Hong Kong's Political Storm Threatens the City's Economy -- Journal Report
January 19 2020 - 3:01PM
Dow Jones News
By Natasha Khan
HONG KONG -- For more than half a year, antigovernment protests
have gripped this city, keeping locals at home and tourists away
and plunging Hong Kong's economy into a recession.
Hong Kong's economy contracted 2.9% in the 2019 third quarter
from the same period a year earlier, the first year-over-year
contraction in a decade. Conferences, music festivals and fireworks
have been canceled; restaurants and shops closed; and companies are
rethinking their future here as tear gas, clashes and travel
disruptions weigh on their businesses. According to the latest
government forecast, real gross domestic product for 2019 as a
whole is forecast to contract 1.3%, the first annual decline since
2009.
The government -- still at an impasse with protesters -- has run
advertisements and made promotional videos with the tagline "Hong
Kong is On," seeking to reassure investors and visitors that the
Asian financial hub remains free and stable despite the street
battles. It has brushed off credit downgrades and world criticism
of its handling of the protests.
Looking ahead, Hong Kong Financial Secretary Paul Chan has
pointed to economic opportunities for the city linked to mainland
China -- from China's infrastructure-based Belt and Road Initiative
(a plan to build infrastructure spanning the globe) to the Silicon
Valley-like area Beijing envisions for the Southern China region,
dubbed the Greater Bay Area. Hong Kong Chief Executive Carrie Lam
also has promised billions of dollars in social-welfare
initiatives, including pledging to build more low-cost homes and
giving easier access to mortgages for first-time buyers in a city
designated as the most expensive in the world to buy a home. The
government also has introduced several rounds of stimulus packages
for businesses.
Yet a political solution remains elusive, making it likely that
the protests will continue. To tackle the unrest -- which was
sparked by a legislative measure that would have allowed the
extradition of criminal suspects to mainland China for trial -- the
government has called on its police force to bring demonstrators to
heel, often prompting more anger from protesters who have accused
the police of excess brutality.
In September, authorities announced the withdrawal of the
extradition bill -- one of the protesters' five demands -- but
haven't budged since on further concessions. The protests have
since morphed into a broader movement opposing the government,
police conduct and China's increasing encroachment on the
semiautonomous city. A police watchdog report into how the force
has handled the first key events of the protest is expected in
coming weeks and will be closely watched as another potential
flashpoint.
Meanwhile, a new cohort of pro-democracy district councilors --
many of whom were voted in in November in a resounding rebuke to
the pro-China government -- could direct the movement into
different directions, heightening community engagement and urging
protesters to join unions in preparation for potential strikes.
Hong Kong has bounced back from two financial crises, a transfer
of sovereignty to China from the U.K. in 1997, the deadly SARS
epidemic, and a wave of pro-democracy protests in 2014, yet the
current troubles seem set to continue.
Major transportation disruptions have eased in recent weeks, but
there are still unpredictable protests. At times, the protests have
taken a decidedly anti-mainland turn. In early January, hundreds of
protesters in the border neighborhood of Sheung Shui chanted for
mainlanders to "go home" and stop flooding neighborhood shops
selling milk powder and medicines
Many buyers of those products, as well as luxury items, come
from mainland China, which accounts for the largest segment of
inbound tourists to Hong Kong. As the unrest intensified, many
stopped visiting. Retail sales volume plunged 25.4% year-over-year
in November, the government said.
The city also is caught in the U.S. and China trade tensions.
Its role as a financial gateway for China, though, seems
undiminished. In November, Alibaba Group Holding Ltd. raised about
$11.2 billion in a secondary listing in the city, a vote of
confidence in Hong Kong as a financial center.
Ms. Khan is a reporter for The Wall Street Journal in Hong Kong.
Email her at natasha.khan@wsj.com.
(END) Dow Jones Newswires
January 19, 2020 14:46 ET (19:46 GMT)
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