China’s real-estate investors down on Vancouver, but not out

Douglas Todd
The Vancouver Sun

Huawei CEO Meng Wenghzou must stay under mansion arrest following this week’s court decision in Vancouver. China’s authorities rage, while continuing to unfairly jail Michael Spavor and Michael Korvig and drastically cut imports of Canadian canola.

Rival ethnic Chinese groups clash in the streets of Vancouver over Beijing’s clampdown on Hong Kongers’ freedoms. COVID-19 kills more than 6,800 across Canada and lockdown virtually ends international travel, sending home many of China’s foreign students, especially from Toronto and Vancouver.

China-Canada relations are at their lowest ebb in decades, particularly according to China’s pervasive regime-backed media outlets, which this week called Canada a “pathetic clown.”

And that has implications for Metro Vancouver’s housing market.

This region of 2.6 million is feeling the impact of soured relations with China, even while polling suggests the city continues to retain some of its traditional allure to the world’s most populous country as a desirable place to experience and invest in.

In addition to geo-political tensions, however, it must be said that Metro Vancouver’s real-estate market has also lost some of its global appeal because of financial trends. Real-estate prices have fallen in many parts of the West, especially in the Lower Mainland. That’s while housing values have been rising in China.

Let’s look closer at what’s leading China’s upper- and middle-classes to steer away from buying into Metro Vancouver real estate like they once did.

China’s investors are also this year not pouring the same billions into high-end commercial or residential properties in adjacent Hong Kong, which has up until now been the top investment destination for China’s wealthy.

One reason for China’s investors pulling back is their rising suspicion of the West, including because of the erratic ways the U.S., some European countries, Canada and others have handled the coronavirus outbreak.

Although the World Health Organization and other health experts say COVID19 emerged in Wuhan, China’s state media claims the country has kept a better lid on it than the West. That’s lead to nervousness among many Chinese citizens about getting sick abroad, as well as fear about being blamed for spreading the virus.

The South China Morning Post, for one, has been talking to rich and middle-class people around China and discovering they’re losing their appetite for buying real-estate “investment vehicles” in the West, in part because of such COVID-19-related fears and mistrust.

That goes with their weakening desire to send children to study in English-speaking countries, where many became involved in real-estate on behalf of their families. At the end of 2019 there were 640,000 students from China around the world, 144,000 of whom were in Canada and 50,000 in B.C.

In addition, however, an equally strong force that is diminishing Chinese people’s interest in buying Metro Vancouver’s pricey houses and condominiums, according to the Hurun Report, is that the city doesn’t offer the same profits it once did.

Housing values have dipped in Metro Vancouver since 2016, when buyers from China were deeply engaged in pumping up the city’s luxury market. And the Canada Mortgage and Housing Corporation predicted this week prices could fall an additional nine to 18 per cent in Canada because of the pandemic, and even slightly more in British Columbia.

Bigger real-estate profits are to be made in China.

The widely read Hurun Report is considered an authority on what it calls “China’s high-net-worth individuals.” And its 2020 report said, even before COVID hit, that China’s rich were finding some of the most rewarding real-estate ventures were in their own country.

“Twenty-seven Chinese cities entered the top 50 cities (around the world) with the highest house price increases,” said this year’s Hurun Report. Many of those Chinese cities had values leap 35 to 45 per cent over just three years. There’s no suggestion such hefty profit margins are being seriously dented by COVID-19.

Much of the sharp rise in China’s real-estate prices is the result of its authorities becoming more intent about enforcing a US$50,000 a person limit on the movement of funds out of the country – and banning the widespread use of credit cards, including China’s UnionPay, for buying foreign real estate.

Vancouver realtor David Hutchinson said this week that, for many of the reasons mentioned here, “China is not coming” to local real estate like it once did. “That ship has sailed.”

His perspective echoes that of West Vancouver realtor Nicole Lee, who said earlier that many rich clients from China are looking elsewhere now that B.C. has brought in a foreign-buyers tax on housing, along with a speculation and vacancy tax.

