Once one of Asia’s most up-and-coming cities, Hong Kong is now struggling with deep pessimism.

The stock market is in decline, real estate values ​​have collapsed and emigration is fueling the brain drain. Some of the hottest restaurants, spas and malls that locals flock to are across the border, in mainland China’s city of Shenzhen.

“It pains me to say that Hong Kong is over,” Stephen Roach, an economist and former chairman of Morgan Stanley Asia long known for his optimism about the city, wrote in a recent op-ed in the Financial Times.

The government needs to revive Hong Kong’s economy and promote its global image, but it has instead largely focused on national security. It moved with unusual speed on Tuesday, passing a package of updated and new security laws aimed at curbing foreign influence and dissent and imposing penalties such as life in prison for treason and other political crimes. The legislation could deter even more foreign companies from investing in Hong Kong as their presence is already shrinking.

The malaise gripping Hong Kong is partly a result of its status as a bridge between China and the West, with the city’s growth slowed by the mainland’s weakening economy and China’s tensions with the United States.

At the heart of Hong Kong’s problems, however, is an identity crisis, as the city’s Beijing-backed officials push the once permissive city away from the West and embrace the top-down political culture and nationalist fervor of President Xi Jinping’s China.

“People are very unhappy for all sorts of reasons,” said Emily Lau, a veteran pro-democracy politician and former lawmaker who now hosts an interview show on YouTube. “Of course the authorities won’t admit it publicly, but I think they know.”

Hong Kong, a former British colony, was promised a degree of autonomy by Beijing after its return to Chinese rule in 1997, with freedoms not available on the mainland. But after months of massive anti-government demonstrations rocked the city in 2019, Beijing passed a sweeping national security law on Hong Kong in 2020, with authorities brutally cracking down on pro-democracy opposition.

According to the Chinese Communist Party, the protests were fueled by Western forces seeking to undermine Chinese sovereignty. John Lee, the city’s Beijing-backed leader and former police officer, portrays Hong Kong as a city still under siege by subversive foreign forces.

Says Mr. Lee The new security laws will eliminate such threats and be “the strongest foundation for Hong Kong’s prosperity and stability.”

Mr. Lee and Chinese officials have argued that such laws are long overdue. The Basic Law, the city’s mini-constitution, requires Hong Kong to maintain its own political and economic system for 50 years, but also requires it to enact its own internal security laws under Article 23. The government first tried to legislate under Article 23 in 2003, but gave in after hundreds of thousands of residents took to the streets in protest, fearing the law would restrict civil liberties.

With security laws in place, officials now say, the government can focus on other needs, such as reviving the economy.

But it is unclear whether Hong Kong can maintain the dynamism and vitality that has driven its prosperity at a time when Beijing’s control is so evident. The new rules also raise the question of how the boundaries have shifted.

“Xi Jinping knows that Article 23 will damage Hong Kong’s reputation as a financial center,” said Willy Lam, a Chinese policy analyst at the Jamestown Foundation in Washington. “He knows that Beijing needs Hong Kong for foreign investment, foreign exchange and stock market listings. But he is a completely ideological leader. It is much more important for him to demonstrate his power, flex his muscles and emasculate all resistance in Hong Kong.”

If you visit Hong Kong today and scratch beneath the surface, you see a city that is very different from the vibrant, sometimes noisy political culture that existed before the current crackdown.

Now government critics and opposition lawmakers are languishing in prison. Jimmy Lai, a pro-democracy media tycoon, is on trial on national security charges. Independent news organizations were forced to close. Public school officials and teachers will be required to take oaths of loyalty and pass national security tests.

In this new environment, sport cannot escape politics. Last month, an outcry erupted in Hong Kong after soccer star Lionel Messi was forced to miss a friendly match against a team of local players due to injury. The government had promoted the Inter-Miami game, for which many tickets were sold for hundreds of dollars each, to create excitement in the city.

But as Mr. Messi remained on the bench, disappointing fans, officials and Chinese state news media suggested he had been used by the United States in a plot to embarrass Hong Kong. Mr Messi later posted a video clip on social media in which he denied the allegations and expressed his affection for China. Some netizens said the footage looked like a hostage video.

One of the harshest voices criticizing Mr. Messi was Regina Ip, a senior adviser to the Hong Kong government and a veteran pro-Beijing lawmaker.

“The people of Hong Kong hate Messi, Inter-Miami and the black hand behind them for the deliberate and calculated snub of Hong Kong,” she wrote on X, formerly known as Twitter.

The Mr Messi controversy was a prominent example of an increasingly testy official atmosphere – but it was by no means the exception.

Ms Ip also criticized Mr Roach, the economist, for his “Hong Kong is over” op-ed in the Financial Times, saying he ignored the real causes of the financial hub’s economic woes, which she attributed to American policies such as federal interest rate hikes. Other top officials accused Mr. Roach of scaremongering.

(Responding to the backlash, Mr. Roach wrote an op-ed for The South China Morning Post, a Hong Kong newspaper, in which he argued that the city lacked the dynamism to deal with Beijing’s increasing political influence, geopolitical tensions with the United States and a protracted decline to overcome China’s economic growth.)

“The energy and unbridled optimism that were once Hong Kong’s most distinctive feature, its greatest asset, have been lost,” Mr. Roach wrote.

City officials now regularly attack foreign governments, diplomats and the news media when they criticize Hong Kong policies. Even voices from the Hong Kong establishment are not spared from the allegations.

When a pro-Beijing lawmaker complained that police officers were handing out too many fines, Mr. Lee, the city’s leader, rebuked him for what he called an act of “soft resistance.”

The authorities use this term to describe insidious, passive resistance to the government. This disregard, Lee said, also includes complaints that Hong Kong is too focused on national security.

The Article 23 legislation is intended to stamp out such “soft resistance” from officials have saidIn addition, gaps created by the national security law directly imposed by China should be closed. The laws focus on five areas: treason, insurrection, sabotage, foreign interference, and theft of state secrets and espionage.

Legal experts and trade groups said the laws’ broad and often vague wording creates potential risks for companies operating or seeking to invest in Hong Kong. The government had to scramble this month to deny reports that it was considering banning Facebook and YouTube as part of the legislation.

“An unimpeded flow of information is critical for the city to maintain its status as Asia’s financial hub,” wrote Wang Xiangwei, an associate professor of journalism at Hong Kong Baptist University, in an editorial published Monday in the South China Morning Post He was once editor-in-chief.

The uncertainty has led some foreign companies to treat Hong Kong as if it were the mainland. They have started using burner phones and restricting local employees’ access to their companies’ global databases.

Mark Lee, a Hong Kong native, said the more his city looked and felt like the mainland, the greater the temptation to emigrate abroad.

The 36-year-old personal trainer said that in recent years about a quarter of the 200 people who belonged to his WhatsApp group for organizing group runs and training sessions had left Hong Kong. He is reluctant to have a child because of concerns about Hong Kong’s public school system, which requires national security education.

“If Hong Kong is no longer my city, I will have to leave,” Mr Lee said. The changes, he added, felt like “death by a thousand cuts.”

Keith Bradsher And Olivia Wang contributed to reporting.

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