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China's new national security law for Hong Kong could scramble Big Tech's business there

Big Tech companies are scrambling to figure out what China's imposition of a new national security law in Hong Kong means for their businesses there.

The big picture: Tech companies, like other multinationals, had long seen bases in Hong Kong as a way to operate close to China without being subject to many of that country's most stringent laws. Now they likely must choose between accepting onerous data-sharing and censorship requirements, or leaving Hong Kong.


Driving the news:

  • Under the new law, passed last week, companies doing business in Hong Kong are required to hand over a wide range of customer information and comply with censorship requests.
  • For now, many of the big tech companies said they have temporarily paused all responses to data requests from Hong Kong authorities as they seek to understand the law's implications.
  • Chinese-owned TikTok, meanwhile, said it would pull its app from the Hong Kong market as it seeks to maintain the distinctions between its popular international app and a similar service its parent company ByteDance runs inside China.
  • ByteDance has said that TikTok hasn't shared data with the Chinese government nor would it, a position it probably could not maintain were it to continue being made available in Hong Kong.

Yes, but: These pauses aren't seen as anything but a very short-term solution. In the long term, companies will likely face the choice of doing business in Hong Kong the way China wants, or picking up stakes and moving employees elsewhere in Asia.

Be smart: The big U.S. tech companies have taken different approaches when it comes to doing business in China.

  • Apple and Microsoft do significant business in China, while Facebook and Twitter don't.
  • Google at one time had operations in China, but very publicly pulled out in 2010. (Since 2018, there have been reports the company is weighing a reentry, though CEO Sundar Pichai has stressed there are no current plans to resume offering search in mainland China.)

Our thought bubble, via Axios China's Bethany Allen-Ebrahimian: The global future of digital free speech may hinge in part on what these companies decide over the coming weeks.

  • China's new national security law for Hong Kong states clearly that all of its provisions apply to every person in the world, and the new internet laws require individuals working at internet firms to hand over data and comply with censorship requests, or else face a year in jail and large fines.

What they’re saying: Google, Facebook, Microsoft, Twitter and Zoom have all paused their processing of user data requests from Hong Kong authorities and said they’re reviewing the details of the new law. Twitter in a statement said it has “grave concerns regarding both the developing process and the full intention of this law.”

What's next: Companies that have operations in Hong Kong could consider moving operations to Taiwan to stay close to China without being subject to the new Hong Kong law. Other companies may decide to locate regional operations elsewhere in Asia, while still others may choose to continue in Hong Kong and deal with the added restrictions.

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