The View

Will Occupy Central send Hong Kong down the road to irrelevancy?

Political instability is stoking fears that the city's role as a trading and financial centre will diminish

PUBLISHED : Monday, 07 July, 2014, 12:26pm
UPDATED : Tuesday, 08 July, 2014, 1:29am

Hong Kong is suffering from a renewed bout of existential angst, an abiding fear that this great trading and financial centre will one day be irrelevant.

This is one way to interpret the rather paranoid pushback against Occupy Central protests - with one group making a video in which the business district is represented by a heart, and animated blood spurts everywhere when the Occupy Central knife cuts in.

Hong Kong has been through this before. In the years before the handover, many professionals obtained foreign passports, and some poor folk had to go to such extremes as migrating to Australia, with its dangerously thin ozone layer, or to Canada, where they risked death by boredom.

But in time many of these emigrants wandered back to Hong Kong. The worst fears of a post-handover deterioration in civic and political rights were proved wrong, and economic opportunities remained robust, thanks to increasing integration with a booming mainland economy.

Market-based reform … is a vote in favour of a ‘merit-based’ system

Has something changed? If so, will money fly out of Hong Kong, the stock market deflate, property go bust? These are the economic questions that lurk in the background of the current political strife.

There are countless possibilities as to why existential angst is rising again in Hong Kong. Here are a few:

1) In 1997, the last thing Beijing needed was to tarnish its reputation by screwing up one of the most prosperous cities in the world. But nearly two decades later the mainland is a major economic and political power; she might have grown more arrogant, and thus more willing to "teach Hong Kong a lesson".

2) President Xi Jinping's reputation for political purge on the mainland is considerable. This raises the question of whether he will extend his hardliner style to the special administrative regions. A recent Reuters story quoted an unnamed source close to Xi as saying: "In the past, the mainland has compromised towards Hong Kong too much and was perceived to be weak."

3) Perhaps the mainland is feeling scorned, due to the xenophobia some Hongkongers have shown towards purportedly badly behaved mainland tourists.

4) The mainland financial system is today much more developed, and its capital account freer - this puts the longstanding Shanghai vs Hong Kong competition into sharper resolution.

Some officials are already threatening Hong Kong's premier position as China's international banking centre. Guo Jianwei, a deputy director at the People's Bank of China, recently said: "Hong Kong accounts for 53 per cent of the offshore renminbi market around the world. This is a growing pie and Hong Kong has to treasure it. But if it doesn't want to eat it, that's Hong Kong's own business."

In light of such threats, it is no surprise that professional and business groups are rushing to say, effectively, "Yes! We do want to eat it!"

Will the anti-Occupy forces in Hong Kong act as a salve, offsetting the clear enmity Beijing feels towards the protestors, as reflected in everything from the white paper on the Basic Law to apocalyptic mainland press editorials on the dangers of political trends in Hong Kong (the "next Thailand", etc)?

Or, by revealing deep-seated fears of economic irrelevancy, is this contingent sending a signal that Hong Kong's contribution to the national economy is just some sort of political perk?

If the latter, this is worrying. It is not in Hong Kong's interest to allow the debate to shift in this direction. Rather, it is better to focus on another component of the current administration.

While Xi has been tightening the political noose on the mainland, at the same time he and Premier Li Keqiang have also outlined quite a number of market-based economic reforms.

And what, in essence, is a market-based reform? Ultimately it is a vote in favour of a "merit-based" system. By subjecting more industries to market forces, the best and most productive competitors will tend to gain ground, and this is good and necessary for China's continuing economic development.

In a "merit based" economic system, Hong Kong's financial expertise, strong rule of law and other advantages are myriad.

But if Hong Kong had to compete for business on terms of political favour - then the city would indeed be on the road to irrelevancy.