The passage of a new security law has executives at foreign firms really worried.

Foreign companies in Hong Kong fear it won’t be business as usual after the city’s legislature passed a controversial security law yesterday.

Hong Kong has historically been the world’s financial gateway into China thanks to its common-law court system, transparent regulations, and relative political autonomy from Beijing—legacies of its status as a former British colony that was handed over to China in 1997.

But now, Hong Kong’s global finance mojo is threatened by the law, known as Article 23, which builds on an earlier national security law imposed by China that critics say has been weaponized against dissidents.

Corporate collywobbles

Executives are particularly uneasy about how Article 23 lays out prosecuting espionage and the mishandling of state secrets. Hong Kong officials insist that the law targets only bad actors who threaten national security, not “normal business operators,” but firms worry that it could cover activities like collecting due diligence intelligence and data about the Chinese economy.

Big picture: The new law could make the business climate in Hong Kong similar to the rest of China and comes as foreign corporations have already slowed their hiring in the city, possibly due to China’s mainland authorities establishing tighter regulatory control there in recent years. Many businesses have started moving parts of their staffs to what they see as safer harbors, like Singapore, while others have closed shop in Hong Kong altogether.

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