Summary Conclusion
At the beginning of this week I wrote to friends I was scared. Irresistible forces seemed headed for immovable objects and it wasn’t clear how the mob, then reeling from clashes with tear-gas firing riot-squad-gear clad police, would proceed. My biggest worry was our Wednesday holiday would turn into a July 1st 2003-style day of mass protest and the citizenry in force would turn out. As it happened, they didn’t; and I’m no longer afraid. The demonstrations will likely now fade away.
Lack of Popular Support
On Wednesday I visited Causeway Bay and Central, the major centers of congregation for protesters on Hong Kong Island. What was clear was regular shoppers were avoiding these areas. For fear of the disruption or perhaps being caught up in an escalation of the protest? I don’t know, they just weren’t there. Even many of the demonstrators seemed to be taking a part-time attitude to dissent, knocking off for shopping or afternoon tea before returning to the night shifts that had seen most of the action.
Maybe there were twenty thousand on the streets, maybe thirty thousand, maybe (but it really didn’t look like it) fifty thousand? What there wasn’t was the great mass of citizenry that turned out in 2003 to protest the Tung administration. So, let’s say thirty thousand were on the streets? Seven point two million therefore were not. The rain from the previous day had stopped and the temperature was a pleasant 29-degrees. Weather can’t be blamed; only general apathy on the part of the silent majority fits the facts.
Beijing’s Response
Press reports have highlighted how Beijing is taking care not to interfere, save expressing faith in the Leung administration’s ability to tidy the mess up, in time. I disagree. I don’t believe it was just a coincidence that on Monday night China’s top leaders, past and present, turned out together. This unusual behavior continued Tuesday at a banquet with Xi Jinping toasting Jiang Zemin and Hu Jintao seated immediately on either side. It’s unlikely this show was choreographed with Hong Kong solely in mind but the message to ‘splitists’ was plain. The Party is united, resolute and uninterested in brooking any opposition (least of all from spoiled poor-little-rich-kid Hong Kong).
As if that message weren’t clear enough on Wednesday it appeared Beijing banned group tours to Hong Kong. There’s been no violence here so personal safety can’t be the issue. Perhaps it’s because it doesn’t want more photos of civil disobedience circulating on social media or the infection otherwise spreading? Or perhaps it’s to underline the point, for those failing to get it, without China’s goodwill Hong Kong would have very practical negative economic issues to deal with. Perhaps it’s a combination of all three?
Incoherence; the big worry. Now the obvious weakness
In the most full account* to date of the incidents of May 1989 that culminated in the armed response begun by Chinese authorities on June 4th (many will know this as the Tiananmen Square massacre or some such) we learn how, in a leaderless vacuum, chaos broke out among student protesters with different factions trying to capture power. Moreover, within these factions individuals struggled between themselves for leadership of their respective factions. My fear was that we were about to face a similar situation in Hong Kong. [*’The People’s Republic of Amnesia’ by Louisa Lim]
In 1989 incoherent demands authorities found themselves presented with was undoubtedly why their response was ultimately so extreme. You can’t negotiate with a mob, really, it can’t be done. The Hong Kong mob seem also to be confused about what they want. CY Leung has to go! OK, how would you propose we arrange that? The stooge-candidate system proposed for 2017 is unacceptable! Yes, it’s not great but it’s better than any other city in China is going to get; and you wish to reform it how? We demand to speak with CY Leung! Who would you propose he speak with? Joshua Wong? Benny Tai? Jimmy Lai? Paul Zimmerman (oh please, Paul, that yellow umbrella thing was just low)? A panel; OK who’d like to put that together?
What Next?
I started this note predicting protest will fade. Fade is not the same as disappearing though and the course tributaries running from this river of discontent will take are impossible to predict. Moreover, the purpose of this note is not to get into the politics. Merely to provide a cooler analysis than investors have been getting from a media thrilled at being able to collect ready images that fit a narrative written long before anyone put on a yellow ribbon or looked out an old black T-shirt.
To remind, people currently blocking traffic and keeping shoppers indoors are acting illegally. We have rights of assembly and free speech in Hong Kong but the actions of most of the protestors now camping on our main thoroughfares are illegal and our police force have an obligation to remove them (sans riot-gear and tear gas this time please). This will most likely, selectively and delicately, soon begin.
Police intervention may now be easier as this week has also brought into question the notion the protesters represent the opinion of the majority of Hong Kong’s citizens. That being the case their actions are, in fact, the antithesis of what democracy is fundamentally about i.e. accepting the will of the majority.
End Game
From here, my guess is, most now on the streets will go home. This may take a week or two and there’ll be a rump of die-hards which the police will shoo into smaller and smaller pens (having to fight for real estate with the Falun Gong no doubt in the process?). These too will, mostly, eventually go home. Success will be claimed by all sides. Beijing was sent a message! The protesters achieved nothing in reality! Hooray for everybody. CY (Leung) will, of course, remain at his post and Beijing won’t immediately engage in a dialogue about altering arrangements for the 2017 election.
CY is of course disgraced as far as Beijing are concerned. On his watch embarrassing protests have allowed world leaders to take out anti-China lolly-sticks and run them along the sides of Zhongnanhai’s cage. More importantly stability, the cornerstone of China’s administration, has been rocked; and for these crimes there can be no absolution.
In Conclusion
So where does this leave us?
A lame-duck administration, an unhelpfully politicized civil service, a fractious and noisy loose coalition of dissent; business then pretty much as usual ( and, sort of, back to the point we started from).
Little of all this affects the earnings power or prospects for the overwhelming majority of companies whose stocks are listed on the Hong Kong Stock Exchange and therefore weakness events have produced must, ultimately, be reversed; but it will take time.
The worst may be over and we’ve (so far) avoided blood on the streets. Seemingly immovable objects may be prepared to budge a bit and irresistible forces have turned out to be resistible. It may well be all over, bar the shouting; but the shouting will be loud and go on for a long time to come.