Hosting outside of Hong Kong is important. Hong Kong can't impound the servers if they're outside the territory, without the cooperation of the server owner/operator or the government where it resides.

Of course, if the owner/operator has employees or assets in Hong Kong, those could be held to elicit cooperation.

It matters a bit, but not that much. Failure to comply comes with a maximum fine of HK$100,000 (US$ 12,500), plus six months imprisonment for service providers. [0]

If HK police repeatedly fine a company, the company may have to stop serving HK or even China.

[0] https://news.rthk.hk/rthk/en/component/k2/1536151-20200706.h...

I think Canada suspended their extradition treaty to protect against this threat.

Companies still serving to HK might be screwed anyway.

I was saying that wrt companies who had infra in HK which was serving traffic outside HK. It might make sense to not keep that in HK anymore.