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Hong Kong is paying a heavy price for months of protests

Andrew Sheng & Xiao Geng
Filed on November 27, 2019 | Last updated on November 27, 2019 at 07.04 pm

Protesters have made intervention unavoidable by allowing peaceful demonstrations to escalate

Nearly six months after they began, the protests in our city have reached fever pitch. On one particularly devastating day earlier this month, police fired more than 1,500 rounds of tear gas, a police officer shot a demonstrator at point-blank range while being attacked, and protesters immolated a man who disagreed with them. More than 4,000 people have been arrested, infrastructure has been destroyed, and the economy has sunk into recession. And for what?

Hong Kong's government withdrew the extradition bill that triggered the protests. Yet the protesters rage on, lacking any coherent strategy or demands. They claim that they are fighting for democracy, but it is hard to reconcile that lofty goal with medieval-style catapults launching bricks and firebombs. In truth, the protesters' scorched-earth strategy can lead only to more chaos, destruction, and death.

It does not have to be this way. To help find a solution, we have conducted a PEST (political, economic, sociocultural, and technological) analysis of Hong Kong's current situation and future prospects. On the political front, the main lesson is that it is up to the government to ensure order and security. Within the "one country, two systems" framework, Hong Kong's own government has powers to address internal security matters. But where its actions are inadequate, it is the right and responsibility of China's central government to intervene. By allowing peaceful demonstrations to escalate into large-scale riots, protesters have made such intervention unavoidable.

Economically, Hong Kong is paying a high price for the protracted protests. In July-September, the city's GDP shrank by 3.2 per cent quarter on quarter - the worst economic performance since the 2008 global financial crisis.

Yet all is not lost, as the city's stock market continues to function. Alibaba - China's largest e-commerce company - has followed through on its plan for a secondary listing in Hong Kong, where it is on track to raise nearly $13 billion.

For most of the last two decades, IPOs in Hong Kong have raised more than those in the United States or mainland China. The market capitalisation of all listed companies in Hong Kong amounts to about half that of the mainland. Hong Kong is also an essential platform for China's management of offshore financial assets, and a critical link to global supply chains, with about 60 per cent of China's inflows of foreign direct investment channeled through the city.

Yet these economic advantages have had unintended social consequences, driving the city's highest level of inequality in 45 years. As in many Western economies, while property owners, developers, and elite professionals amass wealth, Hong Kong's lower-middle-class workers have faced stagnating incomes and surging housing prices. The resulting frustration is at the root of the current upheaval.

Persistent governance failures aggravated public sentiment further. In the face of massive social, geopolitical, and technological disruptions, Hong Kong's government needed to adopt proactive policies that could both respond to new developments and anticipate future challenges - beginning with the lack of affordable housing. But it remained committed to the outdated colonial-era principle of "positive non-interventionism," so the problems festered, popular anger grew.

That anger found a home on social media.

Technology shook the foundations of the "one country, two systems" arrangement by facilitating "information disorder": the spread of overwhelming volumes of biased, misleading, and outright false information, often designed to stoke anti-China sentiment in Hong Kong. The formation of filter bubbles and echo chambers compounded the problem, inundating young people with the message that mainland China was to blame for their every woe.

Despite these provocations, Hong Kong's police have shown considerable restraint. But the longer the violence persists, the fewer options for all. Indeed, the latest district council election, with a turnout rate of 71.2 per cent, showed that people voted peacefully for change. If the protesters had avoided violence and opted to wait patiently to express their preferences at the ballot box, the same message could have been sent. The election result is an opportunity for all to reflect carefully on the need to end violent protests and work together to address genuine grievances. All sides must show empathy, humility, and a willingness to compromise as they design and implement governance reforms that are consistent with Hong Kong's Basic Law and China's constitution.

The alternative is not some fantasy of an independent and thriving Hong Kong. It is a devastated economy, a divided society, and a lost generation. Pretending otherwise will only make that outcome more difficult to avoid.

-Project Syndicate

Andrew Sheng is a former chairman of the Hong Kong Securities and Futures Commission. Xiao Geng, President of the Hong Kong Institution for International Finance, is a professor and Director of the Research Institute of Maritime Silk-Road at Peking University HSBC Business School.

 


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