SVA Update Number 8 - Hong Kong Protests – Threat Assessment – 20 September 2019 - 1000hrs

SVA

Violent protests across Hong Kong continued over the weekend of 14 and 15 September, although the numbers of demonstrators have fallen. 

These declining numbers may encourage hardliners to heighten levels of violence, perhaps in an effort to force a miscalculation from the police or government. 

The risks of further instability, violence, vandalism and a resultant crackdown, in the coming weeks are thus real. 

The Protests

Protests on Friday 13 September, including the formation of a human chain, were peaceful.  However, a face-off between separate groups of pro- and anti-government protesters ended in some street fighting on Saturday 14 September, highlighting how polarised Hong Kong has become.

More notably, on Sunday 15 September, a march for which the police refused permission fractured, and descended into serious violence in North Point, Causeway Bay and Wan Chai. 

Police responded with tear gas, protesters threw petrol bombs, and, in one incident, some officers drew their revolvers.  Fights separately broke out between demonstrators and men in white T shirts, highlighting the latent risk of triad violence against protesters. 

The numbers of protesters were well below those of recent weeks, a decline that may have come about owing to police refusals of permission for rallies, to the Mass Transit Railway (“MTR”) company’s closure of some stations, and, perhaps, to a waning appetite for ugly street violence. 

The situation currently remains intensely “events-driven”.  Protest targets have shifted repeatedly since July, from the Extradition Bill, to the Legislative Council, the Chief Executive, the Hong Kong Police, Yuen Long villages, Hong Kong International Airport, and to the MTR Corporation.

They may shift again.  This week the Hong Kong Jockey Club suddenly cancelled a race meeting owing to fears that protesters would target a horse belonging to Junius Ho, a controversial pro-Beijing lawmaker allegedly linked to triad attacks in Yuen Long on 21 July. 

Those still on the streets now comprise a hard core of violent protesters, who show scant willingness to climb down, and some more moderate supporters, who acquiesce in the violence, in the belief that non-violent protest is not effective.

Worse, the recent turn to uglier violence, epitomised by use of petrol bombs and other weapons, is perhaps a sign of desperation – and is receiving tacit support from some pro-democratic politicians.  The radicals hope to provoke an overreaction by the police, so as to shore up support for their cause. 

The Hong Kong Government

The Hong Kong Government has proven remarkably clumsy in provoking the crisis, and feeble in offering a political solution to what has morphed from a single-issue protest into an inchoate expression of youthful ire. 

The formal withdrawal of the controversial extradition bill, plans to improve the Independent Police Complaints Commission, and subsequent promise of a dialogue, did provided some protesters with the space to proclaim a success (of sorts), and an excuse to return to their studies.  Many demonstrators, though, see these concessions as “too little, too late”. 

The authorities are now focusing on the 1 October National Day celebrations at the Wan Chai Convention Centre, and elsewhere. The Government has cancelled a fireworks display, and may fortify the centre against demonstrators.  The Government has also voiced a willingness to invoke extensive colonial-era emergency powers, so as to re-establish stability, should they deem this necessary.

The Police

In the interim, the police are working to maintain stability.  An initially hands-off approach has long since shifted towards a more assertive stance, perhaps justified by the protesters’ actions (sacking the legislature would result in shootings in most states, but did not in Hong Kong), and by the overall threat to law and order. 

This approach has angered the protesters hugely – and the Police response has displayed some failings.  One example was the tardy response to the Yuen Long attacks and another was an incident on a train at Prince Edward Station. The use of “raptor” squads, decked out in black, whilst effective, presents a poor PR front.

What is clear, though, is that violence from protesters will beget an equally robust response, meaning that clashes may well intensify.  Indeed, the Junior Police Officers Association (“JPA”) recently described petrol bombs as “lethal weapons”, the use of which justifies officers’ responding with live ammunition. 

In this heated climate, a misjudgement by a Police officer, or an arson attack by a protestor or agitator, could easily escalate matters. 

Direct Mainland Intervention?

The protests are anathema to the Chinese Communist Party (“CCP”), which fears that Hong Kong could become a base for broader “colour revolution”. 

The burning of the mainland flag, or the booing of the national anthem, only add to Beijing’s determination to stamp out instability. 

Equally, Hong Kong provides crucial access to international financial markets to Chinese companies, not least owing to its freely traded currency.  Its stability is thus a national interest worth protecting, notwithstanding Beijing’s need to demonstrate its authority.

Accordingly, Beijing will certainly stamp out unrest.  The question is simply how, and when.

Beijing may wish to avoid direct intervention; deploying the People’s Liberation Army (“PLA”) and the People’s Armed Police (“PAP”) would damage its own commercial interests, and reputation. 

The CCP may thus turn to less visible, more invidious, measures, such as: encouraging Hong Kong institutions (such as the police) in crackdowns or arrests; intervening through directly answerable organisations, such as its security services, united front groups, and, perhaps, certain triad societies; and pressuring businesses exposed to Hong Kong or mainland China, domestic or foreign, to support actions that weaken the protesters. 

The Mainland propaganda machine is now in full swing.

Needless to say, any, and all, of these measures will corrode the underpinnings of Hong Kong’s autonomy.  In that sense, the protesters risk bringing the temple down on their heads. 

The Economic and Political Damage

The protests have taken their toll on the economy.  The tourism sector has fallen hugely, with organisers cancelling a number of big events.  Fears amongst expatriate workers are rising, and Moody’s has already scaled down its outlook for Hong Kong. 

Businesses caught in the crossfire have suffered disproportionately.  Cathay Pacific has lost senior executives, and had to cut some flights owing to lack of demand.  Some tenants in buildings owned by Cathay’s owner, Swire, have come under pressure to move. 

The MTR corporation, which is 75% owned by the Hong Kong government and has become a principal target of protests and is struggling to replace station hardware damaged by vandals.  Some Chinese state media outlets have even criticised Hong Kong’s tycoons, raising the prospect of compelling them to sell land banks, so as to ease local housing constraints.

These actions come amidst the uncertainties of trade tensions between America and China, and as the US Congress considers legislation forcing the President to reassess Hong Kong’s special trading status.  A key threat, then, is that events prompt outside investors to slowly disengage from Hong Kong. 

Of course, notwithstanding press images of flames in Hennessey Road, business activity in Hong Kong continues, with the financial institutions that underpin Hong Kong’s prosperity facing only limited disruption.  Rather, the main victims are hotels, small restaurants and the like. 

Moreover, China has every interest in sustaining Hong Kong as a financial centre, and may bolster the economy by increasing its supply of initial public offerings (“IPOs”), or through other mechanisms. 

Such developments, though, will only advance Hong Kong’s absorption into the Greater Bay area, and hence accelerate the very developments that the protesters most oppose. 

What to Do?

As protests continue, SVA recommends that companies evaluate and monitor their risk profiles closely – especially those with offices located around pre-announced demonstration areas. 

Planners should focus on:

Businesses must take particular account of political tensions.  Companies should display a neutral stance, manage their social media and advertising accounts tightly, and encourage staff not to engage in political activities in the workplace.

In the currently unlikely event of an overt full-fledged mainland crackdown, foreign governments, including the US, would likely sanction Hong Kong or Chinese officials and entities, and could threaten Hong Kong’s independent trading status.  Such actions would have a major commercial impact.

Retaining Crisis Response Services

SVA has a dedicated crisis management team which, for our retained clients, stands ready to assist companies during crisis situations.  Retained clients pay an annual fee for a 24-hour response capability.

SVA is based in Hong Kong and is the only firm with the local and senior expertise drawn from Intelligence, Operations and research functions of the former Royal Hong Police Force.