In Hong Kong, China’s Grip Can Feel Like ‘Death by a Thousand Cuts’

Once one of Asia’s most high-flying cities, Hong Kong is now grappling with a deep pessimism.

The stock market is in the tank, home values have tumbled and emigration is fueling a brain drain. Some of the hottest restaurants, spas and shopping malls that local residents are flocking to are across the border, in the mainland Chinese city of Shenzhen.

“It pains me to say Hong Kong is over,” Stephen Roach, an economist and a former chairman of Morgan Stanley Asia long known for his optimism about the city, wrote in a recent commentary in The Financial Times.

The government needs to revive Hong Kong’s economy and promote its global image, but it has instead largely focused on national security. It moved with unusual speed on Tuesday to pass a package of updated and new security laws aimed at curbing foreign influence and dissent with penalties like life imprisonment for treason and other political crimes. The legislation could deter even more foreign businesses, already a shrinking presence, from investing in Hong Kong.

The malaise hanging over Hong Kong is partly a consequence of its status as a bridge between China and the West, with the city’s growth dragged down by the mainland’s sputtering economy and China’s tensions with the United States.

But at the heart of Hong Kong’s troubles is a crisis of identity, as the city’s Beijing-backed officials push the once freewheeling city away from the West and embrace the top-down political culture and nationalistic fervor of President Xi Jinping’s China.

“People are very unhappy for all kinds of reasons,” said Emily Lau, a veteran pro-democracy politician and former lawmaker who now hosts an interview show on YouTube. “Of course, the authorities will not admit it publicly, but I think they know it.”

Hong Kong, a former British colony, had been promised a degree of autonomy from Beijing after it returned to Chinese rule in 1997, with freedoms unseen in the mainland. But after massive antigovernment demonstrations engulfed the city for months in 2019, Beijing imposed a sweeping national security law on Hong Kong in 2020 that the authorities used to crush the pro-democracy opposition with ferocity.

In the Chinese Communist Party’s telling, the protests were fueled by Western forces seeking to undermine Chinese sovereignty. John Lee, the city’s Beijing-backed leader and a former police officer, casts Hong Kong as a city still besieged by subversive foreign forces.

Mr. Lee says the new security laws will eliminate such threats and be “the strongest foundation for Hong Kong’s prosperity and stability.”

Mr. Lee and Chinese officials have argued that such laws are long overdue. The Basic Law, the city’s mini constitution, calls for Hong Kong to retain its own political and economic system for 50 years, but also requires it, under Article 23, to pass its own internal security laws. The government first tried to enact Article 23 laws in 2003 but backed down after hundreds of thousands of residents took to the streets in protest, fearing the legislation would limit civil liberties.

With the security laws in place, officials now say, the government can focus on other needs, like reviving the economy.

But it is unclear if Hong Kong can retain the dynamism and vitality that drove its prosperity at a time when Beijing’s control is so overt. The new rules also raise questions about how the boundaries have shifted.

“Xi Jinping knows Article 23 will damage Hong Kong’s reputation as a financial center,” said Willy Lam, an analyst of Chinese politics at the Jamestown Foundation in Washington. “He knows Beijing needs Hong Kong for foreign investment, foreign exchange and stock market listings. But he is a totally ideological leader. It is far more important to him that he demonstrate his power, flex his muscles and emasculate all opposition in Hong Kong.”

To visit Hong Kong today and scratch beneath the surface is to view a city that is vastly different from the vibrant, sometimes raucous political culture that existed before the current crackdown.

Now, government critics and opposition lawmakers languish in jail. Jimmy Lai, a pro-democracy media tycoon, is standing trial on national security charges. Independent news organizations have been forced to close. Civil servants and public schoolteachers are being told to take loyalty oaths and pass national security tests.

In this new environment, even sports cannot escape politics. Last month, an outcry erupted in Hong Kong after the soccer star Lionel Messi sat out an exhibition match against a team of local players because of an injury. The government had promoted the Inter Miami match, for which many tickets had sold for hundreds of dollars each, as a way to help generate excitement in the city.

But when…