Hong Kong’s stock market plunged after the Chinese government said it planned to impose a national security law on the city.
The Hang Seng closed 5.6 per cent lower on Friday, marking the index’s worst one-day performance in nearly five years. This mirrored investor concerns that Beijing’s show of legal force could reignite mass protests in Hong Kong and further worsen relations between the US and China.
The decline came hours ahead of the opening of the National People’s Congress (NPC), China’s annual rubber stamp meeting of lawmakers.
At the gathering, Beijing announced that it would abandon setting a gross domestic product target for the first time, as the country faces its most severe economic downturn in four decades due to the pandemic.
The growth target is normally included in the work report that is presented at the annual gathering of lawmakers, which was delayed by almost three months this year owing to the pandemic.
The economy contracted by 6.8 per cent in the first quarter of the year during the coronavirus outbreak.
Despite the slowdown, China announced that it would increase its military budget by 6.6 per cent to Rmb1.27trn ($178bn) for 2020. Last year China raised military spending by 7.5 per cent to Rmb1.19trn, or 1.2 per cent of GDP.
Meanwhile, the planned changes in Hong Kong would target subversion, terrorism and foreign influence and would be imposed through Hong Kong’s mini-constitution, the Basic Law. China’s national security agencies would set up operations directly in Hong Kong.
In China, the CSI 300 index of Shanghai and Shenzhen-listed stocks ended the day down 2.3 per cent after the NPC declined to set a GDP target.