Foreign corporations in Hong Kong are nervously considering their options after the passage of Beijing’s totalitarian “national security law” with several already closing their local offices.

Chinese Communist operations are moving quickly to fill the gap by committing billions of dollars in capital to the island.

Apple Daily noted a “string of brand-name departures from the city” as the national security law took shape in Beijing’s rubber-stamp legislature, including Victoria’s Secret, Esprit, Forever 21, Jack Willis, and Greek jewelry chain Folli Follie.

Some of these corporate withdrawals have come in anticipation of U.S. sanctions and other nations withdrawing the special trade privileges Hong Kong has enjoyed in its autonomy.

“I believe that there’s a good chance that all companies who have Hong Kong as their headquarters for Asia will begin to rethink whether the new rules — the new relationship between Hong Kong and mainland China — whether those rules let Hong Kong be as favorable a place to have headquarters as it used to be,” U.S. Commerce Secretary Wilbur Ross predicted Wednesday.

Nikkei Asian Review (NAR) noted that other foreign companies are pulling out because they are uncertain as to how the Chinese security law will be applied, and how it could affect their operations and employees.

“The law is a lot more severe than what we had expected. The power vested on security agencies to apprehend both Hong Kong locals and foreigners and send them to the mainland for trial is causing consternation within,” one European banker told NAR.

This echoes concerns raised when Hong Kong’s Beijing-controlled administration introduced an extradition bill last year, triggering the massive protest movement that dominated Hong Kong news until the coming of the coronavirus in early 2020. Opponents of the extradition bill worried that foreign companies would become reluctant to do business in Hong Kong if their employees could be imprisoned by mainland China using a much quicker and less demanding extradition process.

Foreign business leaders who spoke to NAR said the national security law is extremely vague about what constitutes a crime, or how much privacy they can expect for their valuable data, but it is quite explicit that its harsh penalties can be applied to foreign individuals and corporations. At a minimum, the uncertainties introduced by the Chinese law will require more spending on compliance and legal consultants – and, given how Chinese law enforcement operates, the sort of consulting fees that most other countries would describe as “bribes.”

Another concern expressed to NAR is that U.S. sanctions against China could affect foreign companies operating in Hong Kong, leading local customers to “turn increasingly China-centric,” as one economist put it. In other words, the threat of sanctions against China for violating Hong Kong’s autonomy will make Hong Kong business clients feel safer doing business with Chinese partners, because commerce with foreign companies could be affected by sanctions.

Bloomberg News reported Chinese tycoons rushing to take advantage of the vacuum created by fleeing foreign businesses, as $20 billion in new listings appeared on the Hong Kong stock exchange.

“While the city’s rich are preparing for a worst-case scenario amid a controversial national-security law, major mainland billionaires are coming in. The latest to do so: William Ding of NetEase Inc. and JD.com Inc.’s Richard Liu, whose companies completed secondary listings there last month. They follow Jack Ma, whose Alibaba Group Holding Ltd. stock issuance in November was the city’s largest since 2010,” Bloomberg reported.

The article noted that Chinese tech tycoons operating in Hong Kong now have a higher net worth than the ten richest Hong Kongers combined, and Chinese companies under pressure from U.S. and European regulators are making plans to fall back to Hong Kong, where they are not concerned with diminishing freedom but rather enticed by the prospect of more protection from the Communist regime they serve.