Hong Kong was already struggling with the onset of the US-China trade war, which hit re-exports through the city. But now it would seem that the recent street protests are about to push the economy further into the doldrums by dampening consumer spending and curtailing tourism. An SCMP reportquotes the chief economist of the HK General Chamber of Commerce as saying:
“The overall picture is gloomy. If the political tensions continue or escalate, they could take a bigger toll on retail sales, by straining consumer sentiment of local households, as well as pushing tourists towards other destinations.”
Such short-term thinking misses the point, unfortunately. The bigger risk to Hong Kong’s economy comes from the government’s ongoing inability to regain the confidence of its constituents and break the paralysis that has set in across its regulatory and legislative agendas. There seems less chance of that happening by the day, as deep divisions have appeared not only between the political elite and the masses, but within the establishmentas well. The questions being asked of the Hong Kong police’s standards of professionalism seem sure to drive this wedge further in the coming days and weeks.
The longer this drags on, the higher the likelihood of investment, which generates future growth, being diverted to other jurisdictions.
Some of that investment may move inland, to Shenzhen and Guangzhou, which have leadership teams reforming their economic and financial regulatory landscapes fast. Yet the bigger risk to the GBA’s future is that its primary international financial center starts to wither while global financial flows seek more stable and open environments. Hong Kong has a lot of other items on its regulatory and legislative to-do list; it cannot afford to have this crisis of political legitimacy drag on interminably.
This is not to suggest that what is needed here is hardline action against the protesters. Far from it. What is needed is leadership that can bridge the divide. It may be time for a clearing of the decks.
But who could be asked to step up? Those with the most dynamic leadership potential seem to be anathema to Beijing. Those standing in the pulpit seem incapable of recovering their stature. The middle ground, meanwhile, has been long abandoned in this time of extremely polarizing political discourse.
Fresh voices – and faces – are sorely needed. Let’s see what the Shenzhen-based taskforce comes up with next.