Student-led street protests began end September in Hong Kong’s financial district under the impetus of the pro-democracy ‘Occupy central’ movement. Recently, disruptions have abated and the occupation of major locations by the so-called ‘Umbrella Movement’ has been much reduced. The key demand of tens of thousands of demonstrators is to adopt a real universal suffrage at the next elections in 2017, thereby rejecting Beijing’s plan to continue controlling the election process and if necessary vet CEO candidates.
Another demand is the resignation of current and pro-Chinese CEO Leung whose popularity has considerably declined during the latest crisis. Except in some circumstances where violence has sometimes been hard against protesters, notably pro-democracy leaders, police has generally operated with restrain as to prevent the situation from degenerating.

Impact on country risk

Beijing will not bow under popular pressure and adjust its position on political reform. Therefore, it will definitely stick to its own version of universal suffrage, hoping not being compelled to use force which would damage Hong Kong’s image as a haven of political and financial stability. Protests do not seem to have harmed the economy so far. The longer the crisis, the more uncomfortable the Chinese communist party will feel, especially in terms of credibility and, potentially, stability in mainland China. However, given broad- based support among young people, teachers or the growing poor population, political instability is likely to persist until the 2017 deadline, at a varying degree. The reason is that protests go beyond simply contesting the voting system. Latest rallies are also a reaction to the perceived Chinese invasion and interference, to progressively eroding democratic rights which could threaten the ‘one country, two systems’ model.
Besides, income inequalities have also reached alarming levels in a more difficult economic context for many citizens. In the coming weeks, CEO Leung might be sacrificed and be urged to step down but this would not meet the protesters’ key demand. Therefore, instability factors are to remain and should trigger further protests in future.

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