Clifford Coonan
Hong Kong's democracy protests have had a major impact on one of the territory's favourite pastimes – shopping. Tourism and retail together account for around 10 per cent of Hong Kong's gross domestic product (GDP).
China’s state broadcaster CCTV said that the economic loss for shopping malls and office buildings is at least HK$40 billion (€4.07 billion), quoting business associations.
Shares also took a tumble last week, with the benchmark Hang Seng Index (HSI) registering its biggest two-day drop since February.
The protests began after the Communist Party in Beijing government announced that candidates in the first direct election of the territory’s chief executive in 2017 would have to be vetted by a pro-Beijing panel of business leaders.
"The economy, which is already very weak, could easily be pushed into recession if the protests drag on. The impasse also threatens Hong Kong's reputation as an international financial centre," Capital Economics Asia economist Gareth Leather wrote in a research note.
He said there was a risk of more lasting damage if the government decided to crack down on protesters, and authorise the police to use force to clear the streets.
“Such a scenario would deal a blow to Hong Kong’s status as an international financial centre, which depends on rule of law, a stable system of governance, and being a safe and pleasant place to live.
International financial institutions could easily decide to relocate their Asian headquarters from Hong Kong to Singapore," said Leather.
The timing of the protests is particularly problematic for retailers. Last week was Golden Week, a week-long public holiday centred around National Day, and a time when hundreds of thousands of tourists come to Hong Kong to shop. Last year, there were 41 million visitors from China to Hong Kong.
Chow Sang Sang, the second-biggest chain of jewellery shops in Hong Kong, heavily patronised by mainland Chinese tourists, closed six outlets.
"It's still too early to gauge how much business we lose during the Golden Week," Chow Sang Sang sales operations director Dennis Lau told Bloomberg in an interview. "It may be a headache for some shoppers trying to go to districts such as Mong Kok and Causeway Bay as buses and taxis aren't running."
The China National Tourism Administration told operators not to organise tour groups to the city.
“It means that there will be no more mainland tours a week from now,” Hong Kong Travel Industry Council executive director Joseph Tung Yao-chung told RTHK.
The protests are centred around popular shopping districts such as Admiralty, Causeway Bay and Central, as well as Tsim Sha Tsui on Kowloon side, which is very popular with Chinese tourists. The Dolce & Gabbana and Fendi stores on Canton Road here were shut. Italian luxury group Prada has been monitoring the protests and closing shops early when necessary.
Analysts are also watching the situation to see if impacts on the property market, which has seen prices more than double since 2009 on strong Chinese demand. If prices fall dramatically this could impact on the banks, triggering a rise in non-performing loans.
The demonstrators have blocked roads, making it difficult for shops and hotels to get supplies.
And a slowdown in Hong Kong, which has become a major gateway into China, would also affect the Chinese economy. Many Chinese state-owned companies need Hong Kong as their gateway to the rest of the world.
The demonstrations are so far unlikely to have an impact on Hong Kong’s credit rating, according to a report issued by Fitch Ratings.
“We don’t expect the protests to have a rating impact in the short term. It would be negative if the protests are on a wide enough scale and last long enough to have a material effect on the economy or financial stability, but we don’t currently see this as very likely,”
Andrew Colquhoun, head of Asia-Pacific Sovereigns at Fitch, which rated Hong Kong AA+ with a stable outlook on September 15th.
