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Protests Heighten Business Concerns in Hong Kong

On Sunday, August 18, an estimated 1.7 million Hong Kong residents marched in an anti-government rally. Protests have continued with regularity for over two months, in what was originally a response to a controversial extradition law amendment that would permit individuals arrested in Hong Kong to be extradited to mainland China. Hong Kong’s pro-Beijing controlled legislature, led by Chief Executive Carrie Lam, faced rampant criticism that the amendment would unduly expose the city to judicial overreach from Beijing. Although the bill (which was suspended in mid June but not formally withdrawn from the legislature) was the initial impetus behind the protests, demonstrators have also used the spotlight placed on Hong Kong to promote democratic reform, condemn alleged acts of police brutality, and broadly highlight concerns over the gradual erosion of some freedoms in the city. 

This ongoing reality, has heightened economic concerns in the region, an attitude that could eventually shift business and investment away from Hong Kong. While Hong Kong’s historically independent legal system, liberal economic policy, and proximity to mainland China have long made it a global investment and financial hub, it is increasingly confronted with civil unrest, the gradual erosion of independence, and spurts of intermittent violence. 

This has proven to be a negative determinant of business confidence in the semi-autonomous region. Hong Kong’s economy has faltered as protests persist, leading local lawmakers to lower growth projections and announce a $2.4 billion economic support package. Violent altercations between protesters and police have become commonplace, leading to nearly 600 arrests and travel advisories from 28 countries. Tensions were recently escalated at the Hong Kong international airport, where violent clashes between police and protestors led to 48 hours of flight delays and cancelations. China has also moved a large number of armed police to its border with Hong Kong, raising concerns that they could be deployed to quell unrest. 

This is not to say that big businesses are clamouring to leave Hong Kong. Should widespread protests continue, adjustments in corporate strategy would take time to implement. In the meantime, major corporate players in Hong Kong have, as reported by the New York Times, have “scrambled to reassure the Chinese government that they condemn the mayhem and support Hong Kong’s Beijing-approved leaders.” But continued violent disruptions, combined with existing global trade uncertainty, could disrupt Hong Kong’s favourable business-friendly image.

It is important to note that Hong Kong maintains strong economic and people-to-people ties with Canada. The region is home to around 300,000 Canadian citizens and 18% of Chinese investment (or CA$16.5 billion) in Canada originates in or flows through Hong Kong, according to data collected by the China Institute Investment Tracker. This investment is most heavily concentrated in the Energy, Entertainment & Real Estate, and Consumer Products & Services sectors. 

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