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Articles

Closed for business: The commercial impacts of civil unrest in Hong Kong

Over the past few months, protests triggered by a controversial bill which would allow extraditions from Hong Kong to mainland China have paralysed Hong Kong. Markus Korhonen looks at how the protests have unfolded, and what commercial impacts they are having.
Protest

Biggest Protest in Hong Kong’s History

Between late March and early August, hundreds of thousands of people have participated in record-breaking protests in Hong Kong initially prompted by controversial proposed legislation that would allow for extraditions from the semi-autonomous city to mainland China.

Organisers say that at the height of the protests on 16 June – and in the single largest demonstration in the city’s history to date – up to two million people marched through Hong Kong to denounce both the extradition bill and allegations that the police used excessive force when dispersing previous protests near Hong Kong’s legislative building and the police headquarters. While police dispute this figure, saying it was closer to 350,000, the recent unrest marks the most significant series of rolling demonstrations since the September-December 2014 Occupy Central protests, commonly known as the Umbrella Revolution, when hundreds of thousands of anti-government protesters occupied Hong Kong’s Central Business District.

At the time of writing, the anti-government demonstrations, along with solidarity protests in major global cities and pro-government counter-demonstrations in Hong Kong, are ongoing. Within Hong Kong, much of the unrest has been concentrated in Admiralty, Causeway Bay, Wan Chai, and Central, all of which are key commercial districts. However, recent protests have taken place further afield. On 5 August, for example, police arrested 82 protesters in Tin Shui Wai, and demonstrators blocked Lung Cheung Road in Wong Tai Sin District during a series of city-wide strikes and protests. Protesters have also intermittently staged demonstrations at Hong Kong International Airport. A three-day sit-in scheduled for 9-11 August extended into the fifth day on 13 August, which prompted airport authorities to cancel all remaining flights for the day. For one of the world’s busiest transportation hubs, such disruptions to service will have significant commercial implications in Hong Kong and beyond. For example, the number of flights from other parts of Asia to Hong Kong fell by 5.4% between mid-June and mid-July.

Paramilitary vs. parasols

The scale and duration of the unrest speaks to a deep political crisis. The protest movement that began in March and April as a few relatively small-scale and peaceful demonstrations has developed into a recurring series of confrontations between demonstrators, police, pro-Beijing counter protesters, and local residents. The protests, held typically over the weekend, have occasionally spanned a number of days and involved a variety of protest methods, and have prompted several countermeasures by security forces.

While most protests have been peaceful, clashes with security forces, and with pro-Beijing counter-protesters, have become more frequent with some escalating into violence. In anticipation of a violent response from security forces, protesters have come dressed prepared: face-masks, goggles and protective hard hats are becoming regular attire. During the city-wide demonstrations on 5 August protesters hid behind umbrellas or makeshift wooden or metal shields as a defence against tear gas and rubber bullets. And arguably with good reason: that evening in North Point, a dozen men with bamboo poles attacked protesters until they were repelled and eventually outnumbered by the protesters, forcing the pole-wielding gang to retreat.

In anticipation of a violent response from security forces, protesters have come dressed prepared: face-masks, goggles and protective hard hats are becoming regular attire.

Some reports suggest that protesters have been careful not to cause undue damage for fear of alienating broader support. For example, while protesters have spray painted slogans on the walls of buildings, they have not caused widespread malicious damage to commercial or residential property, or prevented emergency workers from moving through protest sites.

Many of the protests have been deliberately aimed at blocking traffic along busy routes such as the Cross Harbour Tunnel, or disrupting services at MTR train stations. To prevent vehicles from moving protesters have either marched en masse along roads, or set up temporary barricades. One protestor remarked, “Our strategy is to create flash mobs at multiple points to stretch police’s resources.” In Tai Wai on 5 August, protesters drove in a slow convoy around a traffic circle, again and again, thus preventing other road traffic from progressing. Air travel has also been affected by the protests. On 26 July, airline workers and other protesters organised a sit-in in the arrival hall of Hong Kong International airport. The protests in the first weekend of August caused severe disruptions to flights: a third of air traffic controllers took a day of sick leave on 5 August, forcing the airport to close one of its runways and causing hundreds of flight delays and cancellations. The normal rate of 68 flights per hour dropped to 34 at one of the world’s busiest airports.

Protest map

Commercial implications

While the Hong Kong government has not yielded to protesters’ demands, the ongoing protests have had a direct impact on several commercial operators. Luxury brands, major electronics retailers, small shopkeepers, shopping malls and restaurants have all reported a dearth of customers in recent weeks. Entertainment events and exhibitions have been cancelled over safety concerns. Shops and restaurants across the city have closed early ahead of many of the protests, and those that have remained open report slower sales.

The shutdown of airport operations, following an extended sit-in by protesters, caused hundreds of cancellations and delays to flights on 12 and 13 August. On 14 August, Hong Kong International Airport announced the resumption of services. Airport officials secured an injunction to ban further demonstrations in all but two designated areas. While it is unclear if protests at the airport will continue, further demonstrations are likely in various locations across the city of Hong Kong.

While the retail market will be hardest hit by a shortage of travellers, the knock-on effects of the current unrest will be felt across the broader Hong Kong economy. At the end of July, Fitch Ratings warned that the factors underpinning Hong Kong’s AA+ rating may be undermined by the protests and the Hong Kong government’s response. Sagging business confidence, and the prospect of the current situation causing long-term damage to the business outlook in the territory, have the potential to result in significant economic difficulties.

While the retail market will be hardest hit by a shortage of travellers, the knock-on effects of the current unrest will be felt across the broader Hong Kong economy.

Violent protest incidents have inevitably received widespread media coverage amid numerous peaceful demonstrations. The peaceful mass demonstration which drew hundreds of thousands of participants on 18 August may point to a renewed intent by the protesters to seek their objectives without resorting to violence.

Whatever the means of demonstration and the political outcomes of the current civil unrest, to prevent further economic damage and unrest the Hong Kong government will need to convince commercial operators that rule of law and stability can be restored. The duration and intensity of the protests suggests Carrie Lam’s government will find this no small task.

Scenarios

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