China moves to tighten grip on Hong Kong

China moved on Friday to quash Hong Kong's anti-Beijing movement by unveiling plans for a new security law at the start of its annual parliamentary session that also laid bare the "immense" economic challenges caused by the coronavirus.

The 3,000-member National People's Congress (NPC) began with a minute of silence for China's victims of the coronavirus before Premier Li Keqiang delivered his annual version of the US president's "state of the union" address.

"At present, the epidemic has not yet come to an end, while the tasks we face in promoting development are immense," Li told mask-wearing delegates in Beijing's cavernous Great Hall of the People, while also touting China's success in suppressing the contagion.

The pandemic forced Beijing to delay its annual parliament by two months and reduce its length to a week.

Citing "great uncertainty" ahead, Li took the rare move of refraining from announcing a 2020 growth target for China's pandemic-battered economy, offering only a vague promise to address mounting joblessness and to improve living standards.

Hong Kong under siege

The most controversial move at the NPC opening was the introduction of a proposal to impose a security law in Hong Kong — immediately denounced by the US and anti-Beijing figures in the financial hub who called it a death sentence for the territory's unique freedoms.

The draft proposal will "guard against, stop and punish any separatism, subversion of the national regime, terrorist group activities and such behaviours that seriously harm national security."

The motion, which goes to a vote in the rubber-stamp legislature on Thursday, would authorise Chinese lawmakers to directly enact long-delayed Hong Kong security legislation itself at a future date, rather than leaving it up to the territory's administration.

China made clear it wanted the law passed after Hong Kong was rocked by seven months of massive and sometimes violent anti-Beijing protests last year.

City leader Carrie Lam, who is attending the NPC, vowed to "fully cooperate" with Beijing over the national security proposal and complete the legislation "as soon as possible."

Lam said national security laws to be drafted later by the NPC seek "to punish 'Hong Kong independence' and violent political elements that seriously harm national security."

An initial bid to enact such legislation in 2003 was shelved after half a million people took to the streets in protest.

Wang Chen, deputy chairman of the NPC Standing Committee, told delegates Beijing must "take powerful measures to lawfully prevent, stop and punish" anti-China forces in Hong Kong.

One of the proposal's articles opens the door for Beijing to increase its presence in the financial hub by allowing the central government to set up, "when needed," agencies in Hong Kong "to fulfill relevant duties to safeguard national security in accordance with the law."

China's army already has a garrison in Hong Kong but soldiers have not intervened in the protests.

The city's mini-constitution allows the local government to request help from PLA garrisons in the territory in the event of a public order breakdown.

"This is the end of Hong Kong, this is the end of 'One Country, Two Systems,' make no mistake about it," Civic Party lawmaker Dennis Kwok told reporters, referring to China's description of the territory's status.

"One Country, Two Systems" gives Beijing ultimate political sway over Hong Kong but allows the former British colony to retain liberties unseen elsewhere in China.

Stocks tumbled in the city Friday on news of the security law move.

US President Donald Trump promised to respond "very strongly" once details emerge, and US senators introduced legislation to impose sanctions on any entity involved in curbing Hong Kong's autonomy.

Targets could include police who crack down on demonstrators, Chinese officials involved in Hong Kong policy, and banks that conduct transactions with anyone who infringes on its freedoms.

Economic uncertainty

Although infection numbers have dwindled, China is still recovering from the Covid-19 outbreak that first appeared in the central city of Wuhan late last year and spread globally.

Beijing has faced accusations led by Trump that it mishandled its initial response, leading to nearly 330,000 deaths and economic carnage worldwide and sending US-China tensions spiralling to new depths.

China's economic growth shrank 6.8 percent in the first quarter because of the virus, its first contraction in decades.

Li had originally been expected to announce a 2020 growth target of around six percent — but the pandemic has scrambled expectations, leaving millions of Chinese jobless and imperiling countless businesses.

Still, the government announced on Friday it would increase its military budget by 6.6 percent.

The budget will be set at 1.268 trillion yuan ($178 billion) for the year — the second biggest in the world after the US but continuing a trend of slowing increases.

China's rapidly growing and modernising armed forces are a source of concern in the United States and neighbouring Asian countries nervous about Beijing's rise.

Hong Kong opposition slams move

“I deeply believe that the national law to be enacted by the Standing Committee of the NPC will seek to practically and effectively prevent and curb acts and activities that seriously undermine national security, as well as sanction those who undermine national security by advocating “Hong Kong independence” and resorting to violence,” Lam said.

While the enactment of such legislation is required under Article 23 of the Basic Law, Beijing has decided not to try to ram it through the Hong Kong legislature, said Steve Tsang, director of the China Institute at the School of Oriental and African Studies in London.

Instead, it has chosen what he called a “worse option” by proposing the National People's Congress enact a national security law for the territory.

“For many in Hong Kong, the NPC enacting for Hong Kong will be tantamount to the effective end of the ‘one country, two systems’ model,” Tsang said. “I find it hard to believe this will not trigger either a massive peaceful and orderly demonstration or more vocal and aggressive protests or, indeed, most probably, a combination of both.”

A return of violent protests would be a further drag on the territory’s creaking economy, prompting multinational companies to reconsider their presence and Washington to review its policy of granting Hong Kong more advantageous trade conditions than mainland China, Tsang said.

Hong Kong’s main stock market index fell 5.6 percent on news of the bill. Other Asian markets also declined due to concern about US-Chinese tension, but none by such a wide margin.

Former Hong Kong leader CY Leung defended the introduction of the legislation in an interview with Chinese state broadcaster CCTV. He warned that the anti-Beijing opposition should not “underestimate the determination of the Chinese government to deal with the issues of Hong Kong.”

Pro-Beijing lawmaker Martin Liao said that Hong Kong had “legal obligations” to introduce national security legislation and since 23 years have passed and there is no foreseeable plan to do so, that now was a “proper time to deal with this.”

“For 23 years, in the absence of proper national security legislation, I think the central government has been very tolerant,” Liao said in a news briefing by the pro-Beijing camp.

Anti-Beijing lawmaker Tanya Chan countered that the proposal violates the Basic Law. “It is a complete dishonour of promises made under the Sino-British Join Declaration, as well as all the promises made by the Chinese government to us and the world,” she said.