HONG KONG (Reuters) – For Chinese leader Xi Jinping it is a high-stakes power play. His move to impose tough national security laws on Hong Kong risks reigniting pro-democracy protests that plunged the city into chaos last year, increasing tensions in an already fraught relationship with the United States and undermining Hong Kong’s status as a global financial hub.

In the aftermath of the protests, Beijing appears determined to stamp out any renewed rebellion against the Communist Party’s authority over the former British colony. China’s largely rubber-stamp parliament, the National People’s Congress, is preparing to circumvent the city’s lawmaking body, the Legislative Council, in drafting the new laws. The fear among many in Hong Kong is that China intends to criminalize existing freedoms, including criticism of the central government and its policies. It is the latest and biggest step in a concerted effort by Beijing to assert control over Hong Kong and its 7.4 million people.

In recent weeks there had been widespread speculation here that Beijing was planning this move, described by some local commentators as the “nuclear option.” Thursday’s announcement by China nonetheless stunned pro-democracy lawmakers, business leaders and lawyers in the city. It was, they said, a historic turning point – the end of “one country, two systems,” the formula Beijing had promised would allow Hong Kong to retain its way of life and freedom for at least 50 years after the 1997 handover to Chinese rule.

“This represents a real demolition of the one country, two systems idea and also the idea of Hong Kong’s autonomy,” said barrister Wilson Leung, a member of the Progressive Lawyers Group. Leung said extremely harsh sentences had been imposed on dissidents, journalists and lawyers on the mainland under vaguely expressed but draconian laws. “These same vague concepts are now being introduced to Hong Kong,” he said.

Many details of the new laws and exactly how they will be absorbed into Hong Kong’s existing statutes remain unclear. But Beijing has openly expressed its intentions in recent months. It wants to end the cycle of mass protests that have thwarted successive post-colonial administrations each time they have moved to more closely align the city with China’s political and legal system.

The current Beijing-backed leader of Hong Kong, Carrie Lam, was forced to drop proposed laws last year that would have allowed extraditions for trial in mainland Chinese courts after demonstrations convulsed the city. Alarmingly for Beijing, many young protesters began making calls to “free Hong Kong” and became increasingly violent as police battled to restore order.

The new laws will be annexed into Hong Kong’s mini-constitution, known as the Basic Law, outlawing secession, subversion and terrorism – and providing for the stationing of mainland national security agencies in the city, according to a draft seen by Reuters that spells out what the legislation will cover. That intention is raising fears in Hong Kong that Chinese intelligence agents and police will not only be based in the city, but have formal enforcement power for the first time.

The draft also states that Hong Kong’s “judicial organs” along with its government and legislature “must effectively prevent, stop and punish acts endangering national security.”

Senior judges in the city told Reuters last month that the independence of Hong Kong’s judicial system is under assault from the Communist Party leadership, posing a grave threat to the rule of law.

The proposal for new legislation is expected to be passed on May 28 by the National People’s Congress, though it remains unclear how and when exactly Hong Kong will bring it into effect.

Legal scholars are unsure whether the Basic Law’s extensive human rights protections will apply to the new imposed legislation. The Basic Law currently prevents mainland security institutions from routinely taking enforcement action inside the city.

Shiu Sin-por, a former top aide to Lam’s predecessor as city leader, told Reuters that the deployment into Hong Kong of the Ministry of State Security – China’s leading intelligence agency – could happen “right away.”

“For Beijing to announce this, they most probably already have something in mind,” Shiu said. “This is not difficult to set up, so this can happen anytime.”

‘ENOUGH IS ENOUGH’

Chinese officials say the decision to pass the legislation via the National People’s Congress is because they know it won’t be passed by the Legislative Council in Hong Kong. “Hong Kong still has not completed legislation on national security since its return to China,” said a person with direct knowledge of Beijing’s thinking. “After the endless protests, it’s time for Beijing to say enough is enough.”

The mainland authorities did not immediately respond to questions from Reuters.

Lam said in a statement on Friday that she “deeply” believed the new law “will seek to practically and effectively prevent and curb acts and activities that seriously undermine national security, as well as sanction those who undermine national security by advocating ‘Hong Kong independence’ and resorting to violence.”

The immediate risk for Beijing is that the move will spark a fresh, more violent round of demonstrations. Protest groups and pro-democracy lawmakers are furious and have vowed to take to the streets to protest what they describe as “evil laws.”

