The State Council's Hong Kong and Macau Affairs Office, Beijing's top-level body overseeing the city, said the law would "build a firm institutional foundation for the stability and longevity of "One Country, Two Systems".
Her comments are likely to anger demonstrators and fuel protests that have resurged in recent weeks following months of disruption leveled by the virus.
But in Hong Kong, this law is seen as the most direct codification of Beijing's control over the city.
On internet threads and chat apps used by the pro-democracy movement, there were calls to resume the protests of past year that were largely subdued in recent months because of coronavirus restrictions.
President Donald Trump has said the USA would react strongly if China followed through with its proposals, without giving details, the BBC reported. "If it happens, we'll address that issue very strongly", Trump said.
Hong Kong's government is bound by Article 23 of the Basic Law, its constitution, to enact laws to prohibit any act of treason, secession, sedition or subversion against China. It also provides that rights and freedoms, including those of the person, of the press, of assembly, of association and others, will be ensured by law in Hong Kong, and that the provisions of the two United Nations covenants on human rights (the International Covenant on Civil and Political Rights and International Covenant on Economic, Social and Cultural Rights) shall remain in force.
The Hong Kong dollar, which has been at the strong end of its trading band with the USA dollar for several weeks, also dropped as dealers began selling the unit.
A spokesman for the Chinese foreign ministry's office of the commissioner to Hong Kong said in a statement Pompeo's actions can not scare the Chinese people and that Beijing will safeguard its sovereignty, security and development interests.
"If Beijing can with impunity rip (up) an worldwide agreement registered with the United Nations at will without being held accountable for it, Beijing would thereby be encouraged to break more global agreements with other countries", Lee said. "No country will allow separatist activities and other activities endangering national security on its territory".
He warned that if the legislation is passed in the territory, "Hong Kong police or secret agents can use this to arrest people or prosecute people or even extradite Hong Kongers from Hong Kong to China".
"Traders around the world are playing the waiting game to see details of the new Hong Kong law to gauge how severe the terms are", said Stephen Innes of AxiCorp. "It is very important for Hong Kong to prosper stably on the basis of 'one country, two systems.' I want to emphasize this again".
"The United States condemns the. proposal to unilaterally and arbitrarily impose national security legislation on Hong Kong", Pompeo said in a statement.
But the increasingly notable national security risks in the HKSAR have become a prominent problem, the document says, citing activities that have seriously challenged the bottom line of the "one country, two systems" principle, harmed the rule of law, and threatened national sovereignty, security and development interests. His colleague Tanya Chan added that this was the "saddest day in Hong Kong history".
In a statement, she announced that the Hong Kong government will "complete the legislation as soon as possible to discharge its responsibility of safeguarding national security".
Other reporters remarked that Chinese officials "probably wouldn't expect BBC World News to be leading the morning bulletins in Europe not with the coronavirus or GDP, but national security in Hong Kong".
Activist Wong said he has "no doubts at all" Beijing "will continue to crack down on Hong Kong people who fight for democracy and freedom" and vowed protesters will take to the streets until their voices are heard.
Some democratic lawmakers also protested during an afternoon committee meeting at the Legislative Council.