Tensions in Hong Kong as China Plans to Impose a New Law

Stock markets and various factors

Hong Kong is a financial hub. Demonstrations that started a long time ago already affected the local economy. Moreover, there is a risk that tensions could rise as China plans to impose a new national security law on Hong Kong. Importantly, the draft law was announced at the annual National People’s Congress (NPC). The NPC is the country’s parliament. The event started on Friday.

This news had a negative impact on Hong Kong’s Hang Seng index as it fell 5.56% to close at 22,930.14 on May 22.

Moreover, mainland Chinese stocks also saw losses on the day. The Shanghai Composite fell 1.89% to approximately 2,813.77. At the same time, the Shenzhen Component dropped 2.22% to 10,604.97.

Japan’s Nikkei 225 closed 0.8% lower at 20,388.16. In the meantime, the Topix index ended its trading day 0.9% lower at 1,477.80.

Also, South Korea’s Kospi index dropped 1.41% to close at 1,970.13.

Australia’s S&P/ASX 200 fell 0.96% to 5,497.

National People’s Congress and Hong Kong Stock markets and China’s decision

As stated above Hong Kong is a financial hub. It was a British colony that returned to Chinese rule more than 20 years ago in 1997. Interestingly, Hong Kong is governed as part of the “one country, two systems” principle. The purpose of this principle is to guarantee a high degree of autonomy for the special administrative region of China.

Moreover, the move triggered concerns that the government of China is tightening its grip on Hong Kong. Aso, this law could unleash another wave of pro-democracy protests.

Notably, the laws would reportedly ban secession as well as foreign interference, terrorism, and all activities aimed against the central government. Also, the laws would ban any external interference in Hong Kong.

Importantly, it is not the first time when China wanted to introduce national security legislation. In 2003, China also tried to introduce national security legislation, but the government changed the plan as a result of mass protests.

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