As Hong Kong awoke to the first day of life under new national security laws imposed by Beijing, activists have called on residents to defy a ban on protests and take to the streets.

The calls came as the city’s leader, Carrie Lam, told a ceremony marking the 23rd anniversary of its handover to China on Wednesday that the laws were “the most important development in relations between central – HKSAR [Hong Kong Special Administrative Region] since the handover”.

On Tuesday, China passed a sweeping security law for the city, a historic move decried by many western governments as an unprecedented assault on the finance hub’s liberties and autonomy.

On Wednesday morning, Hong Kong politicians and dignitaries gathered in far greater numbers than those legally allowed by the city’s anti-pandemic measures for a flag-raising ceremony to mark the anniversary.

Lam gave her speech, saying the past year – which saw the city paralysed by protests – was “the most severe challenge” in her four decades of civil service, but said she believed such difficulties would pass with support from Beijing.

She then led the crowd in a toast, clinking champagne flutes with the Hong Kong and Beijing representatives lined up on stage. “To the success and affluence of our motherland to the prosperity and stability of Hong Kong – cheers!”

The mood differed outside, with protesters holding placards and burning signs referring to the new laws.

From the US, secretary of state Mike Pompeo issued a statement condemning the law. “The CCP [China Communist party] promised Hong Kong 50 years of freedom to the Hong Kong people, and gave them only 23,” said Pompeo.

Echoing the rhetoric of Beijing voiced earlier this year, Pompeo said the US would “not stand idly by while China swallows Hong Kong into its authoritarian maw”.

The US has imposed visa restrictions on Chinese officials linked to the security law, and committed to ending defence and technology exports, and will end Hong Kong’s special status treatment.

Australia’s foreign minister, Marise Payne, again expressed “deep concern”. “The people of Hong Kong will make their own assessments of how this decision will affect their city’s future,” said Payne. “The eyes of the world will remain on Hong Kong.”

Japan’s defence minister, Taro Kono, has warned China’s “unilateral attempt to change the status quo” might jeopardise a planned state visit by Xi Jinping. The timing for Xi’s state visit – delayed by the coronavirus – had yet to be finalised.

It remains unclear whether Hongkongers will heed the call to protest given the risks posed by the new security law – which came into effect overnight – and increasingly aggressive police tactics towards even peaceful gatherings in recent months.

The 1 July anniversary has long been a polarising day in the semi-autonomous city.

Beijing loyalists celebrate Hong Kong’s return to the Chinese motherland after a century-and-a-half of what many considered humiliating colonial rule by Britain.

Democracy advocates have used the date to hold large protests as popular anger towards Beijing’s rule swells. During last year’s huge pro-democracy demonstrations, the city’s legislature was besieged and trashed by protesters.

For the first time since 1 July flag-raising ceremony began 17 years ago, authorities have banned the annual democracy march, citing fears of unrest and the coronavirus – although local transmissions have ceased.

Ahead of the 1997 handover by Britain, China guaranteed Hong Kong civil liberties – as well as judicial and legislative autonomy – for 50 years in a deal known as “one country, two systems”.

The formula helped cement the city’s status as a world-class business hub, bolstered by an independent judiciary and political freedoms unseen on the mainland.

Critics have long accused Beijing of chipping away at that status, but they describe the security law as the most brazen move yet.

Passage of the legislation was speedy and opaque even by Beijing’s standards.

The law was passed in just six weeks, skipping Hong Kong’s fractious legislature, and the precise wording was kept secret from the city’s 7.5 million inhabitants even as it came into effect.

The law was finally published on Tuesday night. It outlaws subversion, secession, terrorism and colluding with foreign forces to undermine national security with sentences up to life in prison.

The new suite of powers radically restructures the relationship between Beijing and Hong Kong, toppling the legal firewall that has existed between the city’s judiciary and the mainland’s party-controlled courts.

China will have jurisdiction over “serious” cases and its security agencies will also be able to operate publicly in the city for the first time, unbound by local laws as they carry out their duties.

The United States, Britain, the European Union and the United Nations rights watchdog have all voiced fears the law will be used to stifle criticism of Beijing, which wields similar legislation to crush dissent on the mainland.

Beijing says the law will restore stability after a year of pro-democracy protests and will not end Hong Kong’s freedoms.

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