BEIJING — While the clouds of the student protests are still casting a shadow over Hong Kong, the impact of the "Occupy Central" movement on the city's middle- and long-term prospects is particularly concerning.
A forecast from the University of Hong Kong predicts a sharp drop in growth from the 3.4% predicted earlier to 2.2% for the city's GDP this year, specifically citing economic uncertainty in Europe and mainland China as well as the turbulence caused by the democracy protests. The International Monetary Fund has also lowered forecasts for Hong Kong's economic growth for the year from 3.7% in April to 3%.
The big question seems to be whether the Occupy Central movement will trigger Hong Kong's next round of economic recession. Numerous Hong Kong economists say this major political event may bring short-term fluctuation to the island's economy — similar to what happened during the 2003 SARS viral respiratory disease outbreak.
Wang Jiafu, principal lecturer at the University of Hong Kong, says that comparing the impact of the student demonstrations to what happened during the flu-like epidemic is reasonable because both were unexpected events. And then, as now, the SARS outbreak led to a decline in both local consumption and services such as tourism.
Tear gas fired on protesters on Sept. 28 — Photo: voafanti
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The university's report predicts that a decline in tourism coupled with weak local consumer demand will lead retail sales to fall by 2% this quarter and 1.2% annually compared with last year.
Lu Mingli, economist at DBS Bank, agrees that the political campaign will inevitably have a negative effect on local and tourist demand in the short term. But he predicts the scale won't reach SARS proportions.
What will create the greatest economic impact is less demand for the city’s Individual Visit Scheme, which allows mainland travelers to visit Hong Kong on an individual basis without holding a business visa or joining a tour group. As Xinhua News reports, tour groups from the mainland decreased by about 200 a day during China's recent national holiday. The hotel occupancy rate around Occupy Central area fell to between 50% and 60% while it was typically around 80% to 85% in previous years.
The economists seem to believe that this political situation will not create structural financial risks or affect investor confidence. Hong Kong Financial Secretary John Tsang notes that the stock and foreign exchange market operations have been operating normally, and that any systemic impact on the local economy would already have been registered.
Still Tsang does note that if the political dispute continues any longer it could have a certain influence on market confidence. Since the student movement started, the Hang Seng Index fell at most by 2.3%, but it has since stabilized at its original level.
Wang Jiafu says that Hong Kong remains an attractive place for investors, thanks to advantages such as the rule of law, a huge neighboring mainland market and the upcoming China-Hong Kong stock market opening.
In response to those who hold a pessimistic view of the former British colony's status as an international financial center, Wang says that mainland China's opening-up does bring a certain competition to Hong Kong. But this is not a "zero-sum game" because Hong Kong also contributes to this process, creating a mutually beneficial situation. The key lies in how Hong Kong grasps the opportunity of China's opening.