“So what's the scenario? Hong Kong's economy is highly dependent on the services and tourism industries. If [the number of] tourists continue to decline and some financial companies leave the city, that would inevitably affect the real economy and the balance of payments, and that would eventually lead to a crisis,” Yu added.

The 71-year-old Yu, a PhD graduate from Oxford, was the former director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences. He also served on the Monetary Policy Committee of the People’s Bank of China and as an advisory committee member for the National Development and Reform Commission and Ministry of Foreign Affairs.

Ding Shuang, chief Greater China economist for Standard Chartered Bank, disagreed with Yu’s view, arguing that the chances of an end to the Hong Kong dollar peg were close to zero.

“Economically speaking, HKMA [Hong Kong Monetary Authority] has a strong base of foreign exchange reserves, which are larger than a lot of other country’s foreign exchange reserves,” he said.

“Compared to a decade ago, the size of Hong Kong’s current capital outflows is very small. Politically, the authorities will undertake every effort to maintain the peg mechanism to support the ‘one country two systems’ constitutional principle.

“If there were to be a deficit in the current account, HKMA could still raise interest rates to effectively curb capital outflows. Of course the move would harm the economy but that’s one way to hold onto the pegging mechanism.”

If protests were to continue for another five years and no tourists visited at all, then foreign reserves could dry up, Ding said, though he added “the chances of this scenario occurring are close to zero.”

At the moment, financial risks in Hong Kong appear to be under control.

Hong Kong’s current account – a measure of the flows of goods, services, and income between residents and non-residents – was in surplus in the second quarter, rising to HK$37.77 billion (US$4.8 billion) from HK$15.40 billion (US$1.9 billion) in the same period of the previous year, according to data from the Census and Statistics Department.

In addition, the Hong Kong government has continued to make clear its commitment to the US dollar peg.

James Lau, secretary for financial services and the treasury, said the linked exchange rate system (LERS) “has served Hong Kong well through many economic cycles in the past 36 years, and has been operating smoothly even in times of massive fund flows”, adding the government has no intention to change it.

The HKMA, the city’s de facto central bank, has a large amount of ammunition with which to defend the peg.

“The LERS is underpinned by a massive Exchange Fund, which is worth over HK$4 trillion (US$511 billion) and equivalent to 2.5 times the monetary base in Hong Kong. The HKD exchange rate has remained steady under the effective operation of the LERS and the HKD market has been operating in a smooth and orderly manner,” Lau said in the statement published to the government’s website on Wednesday.

Hong Kong’s dollar has been pegged to the US dollar since 1983, and the HKMA is currently required to keep the currency trading within 7.75 and 7.85 to the US dollar. If it hits either end of the scale, the authority is obliged to step in to buy or sell the currency to ensure it stays within its target band.

But if the protests were to continue for an extended period, leading to sharp deterioration of the city’s economic and financial health, it could force the HKMA to expend a large portion of its foreign exchange reserves to defend the currency. If that were to occur, the city’s government could face a shortage of reserves, theoretically forcing it to abandon the peg.

Anti-government protests, now in their 22nd week, have taken a sharp toll on the city’s economy, with foreign tourists and businesspeople staying away for fear of increasing violence.

Sales at stores and restaurants across the city have plunged, while hotel vacancy rates have soared. More than 200 restaurants have shut, and one in 10 stores in Causeway Bay – before the protests the world’s most expensive retail area – now stand empty.

“Once the public fears there is a possible delinking, even if they expect it to happen in two years, people will just take action in advance, for example, they could change all their Hong Kong dollars to US dollars, then possibly leave the city afterwards. When enough people believe this theory, the collapse of the peg-system will accelerate,” Yu said.

If a crisis were to draw near, the Chinese government could offer help with its own foreign reserves, but the question would be “will China still be willing to help the HKMA like it has before?” Yu asked.

“Hong Kong still has the edge over Shenzhen and Shanghai as a financial hub, but will it still have this privilege over the two Chinese cities in five years or 10 years?” Yu said.

Hong Kong’s hedge fund industry has seen its biggest quarterly outflow since the global financial crisis a decade ago amid growing concern over market stability there, information services provider Eurekahedge reported in October. The firm predicted that continued violent protests would lead to a major downturn in Hong Kong's economy in the next 12 to 18 months, causing a large capital outflow.

But HKMA chief executive Eddie Yu said in October there have been no signs of massive capital outflows from the city's banking system and the Hong Kong dollar exchange rate has remained stable. He added that while foreign exchange and money markets were operating smoothly, the public must prudently manage financial risk.