However, even though Metro Vancouver and its real estate might be down in the minds of many of China’s wealthy, they’re definitely not out.

Although five years ago China’s rich ranked Metro Vancouver as the third most desirable city in the world for “overseas property purchases,” this year’s Hurun Report says they still rate this relatively small city on the West Coast of Canada as seventh.

In addition, the Hurun Report says China’s high-net-worth parents pick Canada as their fourth favourite place to send their children for an education. As well, out of the 10 million Mainland Chinese who are transnational migrants, according to the Migration Policy Institute, half have ended up in Hong Kong and the U.S., while Canada has been, and remains, their third most popular choice, with Australia fourth.

There are now more than 500,000 ethnic Chinese people in Metro Vancouver, the majority, because of recent migration trends, from China. They can find familiarity in the city’s vibrant ethnic Chinese supermarkets, retail outlets, entertainment, restaurants and housing.

There might not be quite the tremendous volume of money coming out of China into Canada’s property market as there has been in the past two decades, but streams of Chinese capital are sure to continue to make their way across the Pacific.

That should be the case despite the tensions wrought by COVID-19 lockdowns, Huawei controversies, Hong Kong clashes and even a stumbling local real-estate market.

© 2020 Vancouver Sun

Panatch Group launches second phase of Port Moody’s 50 Electronic Avenue

Michael Bernard
The Province

It is every developer’s nightmare. You have everything in place for your opening day, and then your plans are dashed by an event completely beyond your control. With COVID-19 and the public safety orders banning events of more than 50 people, you have the makings of a true catastrophe.

It could have turned out that way for Kush Panatch and the March 21 launch of the second phase of his multi-unit residential development 50 Electronic Avenue in Port Moody, except that this developer has shown an uncanny ability to adapt to change.

The Panatch Group’s challenge was to address the need for people to socially distance while giving them a close-up look at a new home. “Some people wanted to get full information on what was available but were uncomfortable coming in (to the sales centre). So what do we show people?  We came up with the idea of hiring a professional videographer and featuring Jody Jobber, our sales director, conducting a virtual tour of the presentation suite.”

The result was a guided tour that was made available online. “Jody was nervous at first and had never done anything like that, but we told her to think of how she would do it if a real person was present,” said Panatch. That, combined with a robust list of more than 8,000 people who had registered their interest in the 358 homes in the two-stage development, led to an enviable start to the sales campaign. In less than two weeks, Panatch had 46 signed sales.

But that ability to act quickly isn’t the only reason 50 Electronic Avenue—named in honour of the radio and TV manufacturer, Chisholm Industries that produced products at the location for decades—has done so well. In fact, the seeds of success were sown more than 22 years ago when Panatch bought a 3.5-acre parcel of industrial land opposite Port Moody’s downtown. At that time it was simply a big industrial area with a sawmill, but Panatch saw the potential, even before the Westcoast Express and SkyTrain’s Evergreen Line hastened Port Moody’s development.

Story continues below

Even as phase-one sales were progressing two years ago, the company was taking careful note of what buyers wanted in condo living. Panatch began tinkering with the project’s second-phase plans, especially after being pleasantly surprised by the resounding success of one particular type of unit.

 “In phase one, we were blown away because in the first week we sold every one of our rooftop units,” Panatch said. “We always suspected we had the demand for that, but we never anticipated the strength of it. We had 24 rooftop units, and ended up with 34 offers. So, for our second phase we made some design changes, moved around units and ended up increasing the number of rooftop units to 32 from the original 14 planned.” With their private fenced and landscaped spaces accessed through a vertical door at the top of a flight of stairs, the units have been “over-the-top popular.”

The other change the company made was to increase the number of four-bedroom units in the second phase. Historically, such larger units have proved more difficult for developers to sell, but Panatch believes there is an increased demand for such larger spaces. He has found that baby boomers appear more willing to make the transition to condo life from single family homes if they are offered the space they need. 50 Electronic Avenue, for instance, offers suites as large as 1,635 square feet.

