A corruption crackdown at a powerful Chinese state-owned enterprise has spilled over into Hong Kong, where employee passports were seized in the latest sign of the extraterritorial reach of China’s Communist party.

Staff at several subsidiaries of China Huarong Asset Management in Hong Kong were required last Friday to surrender personal travel documents to the company by Monday this week or face unspecified punishments, according to emails and documents obtained by the Financial Times.

The demand followed news last week that Lai Xiaomin, Huarong’s chairman, was under investigation by Chinese authorities for “severe disciplinary violations”, a phrase that usually refers to corruption.

The allegations against the 55-year-old, who had run the bad debt investor since 2012, have not been disclosed. Huarong has previously declined to comment on Mr Lai’s situation and did not respond to questions regarding employee passports.

The demand for passports was specific to staff who came from China to work for the company in Hong Kong but do not hold permanent residence status in Hong Kong. The FT has learnt that some employees have complied with the requests.

The confiscation of employee passports is a breach of Hong Kong law, according to the territory’s Labour Department. An officer at the department said that “nothing gives employers the power to force employees to involuntarily hand over their travel documents”.

Demand to surrender employee passports came from Huarong’s “Organisation Department”, an office that answers to a ministry-level body controlled by the Communist party. The department, installed in all state companies, is similar to a human resources office but takes direction from its Beijing office.

Huarong has seven subsidiaries in Hong Kong, employing hundreds of people.

In China, such actions by state-owned groups are common. Companies within China often halt employee travel when they come under scrutiny from the Central Commission for Discipline Inspection, the body leading President Xi Jinping’s anti-corruption crackdown that was launched more than five years ago.

“I think it is actually normal to ‘freeze’ the whole organisation when the top leader is under investigation,” said Zhu Jiangnan, an associate professor at the University of Hong Kong, who studies corruption in China. “The rationale is probably to prevent other persons involved from fleeing and also wealth transfer.”

Hong Kong, a former British colony, is not subject to the same laws as China. The city of 7m people is a Chinese territory but has its own “mini-constitution”, called the Basic Law, guaranteeing it a high degree of autonomy from Beijing.

However, in recent years many of the legal barriers between the two jurisdictions have been eroded.

While Chinese police have no legal right to operate independently on Hong Kong soil, a bookseller was abducted by Chinese authorities from the territory in 2016. The following year, tycoon Xiao Jianhua was kidnapped from the city’s Four Seasons hotel and taken back to China. He has not been heard from since.

Top leaders in Hong Kong have shrugged off the violations of the Basic Law, deferring to Beijing’s power.

In 2014, President Xi launched Operation Fox Hunt, a global project that has co-operated with other countries to bring home Chinese citizens suspected of corruption that have fled overseas.

“China has extended the reach of its anti-corruption campaign, certainly in the sense of attempting to repatriate fugitives,” said Minxin Pei, the director of the Keck Center for International and Strategic Studies at Claremont McKenna College, and an expert of governance and corruption in China. “Since Hong Kong has hundreds of [state-owned enterprises], I am not surprised that they are now under scrutiny.”