Nat'l Security Clause On HK Land Sales Terrifies Foreigners, Corporations

Hong Kong real estate is the most expensive in the world, but it wasn’t eye-watering prices that took investors by surprise this week.

Photo Insert: Hong Kong authorities have repeatedly claimed the law has restored order and stability after the city’s 2019 anti-government, pro-democracy protests, and said it would not diminish freedoms in the semi-autonomous city.

A public tender spelling out the details of a government land sale in the city’s Kowloon district states that prospective buyers can be disqualified if they or their parent firms engage in activities that “endanger national security” or affect public order, Kathleen Magramo reported for CNN.

When the Hong Kong Economic Times, a Chinese-language newspaper, first reported the insertion of the national security clause, the Hang Seng Property Index, which tracks property companies listed on the Hong Kong Stock Exchange, tumbled as much as 4.9% before closing 3% lower.

Hong Kong's wide-ranging national security legislation — which criminalizes secession, subversion, terrorist activities and collusion with foreign forces — was introduced in 2020 and carries a maximum sentence of life imprisonment.

It has been widely criticized by foreign governments and human rights organizations. Hong Kong authorities have repeatedly claimed the law has restored order and stability after the city’s 2019 anti-government, pro-democracy protests, and said it would not diminish freedoms in the semi-autonomous city.

Speaking at a press conference on Tuesday, HK leader John Lee refuted the idea that the addition of the clause to the government’s tender documents would have an impact on investor confidence. Lee said the legal provision is “an obvious thing” for Hong Kong to add to safeguard national security.

The Hong Kong government owns almost all of the city’s land. One of its biggest sources of revenue is land sales, with winning bids usually coming from local tycoons or mainland Chinese developers.

Shareholder activist David Webb told CNN the insertion of a national security clause reinforces the idea that bidders shouldn’t cross any red lines the government perceives as threats to national interests.

“If the approach to land tenders is extended to other sectors where foreign companies are more likely to participate, then it could damage our reputation as an open economy,” he warned.

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