“As the European Union, we will not simply stand back and watch as China attempts to curtail these freedoms even more, with its imposition of the draconian national security law. We are working on a comprehensive and coordinated EU response.”

Borrell’s statement did not mention what the EU response might entail.

While in general the report by the European Commission – the EU’s executive branch – was satisfied that key freedoms continued to be upheld, and the rule of law and judicial independence remained as key safeguards, it noted that concerns had intensified over the erosion of the “one country, two systems” principle and the city’s autonomy.

In a statement issued on Thursday, the Hong Kong government called the EU’s concerns “totally unfounded”, and said the new law was “constitutional, lawful, rational and reasonable”.

The government went on to emphasise that the law would not affect the high degree of autonomy guaranteed to the city under one country, two systems.

The report came days after Britain announced the immediate suspension of its extradition treaty with Hong Kong over the national security law, which criminalises secession, subversion, terrorism and collusion with external forces in Hong Kong and came into effect on June 30.

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China warns of ‘forceful counter-attack’ against UK’s extradition treaty suspension with Hong Kong

China warns of ‘forceful counter-attack’ against UK’s extradition treaty suspension with Hong Kong

The resulting divisions in society had also put pressure on the business community, it said.

“Growing political pressure and interference in the conduct of normal business were new elements in Hong Kong in 2019,” the report said, adding that employees of some companies were penalised through measures including dismissal for joining demonstrations, and for pro-protest comments on social media.

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“The companies themselves have come under pressure, resulting in well-publicised cases of business leaders resigning and public apologies being issued over the political views and actions of their staff,” the report noted, without naming names.

“Businesses perceived as pro-China have been extensively targeted by those sympathetic to the protests. This has taken the form of boycott in some cases, but also violent actions, in particular vandalism of their premises,” the report said.

It added: “As the unrest unfolded, European companies unequivocally condemned violence, while expressing their serious concern at the political impasse and how it affected the business climate in Hong Kong.”

In its response, the Hong Kong government said it wished to “reiterate at the outset that the HKSAR is an inalienable part of the People’s Republic of China, a local administrative region that enjoys a high degree of autonomy under one country, two systems and comes directly under the Central People’s Government”.

The statement said while the government had made full use of the provisions in the Basic Law in conducting external affairs and expanding bilateral and multilateral relationships, “matters of the HKSAR remain our country’s internal affairs. No other state has the right to intervene, directly or indirectly, in such internal affairs”.

Acts and measures taken by other countries were called “flagrant violations of international law”, and not in the best interests of Hong Kong people.

Regarding political development, the report noted the record turnout at last November’s district council elections and the opposition camp’s landslide victory.

Wong, the only election candidate barred over his political stance, was disqualified from running after the government said he had not changed his views on Hong Kong independence.

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“The EU continues to encourage the [Hong Kong and Beijing] authorities to resume electoral reform as enshrined in the Basic Law, and to reach agreement on an electoral system that is democratic, fair, open and transparent,” it said.

“Universal suffrage would give the Hong Kong government greater public support and legitimacy, which would help in attaining Hong Kong’s economic objectives and tackling its socioeconomic challenges.

“A convincing response is needed to the grievances expressed through the ongoing protests in order to secure Hong Kong’s stability in the longer term.”