Hong Kong's government said on Friday it rejected "unfounded and ridiculous" allegations made in policy reports from Britain and the United States of a deteriorating political and legal situation due to the city's sweeping national security law.

The United States and Britain released strongly-worded reports on Thursday detailing concerns about an erosion of freedoms in the global financial hub and the stifling of dissent in the city's legislature, civil society and media.

The reports come after...