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What do the protests in Hong Kong signify for its economy and workforce?

In February 2019, Hong Kong leader Carrie Lam announced a controversial new bill, allowing extraditions to mainland China. The principle of “one country, two systems”, under which Hong Kong has been operating since 1984, currently allows the territory a high degree of autonomy in terms of its judicial system, borders and rights, including freedom of speech.

The new bill would infringe on this autonomy as it would allow for the extradition of criminal suspects to mainland China, Taiwan and Macau. The Hong Kong government positioned the bill as a way to “plug the loopholes” and stop the city from being a safe haven for criminals. However, critics of the bill argue that it would expose the city’s residents to China’s deeply flawed justice system, under which they could be unfairly detained and tortured. These fears have led to widespread protests, with 2 million people taking to the streets, according to organisers. Following the mass demonstrations, Carrie Lam announced that the bill “is dead”; however, she stopped short of saying it had been fully withdrawn. Protestors remain unsatisfied and are calling for Lam’s resignation, as well as an official withdrawal of the bill.

On top of the immediate effects of continued mass demonstrations on Hong Kong’s business community, the proposed amendments to Hong Kong’s positioning with China could have a number of serious consequences for the city’s economic standing.

Hong Kong is currently viewed as a global financial hub; over 8,000 international companies set up a Hong Kong office last year. This is in large part due to the special trade relationship the city has with international powers, in particular with the USA. Seen as fully economically autonomous, Hong Kong is exempt from tariffs placed on China – last year alone, the USA imposed tariffs on nearly half of all Chinese goods, worth more than $250bn. Any change to Hong Kong’s special trading privileges could therefore greatly damage its status as a free trading and manufacturing hub, as well as its relationship with the United States. This would likely have a domino effect on the wider economy, such as the withdrawal of foreign investment in Hong Kong businesses and international businesses reconsidering whether to set up offices in Hong Kong.

Expats make up 4.6% of Hong Kong’s population of seven million, with 45% working in banking, insurance and financial services: a cornerstone of its economy. The city’s rights and freedoms legally protect these workers from the more extreme rule of the Chinese government. Infringement on their freedom of political expression is a main concern of workers and expats in Hong Kong. Chinese citizens can face prosecution for subversion if they express anti-government sentiments; under the proposed extradition law, anyone working in Hong Kong could be at risk of facing Chinese jurisdiction for similar charges. This would particularly affect those working within journalism, human rights law, social work or the charity sector.

This could lead to an exodus of highly skilled expat workers, which would have obvious short-term repercussions for Hong Kong’s economy. Asia economist Gareth Leather argues that it is the city’s Chinese connections paired with its Western institutions and rule of law that makes it such a desirable location and “if these qualities are threatened, what would be the advantage of Hong Kong compared with other cities in China?”.

However, immediately following the mass protests the government made some concessions regarding the bill. Hong Kong officials stated that only extradition requests for fugitives with maximum sentences for crimes such as rape and murder would be granted, meaning commercial crimes such as tax evasion would not be extraditable offences. While the government clearly hoped to reassure the business community, many still expressed concern that once the bill is passed, the stipulations may be broadened to appease Beijing.

The month-long unrest came to a head on 9th July with Carrie Lam’s announcement that the bill “is dead”. She stated that work on the bill had been a total failure and reiterated that there was no plan to restart work on the bill in the future. This suggests the government’s acknowledgement of the far-reaching implications of passing the bill, for both local and international business. If this truly marks the end of the extradition bill, Hong Kong’s economy should recover swiftly from the disruption and continue to thrive as a global hub.

Yet Lam has been accused of being intentionally vague in using non-legislative language and not explicitly stating the bill’s immediate withdrawal. By not actively withdrawing it, the bill will continue to exist in legislation until July 2020. The accusation of her evasive wordplay means the issue remains unresolved; concern and fear are still rife among Hong Kong citizens, expats and the business community.

Hong Kong’s economy has proven itself to be resilient before. It rebounded quickly after previous public protests and following the SARS virus outbreak in the 2000s, which many feared would halt all supply, trade and tourism. The question of its future stability, however, is twofold: if the bill remains in legislation, will the economy be able to weather its repercussions on the city’s global positioning and appeal? And even if the bill is officially withdrawn, will there continue to be a backlash, fuelled by widespread mistrust in the Hong Kong government and uncertainty about the city’s future autonomy?

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