Hong Kong's former central banker Joseph Yam Chi-kwong has warned that the city could lose its status as China's top financial centre if political developments unnerve the country's leaders.
The Hang Seng index dropped 389 points yesterday, its biggest fall in three months, amid growing concerns about political instability.
And Chow Chung-kong, chairman of Hong Kong Exchanges and Clearing, weighed in by warning that the increasingly tense political atmosphere could shake the confidence of international investors.
In the preface of his new book, Gui On Si Ngai, Yam writes: "The politics of finance is already complex … It may well be that political developments in Hong Kong are eroding the willingness of the leadership to rely too much on Hong Kong as a venue for the conduct of international financial activities of the mainland. If so, this would be regrettable."
The book, in which Yam comments on global financial affairs and looks back at his time as chief executive of the Hong Kong Monetary Authority from 1993 to 2009, is published this week. Its title roughly translates as "In Prosperity, Think of Adversity".
The warnings come amid growing tensions over electoral reform. More than 720,000 ballots have been cast in the controversial Occupy Central "referendum", which has riled Beijing.
Yam, now an adviser to the People's Bank of China, also calls on local leaders to guard against the risk of Hong Kong being marginalised as a result of financial liberalisation on the mainland, and points out that Hong Kong is losing ground to Shanghai and Singapore. He says it is inevitable that the Hong Kong dollar will pale in significance in the long term, with the yuan bound to play a bigger role.
"It is unrealistic to expect that a significant proportion of the international financial activities between the [future] largest economy in the world, now with 1.3 billion people, and the rest of the world be conducted using the currency of merely seven million people," he writes.
Yam notes that the city's leaders face the imminent task of enhancing the "utility" of Hong Kong as a global financial centre for the mainland and creating a critical mass of financial activities that "is big enough to pre-empt Hong Kong, as the middle man, from being marginalised".
Referring to rising competition from Shanghai as it becomes a free-trade zone and from other regions running offshore yuan centres, he says: "Hong Kong interests are being pushed aside."
Meanwhile, Chow said the city needed to worry more about the political situation than competition from mainland cities.
"I hope there will be no Occupy Central. We would like to see people use legal ways to discuss the way forward for our political situation," he said.
"I would like to see a situation in which international investors would not lose confidence in Hong Kong due to political risk."