As unrest in the world's fourth-largest financial centre shows little sign of abating, Daryl Liew assesses the current impasse and considers the economic impact.
Shocking images of clashes between demonstrators and police in Hong Kong have been broadcast over the media over the last three months. The catalyst for these protests was a controversial extradition bill that would have allowed authorities to detain and extradite people in Hong Kong wanted in territories where Hong Kong does not have extradition agreements - including China. This bill was seen as undermining the autonomy of the territory and bringing Hong Kong further under China's control.
Parallels have been drawn with the umbrella movement street protests in 2014, where demonstrators occupied several major junctions in the city, disrupting businesses. The 2014 protests were against proposed reforms to the Hong Kong electoral system which was seen as allowing China to pre-screen candidates for the chief executive of Hong Kong.
Developments in recent years suggest that individual liberties are slowly being eroded, as China gradually increases its influence over the territory."
The 2014 protests were largely student-led and did not receive support from the general population. In fact, there were many stories of arguments within families as pragmatic parents forbade their idealistic children from participating in the pro-democracy movement.
While the youth are still largely involved in the current protests, there is evidence that they are now supported by the broader population. Where they differ is that the older folk prefer to voice their displeasure through peaceful marches, whereas some of the younger ones have adopted a more militant form of protest.
The proposed extradition bill is the proverbial straw that broke the camel's back, triggering this outpouring of pent-up unhappiness. The reasons are manifold - a combination of social, economic and political factors. Hong Kong was promised 50 years of semi-autonomy following the 1997 handover from the British.
However, developments in recent years suggest that individual liberties are slowly being eroded, as China gradually increases its influence over the territory.
In addition, Hong Kong is losing a bit of its luster as a business center with the emergence of competing financial centers and ports in Shanghai and Shenzhen. What's worse is Hong Kong has seen an influx of mainland Chinese who compete with locals for jobs, depressing wages.
Despite these economic uncertainties, Hong Kong still has one of the most expensive housing markets in the world, suffering from an acute shortage of affordable public housing. With all these issues, it is no wonder then that Hong Kongers, especially the young, are despondent about their future.
Officially, the protestors have five demands, including the complete withdrawal of the extradition bill and the resignation of Chief Executive Carrie Lam. Beijing however has maintained a hardline stance backing Carrie Lam's administration and the Hong Kong police to maintain law and order. Notably, Beijing has not ruled out sending in Chinese troops, who have been mobilizing across the border in Shenzhen, should the need arise.
This would probably only be implemented as a last resort as there will be international repercussions to such a move and draw memories of the Tiananmen crackdown in 1989.
The immediate economic implications of the protests have mostly been localized, with tourist-related sectors in Hong Kong taking a hit. The middle to longer term effects, however, could be more severe for Hong Kong, as there have been reports of foreign companies and high net worth individuals looking to potentially relocate and transfer their funds to other jurisdictions.
Beijing could also re-consider Hong Kong's position in its overall strategic plan, including the territory's role in internationalizing the RMB. There will probably be minimal impact on the global economy unless the violence escalates and Beijing is forced to send in the troops.
Hong Kong's reputation for pragmatism will, it is hoped, prevail.
Daryl Liew is head of portfolio management for REYL Singapore.