Last month The Economist featured a story on HSBC’s since-abandoned proposal to return its headquarters to Hong Kong from London, where it has resided since the early 1990s. According to the magazine, a number of factors motivated the bank to consider the move. These included the appeal of Hong Kong’s less stringent regulatory regime, the prospect of lower tax rates, and the fact that the bank now makes 60% of its profits in the Asia-Pacific Region. HSBC is no stranger to relocation: Founded in 1865 in Hong Kong, the bank has moved or has debated moving its headquarters eight times. The bank’s most recent relocation was from Hong Kong to London in 1993, made in anticipation of Hong Kong’s return to the Mainland. Motivating the move was the fear that China would “rip up” the Basic Law, a bilateral agreement between the PRC and the UK outlining how Hong Kong would be governed after the U.K. returned Hong Kong to the Mainland in 1997. When HSBC moved to London in 1993, its Chairman predicted that if the bank were to remained domiciled in Hong Kong it would “‘become a Chinese bank.’” In contemplating a return to Hong Kong this past year HSBC had decided that both Hong Kong’s legal system and China’s commitment to the notion of “one country, two systems” offers it sufficient protections.
HSBC has since decided to remain headquartered in London, but the fact that it considered moving to Hong Kong raises questions. Unlike HSBC, many in Hong Kong have come to seriously doubt China’s commitment to the “one country, two systems” agreement. In the fall of 2015, massive demonstrations erupted in Hong Kong over the Mainland’s decision to limit the openness of the election of Hong Kong’s Chief Executive. During this year’s Chinese New Year celebrations protests broke out when police tried to clear outdoor food stalls from the streets. These protests are in part a reaction to Hong Kong citizens’ feelings that their political institutions, legal systems, and culture are under threat from the Mainland.
China has begun policing actions taken in Hong Kong, even when those actions are legal under Hong Kong law. Over the last six months, China detained five individuals who worked at a small press in Hong Kong that publishes books critical of Mainland political leaders. The detained persons include three citizens of Hong Kong, one U.K. national, and one Swedish national. The Hong Kong citizens were abducted when visiting the Mainland. The British citizen was captured in Hong Kong and taken across the border to Shenzhen. The Swedish national appears to have been abducted from his home in Thailand. To this day all five men remain detained in the Mainland.
Further, over the past year, China has frequently flexed its muscle to repatriate citizen dissidents. In July, China pressured the Thai government to hand over more than 100 Muslim Uighurs whom China accused of being terrorists. In November, Thailand repatriated two Chinese nationals scheduled to fly to Canada the next day. International organizations have stated publicly that the Thai government’s actions violate the international law of refoulement, under which a country cannot return persecuted individuals to the country of their persecution.
China likely sees itself in the right. It claims broad extraterritorial authority over both its own citizens and foreigners: According to its criminal law, Chinese courts have jurisdiction over violations of Chinese law by a Chinese citizen outside of China and over any foreigner who commits a crime against a Chinese national even outside China. In 2010 China enforced this law against a Chinese national accused of murdering his girlfriend, also a Chinese national. Both were students at Iowa State University. President Xi Jinping has gone on a “Fox Hunt” to bring back corrupt officials who have fled abroad. The U.S. has accused Beijing of having covert agents working on these projects in the United States. At home, China has recently passed new laws against terrorism and internal dissent that are vague enough to encompass any act to which the government takes offense. China’s leaders justify its actions abroad through sweeping claims of jurisdiction and ill-defined, wide-reaching criminal laws.
China’s attitude toward international law also colors how it views the extraterritorial application of its domestic laws. China takes a skeptical view of the current international order, which it sees as dominated by the United States. It views itself as the victim of 19th century Western imperialism and sees little gain in adhering to a system that it did not have a voice in creating. (China’s legally dubious claim to and militarization of the South China Sea are the most recent examples of its attempt to redefine long-held standards of state behavior.)
Moreover, China’s legal forays abroad parallel recent domestic developments. The Chinese government sees law as a means to an end, rather than as a good in itself: it wants “rule by law” not the “rule of law.” As Professor Benjamin Liebman has argued, China’s recent push to improve its courts while simultaneously cracking down on rights lawyers might appear contradictory to Western norms but is perfectly consistent with Beijing’s own legal philosophy. Xi Jinping and the CCP see clamping down on political dissent as a tool for both cementing party power and for providing the stability to further grow China’s economy. China sees no contradiction in providing a fair and functional commercial legal regime, while simultaneously limiting its citizens’ human rights. The country is now applying this conception of law to Hong Kong. Large commercial banks like HSBC might still see Hong Kong’s legal system as sufficient for their purposes, but that same legal system is providing fewer and fewer protections to Hong Kong citizens in their exercise of their freedoms of speech and expression.
This is all to say that China’s actions abroad might comport with its own conception of law, despite the fact that its actions run afoul of well-established international legal norms. Moreover, China’s skeptical view of the international order means that it feels no compunction in applying its system of law extraterritorially for promoting its growth, while prosecuting abroad those it sees as violating its laws. While to some in the West, China’s take on international law might seem contradictory, in its own eyes, its position is consistent with its interests, its ideology, and the conception of law it is implementing in the Mainland itself.