HONG KONG -- Hong Kong's expanding crackdown on media companies and other sectors appears to have reignited Japanese companies' concerns over the city's business environment about a sweeping national security law that came into force last year.

In the latest quarterly survey by the Japanese consul general, the local office of the Japan External Trade Organization (JETRO) and the Hong Kong Japanese Chamber of Commerce and Industry, 56.5% of respondents said they are either "very worried" or "worried" about the national security law.

Imposed by Beijing last June, the law prescribes criminal penalties of up to life imprisonment for those found guilty of separatism, subversion, terrorism or collusion with foreign powers.

When the quarterly corporate survey first asked about the security law a year ago, 81% of respondents indicated wariness over it, in part because little was known about its content or likely impact on business.

The level of wariness had slipped to slightly over 50% by the time of the previous quarterly in April. Those who felt "not so worried" rose to more than 40% then.

But in June, the pro-democracy Apple Daily newspaper was forced to shut down after the arrest of top executives and editors and the freezing of company bank accounts in relation to allegations of collusion with foreign forces.

Now, Hong Kong authorities are working to introduce a data protection law that critics say will stifle freedom of expression online. The Asian Internet Coalition recently expressed "serious concerns" over the law, which would give regulators vast powers to curb what the authorities describe as "rampant doxxing activities."

Tomohiro Takashima, director general of JETRO Hong Kong, told reporters on Monday that such developments likely impacted the survey results.

"Wariness over freedoms of the press and expression could have been heightened," Takashima said. The survey was conducted between July 2 and 9, and 280 companies responded.

When asked to say why they were worried about the law, 79% of respondents said they were afraid the free flow of information would be restricted. This was followed by fears of Hong Kong losing its rule of law and judicial independence (60%) and talent leaving the city which could make it difficult to retain and secure competent staff (58%).

Early signs of the impact on human resources have started to emerge. Of the 43 respondents who said they were feeling negative impacts form the national security law, 17 said this was because employees had emigrated from Hong Kong. Two others said clients or business partners had left the city.

Never had the survey before generated so many responses of this nature, Takashima said. Loss of employees seems to focused on the finance, electronics and the precision equipment sectors, he said, suggesting that "people with portable qualifications and skill sets are leaving."

Hong Kong's airport has seen a revival in activity in recent weeks, as families fly out following the end of the local school year, amid concerns about tightening government controls over school textbooks, curriculum and teaching. Hong Kong Chief Executive Carrie Lam said this month that Beijing's top policymaking official overseeing city affairs had directed her government to enhance "guidance, supervision and regulation" of schools and further promote national security education.

Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis, wrote in a note to clients on Monday that emigration will be "one of the lingering concerns" for the Hong Kong economy as it could "affect the talent pool and exert pressure on property prices, especially accompanied by capital outflows."

She said that there is so far "little evidence to support the worries that emigration has materially hit Hong Kong's economy," at least on housing prices and financial stability. However, she noted that though the consequences "may approach slowly but the impact can be large."

On top of worries over the national security law, the coronavirus pandemic is adding to pressure on Japanese businesses in the city. Pandemic controls on travel to and from mainland China and Japan are the top two troubles that they are facing, with both cited by more than 70% of respondents.

While 62% said they are expecting to maintain their operations in Hong Kong, 25.5% said they will either cut back, withdraw or review the functions of their local operations. Takashima said many of these companies are beefing up their presence in mainland China or in Southeast Asia to be closer to clients.

Masakazu Yagyu, secretary-general of the Japanese Chamber, said the organization's membership had fallen nearly 10% since April 2020 to 585 companies. This compares with a peak of 787 three months before Hong Kong's return to Chinese rule in 1997 and marks the first time since 1990 that membership has fallen below 600.

Leaving the chamber does not necessarily mean withdrawal from Hong Kong, though, with Yagyu remarking that membership was "being obviously impacted by coronavirus."

In terms of the outlook for Hong Kong's business environment over the next year, 25.1% of respondents said it will either deteriorate or significantly deteriorate, while only 12.7% expect improvement. The top three reasons for pessimism stemmed from the darkening outlook for the "free flow of information," "securing talent" and "operation of rules and regulations."