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The annual gathering in Beijing of the Two Sessions ("Lianghui") of the People’s Congress was attended by thousands of representatives from around China and concluded on May 28, 2020. The assembly was postponed from its regular date in early March as a result of the COVID-19 pandemic, and its convening constituted a declarative measure by the Chinese government indicating the return to a "new routine." Discussions were conducted amidst concerns regarding a second wave of infection throughout China, deep uncertainty regarding the pandemic’s impact on the economy and society, the widening rupture in relations with the United States, and in particular, a new and significant round of demonstrations on the streets of Hong Kong against the intensification of China’s control over the special autonomous region.

The two main documents adopted at the end of the Congress – “The National Security in Hong Kong Law” and the annual “Work Report” of Premier Li Keqiang, which outlines the main points of planned activity for the coming year – identify current focal points for Beijing. They include preserving the principles of Chinese sovereignty in light of “concerns regarding foreign intervention” in the territories that are defined as a “core interest,” as well as concern regarding economic uncertainty (reflected in the decision not to stipulate numerical targets for growth), high unemployment rates, and social instability, which could be detrimental to the control of the Communist Party.

The National Security in Hong Kong Law, enacted rapidly during the seven days of the Congress, is meant “to improve legal and operative tools” for normalizing the official presence of Chinese security elements in Hong Kong in order to take action against the protesters and thwart “foreign involvement” in Hong Kong affairs. The law is slated to go into effect in September.

For the Chinese, the history of Hong Kong is a symbol of the onset in 1842 of the “century of humiliation,” stemming from the “unequal treaties” that were imposed upon China whereby the world powers annexed areas within the territory of China. Britain ruled Hong Kong for 150 years according to a lease agreement that was imposed on the Emperor of the Qing Dynasty following the First Opium War and was renewed at the end of the nineteenth century. When British Prime Minister Margaret Thatcher visited Beijing in 1982, Deng Xiaoping emphasized that although China could not compromise on its sovereignty in Hong Kong, it would be able to compromise on the administrative features of the territory after it was returned to China. The principle of “one country, two systems” paved the way to a joint Chinese-British declaration in 1984. Prior to the territory’s transfer to China, Deng publically clarified that Chinese sovereignty would be complete, including entry of the Chinese military, if necessary. Following the agreement, in 1990, Beijing enacted the Hong Kong Basic Law, which went into effect with the territory’s transfer to Chinese sovereignty in July 1997, and is valid for 50 years.

Article 23 of the Hong Kong Basic Law stipulates that “the Hong Kong Special Administrative Region shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People's Government, or theft of state secrets, to prohibit foreign political organisations or bodies from conducting political activities in the Region.” The attempt of the Hong Kong local government to enact a law in this spirit in 2003 was halted following public protest. In February 2019, the local government’s attempt to bring up the extradition law for discussion, which was meant to strengthen Chinese control and facilitate the extradition of suspects to China, resulted in months of popular demonstrations and postponement of the debate of the law. Nonetheless, and despite measures authorized by China, including the use of force, mass arrests, and the prohibition of assembly during the COVID-19 pandemic, the demonstrations against the Chinese government revived recently with greater vigor.

The new national security law emphasizes that “China categorically opposes the intervention of foreign forces and will act to penalize those that carry out actions meant to undermine (the government) and foment unrest in Hong Kong.” The law calls for the local government in Hong Kong to enact, at the earliest possible date, relevant local legislation in accordance with Article 23; it also enables security elements under the auspices of the central government in China to establish branches to carry out activity in Hong Kong with the aim of preventing, detaining, and punishing those who endanger national security. Following the law’s enactment, the minister of pubic security in Beijing announced that his ministry would “guide and support” the activity of the Hong Kong police.

After the law’s approval, the United States, Britain, Australia, and Canada issued a joint statement expressing deep concern regarding the legislation, which was enacted by Beijing rather than the local government in Hong Kong. According to the statement, the law is “in direct conflict with its international obligations under the principles of the legally-binding, UN-registered Sino-British Joint Declaration” of May 27, 1985 and undermines the “one country, two systems framework.” The four countries call on the Chinese government to work with the local civilian government in Hong Kong to find a joint and agreed-upon solution, in accordance with China’s international obligations and the Sino-British declaration. The European Union issued a brief statement expressing “deep concern” regarding the Chinese measure and the intention to raise the issue in future dialogues with China. The day after the law’s enactment, President Donald Trump stated that the United States no longer views Hong Kong as possessing the status of “one country, two systems” but rather as reflecting “one country, one system,” and that it will no longer recognize Hong Kong’s status of a special international trade zone.

The political statements of the European Union and the four Western countries against China’s action are moderate in character and do not include practical elements. The only practical measure at this point, declared by President Trump, is the intention to work toward annulment of Hong Kong’s special economic status. Trump’s statement made no mention of the first phase of the trade agreement between the countries, and it is unclear at this point whether his statement will have any impact on the agreement. The fact that Hong Kong continued to operate as a regional trade hub even after July 1997 allowed foreign companies to take advantage of the economic advantages, and especially the tax arrangements and low customs rates in effect in the territory. According to a March 2019 US State Department report to Congress, more than 1,300 American companies have a presence in the territory, and for some 300 of them Hong Kong is the focal point of their activity in Asia. According to the report, “nearly every major U.S. financial firm maintained a presence in Hong Kong, with hundreds of billions of dollars in assets under management.” Hong Kong is the ninth most important destination for US exports, and “U.S. exports of goods and services to Hong Kong supported an estimated 188,000 U.S. jobs in 2015 (latest data available).” The American action is liable to be detrimental to trade with China, as well as to US companies, and apparently, to the residents of Hong Kong.

Are measures of economic sanctions likely to affect China’s decisions and actions? Contemporary China, under the leadership of Xi Jinping, views its complete sovereignty over Hong Kong as a supreme political interest for which, if necessary, it will be willing to pay a political and economic price. American elements have stated that the United States will take action to ensure that the annulment of Hong Kong’s special economic status will not impact detrimentally on the local population. At the same time, it appears that harming Hong Kong’s special economic status could even play into Beijing’s hands, which, in the long term, is interested in weakening the strength of the territory and its “recalcitrant” inhabitants. According to this approach, following the end of the Sino-British treaty in 2047, the territory of Hong Kong will be annexed to the city of Shenzhen and become part of the special Pearl River Delta Economic Zone.

The significance of enactment of the national security law in such a tense period goes beyond the context of Hong Kong alone. The legislation is meant to send a clear message to domestic China, as well as to Taiwan, the United States, and other countries that the Communist party will take all measures it views as appropriate to maintain stability, unity, and sovereignty, and it has no intention of compromising on issues that it views as of fundamental importance. Another wave of violent demonstrations in response to the law’s enactment (despite the fact that the local government prohibited the assembly of more than eight people), in addition to the chronological proximity to the highly sensitive date of June 4 (the 31^st anniversary of the Tiananmen Square massacre), may result in even further escalation of the situation in the territory, as well as aggravation of China’s relations with the United States and other Western countries.

For Israel, Hong Kong still constitutes a bridge to the countries of Asia and another commercial gateway into China. In 2019, trade via Hong Kong (not including diamonds) amounted to approximately $2 billion (approximately half a billion dollars in exports), and approximately $5 billion including diamonds. Over the years, dozens of Israeli companies have selected Hong Kong to serve as their Asian headquarters; however, the mounting instability since early 2019 has promoted some to move to other locations, including Singapore. Thus far, including during the previous round of unrest in Hong Kong, Israel has not expressed itself publicly on the subject. It is advised to continue this policy.