstances; legal research needs to be more in-depth and comprehensive because we don’t want to pass legislation that has loopholes and requires revisions.”
The chief executive added that some common law countries have recently put forth very strict national security suggestions, including barring people who are believed to be national security risks from leaving their premises for extended periods and penalizing them with “repeated bans.” The Hong Kong government is “paying attention to these [national security] practices, and how to balance human rights locally,” he said. Lee also said that comprehensive examination is required to “write legislation in the common law that is sufficient to protect our country from threats and attacks.”
Background: Article 23 of the Basic Law states that the Hong Kong government shall “enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organizations or bodies from conducting political activities in the [Hong Kong Special Administrative] Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies.”
The Tung Chee-hwa administration’s attempt to pass Article 23 in 2002 and 2003 was hugely controversial and inspired a massive demonstration on July 1, 2003 with an estimated 500,000 participants. Observers said at the time that the CCP was keen to have Hong Kong enact Article 23 so that Jiang Zemin could export his persecution campaign against Falun Gong to the city, target other groups in Hong Kong that that CCP viewed as “problematic,” and prevent Hong Kong from becoming an “anti-communist” base.
Following the abortive attempt in 2003, pro-establishment lawmakers and PRC officials would frequently propose that Hong Kong pass Article 23, but such efforts lacked public support and no headway was made on the issue. Article 23 gained attention again in 2019 following the anti-extradition bill protests. The demonstrations were later suppressed and Beijing imposed a National Security Law on Hong Kong on June 30, 2020. Since the passage of the Hong Kong National Security Law, pro-establishment lawmakers have been pressing the Hong Kong government to finally work on and enact Article 23.
In July 2021, pro-establishment lawmakers pressed Secretary for Security Chris Tang on the issue of Falun Gong during a legislative session. In particular, Junius Ho questioned Tang on how the Hong Kong government would deal with Falun Gong or other “subversive” groups designated by the CCP when Article 23 of the Basic Law is enacted. Tang was ambiguous in his responses and hardly referenced Falun Gong (for details, see our earlier analysis).
In January 2022, the Hong Kong government under outgoing chief executive Carrie Lam put the “safeguarding national security” bill on its list of draft legislation. In July, Hong Kong media reported that Hong Kong’s Security Bureau had closed its Article 23 webpage that was set up in 2002 when the Tung administration tried to pass the legislation. The Security Bureau’s official response was that the webpage had been taken down because it was being “updated.”
OUR TAKE
The removal of Article 23 from the Hong Kong government’s legislative agenda was almost certainly done at the request of the Xi Jinping leadership. Several factors could have weighed into Beijing’s decision to delay the passage of Article 23, including:
Stabilizing Hong Kong’s position
Hong Kong’s position as a leading international hub has come under serious pressure over the past two years following the implementation of the National Security Law and draconian “zero-COVID” measures in the city.
Surging emigration has resulted in a net outflow of more than 200,000 people over the last two years as of September 2022. Also in September, Hong Kong (fourth place) fell behind Singapore (third place) in the Global Financial Centers Index. Meanwhile, the Hang Seng Index fell for five consecutive days since the end of the first week of October, slipping 0.78 percent to 16,701.03 on Oct. 12; the index fell to 16,438.60 points during intra-day trading, the lowest since October 2011.
Hong Kong Financial Secretary Paul Chan noted in September that “there is a very high chance for Hong Kong to record a negative GDP growth” in 2022. Chan added that Hong Kong could incur a fiscal deficit for 2022-2023 of over HK$100 billion (about $12.7 billion), a figure that would be the second-largest deficit on record.
The Hong Kong government has been taking steps to reverse the bleak situation. Near the end of September, the Hong Kong Monetary Authority announced that Goldman Sachs CEO David Solomon, Citigroup head Jane Fraser, Morgan Stanley CEO James Gorman, and BlackRock president Rob Kapito will be attending the Global Financial Leaders’ Investment Summit in Hong Kong on Nov. 2. On Oct. 9, Hong Kong finance secretary Paul Chan wrote in a blog post that the investment summit would be extended to three days (Nov. 1 to Nov. 3) instead of just one. The government also eased strict COVID-19 restrictions by scrapping mandatory hotel quarantine for arrivals from Sept. 26, but kept a three-day self-monitoring measure in place.
