The Washington PostDemocracy Dies in Darkness

For U.S. tech firms, doing business in Hong Kong is suddenly a whole lot riskier

“Hong Kong will continue to be a free and open society,” Chief Executive Carrie Lam said at a recent event. (Vincent Yu/AP)
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HONG KONG — Touting her city's credentials as a base for tech start-ups, Hong Kong Chief Executive Carrie Lam told entrepreneurs last week that she needed to "dispel some misrepresentations" about a wide-ranging security law that had just taken effect.

"I am not going into the details of the law save to impress upon you that the legitimate rights and freedoms currently enjoyed by Hong Kong people will not be affected. Hong Kong will continue to be a free and open society," she said at the StartmeupHK Festival, adding that the financial center would remain a favorable business destination.

U.S. tech companies weren't buying it. The same week, Google, Facebook and Twitter said they would stop processing data requests from Hong Kong authorities, pending a human rights assessment of the law. In Silicon Valley boardrooms, tech executives were going further, their employees said, debating whether their workers might face arrest for noncompliance.

"It is a different era for Hong Kong," said an official at a large U.S. tech company. The company is "gravely concerned about the way in which China has conducted itself."

Spooked by a law that takes aim at Hong Kong's previously unrestricted Internet, tech giants are scrambling for legal expertise on how to navigate a market that has changed fundamentally.

Under the "one country, two systems" framework, Hong Kong's Internet landscape has been largely untouched by censorship and digital surveillance from mainland China. Google, Facebook and other U.S. social media companies are blocked in China, but have operated freely in Hong Kong. Google and Facebook have staff in Hong Kong.

The Washington Post spoke to employees at several U.S. tech companies who requested anonymity to discuss sensitive political matters. At least one tech company has shelved plans for future investment in Hong Kong, a business consultant said.

Tech firms admit that pausing data requests is a temporary solution — a "way to buy time," as one employee at a U.S. social media company put it. In grappling with Hong Kong's new reality, analysts say, companies will have to weigh their approach and values against their interest in the Chinese market, a trade-off that has long dogged Silicon Valley.

"People like to pretend that you can be operational in China and not compliant with Chinese law, and that's just not a realistic possibility," said Matt Perault, director of the Center on Science and Technology Policy at Duke University and former director of public policy at Facebook. "A pause is not a long-term solution."

On July 1, China implemented an authoritarian national security law aimed at stifling dissent and protests in Hong Kong, breaking its treaty with Britain. (Video: The Washington Post)

Facebook, Google, Twitter halt review of Hong Kong requests for data

Samm Sacks, a senior fellow at Yale Law School's Paul Tsai China Center, added that technology companies must adjust to the reality that the "one country, two systems" framework under which Hong Kong was supposed to largely govern itself is "no longer a backstop and doesn't get them out of dealing with China."

"On one hand, what do you do if the Chinese government comes to us with a request for data that will lead to an arrest?" Sacks said. "And on the other hand, what is the cost if we pull out entirely and suddenly these platforms are no longer available in an environment where free speech really matters?"

Widening censorship

When Beijing imposed the national security law by fiat, bypassing Hong Kong's political processes, it put the city's 7.5 million residents under the same draconian speech controls as mainland China. The law criminalizes four broad offenses — separatism, subversion, terrorism and foreign collusion — and sets out sentences of up to life imprisonment. Implementation rules released several days later granted police sweeping powers to seize servers, block websites and raid the offices of publishers and Internet companies. Police can also force technology companies to help decrypt information.

A spokesman for the Hong Kong Police Force, responding to a request for comment, said police will continue to request information or cooperation from "relevant persons or organizations" but will make these requests only when necessary for performing enforcement duties and in accordance with the law.

Even before the new law, Hong Kong authorities had been ramping up data requests, transparency reports show. Google received 39 requests from Hong Kong's government to remove 62 items from its platforms between July and December 2019. Google removed 10 items. In the preceding six months, the company received 13 requests for content removal. Some that Google rejected included requests from police to pull an app from the Google Play store that displays the locations of police and protesters, and a demand to take down a YouTube video by hacktivist group Anonymous calling on protesters to stay vigilant.

Facebook received 241 requests from July to December 2019, up from 143 in the six months prior. It complied in fewer than half of the instances.

Analysts and tech executives say the new law has made it clear that Beijing wants to extend its digital censorship and surveillance to Hong Kong, creating an environment where it is impossible for companies to operate by their principles of free speech. Tech companies are hoping to avoid a repeat of 2004, when Yahoo provided information that led to the prosecution of a Chinese journalist who was found guilty of leaking state secrets.

"The politics at this point is more important than the legal aspects of the law," said the employee at the U.S. social media company. "The target is moving. They are looking to implement this in real ways."

With Hong Kong security law, China writes broad international powers for itself

The business consultant said a tech company made contact after the law came into force, alarmed by its sweeping nature. Of particular concern, the consultant said, was the law's extraterritorial application. Assurances that the law would not be retroactive have not convinced this company either, the consultant said, given that Hong Kong libraries have started to remove books by prominent activists that were written and published before the law was put in place.

Charles Mok, a pro-democracy lawmaker who represents the IT industry, said the companies that declared they would halt compliance with data requests represented just a fraction of businesses that could be tripped up by the law, pointing to telecom companies, Internet service providers and cloud hosting services. Mok noted that Amazon Web Services launched its Hong Kong operations just last year. (Jeff Bezos is the founder and chief executive of Amazon and the owner of The Post.) Amazon declined to comment.

Authorities have drafted rules "without talking to the industry about feasibility and have created a whole range of uncertainties and liabilities," Mok said.

An 'elaborate dance'

Among the companies plowing ahead in Hong Kong is Uber, which plans to move its Asia-Pacific headquarters to the city if officials legalize ride-hailing, according to people familiar with the matter. While Uber operates in Hong Kong, ride-hailing is not legal, and drivers face penalties for using the app.

The company is on a public relations blitz, promoting its Uber Eats food-delivery service in Hong Kong and recently launching Uber Transit, a feature that enables commuters to assess public transportation options using real-time arrival data. Uber has also created a website for people to petition lawmakers to change ride-sharing regulations.

Uber has publicly lauded Hong Kong's approach to the coronavirus pandemic and says it is bullish about the city's future. Privately, Uber executives have pitched the company as a potential poster child in discussions with the Hong Kong government, promising investment and jobs when other companies are shelving expansions or planning exits.

"The thinking is that Uber wouldn't be a target if it demonstrates itself as one of the good guys," said a person familiar with the company's thinking. Uber declined to comment, pointing The Post to a prior statement announcing a decision to move its operational headquarters to a new regional location.

The security law states that anyone who provides "support" or "assistance" to a terrorist or terrorist group — including transportation — can be guilty of an offense. Many Uber drivers gave anti-government protesters rides home last year, helping them to avoid police action.

Sacks observed that many American tech companies have limited understanding of how to operate in China because they have no real footprint there, other than small advertising businesses or stakes in Chinese firms. Companies like Microsoft that have operated there for years, she said, have developed "savvy strategies" to figure out how to play an "elaborate dance" with the Chinese government, allowing them to comply without crossing red lines.

"But companies like Facebook and Twitter have no experience doing this inside China. They are babies inside a place where they are not prepared for the implications," she said. "Are they prepared to push back — do they even know how?"

Facebook, Google, Twitter halt review of Hong Kong requests for data

With Hong Kong security law, China writes broad international powers for itself