The View

Umbrella revolution’s impact may be boon for Shanghai?

Cognitive biases distort any analysis of the umbrella revolution's outcome, but there are as many optimistic scenarios as there are doomsday ones

PUBLISHED : Monday, 13 October, 2014, 9:24am
UPDATED : Tuesday, 14 October, 2014, 3:22am

The "umbrella revolution" will undoubtedly shave a few billions off Hong Kong's next gross domestic product print, but what will be the longer-term payouts or penalties?

Interesting times call for sweeping narratives - from the paranoid to the pie-eyed.

One Hong Kong Facebook friend and local author keeps posting the cryptic phrase "Sars was a natural disaster, this one will be man-made", referring apparently to the risk of a collapse in the property market.

To which another Hong Kong friend responded wryly: "Yes, many hope this way but it just never drops."

Still others raise the spectre that revenge will be served cold, with Hong Kong's role in the mainland economy sharply marginalised over the long run.

The idea here is an old one with a new twist - recent financial liberalisations are specifically designed to groom Shanghai to take over from Hong Kong as the country's premier financial centre.

Now, with roads blocked and foreign investors grumbling, the sands in the hour glass are running out more quickly.

According to commentators, including the former US ambassador to China, Jon Huntsman, Xi Jinping once ran Shanghai, so views Hong Kong as a troublesome rival.

And if Shanghai does not immediately get the prize, then Singapore just might. There are plenty of people musing that if investors and dealmakers are now thinking twice about Hong Kong, Singapore is the natural alternative.

Yet how accurately can we a forecast the myriad potential scenarios could unfold? Nobel prize winning psychologist Daniel Kahneman has made a career demonstrating that the answer is "not too well".

This is in part because there is too much chance and too many numerical possibilities in how complex events might play out. It is also because when it comes to big emotional events, such as going to war, cognitive biases distort the analytical process.

People tend to go with their gut on the big calls, then later come up with the reasons to justify their decisions. Such cognitive biases are hard to combat because they are hard to recognise - they are intuitive, part of our automatic responses to the world.

But sometimes you know you have a bias.

I am aware that I have one in favour of the umbrella revolution. It is based on very narrow perimeters - if you stand up to Beijing in any other mainland city, you may well get shot. So one gets a little misty-eyed seeing the kids stand up here.

"Associative memory" is involved here - perhaps it is the lifetime of Western brainwashing, or maybe just the evocative way Mel Gibson cries "Freedom" in Braveheart. But according to Kahneman, the next stage is confirmation bias - latching on to positive scenarios that fit one's thesis.

If Shanghai does not immediately get the prize, then Singapore just might

And, with the umbrella revolution, there are as many optimistic scenarios as there are doomsday ones.

One prevailing argument is that by drawing a line in the sand now, Hong Kong reverses the slow process of "mainlandification".

That is crucial because if Hong Kong's freedoms, transparent rule of law and laissez-faire economic framework were eroded, then, as Michael Schuman at Time magazine wrote: "Hong Kong would become just another [mainland] city, unable to fend off the challenge from Shanghai".

An extension of this theme dictates that the mainland will in fact slow the pace of liberalisation that is boosting Shanghai - as recent events convince Beijing that one free-wheeling, trouble-making city is enough.

Another very different scenario runs like this. That Hong Kong's rebellion will reverberate back into the mainland, and in time the "wait for the boss" mentality, will be supplanted by more bottom-up dynamism, spreading economic benefits far and wide.

But my favourite, and most fantastic, optimistic scenario is this one - that there are Communist Party members who are secretly pleased with Hong Kong's show of defiance.

This is not a reference to the many enemies Xi has surely made with his anti-corruption campaign and party purges, but rather to those who, just like Zhao Ziyang 25 years ago, may believe the China Dream is best executed in a freer, kinder and more sophisticated intellectual milieu.

In this pie-eyed scenario, the mainland's future leaders will be grateful that Hong Kong did not cave in during a period of rising political repression, but instead helped lead the way out.