An informal civilian referendum on ‘democracy’ organised at poll stations or on the Internet by the pro- democracy camp (comprising politicians, lawyers and academics…) showed high popular support for direct universal suffrage, i.e. out of Beijing’s influence. Beijing condemned this referendum by judging it illegal and groundless. In fact, earlier in June, Beijing had anticipated the referendum by recalling in a white paper that it keeps control on Hong Kong’s political system. This warning has probably boosted voters’ willingness to express in the referendum their opposition to Beijing’s political interference.

Impact on country risk

Hong Kong’s Basic Law – the city-state’s constitution since it was retroceded to China in 1997 - and fundamental ‘one country, two systems’ principle grants large autonomy and freedom to Hong Kong’s citizens and provides for an ultimate universal suffrage of Hong Kong’s CEO. Although Beijing has promised to hold direct elections by 2017 at the earliest, it has repeatedly stressed that it will keep the right to monitor the electoral process and to vet future CEO candidates. In a regional context of growing Chinese assertiveness and nationalist stance, Beijing will certainly hold this line whatever the pressures from a large pro-democracy camp. However, recent events highlight the threat of rising demands for more democracy  and tensions between the civilian ‘Occupy Central’ movement and Beijing, with a peak likely to be reached by the next 2017 elections. Those tensions are exacerbated by growing resentment against mainland China which is notably blamed for soared property prices and decreasing democratic rights. In the future, the risk  of clashes with the police and of China’s tougher policy could harm political stability, as polarisation with mainland China deepens.

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com