Are Hong Kong’s days as a global business hub over?

Authorities say it will protect the city and ensure stability. Critics are alarmed it will silence all dissent with its closed-door trials. It comes at a time when Beijing’s iron grip and US-China tensions were already driving away foreign investors who now have an “anywhere but China”" policy. The emphasis on national security and the danger posed by “foreign forces’ raises the stakes for foreign capital and businesses operating in the city.

The business has been awful in the past two years and there was no major deal at all, says one worker. He said his company fired 10% of their staff in June and another 5% just this past week. Hong Kong’s Article 23 expands on national security legislation imposed by China in 2020. It comes at a time when the city is trying to reassure the world that it’s still a financial dynamo.

Article 23 will make the city “advance from stability to prosperity, government says. Hong Kong economy has been reeling from Beijing’s crackdown since the pro-democracy protests in 2019. Rentals for commercial and retail spaces have fallen, leaving office buildings and shopfronts vacant. India overtook the city in January to become the world#38;s fourth-largest stock market.

Global banks have been laying off people focused on Hong Kong and China, pointing to sluggish growth and plummeting investor confidence. An exodus of capital and people has followed, with the former head of Morgan Stanley Asia declaring recently in a newspaper column that “Hong Kong is over. Beijing promised that Hong Kong would enjoy civil liberties for half a century. Critics say it has reneged on the deal, crushing pro-democracy protests.

More than 260 people, including former lawmakers, have been arrested. Authorities defend it, saying it marked the transition from chaos to governance. Under Xi Jinping, China attaches absolute importance to national security. Hong Kong’s status as a free society and an international gateway comes second.

The arrest of Jimmy Lai was an “awakening for the international community. Personal safety, private property rights, and individual assets are not guaranteed. Under such security laws, businesses in Hong Kong have to adopt additional measures to mitigate political risk. Big companies have started recruiting political consultants to evaluate risks and build political connections.

The city should not be discounted as an international financial hub, says Kevin Tsui, chief economist at the research firm Orientis. Half of the 2,600 companies listed on Hong Kong’s stock market are from mainland China. But a new rule Beijing introduced last year requires Chinese companies to have official approval to list overseas. This has made the process far more cumbersome, said a banker.

Hong Kong, which ranked as the world’s number one IPO venue in seven of the last 15 years, is now in the eighth spot, according to industry reports. If the companies are involved in sensitive industries such as data security or genetic technology, the process will be extremely slow.