Occupy Central, the as yet unrealised protest at the heart of Hong Kong's financial district, is supposed to bring business to its knees but the reality is not so black and white.
The motives behind the protest are predominantly political but the tentacles of those politics have implications for the city as a regional financial centre.
In essence, the protest is set to involve swathes of people staging a sit-in not far from the Asian headquarters of HSBC and Citi, among others, clogging up roads and transport links for an unspecified time and creating widespread disruption.
The aim – or threat – is to force Beijing to provide total freedom of choice when it comes to electing the next chief executive in 2017, rather than merely offer up its own slate of would-be chiefs. There is no definite timetable for action but it is imminent.
An unofficial vote on universal suffrage was backed by nearly 800,000 people last month and, although it denied a link, the Chinese government issued a now infamous white paper reminding its semi-autonomous region what “semi-autonomous” means.
But, of course, nothing is quite that simple when it comes to Hong Kong’s relationship with the Chinese mainland. So the issue has stirred up a raft of other controversies. And rather than use business as a stick to beat the city with, the protest is partly aiming to save it.
“Hong Kong’s core values are being eroded and the financial services industry is facing a big challenge to remain strong. It risks losing out to Singapore and Shanghai,” Kenneth Leung, a lawmaker representing the accountancy profession in Hong Kong, told FinanceAsia.
On Tuesday, 98,600 people (police data) gathered in Hong Kong’s Victoria Park to protest at Beijing’s handling of the city – organisers put the figure at 510,000. It was the 17th anniversary of Hong Kong's formal handover, when the city was given back to China by the UK.
The crowd, the biggest in 10 years even when using police data, then marched – slowly – to the city’s financial district to hear speeches, sing songs and look really annoyed.
“We are doing this because we are in a crisis; a crisis for democracy,” Kin-man Chan, co-founder of Occupy Central, and professor at Chinese University of Hong Kong, told FinanceAsia.
Politics aside, Hong Kong's status as a financial hub has waned in the past few years as the number of initial public offerings launched on the Hong Kong Stock Exchange has slipped. Although that decline bottomed out in the final quarter of 2013, there is still a glut of banks chasing a dearth of deals.
Investors have also been perturbed by the increased reliance on cornerstone investors, which take a sizeable portion of the deals, leaving less pie for retail investors. And earlier this year Chinese pork producer WH Group scrapped a high-profile US$1.9 billion IPO, while internet titan Alibaba chose New York over Hong Kong for its bumper IPO that could yet raise up to US$20 billion.
Anecdotally headhunters are also seeing a reduction in activity from the city's big banks, suggesting a lack of staff moves and new hires.
“The business environment in Hong Kong is getting worse,” Leung said, two hours before the march, in which he took part. “Tycoons are diversifying their portfolios to Europe, the US and elsewhere in Asia. Hong Kong is thus being downgraded to a nominal headquarters.”
Leung said that deals and transactions with the Chinese mainland are contributing to an erosion of morale because of their perceived murkiness.
“We need a strong rule of law. To help accomplish this we need a judicial system that is working properly. These are the real cornerstones of a fully functioning financial centre,” he said.
Coincidentally, so-called cornerstone investors – who get in early on a deal, to help give it critical mass – are also a key concern for analysts and investors at the moment.
According to the Financial Services Development Council, 75% of Hong Kong listings had cornerstone investors in 2013, compared with 45.6% in 2010. This over-reliance on such investors is transforming Hong Kong as an IPO destination, some in the market say.
Among the factors scaring away would-be investors are the “family and friends” who have taken up an increasing percentage of IPOs, a Hong Kong market governance conference heard in June. This appears to be primarily an issue with Chinese companies listing in Hong Kong, which is adding to the perceived mainland murkiness that is so upsetting the city's citizens.
“If things continue to go in the same direction and [at] the same speed as the past two years, Hong Kong will be overtaken by Shanghai as a financial hub; not in five years but in two years,” Leung said.
That said, Hong Kong's IPO market has shown signs of renewed life so far this year, in the wake of the WH Group failure. And it is not clear how much the city would lose out if Beijing refuses to cede ground to those who want universal suffrage.
In the long-run, reputation is also crucial. Take the case of Alibaba. Alibaba wanted Hong Kong's stock exchange to bend its rules to allow it to list with a dual-class shareholding structure, which would have disadvantaged normal retail investors. It did not get its way but for Leung it provides some evidence of a deteriorating business environment.
“Of course the HKEx didn’t buckle but it didn’t stop Alibaba trying to pressure the city and the regulators...The [Securities & Futures Commission of Hong Kong] has done a good job [generally] but we don’t know how long that will continue. We have international standards to uphold,” he said.
To be fair, Beijing is attempting to modernise, open up and adapt its financial system to better engage with the world at large, and Hong Kong does enjoy a rarified status as an offshore renminbi trading hub.
But Occupy Central argues that it is on a slippery slope. Its campaign is a more general – and direct – attempt to register displeasure with the status quo, although at present it is more of a threat than anything else. This may change soon, though, as a group of 1,000 students staged a sit-in outside HK leader Leung Chun-ying’s office on Tuesday night and hope to confront him when he arrives at work on Wednesday morning.
Some are calling this a dry-run for the main Occupy Central action, which as yet has no timetable.
Also, if disruption is the name of the game for Occupy Central, disruption to business, it appears, is not.
“That is not our objective; it is not the point and it is not what we want to achieve. But it will be a side effect of the protest, when you consider we will block roads and transport links,” Chan said.
Leung said the protest will have only a minimal effect because it is more of a symbolic move due to most of the banks’ back office operations being held elsewhere. He also said the banks have contingency plans in any case.
That all may be true but bringing the centre of any financial centre to a halt, if it happens, will no doubt have implications for the everyday running of business, not to mention the staff.
“Occupy is really a last resort. We will only do this when the government refuses to listen to people and we don’t know how long it will last when it starts,” Chan said, while adding that they would not confront the police nor resist arrest. Nor will they file any legal defence if arrested.
If organisers are hoping the authorities will blink in this game of bluff, they might be disappointed.
The Hong Kong government on Tuesday re-iterated its stance in terms of nominations for the chief executive’s role. Essentially, it suggested that leaving such an important decision to the people of Hong Kong is not a good idea.
“Politically, such a proposal will unlikely be conducive to forging consensus, and operationally, the feasibility of implementation is questionable,” it said in a statement.
So, if Occupy Central happens – as seems likely – is it bad for business in Hong Kong?
The Hong Kong branches of the Big Four accountancy firms – PwC, Deloitte, KPMG and EY – think so, and ran a half page advertisement in the local press last week to explain why. Disruption, they said, would knock the city’s reputation and bring it to its knees.
A few days later, a bunch of their employees took out their own ad in the Apple Daily newspaper; arguing that their companies did not speak for them.
Perhaps, then, the answer is that a city or organisation that does not listen to its people is bad for business.