Occupy Central is no threat to Hong Kong's economy

City counts on standing of regulators, reliability of legal system, solidity of institutions, freedom of information and know-how of financiers

PUBLISHED : Thursday, 28 November, 2013, 4:17am
UPDATED : Friday, 29 November, 2013, 6:45pm

Students sitting in the streets; lots of colourful banners; some noisy chanting with people banging gongs; a sprinkling of jugglers, mime artists and the like; a few earnest types with megaphones - and legions of cops all itching to use their pepper spray.

If it goes ahead next summer, for some of Hong Kong's workers, Occupy Central's plan to block streets in the city's main office district will be an amusing diversion. For others, it will be an irritating inconvenience.

What it certainly won't be, however, is what the democracy movement's detractors say that it will be: a threat to Hong Kong's reputation as an international financial centre and damaging to the city's economy.

Hong Kong's position as a financial centre rests on the reliability of its legal system, the credibility of its regulators, the solidity of its institutions, the freedom of its information and the know-how of its financiers.

None of those will be jeopardised by a few thousand protesters temporarily blocking some streets.

If you doubt that, simply look at London, which has a long and turbulent history of street protests, many of them aimed directly at the institutions of "the City", the financial centre at the heart of Britain's capital.

From the anarchist Stop the City marches of the 1980s to the Carnival Against Capitalism of the 1990s (in 1999, demonstrators attempted to storm the floor of London's leading derivatives exchange, only to be repulsed by the traders), the anti-globalisation movement of the 2000s and the Occupy Movement of the past few years, London's financial services sector has been a lightning rod for protests, often violent.

Yet despite the turbulence, London has only gained market share as an international financial centre. When the City's reputation has suffered, the damage has invariably been self-inflicted, as with the recent Libor-rigging scandal.

So we can be confident Hong Kong's reputation will survive Occupy Central untarnished. If anything, Hong Kong's standing could well emerge enhanced in the eyes of the world as one of the few cities in the region self-assured enough to permit popular street protests.

The allegation that Occupy Central will harm Hong Kong's economy is equally flimsy.

Granted, if dedicated, disciplined and ably led, 10,000 protesters could cause considerable disruption by blockading areas of Central.

But even so, the impact will be localised and temporary. At most, the economic effect of closing off a few streets in Central for a day or two would be far smaller than that of a signal eight typhoon, which can shut down almost all economic activity across the whole territory for up to a day at a time.

Yet look for the impression of even the severest typhoon on Hong Kong's economic output, and you will find no trace at all.

Typhoons generally fall in the third quarter of the year, from July to September. On average, since 1990, Hong Kong Observatory has hoisted typhoon signal eight or higher for 14 hours 35 minutes during the third quarter of each year.

Allowing for night-time storms, and disruption as things get back to normal, that equates to almost a full working day lost to typhoons in each July-September period.

The comparable figure for the second quarter is just one hour, with no time lost in the first and fourth quarters.

Assuming 62 working days each quarter, a day lost to a typhoon would knock about 1.5 per cent off Hong Kong's economic output for that three-month period.

As a result, on average you would expect the city's economic growth to be appreciably lower in the typhoon-afflicted third quarter of the year than in either the second or the fourth quarters.

But it isn't. Since 1990, Hong Kong's quarter-on-quarter growth in the third quarter has averaged 1.1 per cent. Both second and fourth quarter growth rates averaged 0.9 per cent.

This should come as no surprise. A typhoon might shut businesses down for a day but they simply work harder in the following days to make up for lost time. Overall economic output is not affected.

Any disruptions caused by Occupy Central will be ironed out in the same way. The protests will inflict no economic damage on the city at all.

In fact, when you allow for all the noodles ordered in by the protesters, and all the over-time paid to the cops policing the demonstrations, the net impact on Hong Kong's expenditure could even end up positive.