Xi Jinping and the CCP are coming under increasing scrutiny by the international community for human rights abuses and rising authoritarianism. Hence, Beijing could have decided that it was better to slow down or suspend the effort to enact Article 23 in Hong Kong to avoid more negative attention to the PRC and the risk of global sanctions, or developments that would impede its recent efforts to stabilize a Hong Kong in decline over its earlier policies. Indeed, pressing ahead with Article 23 could worsen Hong Kong’s migration wave, trigger more capital outflows, see CCP and Hong Kong officials on the receiving end of international sanctions, and hasten the demise of Hong Kong’s reputation as an international hub and becoming “just another PRC city.”
Preserving regime interests
Beijing is keen on preserving Hong Kong’s position as a key financial hub because regime interests are also at stake.
First, Hong Kong is a key center of financing for mainland companies. Mainland firms have raised about $335 billion since 1997 from Hong Kong listings. Hong Kong is also the largest center for arranging offshore bond issuance for Chinese companies. Further, many mainland companies repatriate overseas earnings through Hong Kong because the city does not impose capital controls, as the Hong Kong dollar is linked to the U.S. dollar.
Hong Kong is also a key conduit of foreign capital entering the mainland. In 2021, 76 percent of direct investment in China passed through Hong Kong. Also in 2021, 22 percent of foreign investment in Chinese equities, as well as 28 percent of foreign investment in Chinese bonds, came through Hong Kong.
Finally, Hong Kong is a major offshore renminbi business hub and one that the PRC can more easily exert influence over. This means that Hong Kong can help to prop up the renminbi if necessary and stem capital outflows from the mainland.
The passage of Article 23 would further tarnish Hong Kong’s international image, impact the city’s position as a financial hub, and in turn affect the CCP regime’s finances at a time when the Chinese economy is deteriorating rapidly and financial troubles are swiftly surfacing.
Factional struggle
We previously outlined how the Xi leadership appears to be keeping the “Falun Gong card” in Hong Kong in play against the Jiang faction (see here, here, here, here, here, and here).
Since our last analysis of the “Falun Gong card” in Hong Kong and before the recent removal of Article 23 from the Hong Kong government’s legislative agenda, there has been at least one potentially significant development on the topic. In July, then-newly inaugurated Hong Kong chief executive John Lee told PRC state broadcaster CCTV in an interview that he has been practicing qigong for more than 25 years when asked if he did any sports or exercises to stay healthy. The CCTV interview was later aired on the mainland and republished by mainland media outlets.
That CCTV and mainland media did not censor Lee’s “qigong” revelation is surprising because official media mostly clamped down on positive mentions of qigong since Jiang Zemin launched his persecution campaign against Falun Gong (a type of qigong) in 1999. While qigong became less taboo in China after Xi Jinping took office in 2012, it is still very unusual and politically sensitive for the Hong Kong leader to talk openly about his fondness of qigong practice on CCTV of all places. In the mainland environment where official messaging must adhere to “political correctness” and sensitive messaging is transmitted through “you know what I mean” (你懂的) methods, observers are warranted in extracting extra meaning from developments that deviate from the usual script. Those who are familiar with Jiang’s persecution of Falun Gong and why the Jiang faction-dominated CCP pushed for the passage of Article 23 in Hong Kong will connect the dots and suspect that John Lee—someone who has the Xi leadership’s trust—was not simply expressing his love for qigong on state media, but likely was stating Beijing’s stance on Falun Gong in Hong Kong in a coded way. Coincidentally or otherwise, Hong Kong’s Security Bureau also closed its Article 23 webpage in July, or the month in which Lee gave his interview to CCTV.
As for the Hong Kong government putting the passage of Article 23 on hold, it is possible that Xi Jinping is looking to keep the “Falun Gong card” in play and not abandon his political leverage over the Jiang faction before consolidating power further at the 20th Party Congress. Xi may also be looking to give himself more political leeway as he decides whether or not to go ahead with denouncing Jiang Zemin and his “incorrect political line.”
