The witness, Cheung Kim-hung, said Lai believed a proposed law that would allow people in Hong Kong to be sent to China to face trial in courts controlled by the Communist Party would be used to crackdown on the territory's democracy and freedoms.

According to Cheung, Lai said "the business community was very much concerned" and "if the law was enacted, media would not survive".

The bill was later withdrawn by the government. But mass demonstrations over the bill evolved into pro-democracy protests that rocked the city for months.

Lai, 76, founder of the now defunct pro-democracy tabloid Apple Daily, has pleaded not guilty to two charges of conspiracy to collude with foreign forces and a lesser charge of conspiracy to publish seditious material.

For years an outspoken critic of China's Communist Party, Lai is the highest profile figure to face prosecution under the security laws that Beijing imposed on the financial hub in 2020.

"PRESSURE THE GOVERNMENT"

Cheung, former CEO of Apple Daily's parent company, Next Digital, said Lai gave him instructions to "use Apple Daily to call people to take to the streets, to demonstrate, and to pressure the government".

He told the court that the image of Lai "was all along very clear, who pursued democracy, freedom and was anti-totalitarian".

Cheung added that Lai had a view of "getting the attention of Western democratic countries, hoping that they could provide assistance, and even take stronger actions, including imposing sanctions".

Lai's trial is being closely watched by diplomats.

Hong Kong's former colonial ruler Britain and the United States have called for Lai's immediate release, saying the case is politically motivated. Hong Kong officials say Lai will receive a fair trial.

Both Chinese and Hong Kong officials have said the national security laws were vital to restoring stability in Hong Kong. They punish acts of subversion, secession, terrorism and collusion with foreign forces with up to life imprisonment.

Other prosecution witnesses include Apple Daily's former associate publisher Chan Pui-man, former editorial writer Yeung Ching-kee, activist Andy Li and a paralegal Chan Tsz-wah. They have all pleaded guilty and will be sentenced at the end of the trial.

(Reporting by Jessie Pang, Edward Cho and Dorothy Kam; Editing by Greg Torode, Neil Fullick and Ros Russell)

By Jessie Pang and Edward Cho