By, Joshua Barzola
Months of continued protest continue to leave Hong Kong in a state of financial disarray and political unease. This unrest poses the question, what caused the protests and why do they have a major global economic and political impact?
To start, the independence of Hong Kong had partly arrived in 1997. Since the opium war ended in 1842, the British had control over Hong Kong island and leased the rest of the city from China for approximately 99 years. During the 1980s, the British signed an agreement to give up ownership of Hong Kong back to China with the condition that Hong Kong would be able to govern themselves semi-autonomously from mainland China until 2047. The belief during this time was that Hong Kong would be able to legislate and have basic freedoms of assembly and speech that are not seen in mainland China.
The precedent that Britain and China placed on Hong Kong is fascinating yet an unpredictable scenario. Since the beginning of the lease agreement in 1898, the British colony and China had gone in two different ways of living. While China became a communist country in 1949, hundreds of thousands of people fled to Hong Kong to seek refuge. Starting in the 1950s, Hong Kong started to grow economically, due to its trading and manufacturing hubs. After years of British rule, the people of Hong Kong grew accustomed to Western life, with their beliefs and traditions became quite different than mainland China.
As the trade war between the U.S and China worsens, and the political forefront for Hong Kong continues to dampen and gloom, the economy as a whole could be headed for small growth and possibly some downturn in the near future.
This history ties back to the current issue. Since the British left and gave Hong Kong back to China, it has been difficult for Hong Kong to not feel the pressures of “pro-Beijing” groups, many believing China has been meddling within Hong Kong to slowly self-censor the city. As per the Sino–British Joint Declaration agreement, Hong Kong has their own constitution and legal system, residents cannot elect their own leaders, rather it is chosen through a 1200 election committee that only 6.o% of eligible voters chose. Even the Legislative Council, the law-making type do not fully represent voters as majority are pro-Beijing lawmakers. This “Sham” democracy critics claim alongside extradition laws that would ship Hong Kong residents off to China’s judicial policies in certain countries have caused the people to protest and begin pushing back on mainland China(1).
As protests and strikes continue to deepen the situation in Hong Kong, it is having a negative effect on the various emerging Asian markets and to the Hang Seng Index (HSI). For several days the airports are being blocked off by protestors, causing economic turmoil and causing HSI and other markets to fall behind. For financial investors this may be concerning, Hong Kong has always been considered an important gateway to China and has been widely considered a financial powerhouse.
In comparison to the city state’s economic impact on China, it is far less significant than when Hong Kong was first under their rule. In 1997, the economy of Hong Kong was about 18.0% the size of the economy of the rest of China. Move forward only 17 years later, Hong Kong only represents about 3.0% of Chinese GDP. This is in part due to the fast growth of the Chinese economy, as the nation continues to grow into an economic powerhouse. Their growth has given the Chinese government confidence in the way mainland China is run, which hurts protestors’ chances to push for more democratic laws throughout the country. Although, politically, protestors have a large voice to the mainland, economically, China is less inclined to worry about the economic downturns the protests could cause in the future.
If laws continue to be passed to make Hong Kong more autonomous with China, this could lead to Hong Kong residents being forced back to assimilate to a lifestyle they no longer feel accustomed towards. However, should the protesting and strikes continue and mainland China is forced to take military action, this could force the wealthy from Hong Kong to move out of the country. As seen by the Hang Seng Property Index, this indicates that if protesting and China military is needed to intervene, huge devaluation could be coming to a lot more than Hong Kong property investments which represents 5.0% of Hong Kong’s GDP. In addition, the country is reliant on trade from around the world, with total trade over three times its percentage to GDP. This would reflect disaster if Hong Kong would ever be considered as China, as the many trade wars with the U.S and their tariff sanctions could later apply to the people of Hong Kong as well.
Featured photo by Han Min T.