Five months since Hong Kong’s mass anti-extradition bill protests began in earnest, few investment professionals believe the city’s government is capable of putting an end to the social unrest any time soon.

Fears are rising that the violence could further increase, following a particularly violent series of events on Monday (November 11). Of serious concern is that China could use the escalating violence to have Hong Kong’s government pass anti-sedition legislation.

Doing so risks fatally undermining the "One Country, Two Systems" political arrangement that embodies Hong Kong’s appeal with international companies and investors.

Protesters had called for Monday’s general strike after university student Chow Tze-lok became the first person to die from serious injuries sustained at the scene of the protest on Friday (November 8). They began disrupting the city’s subway service and setting up roadblocks across parts of the city in the early morning.

Riot police were duly deployed. Some responded in a particularly heavy-handed manner, firing live bullets in several districts. Two unarmed students were shot, with one left in critical condition. 

The police also fired tear gas canisters at protesting students on university campuses. They did the same in Central, the financial and commercial heart of Hong Kong, after white-collar staff staged a flash mob to express their anger.

Meanwhile a man arguing against the demonstrations was set on fire by a protester in the afternoon, and ended up with second-degree burns over 28% of his body.

The extremity of the police crackdown and the mounting rage of protesters is creating a volatile and worrying situation. It could result in a spiral of escalating violence, the chief investment officer at a global bank told AsianInvestor on condition of anonymity.

Buses are blocked
by protests in Central

“It doesn’t seem the Hong Kong government has a strategy to resolve the problem… People cannot be sure if police are still under control,” she said.

The mayhem has already damaged investor confidence in Hong Kong and its international wealth hub status, as well as pushed Hong Kong into a technical recession, defined as two consecutive quarters of negative growth.

The latest bout impacted Hong Kong’s stock market. The benchmark Heng Seng Index fell 2.71% by the time it closed on Monday, the biggest fall among the major Asian stock markets. 

“Escalation of violence on both sides means that there are more risks even for regular people and walk-by people. Today there was tear gas in the financial district, my assistant got gazed [suffered the tear gas] on her way to lunch,” the partner of a fund house who declined to be named told AsianInvestor.

FIVE MONTHS OF MAYHEM

The protests can be traced back to the government’s attempt to pass the extradition bill that allowed extradition of suspects to China.

On June 9, one million demonstrators took to the street peacefully to protest against the bill, but the government tried to press ahead. That led to further protests, including a two million-strong march the following week that stated five political demands: complete withdrawal of the extradition bill, an independent inquiry into alleged police brutality, retracting the classification of protesters as rioters, amnesty for arrested protesters and universal suffrage.

The government eventually withdrew the bill but has otherwise refused to countenance these demands. And protesters and police have clashed almost every weekend since, with escalating violence from both sides. Last month, the government invoked the emergency law to pass the anti-mask law in a bid to quell the protest, but this only further exacerbated protesters’ anger.

The steadily worsening climate and mounting violence indicates that of chief executive Carrie Lam and her administration is unequal to the task of tackling these challenges, said the fund house partner.

The portfolio manager of a global insurer agreed, telling AsianInvestor that the government isn’t attempting an ongoing dialogue with the protesters but is instead trying to crush them by deploying riot police.

Riot police block a walkway

Local politicians are also aghast. "White collar professionals [in Central] were escaping the tear gas....most of them were out for lunch. Would an accountable government allow such a mess that happened at the financial city centre? Even the city's elites are no longer safe," Nathan Law, a former Hong Kong lawmaker, said on his Twitter account.

GOVERNMENT RESPONSES

Lam’s lacklustre response on Monday evening only appears to validate such criticisms. The chief executive stated, as she had before, that the government would not succumb to violence – while offering no concrete proposals as to how the government will resolve the crisis.

“The Hong Kong government has been resorting to various methods and means to tackle the escalating violence ... I want to make it clear that we will spare no effort in finding ways and means in ending the violence in Hong Kong as soon as possible,” Lam said, without elaborating further.

Perhaps most worrying is the possibility that China uses the ongoing violence as an excuse to further erode the supposedly arms-length oversight it has over its unruly southern city.

China President Xi Jinping gave his “full support” to Lam when meeting with her in Shanghai last week, while reminding her of her heavy responsibility to resolve conflicts and challenges facing the city. And Zhang Xiaoming, director of the Hong Kong and Macau Affairs Office under the State Council, said over the weekend that there is an urgent need for Hong Kong to enact national security legislation

He is likely referring to the controversial national security law Article 23, which prohibits any act of treason, secession, sedition, or subversion against China. Hong Kong’s government's original attempt to pass this legislation in 2003 caused one million people to march against it in protest.

Unfortunately, with the city increasingly engulfed in chaos and its current government seemingly more interested in the views of Beijing than millions of its own people, China may finally get what it wants.

But such a move would come at a huge cost – the last vestiges of Hong Kong’s "One Country, Two Systems" relationship. China's obsession with control could eliminate the key part of Hong Kong’s appeal to international investors and companies alike.