How a British company helped China fight democracy in Hong Kong

THE BIDEN ADMINISTRATION HAS WARNED U.S. companies operating in Hong Kong that they face “new and heightened” risks as Beijing aligns the city’s legal and political regimes with the mainland. September 6th announcement from the U.S. Departments of State, Agriculture, Homeland Security, Commerce, and Treasury updated Warning 2021 “reputational, regulatory, financial and in some cases legal risks” for American companies in the city. Even ordinary business activities could run afoul of the territory’s national security legal regime, according to the warning.

The advice should have highlighted how companies can come under pressure to do the Hong Kong government’s dirty work. Consider the case of British multinational BDO, the world’s fifth-largest accounting firm, which helped the Hong Kong government liquidate Next Digital Limited, the parent company of a popular pro-democracy newspaper Apple every day.

Beijing introduced the Hong Kong National Security Law in 2020 after months of sustained pro-democracy and rule-of-law protests, effectively ending Hong Kong’s autonomy and crushing the democracy movement. The law’s sweeping but vague provisions criminalize virtually anything Beijing wants under the guise of subversion, secession, terrorism, and foreign collusion. The law also established a parallel national security system that answers to Beijing and is staffed by a separate national security police and judges. An additional law, passed in Hong Kong in 2024, expanded the categories of national security crimes.

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For Beijing and its proxy, the Hong Kong government, the closure Apple every day was a top priority. The newspaper was forced to cease publication in June 2021 when its accounts were frozen without due process, preventing it from paying staff and suppliers.

The following month, Hong Kong Financial Secretary Paul Chan appointed Clement Chan, BDO’s Hong Kong managing director of audit, as a “special inspector.” The BDO chief executive used government powers to conduct searches and seizures and interview witnesses. The financial secretary then used the BDO chief executive’s interim report on Next Digital as justification dissolve Apple every day publisher in December 2021. Chan’s appointment has been renewed multiple times and currently runs until 2025.

Jimmy Lai, Founder Apple every day and Next Digital, was unable to defend himself. Arrested in August 2020, he has been in prison since December 2020, convicted of participating in unauthorized demonstrations and falsely accusing him of fraud related to the company’s lease agreement. Lai is on trial on charges of violating national security, in which he faces a life sentence. Six members of his senior management and editorial staff have also been charged with national security crimes.

Two former Next Digital executives, Mark L. Clifford and L. Gordon Crovitz, have filed a complaint in the U.K., where BDO is based, with the Organization for Economic and Cultural Development. They allege that the company “engaged in the suppression of the free press and the persecution of journalists” in violation of the OECD’s Responsible Business Practices Guidelines, and are seeking an end to BDO’s relationship with the Hong Kong government.

Clifford and Crovitz also demand an apology from BDO “to the people of Hong Kong and to the many customers and employees of BDO who must be horrified to learn of the role BDO has chosen to play in censoring the free flow of information that has made Hong Kong one of the most successful and admired economies in the world.”

BDO should be able to meet both demands – i.e. if it wants to live by the motto “do what’s right”, Claims as one of the “basic pillars”.

Still, the company and Chan would emerge unscathed. The Biden administration should impose travel and financial sanctions on both Chan and Clement Chan for their roles in the takedown of Next Digital. The United States has already imposed sanctions on Hong Kong Chief Executive John Lee and other senior officials for their roles in the national security crackdown. The global Magnitsky sanctions regime allows for these sanctions not only on government officials but also on any persons who acted as agents or on behalf of persons committing human rights violations.

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The episode should serve as a cautionary tale. Clement Chan and BDO appear to be willing tools of the Hong Kong government. American businessmen may feel that they are immune to pressure and would, if faced with a choice, adhere to professional and ethical standards. Indeed, the OECD complaint attributes another leading accounting firm, Ernst and Young, with refusing to appoint it to investigate Next Digital.

But American companies should not fool themselves into believing they can avoid being caught in the ethical and legal vise that is crushing freedoms in Hong Kong. China is a master of coercion. Co-opting and compromising business elites as part of a bid for global leadership is a top priority for General Secretary Xi Jinping, according to the Congressional Commission on the Chinese Communist Party. report on the united front influence operations of the Communist Party of China.

Department of State warned in March that Hong Kong was maintaining a watchlist to prevent specific residents from leaving the city. On the mainland, where travel bans are well-established, 29 Americans he believed be banned from leaving the country.

The pressure and the stakes will only increase as Beijing is confident it can make demands on those doing business in Hong Kong with the Chinese Communist Party’s connivance.

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