Is Democracy Bad For Business In Hong Kong?

The glittering skyscrapers of Hong Kong's "Central" district are the heart of an international powerhouse, a global center for banking and finance that's home to the Asian headquarters of a large number of Western companies. It is also about to become the stage for a confrontation over the city's latest political crisis.

The ruling just over a week ago from the National People's Congress of China, which effectively enforces Beijing's right to politically screen candidates for the post of the city's chief executive, has exposed the sharp divide between those in the city for whom economic prosperity is a paramount concern and those lobbying for increased democratic liberalization.

The business establishment is on one side of this debate. On the other side are activist groups, the most influential of which are Scholarism and Occupy Central With Love and Peace.

Occupy has, since its inception in 2013, pledged to use peaceful civil disobedience to disrupt the city's financial district unless the 2017 election for the city's chief executive meets “international standards.” Their demands are for universal suffrage and that the Beijing government not exercise any control over who can stand for election.

The city's major business interests strongly oppose this threatened civil disobedience. Five major Hong Kong business confederations took out ads in city newspapers on July 25, warning that “the social unrest and political instability created by Occupy Central will deter foreign companies from investing in Hong Kong, thereby creating an enormous ripple effect throughout the local economy [and] … reducing employment opportunities.”

In June, the Hong Kong affiliates of the Big Four accountancy firms, Ernst & Young, PricewaterhouseCoopers, Deloitte and KPMG, placed a Chinese-language ad in the city's papers, stating: “We worry that multinational companies and investors might consider moving their regional headquarters from Hong Kong, or even remove their businesses, in the long term shaking Hong Kong from its position as an international financial and commercial center.”

Spokespersons for these organizations referred to their previous statements and declined to comment further.

Benny Tai, a professor at the University of Hong Kong and the founder of Occupy Central, rejected the notion that political protests were ultimately the enemy of prosperity.

“In the short term, the Occupy Central action may cause many problems to economic interests in Hong Kong. But actually, the decision of the Standing Committee, and the failure to reach consensus, may hurt Hong Kong's economy more in the long run,” he said in an interview.

“If you ask what is causing damage to Hong Kong's economy, I would say that it is the way China is doing things... In Hong Kong we practice the rule of law, and business relies on the rule of law. Yet we cannot rely... on the government to honor policy [commitments] and laws. That, in the long run, may affect Hong Kong's economic development."

Tai's sentiments were echoed by Agnes Chow, a spokesperson for Scholarism, a student activist group. “I think we can't compare democracy and the economy, or put them in conflict," she said. "The political system is affecting all parts of our lives, the economic aspect, social aspect, cultural aspect... The emphasis of Hong Kong's people should not only be on economic development.”

Businesses in Hong Kong have found their economic health dependent on avoiding conflict with the central government in Beijing. Bloomberg's website was blocked in mainland China after it published an article about the financial affairs of Chinese President Xi Jinping's family. In 2013, three of the city's largest banks -- HSBC, Hang Seng and Standard Chartered -- pulled their advertisements from local newspaper Apple Daily because, the paper's owner alleged, of the Daily's criticism of Hong Kong's pro-Beijing government.

However, according to David Zweig of the School for Humanities and Social Science at the Hong Kong University of Science and Technology, the status quo is a poor option for the city's economic future.

“Here in Hong Kong we elect the opposition -- we don't elect the government. And once you put an opposition into power, what can they do? They can't draft laws, all they can do is make trouble. That's the way the system is structured and that's not very good. There are all kinds of things that need to be changed."

“Serious problems exist in Hong Kong in terms of governance. The chief executive is completely ineffective. Is that stability? My answer would be no, that's not,” he said.

“I think it's one-sided to say that the people who are protesting are the ones who are going to create chaos when the government can't pass anything. From a business perspective, this place is pretty ungovernable and that's not good for business.”

The status quo, however, might be exactly what Hong Kong's political polarization helps to maintain. The administration of current Chief Executive CY Leung has to submit a bill to implement the Standing Committee’s ruling to Hong Kong's legislative council in the coming weeks.

Although a majority of the council is in the pro-Beijing camp, with 43 of the chamber's 70 seats, the Pan-Democrat opposition, if united, has enough votes to block the bill's passage. If that happens, the city's current system -- where the chief executive is “elected” by a committee widely viewed as stacked with pro-Beijing members -- will continue to be the method by which the city's leader is chosen.