“Beijing is attempting to silence Hong Kongers’ critical voices with force and fear,” pro-democracy activist Joshua Wong said on Twitter. “Deep down protesters know, we insist not because we are strong, but because we have no other choice.”

It is a decisive but potentially fraught move for the Chinese leadership at a time when Beijing faces the most intense international and domestic pressure it has experienced in decades.

The Covid-19 pandemic that began late last year in the Chinese city of Wuhan is battering the global economy. The death toll now exceeds 330,000 worldwide. China’s inability to initially contain the virus – and evidence that it suppressed information about the outbreak – has damaged its international standing. A report presented early last month by the Ministry of State Security to Xi and other Chinese leaders contained a stark warning, Reuters reported: Global anti-China sentiment was at its highest since the 1989 Tiananmen Square crackdown.

Compounding Beijing’s discomfort, Taiwan’s government under President Tsai Ing-wen is basking in international acclaim for its success in containing the infection and avoiding serious economic harm. So far, Taiwan has had 441 confirmed cases of coronavirus and just seven deaths. China claims Taiwan as its own territory and has never renounced the use of force to assert that sovereignty.

As the pandemic spreads, Beijing has unleashed what Chinese commentators dub “wolf-warrior” diplomats – envoys who are lashing out against perceived slights or criticism with mockery and threats of trade retaliation.

China may be misreading the international mood. After Australia last month called for an independent inquiry into the origins and spread of the Covid-19 pandemic, China’s ambassador said Chinese consumers could boycott Australian beef, wine and tourism. Beijing ultimately agreed to back a probe when it became clear at this month’s meeting of the World Health Assembly, the decision-making body of the World Health Organization, that there was overwhelming global support for an inquiry.

‘READY TO FIGHT TONIGHT’

Military and economic tension with the U.S. is also on the rise. The Trump administration is sending loud signals that it will resist any Chinese move to expand its footprint in the South China Sea or seek territorial gains while the world is distracted with the public health crisis. Earlier this month, the U.S. Navy’s Pacific Fleet took the unusual step of announcing that all its forward deployed attack submarines were at sea on patrol in the Western Pacific. The location of U.S. submarines is normally secret – unless the Pentagon wants to send a warning that it is prepared to counter a threat.

“The Pacific Fleet submarine force remains lethal, agile and ready to fight tonight,” U.S. Pacific Fleet submarine commander Rear Admiral Blake Converse said in a statement.

In the South China Sea and East China Sea, U.S. warships and long-range bombers have been mounting an ongoing series of patrols and exercises off the Chinese coast.

On Hong Kong, the United States is warning that Washington could retaliate economically if the city’s freedoms are threatened. At stake is Hong Kong’s special status in its ties with the United States, which provides for a broad range of trade, economic, political, social and law enforcement cooperation. Hong Kong, for example, is treated separately from the mainland by the United States in terms of customs and immigration.

On Thursday, a bipartisan group of U.S. senators introduced a bill to impose sanctions on Chinese officials or entities who violate freedoms China pledged to preserve in Hong Kong. The bill also would place sanctions on any bank that does significant business with those officials and entities.

Chinese officials bristle at U.S. attempts to dictate to Beijing how it should handle Hong Kong, which is a Chinese city. In particular, some point to the State Department saying it would delay the release of a report on whether Hong Kong is autonomous enough to continue receiving special treatment from the world’s biggest economy.

“Beijing doesn’t bow to threats like this,” said the person with direct knowledge of Beijing’s thinking. “To Beijing, Hong Kong is China’s Hong Kong.”

Damage to Hong Kong’s role as a financial center could compound the challenge facing Beijing in rejuvenating the Chinese economy. Business activity had been slowing even before the pandemic; Covid-19 has hammered it. Official figures recorded a 6.8% contraction in economic output in the first quarter. One measure of the country’s woes: The authorities announced this week that because of the uncertainty created by the pandemic, they won’t be setting an annual growth target, a stark turnaround for a country whose statistics have shown unbroken expansion for decades in virtual lockstep with government forecasts.

