The long running unrest has hit business confidence

Tourists are avoiding Hong Kong and retailers are feeling the heavy consequences of the five months of protests that have dealt a devastating blow for business in Hong Kong. The violent unrest has pushed the economy to the edge of a recession with two quarters of negative growth.

The recession is not just about the riots and protests against Carrie Lam’s now withdrawn extradition bill between the territory and mainland China, but also a reflection of the impact of the US-China trade war and a weaker renminbi which has hit consumer spending and confidence. Holiday makers have fallen by 50% in October 2019 as compared to October 2018 with hotel vacancy rates as high as 60%, leaving hotels slashing prices and making staff cuts. Qantas, the Australian flagship airline, has stated that the protests will hit their half-year profits by £13m.

Mainland China has virtually no sympathy for the Hong Kong protestors who are seen as unpatriotic and ungrateful. The hope in Beijing seems to be that the average Hong Kong citizens will lose patience and sympathy with the protestors as the economic damage worsens. So far this has not happened at all. The clashes between police and protestors have escalated and become increasingly more violent with police firing live ammunition while protestors retaliating by using petrol bombs.

The Hong Kong protesters were given a major boost by the city’s electorate in the November district council elections. This was the first chance that the people of Hong Kong have had to register their feelings about the handling of the crisis. The results saw 17 of the 18 districts now run by pro-democracy councillors due to an unprecedented 71% turning out to vote. This outcome has given Carrie Lam a lot to reflect upon after some high-profile pro-Beijing candidates lost their seats.

The long running unrest will continue to hit business confidence. This may have a longer-term impact on Hong Kong’s future as a financial hub. The authorities are all too well aware of the consequences to the island city.

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