China votes for Hong Kong security law as US tensions rise

China's parliament has voted overwhelmingly to impose a national security law on Hong Kong in a move that has unnerved markets and threatens to increase tensions between Beijing and the US.

The National People's Congress voted 2,878 to 1 in favour of its standing committee drafting the legislation with six abstentions. Legislators in the Great Hall of the People applauded when the vote was projected onto screens, Reuters reported.

The proposed law's stated aim is to thwart "secession, subversion and terrorist activities". Critics say it undermines Hong Kong's constitution, agreed when the UK handed the city back to China in 1997, which guarantees freedom of speech, association, assembly and demonstration.

Hong Kong was given a high degree of autonomy in the handover agreement - an arrangement known as "one country, two systems". That deal has come under strain as protests against Beijing's interference have angered the Chinese government.

The surprise announcement on 22 May hit market confidence as investors feared a new wave of anti-China protests and limits on economic and business freedom. Hong Kong was affected by months of unrest in 2019 over Beijing's interference in its way of life.

Hong Kong's Hang Seng index was down 0.7% to 23,133 at 09:16 BST, taking its drop since the law's announcement to almost 5%. In London the shares fell of HSBC and Standard Chartered, banks with large Hong Kong operations.

Carrie Lam, Hong Kong's leader, has said the law will not hurt citizens' freedoms. Lam's critics say she is too close to Beijing.

The law is increasing friction between China and the US. Mike Pompeo, the US secretary of state, said the law means Hong Kong is no longer autonomous from China in a clash at the UN. That could lead to Hong Kong losing its special trading status with the US and threaten its position as an international financial centre.

Neil Wilson, chief market analyst at Markets.com, said: "Tensions are showing signs they could boil over. We cannot play down the importance of an embattled US president facing a national crisis at home in an election year – one he can blame on his chief geopolitical adversary."