The homegrown legislation is set to become the city's second national security law, following the one Beijing imposed in 2020 after quashing huge and sometimes violent democracy protests.
The "Safeguarding National Security Bill" was formally introduced at the city's opposition-free legislature on Friday morning for vetting.
Security chief Chris Tang told lawmakers there was a "genuine and urgent need" for the new law.
"Hong Kong had faced serious threats to national security, especially the colour revolution and black-clad violence in 2019, which was an unbearably painful experience," he said, referring to the democracy protests.
Legislative Council president Andrew Leung vowed lawmakers would "spare no effort and work together to plug the national security loophole as soon as possible".
The bill lists five new categories of offences -- treason, insurrection, espionage and theft of state secrets, sabotaging national security and external interference.
Authorities have proposed life imprisonment as the maximum penalty for treason, insurrection, sabotage endangering national security, and incitement of members of China's armed forces to mutiny.
The bill also reworks Hong Kong's colonial-era crime of "sedition" to cover inciting hatred against China's Communist leadership and socialist system, while upping the maximum penalty from two years to 10 years.
The process has been fast-tracked, with the bill unveiled nine days after a month-long public consultation ended last week.
As legislators discussed the bill Friday, activist Alexandra Wong, also known as Grandma Wong, was the sole voice of opposition outside the government headquarters.
"For such an important bill, how can they spend just over a month to (consult) the public?" she told AFP while being watched by a dozen police officers.
"Even lawyers who specialise in national security won't get it, not to mention ordinary citizens like me," Wong said, calling the draft bill "ridiculous".
But China's foreign ministry spokesperson Mao Ning said the draft bill "balances the need to safeguard national security and the protection of rights, freedom and economic development," deeming it a "prerequisite for Hong Kong's long-term prosperity".
A European Union spokesperson told AFP that the law "risks exacerbating the erosion of fundamental freedoms" in Hong Kong and that "some definitions and provisions... raise grave concerns".
The United States consulate in Hong Kong said it would "look carefully" at the final law and its implications for US citizens, investments and companies operating in the city.
- 'Deeply disturbing' -
Under the proposed bill, authorities could apply to the court to detain an arrested person for up to 16 days without charge and bar them from consulting with lawyers during their detention.
As with its predecessor, it states that offences committed outside Hong Kong fall under its jurisdiction.
And in a section closely watched by Hong Kong's foreign business community, the draft provides a multipronged definition of "state secrets" that covers not only technology but "major policy decisions" and the city's "economic and social development".
It also criminalises the unlawful acquisition, possession and disclosure of state secrets, though it offers a "public interest" defence under specific conditions.
Authorities said the public submissions received during the consultative process revealed support from a majority.
But concerns have been raised by NGO workers, foreign businesses and diplomats, with critics saying the existing security law has already eviscerated Hong Kong's political opposition and civil society.
The British consulate in Hong Kong on Friday urged the government "to allow time for proper legislative scrutiny" and urged that the law "uphold basic rights and freedoms".
Sarah Brooks, China director of rights group Amnesty International, criticised Hong Kong for "taking repression to the next level".
A previous attempt in 2003 to introduce Article 23 legislation was dropped after half a million Hong Kongers took to the streets in protest.
Since the Beijing-imposed security law came into force, nearly 300 people have been arrested and more than 170 charged.
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