I'm not sure the incident could be exaggerated, given China's propensity to execute those convicted of corruption/embezzlement. They kidnapped a billionaire in another country with the likely intent to kill him sooner or later.
Hong Kong does not have an army (even US states have their own militias). It does not defend its own borders. It does not negotiate its own diplomatic affairs.
However, HK is still subservient to its parent government in terms of legal matters. Taking a foreign national would be a political affair that Hong Kong has no actual right to adjudicate.
The only thing Hong Kong has is a separate legal system, immigration control, and its own delegates in international bodies like the WTO.
If the story gets too big, the Chinese government might be forced to make an example of him.