The influence of the mainland on Hong Kong is increasing, the report said, resulting in changes to many aspects of life in Hong Kong. As a result, an increasing number of Hongkongers are emigrating.
Authorities in Beijing continue to systematically destroy civic organizations in Hong Kong and plant loyalists within the Hong Kong government. With a chief executive “handpicked” by Beijing, China now controls all branches of Hong Kong’s government.
Security services continue to violate Hong Kong’s freedoms; freedoms of religion and speech have almost disappeared. For example, Hong Kong’s elderly Catholic cardinal emeritus, Joseph Zen Ze-kiun, was detained by the national security police in May of this year. In addition, by modifying the electoral system, the Chinese Communist Party (CCP) has created what the report calls “a rubber-stamp parliament full of so-called patriots.”
The report continued that Hong Kong’s judicial system “increasingly mimics” that of the mainland, threatening journalists, civil society, foreign citizens, and businesses in Hong Kong. As only designated judges can hear cases involving national security, judicial independence is weakened.
Hong Kong’s education system is also under strict scrutiny as Beijing seeks to revise history by rewriting textbooks to strengthen national identity, the report noted.
Despite the heightened political risk, foreign investors still rely on Hong Kong as a conduit to the mainland market.
However, recent data indicates that the departure of locals and expatriates will increase as the government limits public criticism of Beijing and implements a strict “zero-COVID policy.”
The resulting brain drain in Hong Kong may become a hindrance to Hong Kong’s economic prospects, the report warns. Foreign companies will find Hong Kong less attractive as they face the challenges of retaining employees and “navigating a higher degree of political suppression and control.”
Some U.S. companies are restructuring their Indo-Pacific operations and are preparing to gradually move more regional operations and headquarters out of Hong Kong, the report noted. Companies and banks from mainland China will dominate Hong Kong’s business environment as those owned by the U.S. and other foreign companies leave.
The report recommends that the U.S. State Department strengthen support for Hong Kongers forced to leave Hong Kong for the United States, including extending its “Deferred Enforced Departure” treatment. The report also suggested that U.S. authorities consider legislation to require U.S. companies with data operations in Hong Kong to submit annual reports, clarifying whether they have ever been required to submit data by Hong Kong or mainland officials.
It also recommends removing the diplomatic privileges currently enjoyed by the Hong Kong Economic and Trade Office (ETO) in the United States. This would take effect unless the CCP and the United States reached an agreement to treat the Hong Kong ETO as an official part of the CCP’s mission to the United States and subject to the same requirements. The removal would also be reversed if the CCP relaxed its control of Hong Kong to allow sufficient autonomy and abide by “one country, two systems.”
