South Korea’s Naver relocates Hong Kong data centre to Singapore

One of South Korea’s biggest technology companies is abandoning Hong Kong as a base for data storage because of privacy fears.

Naver — a Google rival that dominates the South Korean market for web services and owns a majority of Japan-based WhatsApp competitor Line — confirmed it was relocating its data back-up centre from Hong Kong to an expanded site in Singapore.

The move is the first by a major foreign tech group to formally retreat from the territory in response to China’s new national security laws, analysts said.

Silicon Valley giants including Facebook, Twitter and Google are reviewing their operations in Hong Kong in response to sweeping new controls imposed by Beijing this month that bring Hong Kong’s internet within mainland China’s Great Firewall.

“We have recently made the decision, considering various factors, including Hong Kong’s National Security Law,” Naver said.

Its exit comes amid widespread concern among foreign groups that they will be forced to hand over private user data to Hong Kong authorities as well as face censorship by the Chinese Communist party. Similar fears have stopped many US tech companies from operating within China for years.

Claude Achcar, the Hong Kong-based managing partner of Actel Consulting, a technology advisory group, said Naver’s move was further evidence the world is becoming firmly divided between two tech “poles”, the US and China.

“It is difficult to make the claim for Hong Kong being Asia’s world city when it is being pulled firmly into the China pole . . . Non-China tech will expand elsewhere,” he said.

Facebook, Google and Microsoft were among companies that this month temporarily blocked Hong Kong’s government from accessing user data as they assessed the implications of the new law. The US tech groups, most of which have data centres in Hong Kong, are locked in negotiations over a proposal to give regulators in the territory access to customer banking records.

Several smaller internet server groups have also this month shut down their Hong Kong VPN servers, which are commonly used to circumvent Beijing’s internet controls.

Analysts say some companies will be forced to move infrastructure out of the city rather than compromise their privacy obligations to clients. 

In one case, the US government itself has taken action. Last month the US justice department warned against linking a planned high-speed internet cable between Hong Kong and the US on the basis that it could expose global data to China. The Pacific Light Cable network, backed by companies including Google and Facebook, would have been the first direct connection between the US and Hong Kong.

However, Mr Achcar added that despite a potential exodus of foreign tech groups, Hong Kong would benefit from fresh Chinese investment.

Still, the decision by Seoul-based Naver highlights the potential that other companies and investors could similarly shift operations and assets to Singapore, as Hong Kong loses its lustre as the region’s leading low-tax financial centre and a key tech and trade hub as Beijing tightens control.

The Hong Kong government did not immediately respond to requests for comment.