Nevertheless, the majority of suites offered at 50 Electronic Avenue are smaller in size. About 30 per cent are one-bedroom and one-bedroom and den homes, 60 per cent are two-bedroom or two-bedroom and den, with the remaining 10 per cent three- and four-bedroom models. The second phase has attracted a broad range of buyers, Panatch said. They include a 21-year-old professional who bought a home with some family help and young married couples from Yaletown and Burnaby’s Brentwood Town Centre seeking to start a family, to older retired couples downsizing from single-family homes in Port Moody.

Also attractive to buyers is the development’s close proximity to rapid transit, and the popularity of nearby amenities such as Rocky Point Park and the budding Brewery District. It also helps that 50 Electronic Avenue has a 9,000-square-foot, three-storey amenity centre called Club 50, which boasts a fitness facility, rooms for yoga and bike repairs, a dog wash, an arcade space, media room, social lounge with a large patio and a guest suite for visiting family and friends. There is also a one-acre, elevated private backyard with lawns, courtyards, urban gardens with water features, and a children’s playground. A feature popular with those in the ‘gig economy’ is co-working spaces with two boardrooms.

The homes, designed by Ciccozzi Architecture, have open floorplans with nine-foot ceilings. BYU Design has incorporated laminate wood flooring throughout, an integrated designer wardrobe with drawers in the master bedroom and closets with custom millwork organizers. The suites’ private deck or patio features power outlets and gas connections.

In the kitchen is a premium Bosch high-performance, stainless steel wall oven, a 30-inch gas cooktop, and a 36-inch Fisher & Paykel French door refrigerator with icemaker panelled to match the cabinetry. Also standard are a Bosch ultra-quiet dishwasher with custom panel, a Panasonic stainless steel microwave and a stainless steel Venmar hood fan. Polished quartz countertops are finished with a waterfall edge and there is a custom millwork pantry.

The bathrooms have a designer floating vanity, a large framed mirror with medicine cabinet and Soho white hexagon porcelain tile flooring. There is a frameless, clear tempered glass shower with handheld showerhead in the ensuite bathroom and a deep bathtub with handheld showerhead.

50 Electronic Avenue, Port Moody

Project address: 50 Electronic Ave., Port Moody

Project scale: Phase 2 of this 358-unit development consists of 220 woodframe homes, ranging from a one bedroom at 583 sq. ft. to four-bedroom plans at 1,635 sq. ft. Close to shopping, SkyTrain and West Coast Express and seaside amenities such as Rocky Point Park. Amenities include the 9,000-sq.-ft. three-storey “Club 50,” offering a fitness facility, dog wash, guest suite, bike repair rooms and co-working spaces, plus a one-acre elevated backyard with five distinct courtyards.

Prices: From $459,900

Developer: Panatch Group

Architect: Ciccozzi Architecture

Interior Design: BYU Design

Sales centre: 50 Electronic Avenue, Port Moody

Centre hours:  12 noon to 5 p.m. (by appointment only during COVID-19 social distancing).  Virtual appointments and tours available as well.

Sales phone: (604) 492-2202

Website: www.50electronicave.com

Completion Date: Late 2022

© 2020 Postmedia Network Inc

Dire predictions for house-price drops

Joanne Lee-Young
The Province

Canada’s national housing agency is continuing its grim forecasts for how hard the COVID-19 pandemic will hit home sales, prices and construction, including sharp drops for B.C.

But one local realtor said many people in the local real estate sector and construction industry believe Canada Mortgage and Housing Corp. is being too pessimistic.

Last week, CMHC CEO Evan Siddall told a parliamentary committee that Canadian house prices could drop by as much as a 18 per cent.

He also said that 20 per cent of mortgage holders who are deferring payments could be in arrears at the end of September, when the COVID-19 deferral period finishes, if the economy doesn’t improve.

He said Vancouver could be one of the hardest-hit places, along with Toronto and Alberta.

On Wednesday, the CMHC said home prices in B.C. could drop by 10 to 19 per cent  from pre-pandemic levels, slightly exceeding its forecast range for home prices across Canada of nine to 18 per cent.

