National security law: Hong Kong’s appeal as business hub in the spotlight as China law looms large

Financier and venture capitalist Simon Calton is watching closely how China implements its new national security legislation for Hong Kong, as the impending controversial changes could raise uncertainty that would translate into higher investment costs.

Calton has long been a strong supporter of investing in Hong Kong, a city he sees as serving as a gateway to huge Chinese investment opportunities, especially in the 5G and blockchain sectors, along with projects associated with the nation’s Belt and Road Initiative.

But with China’s National People’s Congress set to approve a motion to amend Hong Kong’s Basic Law, the city’s mini-constitution, to include national security legislation on Thursday, Calton is left with an uneasy feeling of uncertainty.

The legislation, which may still take many months to come into force, is aimed at preventing and punishing subversion, terrorism, separatism and foreign interference, “or any acts that severely endanger national security.”

“Would it stop me from investing? No, but it would make us look real hard at what our security is and what our exit [strategy] is so that we have a backup plan for any problems,” said Calton, CEO of UK-based investment firm Carlton James Group. “Because of that, it means making investments is not so easy, and it's inevitable that the market will be affected.”

The proposed national security law is perceived by many as a damaging blow to the city’s autonomy that could undermine its many business advantages, including its independent regulatory environment and common law jurisdiction for property and contractual rights.