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The cash crunch at Hong Kong's Apple Daily: 5 things to know

Critical newspaper on verge of closing after authorities freeze company accounts

Next Digital has warned it will have to stop printing Apple Daily after Saturday's edition unless funds are released to pay its 2,000 staff.    © AP

HONG KONG -- Two years before Britain was scheduled to hand Hong Kong back to China, businessman Jimmy Lai, who had made his fortune from clothing chain Giordano, boldly entered the city's crowded newspaper market in 1995 by founding Apple Daily with a commitment to "defy the fear."

Worries about the outlook for press freedom under Chinese rule are now proving well-founded. After two police raids on Apple's offices, the arrests of Lai and several top editors and executives, and the freezing of several of its bank accounts, the cash-starved paper is signaling the likely publication of its final edition later this week.

Here are five things you need to know about the embattled pro-democracy newspaper:

1) Why is Apple Daily running out of money?

Apple Daily has been struggling financially for years, despite long claiming to have been the city's most widely read paid newspaper. Due to declining newsstand sales and an advertising boycott by pro-Beijing businesses and the government, parent company Next Digital has recorded five straight years of net losses.

Although Apple's 600,000 online subscribers have helped provide stable revenue, the company still posted a loss of 146 million Hong Kong dollars ($18.8 million) for the six months through Sept. 30.

The prolonged losses led Lai, who still owns 71% of Hong Kong-listed Next Digital, to extend HK$765 million in unsecured loans to keep the newspaper afloat.

While Lai's stake and a number of his bank accounts were frozen by authorities in May in relation to charges he faces of "collusion with foreign forces" under the city's national security law, the final blow for Apple appears to have come from the government's move to block HK$18 million in the accounts of three company subsidiaries last week on allegations that the units were also involved in violations of the law.

With banks warned against dealing with Next accounts, the company is having difficulty collecting payments due.

2) Will the authorities release the frozen assets?

Next Digital's board of directors appealed to Hong Kong's Security Bureau on Monday to release at least part of the frozen funds by 11:59 p.m. on Friday so that the company can pay its 2,000 employees, saying that failure to secure the funds would lead to the immediate closure of Apple after the printing of Saturday's morning paper.

Apple Daily appears to be placing little hope in the appeal's success, halting updates to its online English and financial news feeds in recent hours. A court on Saturday denied bail for Apple Editor-in-Chief Ryan Law and Next Chief Executive Cheung Kim-hung over charges that the paper broke the security law with the publication of some 30 articles seen as calling for sanctions on Hong Kong or China by foreign governments and institutions.

Ryan Law, center, Apple Daily's chief editor, was one of five top editors and executives of the paper and its parent company arrested on June 17.   © AP

Asked by reporters on Tuesday morning if the government would release the frozen funds, Hong Kong Chief Executive Carrie Lam said only that she would "act in accordance with law," before adding that company staff would be "properly protected" under the city's bankruptcy and liquidation laws. Local newspapers controlled by Beijing have reported that the plea for funds will be rejected given the seriousness of security law charges.

3) Why has the paper been targeted by the authorities?

The outspoken newspaper, long a thorn in the side of authorities, has often run articles critical of the Chinese and Hong Kong governments and supportive of the city's democracy movement. People's Daily, the Chinese Communist Party's official newspaper, has called Apple a "propaganda machine" and a "dangerous political organization" in commentaries, with Lai a particular target.

During citywide anti-government protests in Hong Kong in 2019, Apple Daily openly urged citizens to take part in demonstrations, with printed inserts designed for use as protest signs.

On Tuesday, Lam hit back at international criticism over the crackdown on Apple. "Don't try to accuse the Hong Kong authorities of using the national security law as a tool to suppress press freedom," she said. "Don't try to beautify these acts of endangering national security."

4) Will the end of Apple Daily mean the end of Next Digital?

The closure of Apple Daily is likely to spell the end as well for other Next Digital businesses in Hong Kong, including online magazine Next Magazine and other lifestyle titles and multimedia platforms, according to company sources.

However, Apple Daily's online newspaper in Taiwan may possibly be spared, though not without further job cuts. Next Digital ceased publication of the print edition of the Taiwan paper last month.

It earlier sold its TV operations on the island and scaled back its news animation center there, both of which had failed to live up to Lai's business ambitions. Trading in shares of Next Digital has been suspended since last week's arrests.

5) Are other Hong Kong media also at risk of prosecution?

While Lam and other senior officials insist "normal journalistic work" can continue as usual, industry veterans and scholars see further crackdowns on independent news outlets as likely.

The Hong Kong government has already tightened its grip over public broadcaster RTHK with a recent management overhaul, a purge of its programming and archives, and the ouster of critical staff.

New regulations limit journalist access to public databases, with Lam also talking of plans for a "fake news" law to stamp out "disinformation." An RTHK producer was convicted in April for improperly accessing a transport department database as part of an investigative report.

In a recent TV interview, Security Secretary John Lee warned of forces attempting "soft penetration" of the media and the risks of promoting messages that support independence or pose security threats.

"There is a paradigm shift in the post-security law era," said Rose Luqiu, an assistant journalism professor at Hong Kong Baptist University. "The authorities are now acting increasingly similar to their counterparts in mainland China. No negative news is allowed."

Additional reporting by Kenji Kawase

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