It said home sales in B.C. could decline by 15 to 25 per cent and housing starts could drop from 44 to 64 per cent, compared to national forecasts of home sales dropping 19 to 29 per cent and housing starts dropping 50 to 75 per cent from pre-pandemic levels.

But one realtor said many in the real estate and construction industry are still “classically optimistic” and insist they are still seeing demand for housing in Metro Vancouver.

“I think everybody wants to keep the market healthy and churning, and when these reports come out, all they see is that it puts hesitation in buyers’ psyche,” said agent Steve Saretsky.

He said some are calling the CMHC predictions ridiculous. “I’m not sure if they are just saying that to me, or if they actually believe it.”

As for himself, Saretsky thinks it’s unusual for a cautious, crown corporation like CMHC, which oversees the entire mortgage market, to be overly negative in its forecasts unless it needed to be.

Immigration is often cited by the real estate industry as being a resilient, driving factor in major housing markets such as Vancouver, but CMHC chief economist Bob Dugan said that “with the (travel) restrictions on the movement of people, immigration is effectively slowed down dramatically.”

He said that, in the optimistic view, when travel restrictions are lifted, immigration can return, but in the pessimistic view that changes if there are “repeated waves (of infections) and further lock downs.”

Dugan said there isn’t a “lot of data yet on the impact of the coronavirus on the Canadian economy, but we do have some early indicators that the impacts are fairly significant.”

As for the spectre of mortgage deferrals becoming arrears, Dugan said statistics show over three million jobs have been lost, causing the unemployment rate to rise from 5.6 per cent in February to over 13 per cent in April.

“While employment decreased by three million people, the number of unemployed only increased by less than 1.3 million,” said Dugan. The gap “is created by the fact that many people who have lost their jobs have left the labour force and are not actively looking for work, and therefore are not counted as unemployed.”

Corrected for this, the unemployment rate in April would be 20 per cent.

“This doesn’t really count for the fact that many other people who remained employed either had to have their hours reduced and had much lower income than they would have had before the onset of the pandemic.”

© 2020 Postmedia Network Inc

How the Home Buyers’ Plan (HBP) Works

other

Home Buyers’ Plan

The First Time Home Buyers’ Plan allows qualified first-time buyers to withdraw up to $35,000 tax-free from their RRSPs, to purchase or build a home. If a couple is buying together, and both are qualified first-time buyers, they can withdraw $35,000 each for a total of $70,000.

Eligibility

To be eligible for the First Time Home Buyers’ Plan (HBP), you must:

• Be a Canadian resident
• Be considered a first-time homebuyer
• Not have owned a home within the past four years
• Not have lived in a home that your spouse owned within the past four years, if you are now buying together
• Sign a written agreement to buy or build a home
• Intend on living in the home within one year of buying or building it
• Not own the home for more than 30 days before making the withdrawal
• Close the sale before October 1 of the year after you made the withdrawal

Buyers with special needs or who are purchasing homes that are more accessible for an individual with special needs, and/or who are eligible for the Disability Tax Credit, may also be eligible to use the HBP, even if the other eligibility requirements are not met.

Withdrawing from your RRSP

When you find a home you want to buy, you put in an Offer to Purchase (with any conditions you want—a home inspection and/or time to confirm your financing being the most common). Once the seller agrees, you finalize the Agreement of Purchase and Sale (APS) and book your home inspector. At the same time, you can fill out Form T1036, take it to the financial institution that holds your RRSPs, and withdraw the amount you need for your down payment, once you have a firm and binding APS.

To withdraw funds from your RRSPs, using the First Time Home Buyers’ Plan, you must print a copy of Form T1036. Fill out Section 1 yourself then bring the form to the financial institution that holds your RRSPs, so they can fill in Section 2 and make your withdrawal.

Once the withdrawal has been made, your financial institution will send you a T4RSP form, which confirms how much you withdrew. You’ll need to reference this form in the income tax return for the year you made your withdrawal.

