Hong Kong has been removed from an annual index of the world's freest economies because the think-tank that compiles the league table said the city was now directly controlled by Beijing.

The announcement is a reputational blow for Hong Kong and comes as Beijing ramps up its bid to quash dissent after huge and sometimes violent pro-democracy demonstrations in 2019.

The Heritage Foundation, a conservative US think-tank, publishes an annual Index of Economic Freedom ranking countries and territories for how business-friendly their regulations and laws are.

Over the last 26 years, Hong Kong topped the table for all but one year -- a source of pride to the city's government which often used the accolade in its official press releases and investment brochures.

But when the 2021 ranking is released later on Thursday, Hong Kong will not appear because the report's authors believe the city is no longer independent enough of Beijing to justify separate inclusion.

"The loss of political freedom and autonomy suffered by Hong Kong over the past two years has made that city almost indistinguishable in many respects from other major Chinese commercial centres like Shanghai and Beijing," Edwin J. Feulner, the founder of the Heritage Foundation, wrote in the Wall Street Journal on Wednesday.

"[Hong Kong's] ties to Beijing are increasingly forged in steel," Feulner added, while its pre-handover "traditions of English common law, freedom of speech, and democracy have weakened significantly".

Hong Kong's financial secretary Paul Chan criticised the decision on Thursday.

"When they arrived at that decision, they must have been clouded by their ideological inclination and political bias," Chan said during an online conference, according to Radio Television Hong Kong.

- Once embraced -

The Heritage Foundation is one of the major policy think-tanks that influences fiscal conservatives in the United States.

Feulner is also a vocal critic of Beijing and chairman of the Victims of Communism Memorial Foundation.

Hong Kong's pro-Beijing government embraced the think-tank's league table each year it came out.

Back in 2019 -- when Hong Kong topped the table for the 25th consecutive year -- finance chief Chan said it showed the city's "economic resilience, high-quality legal framework, low tolerance for corruption, high degree of government transparency, efficient regulatory framework and openness to global commerce".

Last year the city fell from the top spot for the first time, replaced by rival Singapore, after Beijing imposed a sweeping national security law on Hong Kong.

The city's commerce chief at the time brushed off concern and predicted Hong Kong would soon return to the top of the table.

Instead it -- and neighbouring Macau -- will be counted as part of China which currently languishes in 107th place in the ranking, between Uganda and Uzbekistan, in a section where economies are rated as "mostly unfree."

Beijing says the security law was needed to restore stability to Hong Kong.

But it has also dramatically altered Hong Kong's legislative and judicial relationship with the authoritarian mainland.

Chinese leaders have announced they want to ensure only "staunch patriots" run the city, including within the city's independent judiciary.

That has created some jitters within the international business community, especially as Beijing falls out with a growing list of western powers.

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