Paul Chan, the highest finance official of Hong Kong, traveled to Paris, London, Frankfurt and Berlin final September to lure international buyers. Final month he abolished taxes on foreigners’ purchases of Hong Kong actual property. And he’s quickly set to host a world artwork present, in addition to conferences for large cash funds and advisers to rich households.

Mr. Chan’s brisk work tempo represents an try and shore up Hong Kong’s function and picture because the monetary hub of Asia. However that effort is now colliding with a transfer by town’s Beijing-appointed leaders to additional tighten their crackdown on the remaining political freedoms within the metropolis.

Hong Kong’s legislature accepted broadly worded safety laws on Tuesday. Metropolis leaders described the regulation as essential to cease international interference in native politics, however critics characterised it as a complete effort to muzzle dissent.

Beneath its prime chief, Xi Jinping, China has asserted better affect prior to now 4 years over Hong Kong’s legal guidelines and prosecutors. That has raised alarms for American and European corporations that use town and its open monetary markets as a gateway to China. The mainland’s personal financial struggles, particularly in actual property, have additional shaken confidence in Hong Kong as a spot to place cash.

Many buyers and firms have already begun shifting actions to Singapore, a rival that has the benefit of being an unbiased nation 1,200 miles southwest of China.

“The brand new nationwide safety guidelines have eroded Hong Kong’s distinctiveness for international companies and Chinese language exporters — its comparative benefit is much less clear than it as soon as was for a lot of companies,” mentioned Mark Wu, the director of the Fairbank Middle for Chinese language Research at Harvard College.

Shiu Sin-por, a former head of the Hong Kong authorities’s coverage evaluation company who’s now a senior adviser to Beijing on Hong Kong points, mentioned the laws wouldn’t have a sensible impact on commerce or monetary markets. “It would create a picture downside, however it could not make any distinction for unusual buyers,” he mentioned.

The clampdown coincides with an already troublesome time for the Hong Kong economic system and its monetary sector. Its shut hyperlinks to the mainland economic system have been town’s best energy — and now have change into a legal responsibility as China’s financial exercise slows. The town’s inventory market has misplaced almost half its worth in three years. Dozens of mainland actual property builders have defaulted on bonds issued in Hong Kong, inflicting billions of {dollars} in losses on funding funds within the metropolis and damaging the picture of its bond market.

To make issues worse, rates of interest have soared in Hong Kong, roughly in keeping with these in the USA. That’s as a result of town’s forex is tightly pegged to the greenback and totally convertible into {dollars} — a financial coverage that’s central to town’s function as a world monetary heart. However excessive rates of interest have harm town’s large actual property sector.

Hong Kong imposed prolonged quarantines in the course of the pandemic, eroding its function as an air journey hub. Mainland Chinese language cities like close by Shenzhen have constructed in depth, ultramodern container ports, erasing Hong Kong’s management in logistics.

Beijing has additionally launched in depth duty-free procuring on China’s Hainan Island. That has eradicated a lot of the necessity for mainland consumers to cross the border to Hong Kong to keep away from the mainland’s mixture of steep taxes on imports and excessive gross sales taxes.

Banks and consulting companies have already begun shifting workers to Singapore for politically delicate actions, like assessing the efficiency of the mainland Chinese language economic system. Hong Kong’s new regulation additionally poses an extra problem for town’s as soon as vibrant media sector, which now faces the specter of prosecution for sedition for criticisms of the federal government.

Hong Kong was a British territory from 1842 to 1997, when London returned it to mainland China’s management. The town retains a authorized system based mostly on Britain’s frequent regulation system.

Many mainland Chinese language corporations proceed to signal contracts beneath Hong Kong regulation. The town’s courts are perceived as free from political interference on industrial points, though critics warn that the Hong Kong authorities now appoints pro-Beijing judges.

Hong Kong’s authorized code since 1997, often called the Primary Legislation, requires town to go laws in opposition to sedition, secession, treason, subversion and theft of state secrets and techniques, in addition to to ban international political organizations from conducting political actions in Hong Kong. The town’s leaders tried to go the laws in 2003 however backed off after an enormous avenue protest. Beijing then imposed its personal nationwide safety laws in 2020 after a wave of protests the previous yr.

Regina Ip, a number one member of Hong Kong’s cupboard, mentioned the brand new regulation would enable leaders to deal with the economic system. “We’re 26 years late, and extra importantly, we have to deal with boosting the economic system within the subsequent part of our growth,” she mentioned.

Mrs. Ip’s level was echoed by Leung Chun-ying, a senior adviser to Beijing leaders and former Hong Kong chief government, the highest governmental function. “It’s time for Hong Kong, not Beijing, to enact,” he mentioned.

Worldwide criticism of the brand new regulation has been broad and fierce.

“It might result in vital constraints on freedom of speech, freedom of meeting, the best to dissent,” mentioned Nicholas Burns, the USA ambassador to China.

Hong Kong leaders contended that the regulation was portrayed as extra drastic than it truly is. They mentioned that what Hong Kong was doing to restrict international interference was much less in depth than latest efforts by international locations like Singapore and Australia, two of the primary locations to which many corporations and buyers are shifting.

Hong Kong’s regulation permits a broad function for the judiciary to evaluation authorities selections on nationwide safety circumstances, Mr. Leung mentioned in an interview in Beijing.

Businesspeople in Hong Kong say most of the actions prohibited by the brand new laws might already be deemed unlawful in some kind beneath Beijing’s laws in 2020. So they’re watching to see how the brand new regulation is carried out.

“It’s honest to say that many of the adjustments are already baked in,” mentioned Steve Vickers, the chief government of Steve Vickers and Associates, a regional company threat consulting agency in Hong Kong.