Repaying your Home Buyers’ Plan

Because the Home Buyers’ Plan is considered a loan, it must be repaid. You have to repay at least 1/15 of the amount you borrowed each year. Repayment begins the second year after your withdrawal, and the full amount must be paid off within 15 years of that date. For example, if you withdrew funds in 2019, your first year of repayment will be 2021.

If a condition is not met, after you have made the withdrawal, you will have to claim the amount as income on your personal income taxes and you will pay tax on it. If you’ve already submitted an assessment for the year you made the withdrawal, you will be required to submit a reassessment.

Zoocasa © 2007–2020

MLS Home Price Index Expanding

other

The MLS^® Home Price Index (HPI) will soon offer coverage from coast-to-coast.

The MLS^® HPI is the most advanced and accurate tool to gauge a neighborhood’s home price levels and trends.

There are currently 19 participating real estate boards, which represent more than two thirds of all Canadian resale housing activity, however that number is set to double in the near future.

The additional boards slated to join this year, including the Newfoundland and Labrador Association of REALTORS^®, will add more than 10% to the coverage of the MLS^® HPI based on national sales activity—covering the country from the Pacific Ocean to the Atlantic.

“We would like to congratulate the new boards joining the MLS^® HPI and offering their members access to the best price measure available. The expansion strengthens the national coverage of the MLS^® HPI and increases the value to all industry stakeholders,” says CREA Economist Chris Jokel.

The MLS^® HPI provides an invaluable source of timely, accurate and detailed price information for thousands more members and their clients after the expansion.

Average or median prices can change a lot from one month to the next and don’t tell a complete story.  They don’t consider how a home’s features, like the number of bedrooms or bathrooms, can affect its price—the MLS^® HPI does.

With the MLS^® HPI you get access to:

• home price trends for a specific type of house in a given neighbourhood;
• data on how a home’s features, like the number of bedrooms or bathrooms, affect its price; and
• a more accurate comparison of home prices across the country.

Watch The Video

Your expertise as a real estate professional, backed by the comprehensive data generated by the MLS^® HPI, can help you make better informed pricing decisions and validate your pricing recommendations as part of your comparative market analysis.

To unlock exclusive local market insights, talk to your local board or association.

© 2020 CREA

How agents can best serve their clients during and after the pandemic

Evelyn Anders
REM

With public health safety measures in effect across the country, real estate agents have been quick to find innovative ways to serve clients who need to buy, sell or rent a home during the pandemic. Here’s an overview of how agents can best serve their clients during this time while following local real estate board guidelines, plus a look at how these changes could impact the future of real estate sales.

Be the Voice of Reason:

In these unfamiliar times, clients are looking for clarity. With most people spending more time at home, you have an opportunity to reach out and check in with past and existing clients.

Not all clients are looking to buy and sell at this time and some may be directly impacted by the pandemic. Make sure you’re sensitive and helpful, no matter what their circumstances are. Some clients may just be curious about prices or market conditions in their area, so arm yourself with relevant data to facilitate these conversations.

When working with clients who do need to buy or sell right now, make them feel confident that you’re prepared with market knowledge and are well-informed on real estate board and association guidelines for operating in the current environment. Brush up on tools that facilitate virtual interactions, as this will be your lifeline to accessing clients and properties. Educate clients on the current guidelines for conducting showings and transactions, such as limited in-person contact, and keep clients updated as those guidelines evolve.

While it is important to showcase your expertise in these changing market conditions, also consider this an opportunity to simply check in and build meaningful relationships with them.

Go virtual, electronic and use COVID-19 clauses in offers:

It is important to educate clients on how technology is no longer optional but is necessary for the home-buying process. Many Realtors are pre-screening properties solo, recording videos or streaming showings to clients using their smartphones. These are great options in lieu of halted in-person open houses. Agents who are familiar with current technology will be a step ahead in servicing clients.