Hong Kong is a vital cog in China’s economy. While China still has extensive capital controls and often intervenes in its financial markets and banking system, Hong Kong is one of the most open economies in the world and one of the biggest markets for equity and debt financing. China uses Hong Kong’s currency, equity and debt markets to attract foreign funds, while international companies use Hong Kong as a launchpad to expand into mainland China. The bulk of foreign direct investment in China continues to be channeled through the city. And many of China’s biggest firms have listed in Hong Kong, often as a springboard to global expansion.

The American Chamber of Commerce in Hong Kong said in a statement that the move by China “may jeopardize future prospects for international business,” including the ability to “recruit and retain top tier talent” in the city. “No one wins if the foundation for Hong Kong’s role as a prime international business and financial center is eroded,” said Robert Grieves, chairman of the business group.

MORE DIRECT ROLE

The core of the problem for Xi and other top leaders is that the Communist Party and the authoritarian political system it enforces on the mainland remain deeply unpopular in free-wheeling Hong Kong. With the 23rd anniversary of the handover approaching, top Chinese leaders are rarely seen in the city. When they do appear, usually at carefully staged events, they are enveloped by security cordons designed to ensure they never face the kind of rowdy protests or public criticism that Hong Kong leaders routinely endure.

In some respects, the mainland leadership appears to be more remote from the city’s people than top British officials in the final years of colonial rule. Hong Kong’s last colonial governor, Chris Patten, remains a popular figure here and a regular commentator on local political affairs.

“I think there has been a significant change in China, in Beijing, since Xi Jinping became president or dictator for life, complete with a personality cult which is extraordinary,” Patten told members of the city’s Foreign Correspondents’ Club in an online presentation earlier this week. “I think the sad point is that Xi Jinping and his court have regarded Hong Kong and Hong Kong’s freedoms as an existential problem for them because Hong Kong represents so much of what they don’t like.”

Mainland authorities and their proxies have worked tirelessly to win support from local people since the handover, but these efforts appear to be ineffective. Pro-democracy groups scored a dramatic victory at local elections held after the climax of last year’s protests, in what was widely seen as a referendum on the performance of the Lam administration. A poll conducted for Reuters in March found that support for the demands of pro-democracy protesters had grown even though the demonstrations had paused as a result of the pandemic.

Veteran political activists in the city anticipate that pro-democracy candidates will repeat their success in a Legislative Council poll scheduled for September.

Resistance in the Legislative Council and mass protests killed off Beijing’s first attempt in 2003 to introduce national security legislation. Last year’s proposed extradition laws met a similar fate. Imposing such laws via the National People’s Congress means Beijing won’t have to risk another such setback at the hands of elected lawmakers and their supporters on the streets.

“Hong Kong has a high degree of autonomy, but Hong Kong definitely is not independent from China,” Leung Chun-ying, a former leader of the city and now an adviser to China’s government, told Reuters. “Hong Kong is part of China, and therefore, Hong Kong has an obligation to protect the national security of China.”

Even as the pandemic and social distancing regulations restricted protests in Hong Kong in the early months of this year, there were signs Beijing was preparing to play a much more direct role in running the city. Key moves included the appointment of two top officials, both with reputations for toughness and both with close ties to President Xi, to oversee Hong Kong.

Luo Huining, who Xi had earlier deployed as party secretary to take down a corruption network in Shanxi province, was appointed to run Beijing’s Liaison Office in Hong Kong. Another former provincial party secretary, Xia Baolong, took over the Hong Kong and Macau Affairs Office in Beijing, the top government body responsible for handling the city. Xia was Xi’s deputy when the Chinese leader was Party Secretary in Zhejiang province between 2002 and 2007.

After the two leaders took up their new posts, the Liaison Office sparked a controversy when it said in a statement last month that it had the power, along with the Hong Kong and Macau Affairs Office, to “handle Hong Kong affairs.” Pro-democracy supporters in the city condemned the move as a clear threat to Hong Kong’s autonomy.

The Liaison Office and Hong Kong and Macau Affairs Office did not immediately respond to questions.

In a speech on April 15, Luo also signaled that new national security laws were in the pipeline. “For the nearly 23 years since Hong Kong’s return to the motherland, the system for safeguarding national security in Hong Kong has had shortcomings and could be fatal at critical moments,” Luo said. New laws were needed “without delay,” he added.

On Thursday, five weeks after Luo spoke, Beijing made its dramatic announcement: Chinese-style national security is coming to China’s freest city.