Why China has no reason to feel threatened

Palpable tension has returned to the streets of Hong Kong, sparked by the pro-democracy protests last weekend. The city’s main roads were blockaded in a civil disobedience campaign designed to press the case for universal suffrage.

But what started as a peaceful, student-led protest in the financial and government districts of Central and Admiralty unexpectedly escalated after unwarranted police action. After Occupy Central had joined the demonstration, riot police threw canisters of tear gas in an unprovoked attack to disperse the crowds. The standoff started on Sunday and continued into Monday.

All the police action did was to swell the crowd, encouraging city residents to turn out in greater force, many shocked by the images they had seen of the demonstrations on television. It served only to stir up raw emotions among the city’s inhabitants.

The twin shopping districts of Causeway Bay and Mong Kok reportedly saw thousands of protesters congregate, on top of the tens of thousands already present elsewhere.

In Central was a black sign warning people to back away or be hit by tear gas. People had been sharing masks and cling film in what had been a friendly atmosphere up until the police action. Immediately after the gas was set off, people ran away, screaming and coughing with their eyes streaming. I was scared, as were many people there.

The protests were staged in response to a declaration by the National People’s Congress Standing Committee on August 31 that the status quo of Hong Kong’s election for chief executive had “unshakable legal status and force”.

Beijing has stuck to the letter of its commitment to allow ‘one man, one vote’ by 2017, but this is a hollow deal and it knows it. Candidates allowed to run for election are heavily vetted in the first place because they have to be approved by a majority of a 1,200-strong pro-Beijing nominating committee.

This restricted framework is not democracy in anyone’s book.

While the tactics employed by Occupy Central have not been universally welcomed by Hong Kong society, the movement’s efforts to seek genuine choice in electing a government that truly represents the city’s population have been. A developed society such as Hong Kong feels this to be an inalienable right.

Beijing should understand that safeguarding Hong Kong’s freedom of expression and right to vote is not a threat. In fact, it is of benefit to the unified country’s long-term economic development.

Chinese companies listed in Hong Kong have certainly benefitted from the city’s status as a global capital-raising centre with international standards of corporate governance, accounting and disclosure.

Alongside a free domestic press, investors have the clarity of an unrestricted flow of information. All this is backed by an independent judicial system that is universally respected. It all lends a credibility to Hong Kong as a world-class place to do business.

Without the assurance of this credibility, would the upcoming Shanghai-Hong Kong Stock Connect programme or the mutual fund recognition scheme be backed by the international asset management community to the same degree? And what about the knowledge transfer in international best practices that is taking place behind the scenes?

While its legal infrastructure is an evident advantage for Hong Kong, its biggest draw is a skilled international labour force. Such things cannot be easily replicated, as Shanghai is no doubt discovering through its faltering efforts to create a free-trade zone.

A genuinely representative government that answers to its citizens would only underpin such values, making them more secure, more entrenched. Hong Kong, after all, has no ambition to break away from Beijing, unlike other restive regions.

Hong Kong’s chief secretary for administration, Carrie Lam, has called on the public to “pocket it first”, a reference encouraging them to accept Beijing’s rulings on the city’s political status (see accompanying article in today's newsletter).

But this is not a long-term solution. Opaqueness should never be encouraged. On Stock Connect, it remains open to question whether the China Securities Regulatory Commission will be up to the task of ensuring that no mainland rat-traders enter into Hong Kong stocks.

Beijing’s criticism that the British never introduced democracy in Hong Kong either is valid. But it cannot be forgotten it was also the UK that introduced Hong Kong’s efficient civil service and the Independent Commission Against Corruption.

It is these factors, combined with people’s work ethic, that has made Hong Kong what it is today. The city must seek to maintain this lead, especially with a view to peers North of the border.

Hong Kong finds itself at a crossroads. But the financial industry should take note that calls for more than a sham democracy have relevance to everyone operating in the city, as much as for the seven million inhabitants that feel proud to call it home.