The Economic Freedom of the World 2024 Annual Report ranked Hong Kong as the freest global economy. The Fraser Institute, a Canada-based libertarian think tank produced the analysis “based on updated and revised data for 2021 and new data for 2022,” the first two years after China enacted controversial national security legislation in Hong Kong.
The Fraser Institute’s annual index seeks to measure how people “in 165 jurisdictions around the globe are allowed to make their own economic choices.” It saw Hong Kong overtake Singapore for the top spot.
Beijing has seized on the report to counter narratives that national security measures it implemented in recent years have imperiled the city-state as a global business hub.
“Since its return to China, Hong Kong has retained its status as an international financial, shipping and trade center, remained free and open, and maintained world-class business environment,” Foreign Ministry Spokesperson Mao Ning said during an October 17 press conference.
“This fully shows that the international community highly recognizes Hong Kong’s unique status and advantages and the promising prospects of one country, two systems.”
That is misleading.
The U.S. State Department said Hong Kong has a “highly open economy with generally favorable conditions for doing business.”
And the Financial Times reported on October 15 that Hong Kong is set to overtake Switzerland as the world’s largest offshore wealth management hub by 2028.
Yet observers noted that interventions by the Chinese government greatly erode the territories’ openness and freedom and imperil Hong Kong’s prospects as an international business hub.
The Fraser Institute noted that “Hong Kong’s rating continues to fall precipitously.”
“Thus, we continue to sound the alarm bell about signs of declining economic — and other — freedoms in Hong Kong,” the report said.
The researchers cited the Human Freedom Index 2023, which the Fraser Institute co-publishes with the Cato Institute, a U.S-based libertarian think tank.
That index said Hong Kong had fallen to 46th in 2021 from third place in 2010, noting it was among the countries and territories to "deteriorate the most" in terms of human freedom, “understood as the absence of coercive constraint.”
The authors of the Human Freedom Index said they anticipate a "continuing and pronounced degradation in the territories ratings, including a noticeable decline in economic freedom."
Largely driving this decline is Hong Kong’s National Security Law, or NSL, passed in late June 2020 in response to the 2019–2020 pro-democracy protests. Beijing sowed disinformation that the United States had spurred the demonstrations, which drew an estimated quarter of Hong Kong’s 7.5 million people to the streets.
Since the introduction of the NSL, hundreds of thousands of people have left Hong Kong, the value of the Hang Seng stock market index has significantly dropped and many multinational firms have stopped using Hong Kong as a regional base.
The law gives authorities in Hong Kong and Beijing broad powers to control the internet, media outlets, schools and other civil organizations. It criminalizes four types of activities — secession, subversion of state power, terrorism and collusion with foreign entities.
The U.K.-based rights group Amnesty International called the NSL “dangerously vague and broad,” warning that “virtually anything could be deemed a threat to 'national security’ under its provisions.”
Amnesty International shuttered is Hong Kong office in 2021 in the wake of the NSL, along with some civil society groups, political parties, churches and other institutions.
This past March, Hong Kong authorities introduced Article 23, or the Safeguarding National Security Ordinance. Building on the NSL, Article 23 covers the offenses of “sabotage endangering national security,” “theft of state secrets and espionage,” “external interference,” “insurrection” and “treason.”
Article 23 also increases penalties for other offenses and allows for closed-door trials.
Amnesty International said Article 23 makes it more dangerous to interact with foreigners, as it can land an individual in prison for up to 14 years for the vaguely defined offense of collaborating with an “external force” with “intent to bring about an interference effect.”
Colluding with an external force to publish information Beijing considers false or misleading can also result in 10 years of imprisonment.
In March, Radio Free Asia, or RFA, a VOA sister organization, closed its Hong Kong office, citing Article 23 and safety concerns for its staff. The month before, Hong Kong’s security boss, Chris Tang, called RFA a “foreign force.”
The State Department said Beijing had signaled it would prosecute individuals for offenses committed outside of Hong Kong, warning the “extremely broad and vague definitions” of offenses covered by Article 23 “could affect or impair routine business activities.”
U.S.-based Human Rights Watch said that “Hong Kong incorporated bodies or businesses” are subject to Article 23 anywhere in the world, and that the government can cancel offenders’ “passports and suspend their qualifications to practice a profession.”
Those “directly or indirectly” funding people who run afoul of the law “may be sentenced to up to seven years in prison,” HRW said.
The European Union said Article 23 "raises questions about Hong Kong’s long-term attractiveness as an international business hub” and “could exacerbate the erosion of fundamental freedoms and political pluralism.”
Business analysts and journalists covering the region argue the national security provisions, coupled with China’s zero-COVID policy, demographic issues and tensions with the U.S., are eroding Hong Kong’s position as an international business hub.