Tags: hong kong | china | protests | economy

How to Restore Prosperity to Hong Kong

How to Restore Prosperity to Hong Kong
Tuomas Lehtinen/Dreamstime

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Wednesday, 18 December 2019 10:45 AM Current | Bio | Archive

The Hong Kong protests have endured for nearly seven months. The demonstrations have caused a slowdown in the city’s economy, pushing Hong Kong into a period of negative growth. While business in Hong Kong is still booming, the increasing risk of business interruption and enduring protests are forcing companies to question whether to stay or move elsewhere.

Sparked by a controversial extradition bill with mainland China, the protests have garnered millions of Hong Kong’s citizens. Yet, unlike the Occupy Wall Street movement in the US, and France’s recent ‘Yellow Vest’ demonstrations, the Hong Kong protests are by and large peaceful — there are some fringe elements resorting to violence. The protests are also clearly defined with protesters having outlined five demands, despite lacking a formal leader.

While the bill has been retracted, protesters deemed the sluggish government response as too little, too late. Escalating police activity and anti-protest rhetoric by the administration before the decision has incensed Hong Kongers to take to the streets with a new chant, “five demands, not one less.” Protests have since increased in veracity.

The Economic Ramifications

While the Hong Kong protests have had an undeniable effect on the city’s economy, business interests in the city remain strong. Hong Kong’s economy shrank by 3.2% in Q3 this year compared to the previous quarter, yet a large factor in this shrinkage can be attributed to the frustrated tourism industry that accounts for 5% of Hong Kong’s GDP.

The airport’s two-day closure cost the city $76 million in flight cancellations, and a decline in visitors led to the 10% decrease in consumer spending. However, the ephemeral and temporary nature of the protests mark these sequences of events as abnormal; they are highly uncommon for Hong Kong.

It is important to note that many companies in Hong Kong receive revenue from China and therefore, the nation will never allow the corporations of Hong Kong to reach a breaking point and decide to leave. Further, Chinese citizens and investors rely heavily on the prosperity of Hong Kong , which is another reason why China would never allow Hong Kong’s reputation to disintegrate.

For Hong Kong, the economic disruption indicates an abnormally sluggish quarter. This has been recognized by Hong Kong’s government as well, which is implementing four rounds of relief measures, worth $3.19 billion US dollars, to help alleviate financial pressures. Much of the money is allocated to help the most affected sectors, such as tourism and retail.

Hong Kong as an Economic Hub

The side effects of the Hong Kong protests aren’t just a decline in tourism and a sluggish economy. For decades, Hong Kong has operated as a business hub and foothold for conducting business with mainland China, but the protests are making new companies consider moving Asian operations elsewhere.

Until now, there has been no evidence of multinational corporations leaving Hong Kong, but companies could head for the exits if the protests escalate into violence.

Historically, Hong Kong served as a gateway into China, but China’s loosening of restrictions has enabled close partnerships with Chinese companies to flourish abroad. A Hong Kong office has become less necessary to conduct business with China, which makes Hong Kong’s status as a business hub alluring to corporations. If the protests escalate into more violence or endure for too long, they will prompt a downturn in Hong Kong’s economy.

Hong Kong’s Future

Fortunately, Hong Kong’s status as one of Asia’s premier economic hubs and proximity to China makes it a highly desirable location for international companies to operate out of. The "one country, two systems" approach has helped develop and maintain the business hub’s reputation, and by supporting and strengthening this system, it will surely assist Hong Kong to get back on track. The protests mark a temporary disruption to specific industries based around tourism and retail, but the city’s powerful financial sector continues to operate unimpeded.

The best outcome for all parties involved is the resolution of the current unrest through non-violent protest and peaceful political engagement. To preserve peace and business interests, world media and governments need to allow for a peaceful resolution decided by the HK residents and their government that respects democracy, rejects violence, and ensures economic prosperity. For China, Hong Kong represents a vital gateway to the rest of the world, and the world, in turn, relies on the city as a gateway to China. It is clear that Hong Kong’s dense network of businesses and strategic geopolitical position make it an ideal landing pad for global business, and one that surely will overcome its current setback.

Raphael Badani is a geopolitical risk consultant and interactive simulation designer in the private sector.

 

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The Hong Kong protests have endured for nearly seven months. The demonstrations have caused a slowdown in the city's economy, pushing Hong Kong into a period of negative growth. While business in Hong Kong is still booming, the increasing risk of business interruption and...
hong kong, china, protests, economy
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2019-45-18
Wednesday, 18 December 2019 10:45 AM
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