He added that while police treated him "politely," and he was surprised to be released on bail within 48 hours, the general feeling among the population in Hong Kong is overwhelming, and people are angry.
"Whatever comes, it will be OK," he said in an interview with FOX Business' "Mornings with Maria."
Police arrested Lai, the founder of the Hong Kong media company Next Digital, for "colluding with foreign powers," activist Samuel Chu tweeted on Monday.
He said the National Security Law — which went into effect in June to give the Chinese government more control over the nation-state's residents and stifle protesters — is a "blunder" that "got a strong reaction from the international community."
Some business leaders are thinking about moving their businesses away from Hong Kong, Lai explained, citing a new poll, because the new law also gives authorities the right to raid a business without a search warrant. Police raided the headquarters of Lai's newspaper, the Apple Daily, on Monday.
Once authorities carry out these initial acts of intimidation such as his arrest, Lai believes Hong Kong will go on as before.
"We need China as a partner in the world because this is beneficial to the world and to China. The only thing we need is to have China assimilate into the values of the world, and they have to realize that," Lai said.
He said the new law is excessive.
"The National Security Law is so draconian," Lai said. "Any time they can take you to China—for 10 years or for life—that's something very dreadful, and people are very afraid. ... People are really scared now."