Johnny Patterson: Hong Kong’s reputation is threatened by extradition changes

Businesses warn of waning confidence in the territory’s rule of law

Protests in Hong Kong in 2015 that led to Germany granting asylum to two young activists © AP

Hong Kong was shaken on Wednesday by news that Germany had granted asylum to two of the city’s young activists. The significance of this is clear to all in the territory: a major ally and business partner has so much doubt in the integrity of Hong Kong’s human rights safeguards that they are willing to grant these two young men political asylum.

It sends a stark message to the Hong Kong government at an important moment: the city is facing its biggest political crisis in more than a decade over the damage that proposals to amend extradition legislation could cause to the territory’s rule of law and fundamental freedoms.

The deep divisions in Hong Kong over the proposals make Brexit look comparatively tame. Earlier this month, a pro-democracy lawmaker, Gary Fan, was stretchered out of the Hong Kong Legislative Council by medics, following the sort of brawl that might be expected in the aftermath of a football match rather than in the parliament of one of the world’s most developed cities.

The cause of concern is the Hong Kong government’s attempts to bulldoze through proposals that will allow the city, for the first time since the handover of Hong Kong in 1997, to extradite criminal suspects to mainland China on a case-by-case basis. The amendments to existing laws also reduce the level of scrutiny required for extradition by giving the chief executive of Hong Kong the power to sign off on these arrangements without consulting the city’s Legislative Council.

Government officials claim that the amendments to the extradition law are necessary so that Hong Kong does not become a “fugitive’s paradise” for those fleeing justice in mainland China or Taiwan.

Misgivings about the changes have been well documented. The city’s democrats and business groups say that the move potentially jeopardises the city’s “one-country, two-systems” framework and its autonomy from China. A lack of trust in the judicial system in China — and worries that the Hong Kong chief executive will be unable to reject dubious extradition requests — has led to a fear that journalists, activists and Beijing’s political opponents may face arbitrary extradition.

More than 100,000 attended a rally in April. The Hong Kong Bar Association, Amnesty International and Human Rights Watch have condemned the move, and Chris Patten, the last British governor of Hong Kong, has called the proposals “an assault on Hong Kong’s values, stability and security”.

One of the two activists now living in Germany, Ray Wong, has said that the reason he is publicly disclosing his successful asylum claim is because of concerns about these amendments: “I will never be able to come back if Hong Kong can extradite me back to China once I return,” he said. “It is important for me to speak up as one of the first political refugees of Hong Kong.”

I have conducted a range of interviews behind closed doors, on condition of anonymity, with senior executives at international banks, hedge fund managers and financial analysts, which expose the reasons for the business community’s concerns. A managing director at an Asian bank said that business people were “very worried” about the law because, “In China, the legal system is a bit opaque, and the head of businesses have been imprisoned.”

For one hedge fund manager, concerns about the extradition law are a symptom of “booksellers’ syndrome” — a fear among Hong Kong’s elite that the mainland government will treat them in a manner similar to the five Hong Kong booksellers who were abducted and arbitrarily detained in mainland China in 2015, or the tycoon Xiao Jianhua, who was abducted from the Four Seasons Hotel in 2017.

Likewise, a managing director at a major European bank, said: “The extradition law taps into fears of a midnight knock on the door.” A second hedge fund manager said the threat implied by the legislation would affect his ability to forecast Hong Kong’s finance honestly: “If the extradition law is in effect, I cannot be neutral or objective in my financial analysis; I will have to praise the motherland.”

If the government of Hong Kong decides not to compromise, dissatisfaction with the proposed amendments may have several implications. First, the amendments could seriously damage Hong Kong’s international reputation. “One country, two systems” is a very successful brand for Hong Kong. It allows the city to be Asia’s global city, with all the privileges and prosperity that entails.

But the brand requires the endorsement of the international community. The extradition bill amendments alone would not be sufficient to lead to a retraction of that endorsement. But if it were combined with further measures that undermined Hong Kong’s rule of law and autonomy, such as the draconian national security legislation that could be next on the Hong Kong government’s agenda, the cumulative effect could be devastating.

J Kyle Bass, a hedge fund manager who predicted the 2008 subprime mortgage crisis, recently wrote a letter to investors arguing that the extradition law could put Hong Kong’s privileged relationship with the US under threat. One senior executive I spoke to agreed: “The extradition bill could fundamentally derail the integrity of ‘one country, two systems’.”

This may lead to a second consequence. When international banks and investors started their businesses in Asia, most of them established offices in Hong Kong and Singapore. It is simple for them to transfer human capital and resources from one city to the other. Many business leaders are saying that the extradition law will speed up contingency planning and may even begin the movement of talented professionals away from Hong Kong.

The American Chamber of Commerce has warned that “the proposed arrangements will reduce the appeal of Hong Kong to international companies considering Hong Kong as a base for regional operations”. One senior economist at an international bank was clear: “Singapore is a default winner of what is going on in Hong Kong at the moment.”

Johnny Patterson is the Director of Hong Kong Watch. The piece was originally published in Financial Times on 23 May 2019.