Do protests in Hong Kong threaten its position as ‘Asia’s Financial Hub'?
Palakshi Sharma
Though the autonomous city of Hong Kong has been complaining of Chinese intervention since the enactment of the ‘one country, 2 systems’ agreement, the dissatisfaction and civilian unrest has become more severe and noticeable recently. Protests in the Hong Kong city were initially sparked by the proposed changes to a law that would have allowed extradition to mainland China. Soon, the protestors morphed into broader anti-government demonstrations that include five major demands such as greater democracy and universal suffrage.
There is no doubt in the fact that the unrest in Hong Kong has started to severely affect its position as one of the top global financial centres in the world.
Short term impacts-
While the protests grind on, the short-term economic consequences for the people of Hong Kong have started to mount since early 2019. A drop in consumer spending on non-essential goods is one of the most visible signs of its impact. The threat of violence on the streets and closures of shops had sent retail sales down nearly a quarter the previous year.
The protests hit the city's hospitality and food and beverage industries particularly hard. Many people stopped going out, fearful that if they strayed too far from home they would find themselves accidentally caught up in a demonstration or cut off from public transportation.
The protests, amidst the tensions of the US-China trade war, sent the Hong Kong economy into a recession for the first time in a decade.
Tourism sees a big hit-
Though the pandemic has affected the tourism industry in the entire world this year, Hong Kong is facing its share of blow from much before that. Tourism has a significant impact on the Hong Kong economy – in 2017, accounting for 4% of Hong Kong’s GDP, generating 2,57,100 jobs (7% of Hong Kong’s employment) with 64.15 million visitors in 2018.
Months of running battles between pro-democracy campaigners and local government had deterred many tourists, Ultimately, the protests of Hong Kong have created many economic consequences, such as the 18 billion HK dollar decrease in retail sales between Quarter 1 and Quarter 3 of 2019, which was caused by the lack in tourism due to travel safety concerns to the area.
Long term costs-
The long-term costs of the protests are much harder to quantify. One of them involves Hong Kong’s status as a hub for international companies seeking to do business in China or the region. International companies have historically chosen to set up their businesses in Hong Kong, both because of its desirable location and its perception as a haven where the rule of law is strong, particularly compared with China.
But that’s been changing now as more international businesses opt to move their headquarters to the mainland as its economic power has grown. If China seeks to resolve the protests by taking more control over Hong Kong – which would likely erode its attractive legal environment – multinational companies would have one less reason to keep the city as their regional foothold.
The United Kingdom jumps in-
British Prime Minister Boris Johnson declared that, in response to Beijing’s actions, the UK would alter its existing visa policies, essentially paving the way to naturalised British citizenship for 3 million Hong Kongers.
Several Hong Kongers are sceptical about this commitment as the U.K. has not yet explained how it will accommodate mass migration amid struggles with Brexit negotiations, COVID-19, budget cuts, and a shrinking economy.
Even the Mainland Chinese travellers have stopped going to Hong Kong. Chinese arrivals usually account for 70 per cent of visitors to Hong Kong, but their numbers fell by 29 per cent over the same period. The hotel occupancy rate dropped to 63 per cent in September, a decade low according to data from the Hong Kong tourism board.
Brain Drain
The recent political build-ups and violent anti-government protests have discouraged several Hong Kongers to emigrate, hoping for a better quality of life overseas. “The more China grips Hong Kong, the more it is likely to squeeze out the talent overall,” a Hong Konger interviewee stated to the South China Morning Post team.
So for Hong Kong, if not the virus, then protests have taken its previously blooming economy into recession. Things keep going downhill for ‘Asia’s Financial Hub’ as it faces a double threat of the coronavirus pandemic and persistent anti-government protests. But, as of now, only one thing seems to matter to the Hong Kongers. In the words of a Hong Kong protester- “I don’t mind losing money to support certain ideals.”. Cheuk-Yan Lee, general secretary of the Hong Kong Confederation of Trade Unions, which supports the protest movement, said “What will really hurt Hong Kong is not a brief drop in consumption but a loss of faith from global investors,” he said. “Instead of suppressing the protests, the government needs to revive confidence in the rule of law. Otherwise, we will just end up being another Chinese city.”
Reference links:
1. https://theconversation.com/how-hong-kongs-protests-are-affecting-its-economy-122098
2. https://edition.cnn.com/2020/02/03/business/hong-kong-economy-coronavirus-intl-hnk/index.html
5. https://theconversation.com/how-hong-kongs-protests-are-affecting-its-economy-122098
6. https://www.theatlantic.com/ideas/archive/2020/09/hong-kongers-dont-idolize-the-uk/616407/
8. https://www.nytimes.com/2019/10/13/world/asia/hong-kong-protest-economy.html
10. Image 2- US News & World Report
11. Image 3- CNBC.com
12. Image 4- Nikkei Asia