| China describes Hong Kong's new security law as a "sword of Damocles" hanging over its most strident critics. But the way it's written, this legislation threatens everybody everywhere. The framers of the law in Beijing gave it an unlimited geographical scope: the crackdown on civil liberties applies equally to residents of New York and Paris as it does to those in Hong Kong. And it covers just about every conceivable action Beijing might deem a threat, with vaguely worded offenses such as secession, sedition, terrorism and collusion with foreign forces.  Riot police in Hong Kong on July 1. Photographer: Roy Liu/Bloomberg This week in the New Economy The law will most likely be enforced by China's secret police, whose targets can expect secret trials that may be conducted on the mainland. Hong Kong authorities apparently had no part in drafting the new law. Chief executive Carrie Lam reportedly didn't get a look at it before publication. "Beijing is determined to signal strength and resolve even when doing so might harm China's economic and reputational interests in the U.S., Europe, and now India," said Rush Doshi, director of the Brookings China Strategy Initiative. "This approach, however, clearly reduces the space for bargaining with others."  Carrie Lam, Hong Kong's chief executive. Photographer: Paul Yeung/Bloomberg Capital will likely stick around to see how Beijing wields that Sword of Damocles, but talent won't. Meanwhile, the first instinct of worried Hong Kong residents has been to scrub social media posts that might land them in trouble. Restaurant owners have been pulling down fliers with anti-government messages. Individuals are switching to disposable SIM cards to anonymize their calls. The last time this kind of fear swept through the territory was in the wake of the Tiananmen Square killings in 1989. Then, the wealthy professional elites rushed for the exits. In the years that followed, almost one in 10 residents bolted for places like Canada, Australia and the UK, ahead of the 1997 handover. Most came back, however, with foreign passports in hand. The reverse brain drain led to a population of Canadians in Hong Kong that numbers around 300,000. Now, some of them are once again leaving, a head-spinning phenomenon called "double-reverse brain drain." The UK has promised a path to citizenship for up to 2.9 million Hong Kong residents who are eligible for British passports. The U.S. and Australia are getting ready to accept refugees from the territory as a number of political activists seek safe haven. Japan and Taiwan are hoping to attract some of Hong Kong's financial business, and will no doubt welcome those with financial know-how, too. In the past, wealthy Hong Kong residents often invested and created jobs where they landed. These days, that would be a welcome development in many pandemic-shattered economies. China has expressed outrage at asylum offers, though there will be no shortage of mainlanders ready to take the place of re-emigrants. Beijing is likely more concerned about the wealthy, educated, politically active Hong Kong transplants in cities like London, Vancouver and Sydney. Historically, the gravest threats to the leadership have emanated from the Chinese diaspora. __________________________________________________________ Like Turning Points? Subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close. The coronavirus pandemic has accelerated the race toward smart cities. Join Bloomberg Live on July 7 for the Smart Cities 2.0 virtual briefing, sponsored by Siemens. Experts on mobility, infrastructure and the "internet of things" from Airbus, Mercedes-Benz and Blackberry will discuss how smarter, more adaptable cities can get us to the next normal. Sign up here. Download the Bloomberg app: It's available for iOS and Android. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. | 
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