Hong Kong economy
October 24, 2014
Protesters in Hong Kong have occupied various positions in the city for over 26 days now, and with talks being called off twice in recent weeks there are no signs that the pro-democracy protests will be ending soon.
Tuesday’s talks between student protest leaders and government officials brought little progress, it was reported, and it is not just idealism which is taking a hit.
Asia economist Gary Leather of the UK-based economic research consultancy Capital Economics has announced that effects of the protests have been felt by the retail and tourist industries. Mr Leather has attributed the gentle downturn in tourism to the region to the protests, believing they are putting off potential visitors, whilst shoppers have found it difficult to gain access to the area around Mong Kok – a favourite shopping area for mainland tourists.
Mr Leather has emphasised that, despite the protests coming at a time when Hong Kong’s economy had been struggling, the retail and tourism sectors account for around 30 percent of the territory’s GDP. Financial sector workers have certainly been inconvenienced by having key roads shut down, but otherwise the impact on the financial sector has so far been limited. If the protests recede in the near future, Mr Leather is convinced that any permanent damage to the Hong Kong economy would be avoided. If this action for democracy continues for a substantial amount of time, however, long-term damage would become a potential reality as Hong Kong’s special status as a gateway to China could become threatened.
There are fears for Hong Kong’s economic future should the authorities come down too heavily on protesters.
The pro-democracy protests have drawn the eyes of the world to Hong Kong and now fears are emerging as to how the reaction of Chinese authorities will affect global relations and future investment. Hong Kong has long been one of the world’s most important financial centres, but according to Sebastian Heilmann of the Berlin-based China think tank MERICS (Mercator Institute for China Studies) this status could change if China reacts too severely to pro-democracy protests and any violent, military crackdown on demonstrators would have extremely damaging consequences. From the perspective of Hong Kong’s business and finance elite, a military operation to clear protesters from the streets would have devastating effects on Hong Kong as an international finance and economic centre.
Mr Leather has gone one step further than Mr Heilmann with his economic forecast and has brought the mainland into the mix, highlighting the fact that Hong Kong has also played a key role in facilitating financial reform in China, including opening up its equity markets. If Hong Kong was to lose its special status as the gateway into China, it could set back financial reform in the mainland. In the meantime, the world looks on.