As of: 21.08.2019 | Reading time: 5 minutes
Frank Stocker Financial editor
The protests in Hong Kong hit the city where it’s most sensitive: making money. And the world power China threatens to complicate this further. For this purpose, a megacity Hong Kong in all matters run out of rank. advertising display
Li Ka-Shing, Hong Kong’s richest man, has a problem. Because since the beginning of the protests his fortune has shrunk by about three billion US dollars. Therefore, a few days ago he published in the newspapers of the Chinese Special Administrative Region full-page ads in which he called for an end to the violence. In their place, love should come. And he modestly signed with: a citizen of Hong Kong.
The city’s oligarchs are the mainstay of the Beijing-led government of Hong Kong and the protagonists of the protests. Because they have the most to lose. However, the conflicts meanwhile generally leave their mark on the economy of the metropolis. And Beijing is also planning to build another city into a real competition for the recalcitrant port city. Hong Kong’s position as the most important financial center in Asia is thereby endangered.
When the protests started about two months ago, the stock market was largely unimpressed. Only since the escalation in recent weeks, the courses plunged into the depths. Since then, the Hang Seng Index has temporarily lost around ten percent, only recovering slightly in recent days.
But especially many large conglomerates suffered much more. Li Ka-shing’s empire CK Hutchison, for example, lost up to 20 percent, much like Swire Pacific, largely owned by the Swire family. She also owns much of the airline Cathay Pacific, which suffered from the temporary blockade of the airport . And the stock of New World Development, which is mainly owned by the Cheng family, even raged by 30 percent in depth.
Therefore, it is not surprising that in addition to Li Ka-Shing other super-rich people pleaded for an end to the demonstrations. Swire even talked about “illegal activities”, New World Development called for “protecting the economy and prosperity”.
These are indeed in distress because of the unrest. “The recent closure of Hong Kong Airport is likely to have resulted in the loss of 13,863 tons of freight worth around $ 1.2 billion,” says Christina Bastin, Muzinich & Co. Fund Manager. There is also a decline in visitor numbers in Hong Kong , weaker retail sales and lower hotel occupancy. “
Protests weaken the economy
These economic sectors are the Achilles heel of the city alongside the financial industry. Hong Kong generates around 20 percent of its gross domestic product with tourism and retail . 80 percent of the tourists come from the People’s Republic, and they come to Hong Kong mainly to buy luxury goods there. They are now increasingly out.
The city government has already announced a stimulus package worth around 19 billion Hong Kong dollars (about 2.3 billion euros). However, with an annual economic output of around € 330 billion, this is only a drop in the ocean.
Especially since the economy already stutters for months anyway. In the second quarter, economic output even fell by 0.4 percent. And Tommy Wu, an economist at Oxford Economics, believes that it will fall again in the current quarter, which Hong Kong would officially be in recession. “For 2019 as a whole, we expect the economy to grow by just 0.6 percent,” he says, “much less than 2018 at three percent.”
Much will depend on how long the protests continue and whether they continue to escalate. Already Wu sees clear effects. “In the long term, political turmoil and violent scenes in the international business world have fueled fears about Hong Kong’s medium to long term stability,” he says. “International companies could now be more cautious when planning investments or expansions.
Especially since they might be tempted to make their investments in the neighboring city of Shenzhen. The city is directly adjacent to Hong Kong, but is located on the Chinese side and is thus under the control of the regime in Beijing. There is no freedom of expression, no democracy and therefore no protests. So far, for example, no public services on world level or legal security – and that was the advantage of Hong Kong.
However, on Sunday, China’s government has released a document announcing plans for Shenzhen. The city should become by 2025 “one of the leading cities in the world in terms of economic strength and the quality of development”. By 2035, Shenzhen would become “a national model of high quality development” and by the middle of the century, one of the top cities in the world.
Shenzhen should come to the forefront in all areas
For this purpose, the city should be placed at the forefront of development in all areas. For example, a first-class health care system and a world-class education system are to be developed and the 5G Internet is to be set up here quickly and with priority. Shenzhen should do better than Hong Kong, as China’s state media write. The only chance for Hong Kong is therefore to fully integrate in China.
This shows how the forces have shifted. “Thirty years ago, around the time Hong Kong was handed over to China, Hong Kong was an important gateway to China, which needed Hong Kong as an access point,” says Christina Bastin. “That has changed.”ALSO READ
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In the meantime, it is more the case that Hong Kong needs China first and foremost. “The autonomous region is increasingly dependent on tourism and investment from China.” And soon, when Shenzhen may even tower over the city’s size and importance, Hong Kong’s supremacy as a financial center is in question.
The billionaires of the city should probably have but the least problem. Because they can avoid it at any time. Like Victor Li, the son of Li Ka-shing. He has just bought the largest British Pub and Brewery Group Greene King, for the equivalent of around five billion euros.