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SYDNEY—Australia is suspending its extradition treaty with Hong Kong and giving town’s residents a pathway to staying completely in response to China’s determination to impose new national-security laws, a transfer more likely to additional inflame tensions with Beijing.

Prime Minister Scott Morrison stated Thursday that the national-security legislation constituted “a fundamental change of circumstances in respect to our extradition agreement with Hong Kong” and that Australia had formally notified Hong Kong and Chinese authorities of the…

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