By Dan Strumpf and James T. Areddy
HONG KONG -- The stand taken by several American tech giants
against China's national-security law in Hong Kong brings into the
open concerns many foreign companies in the city are discussing
internally but executives dare not talk about publicly for fear of
getting dragged into the political fray.
By suspending the processing of Hong Kong government requests
for user data, Facebook Inc., Twitter Inc. and Alphabet Inc.'s
Google put up a united front in challenging the law that is the
sharp edge of Beijing's crackdown on the city's protest movement.
The opaque and top-down nature of the law has sown fear among
companies and lawyers who have scrambled to interpret new rules
that are only published as they take effect.
The Silicon Valley giants -- shut out of the censored internet
on China's mainland -- have less to lose than many other foreign
companies with offices in Hong Kong. Businesses in the city
typically have operations in China and more at stake by stepping
into Beijing's crosshairs. Many also store data in Hong Kong that
falls under sweeping new powers of scrutiny and disclosure handed
to law enforcement agencies.
Although there are likely millions of combined users of the
companies' messaging apps and social media platforms in Hong Kong,
the city is insignificant for their revenue on a global scale. The
reputational risk in the West of being seen as working with Chinese
authorities to stamp out dissent in the city is much larger.
Facebook cited human-rights concerns in its decision.
"Companies headquartered in the U.S. or overseas are going to
face pressure in their home governments and in their home
jurisdictions that they shouldn't be complying with these sorts of
orders, particularly when it comes to people being arrested and
charged under this law," said Antony Dapiran, a Hong Kong-based
lawyer and writer.
On Tuesday, additional U.S. tech firms said they were suspending
processing requests for user data in the city. A Microsoft Corp.
spokeswoman said the company, which also owns the Skype
communications service, is "pausing" its responses to requests from
Hong Kong authorities as it reviewed the law. Microsoft's LinkedIn,
one of the few Western social-media companies to operate in the
mainland, is also suspending responses to local law enforcement
requests, the company said.
China's TikTok, the short-video platform owned by technology
titan Bytedance Ltd., said Tuesday it would pull out of Hong Kong
within a week in light of "recent developments" in the city. Also
Tuesday, Zoom Video Communications Inc. said it would pause its
cooperation with Hong Kong authorities' requests for user data.
Until now governed by a British-type legal system, Hong Kong
suddenly faces limits on dissent more commonly associated with
mainland China. The new law overrides key Hong Kong freedoms that
many of the city's 7 million residents exercised in citywide
protests over the past year. The U.S. and some other Western
governments say they are recalibrating trade and other policies
toward the city to reflect its greater control by Beijing.
Hong Kong's government late Monday enacted a legal framework for
police to enforce bans on activities considered counter to China's
national-security interests.
Dropped without prior warning, and taking immediate effect, the
rules state that police can conduct investigations for suspected
violations, in some cases in secret without warrants. The rules
also give police powers to collect suspect data or order it deleted
online, in line with how authorities in mainland China limit
internet dissent throughout the country.
Refusal to comply with orders to remove content or hand over
messages and user data is an offense liable to a fine or up to a
year in jail.
Business executives say privately that they are just getting
their heads around the law and new rules to gauge how it impacts
their activities, from publishing financial reports to storing
data. Many businesses that operate in mainland China use Hong Kong
as a regional headquarters.
"This is new territory for us," said the head of research at an
international investment bank who now worries about what
authorities might find actionable in the tens of thousands of pages
his team publishes annually.
Several executives say remaining compliant will require
companies to operate as they do in cities like Beijing and
Guangzhou, where police regularly order businesses to adjust or
remove language on corporate websites deemed illegal for touching
on issues such as Chinese economic policy and foreign affairs.
On Tuesday, local media reported that the new office created by
Beijing to administer the national-security law would be based in a
hotel in the residential neighborhood of Tin Hau, overlooking a
popular protest gathering site. Tuesday night, workers could be
seen erecting a flagpole and more than a dozen police stood in
front of the hotel.
Regina Ip, an advisor to Hong Kong's administration and
chairwoman of the pro-Beijing New People's Party, said the moves by
the tech giants to suspend data requests from the government are an
"overreaction and based on misunderstanding of the scope of the new
law."
"Day-to-day data requests are nothing to do with
national-security offenses," she said.
Analysts and legal experts say that in mainland China,
businesses have years of experience dealing with adapting to
Beijing's controls. In Hong Kong, they say, the novelty of the new
rules coupled with their apparent wide reach is leading many to
assume the worst about its application -- while executives refrain
from speaking out against it.
The American Chamber of Commerce in Hong Kong was a strident
critic of the now-shelved extradition law that sparked protests
here last year. After Beijing this year announced its intention to
bypass Hong Kong's government and impose a national-security law,
the business group called the move alarming for U.S. businesses,
adding it could "jeopardize future prospects for international
business."
After the law took effect last week, the group took a more
subdued tone, saying it will 'take time for the business community
to digest details of the law, but we hope it will not impact the
dynamism and benefits of this great city."
A spokeswoman for the chamber said it is conducting a survey of
its membership regarding the national-security law and said it had
no further comment on the law until the survey's completion.
Several legal experts said that laws in mainland China offer a
better template than Hong Kong's common-law system for
understanding the rules' application. On mainland China, laws
typically offer broad guidelines for behavior, and the nature of
the prohibitions become clearer only as enforcement takes place,
they said.
"We'll see what it means in the enforcement," said Kent Kedl,
managing partner for greater China and North Asia at Control Risks,
a risk-advisory firm, of the law. "Just because they can, doesn't
mean they will."
--Joyu Wang and Newley Purnell contributed to this article.
Write to Dan Strumpf at daniel.strumpf@wsj.com and James T.
Areddy at james.areddy@wsj.com
(END) Dow Jones Newswires
July 07, 2020 12:54 ET (16:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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