In addition to ensuring that technology-powered interactions are prioritized, pay extra attention to instructions in broker remarks. Here are examples of remarks you may see, or can consider using:

• In-person showings are not allowed for tenanted listings due to COVID-19.
• Live virtual tours and showings will be offered through smartphones provided either by the tenant, listing agent or buying agents due to COVID-19.
• Please insert the COVID-19 clause outlining that all offers shall be conditional upon viewing the property.

Technology can benefit your real estate practice beyond showings and client interactions. Going paperless by using electronic signatures for documents, and wire or electronic transfers for deposits and back-to-vendor cheques will help you streamline your business now and in the future. Speak to co-operating brokerages and your own brokerage in advance to ensure all parties support these types of transactions.

Another way to provide value to your clients during the pandemic is to use COVID-19 clauses in purchase and sale agreements to address potential delays in closing timelines or limiting in-person contact to protect yourself and your clients. Here are examples of conditions, but contact a lawyer and consult with your broker of record for specific direction:

• Make offers conditional upon the buyer or tenant inspecting the property in person.
• Acknowledge and agree to the use of electronic fund transfers and wire transfers when/if required.
• Acknowledge and agree to the use of electronic signatures by all parties.
• Acknowledge and agree to the requirement to close the transaction notwithstanding any impacts of COVID-19, excluding the closing of land registry offices and financial institutions.
• Acknowledge any keys shall be left in a lockbox at the property with the codes released upon transfer of ownership.

Post COVID-19 and brokerage operations:

As the COVID-19 situation improves and life goes back to normal, we may see technology continuing to play a bigger role in all aspects of real estate transactions. Perhaps virtual showings and virtual meetings are here to stay.

Despite the limitations on in-person interactions right now, technology has allowed clients and agents to continue working through all aspects of a real estate transaction seamlessly. It is possible virtual tools will remain for the long-term if they prove to be convenient, efficient and effective. If that happens, we may see a world in which training and licensing criteria for all brokers and agents are updated and adapted by provincial licensing bodies to set new standards of virtual-first service. Agents who take the time to update their virtual skills and adapt to these changing circumstances are already two steps ahead.

© 1989-2020 REM Real Estate Magazine

A survey indicates buyers waiting for the end of the pandemic

Ephraim Vecina
Mortgage Broker News

The results of a recent Ipsos survey suggested that accelerated borrowing and home-purchasing activity is just waiting in the wings to pounce upon the Greater Toronto Area housing market once the coronavirus crisis passes.

Polling found that 27% of respondents are likely to buy a house in the GTA within the next 12 months. The most likely to purchase in the near future are young professionals aged 18 to 34 (45%) and child-rearing households (37%).

“While COVID-19 has temporarily impacted home sales and listings in the GTA, the Ipsos survey results that show homebuying intentions have remained quite stable certainly suggest that many people will be looking to satisfy pent-up demand for ownership housing once recovery starts to take hold,” said Michael Collins, president of the Toronto Regional Real Estate Board. “As people gradually return to work, consumer confidence will improve, and a growing number of people will look to take advantage of very low borrowing costs to purchase a home.”

In a report earlier this month, RE/MAX predicted that elevated housing demand and prices remain likely in Toronto this summer despite the market lethargy brought about by COVID-19.

“We cannot be sure that this [slowdown] will continue into the summer and that prices will necessarily drop further,” RE/MAX said. “[TRREB] notes that the pause on activity will lead to more demand once measures loosen… We expect buyers who have been waiting patiently to continue their home search will quickly re-enter the market when we return to some normalcy.”

Copyright © 2020 Key Media

West opposes China’s move

Jessie Pang and Yew Lun Tian
The Vancouver Sun

Canada , the United States, United Kingdom and Australia scolded China on Thursday for moving ahead with a proposal for a new security law

China’s parliament approved a decision on Thursday to go forward with national security legislation for Hong Kong that democracy activists in the city and Western countries fear could erode its freedoms and jeopardize its role as a global financial hub.

China says the legislation will aim to tackle secession, subversion, terrorism and foreign interference in the city but the plan, unveiled in Beijing last week, triggered the first big protests in Hong Kong for months.

Canada, the United States, United Kingdom and Australia scolded China on Thursday for moving ahead with a new law that they said would threaten freedom and breach a 1984 Sino-British agreement on the autonomy of the former colony.

The four allied nations said in a joint statement that the new legislation would “curtail the Hong Kong people’s liberties, and in doing so, dramatically erode Hong Kong’s autonomy and the system that made it so prosperous.”

“China’s decision to impose the new national security law on Hong Kong lies in direct conflict with its international obligations under the principles of the legally binding, UN-registered Sino-British Joint Declaration.”

Riot police were out in force in Hong Kong as its lawmakers debated another piece of legislation, a bill to criminalize disrespect of China’s national anthem, while the United States piled on pressure aimed at preserving the city’s autonomy.

Dozens of protesters gathered in a shopping mall to chant slogans but there was no repeat of disturbances the previous day when police made 360 arrests as thousands took to the streets in anger over the anthem bill and the national security legislation proposed by China.

Last year, the city was rocked for months by often violent pro-democracy demonstrations over an unsuccessful bid to introduce a law governing extradition to China.

‘Two systems’

The Chinese government’s security law for the city is fuelling fear in Hong Kong and beyond that Beijing is imposing its authority and eroding the high degree of autonomy the former British colony has enjoyed under a “one country, two systems” formula since it returned to Chinese rule in 1997. It’s meant to operate under that framework until at least 2047.

Members of China’s mostly rubberstamp parliament, the National People’s Congress, in the Great Hall of the People to the west of Beijing’s Tiananmen Square, burst into prolonged applause when the tally showed 2,878 votes to one in favour of moving forward with legislation, with six abstentions.

Details of the law are expected to be drawn up in coming weeks. It is expected to be enacted before September.

Chinese authorities and the Beijing-backed government in Hong Kong say there is no threat to the city’s autonomy and the new law would be tightly focused.

China’s Premier Li Keqiang said the law would be good for Hong Kong’s long-term stability and prosperity and the “one country, two systems” formula would remain a national policy.

Conflict between China and the U.S. would harm both sides while both stood to gain from cooperation, he told a news conference.

Hong Kong’s Beijing-backed leader Carrie Lam said her government would work with Beijing to complete the legislative work as soon as possible.

“The law will not affect the rights and freedoms enjoyed by Hong Kong residents,” she said in a statement welcoming the Chinese parliament’s vote.

Democracy campaigners in the city were despondent, however.

“This is the death knell for Hong Kong, make no mistake of it, this is the end of ‘one country, two systems’ … the Hong Kong that we loved, a free Hong Kong,” pro-democracy lawmaker Dennis Kwok told reporters.

‘Show time’

The U.S., Britain and the European Union have also expressed concern about the security legislation and its implications for China’s freest city.

U.S. Secretary of State Mike Pompeo said on Wednesday Hong Kong no longer qualified for special treatment under U.S. law, potentially dealing a crushing blow to its status as a major financial hub.

The proposed security law was “only the latest in a series of actions” undermining Hong Kong freedoms, he told Congress.

“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” he said.

The security law could see Chinese intelligence agencies set up bases in the city.

Relations between the two countries have been tense over China’s claims in the South China Sea and trade, with the coronavirus pandemic adding to the acrimony.

“Already, international business is facing the pressure of increased tension between the U.S. and China, but the enactment of China’s security law for Hong Kong could take the tension to a whole new level,” said Tara Joseph, president of the American Chamber of Commerce in Hong Kong.

“This is show time for Hong Kong,” she said in a commentary in the South China Morning Post.

U.S. President Donald Trump has promised action over Hong Kong, with an announcement at the end of the week. More than 1,300 U.S. companies have offices in the city, providing about 100,000 jobs.

China said it would take necessary countermeasures against foreign interference in what it insists are its internal affairs.

Trump’s possible response could include visa and economic sanctions, David Stilwell, the State Department’s assistant secretary for East Asia, told reporters.

© 2020 National Post