An official statement by the Hong Kong and Macau Affairs Office of the Chinese Central Government, on 29 July 2019, demonstrated support for the Hong Kong Police Force, but offered scant promise of a political solution to Hong Kong’s current crisis.

Rather, a “war of attrition” between the protesters and Hong Kong’s government, in the form of frontline Police Officers, is now taking shape, inflamed by tensions linked to a seeming triad attack in Yuen Long and a cycle of protest violence. No early resolution of the unrest seems likely.

Rising tensions

Protests on Sunday 21 July, targeting the Central Government Liaison Office in Sai Wan closed with the desecration of the Chinese national symbol, engendering outrage from pro-government forces.

Later that day, a large group of suspected triad members indiscriminately beat protesters, and members of the public, arriving at Yuen Long MTR station, leaving dozens injured.

Police were clearly slow to respond on this occasion. This perceived tardiness, combined with subsequent news reports that Police had early warning of an attack but failed to act, and a Reuters video of staff from the Central Government Liaison Office meeting Yuen Long villagers, has elicited public accusations of collusion between the authorities and triads. Whilst these may be overblown they have incensed the demonstrators and angered the public.

Needless to say, this situation has caused huge embarrassment to the Hong Kong government, which has since sought to distance itself, roundly condemning violence on all sides. In the interim, large scale protests continue, many of which end in pre-planned violence.

A divisive environment

These latest events are inflaming an already heated contest between two loose-knit groups. On one side are the protesters, a medley of groups acting peacefully, and a smaller but sizeable “resistance” bent on violence.

On the other side is a pro-Beijing United Front, comprising government, business leaders, organisations such as the Hong Kong Federation of Trade Unions, the Rural Affairs Commission and others.

Absent a political solution, this contest will continue through August, and perhaps into September, when the students return to their studies. Dissent is also spreading; elements of the Hong Kong civil service plan a mass gathering for Friday, 2 August.

A war of attrition

In the long term, only a political solution can defuse tensions.

Prior to recent events, steps to procure such a settlement might have included the resignation of the Justice and Security Secretaries, and an official inquiry into all issues surrounding the extradition bill, including the triad attacks. Such measures might not have satisfied radicals, but would have swayed moderate opinion, and so divided the opposition.

However, the government of Carrie Lam Cheng Yuet-ngor shows scant appetite for concessions, not least as the Hong Kong and Macau Affairs Office has voiced such strong support for her administration. The government may thus choose to wait, trusting that demonstrators’ intemperance and violence will erode public support.

Indeed, the rise in violence has led to a fall in protester numbers, and some marches, such as that in Causeway Bay on 28 July, have lacked clear direction. Further violence will only lead to a weakening of middle class support for the protesters.

Holding the Line

This “events-driven scenario” places a huge burden on the shoulders of the Hong Kong Police.

The Police must now “hold the line” by ensuring stability, dispersing protesters with standard internal security weapons, such as CS smoke, rubber bullets and the like, but must also endeavour to, and be seen to, act in an even-handed fashion – a difficult job.

The Police must act impartially notwithstanding officers’ current fury at their treatment by protesters, and in a polarised climate. Indeed, the Commissioner of Police Stephen Lo has called on officers to “fight for their city”.

Similarly, the Police must be seen to suppress triad activity. These organisations thrive on chaos, and the Hong Kong authorities have not acted firmly enough against them since the Hong Kong handover in 1997.

Of further concern is that managing this unpredictable situation over several weeks, or even months, will strain Police capacity, and morale. Consequently, a breach of discipline, or a mistake, is a real risk, unless cool heads prevail.

The impact of a Police failure would be exceptionally high. Beijing would probably intervene to establish stability, perhaps through the People’s Armed Police (“PAP”), a paramilitary law enforcement agency, or via the People’s Liberation Army (“PLA”).

Any such direct intervention would seriously damage perceptions of Hong Kong’s autonomy, of course, and hence at present seems unlikely – but events may yet force Beijing’s hand.

Threats to business

This uncertain environment poses real risks to international business.

Disruption is one problem. Most protests have had a limited impact on business, so far; indeed, clearing up has proven quicker than in the wake of a typhoon. However, “wildcat protests”, delaying trains or impeding airport access, may now proliferate, as protestors become more desperate.

Ill-considered use of social media or press comments by businesses can also result in attacks from protesters or pro-government forces alike, particularly given the exaggerated claims that foreign forces are backing the protests.

More worrying is the risk of escalation, with violence worsening after each “battle”. Rallies in areas associated with triad societies, such as Yuen Long, Mong Kok and Yau Ma Tei, will certainly compound this threat.

A specific concern for retailers is that Hong Kong’s malls sit above, or adjacent to, the railway stations used by demonstrators to attend rallies. Malls have thus become not only arenas for contest between police and protesters, but also targets themselves, if staff call in police. An ancillary risk is that innocent bystanders find themselves caught in a confrontation.

Other risks are longer term. Some international investors may, in time, eschew Hong Kong, perhaps preferring Singapore as a regional centre. For now, though, this risk is exaggerated, given Hong Kong’s longstanding strengths.

A final risk is that foreign governments sanction Hong Kong or Chinese officials, or that the US alters the trade framework operative under its US-Hong Kong Policy Act. Barring a major incident, such action is currently unlikely; but, if implemented, it would seriously affect commercial operations in Hong Kong.

What to do

As the protests continue, SVA recommends that companies should again carefully evaluate their risk profiles, and monitor developments closely – especially those around pre-announced demonstration areas.

In the immediate term, planners should consider:

• Safety and security of staff, and their families;
• Protection of plant and property;
• Possible denial of access to business premises, owing to demonstrations;
• Business disruption – reaction and priorities;
• Making plans for offsite operations for key assets, if necessary;
• Evaluation of security plans at business events, shows and meetings, especially those around malls, major government buildings, and exhibition centres;
• Developing first aid capabilities – such as capabilities for dealing with CS smoke affecting staff, or its introduction into building air-conditioned systems.

These measures should take account of rising volatility and violence, and of the fact that protests have now spread beyond the city centre, and may last for some weeks. Companies should encourage staff to avoid protest areas, if possible, so as to minimise the risk of personal injury.

Businesses must also take account of tensions. Factions are starting to demand that businesses take sides, or to attribute political motives to commercial decisions and to ill-considered statements.

Close monitoring of social media accounts is especially important, as a rogue, or unwary, employee can cause significant damage. Companies should also re-examine advertising campaigns, in Hong Kong and China, to ensure that no innocent mistakes provoke ire. The prospect of reputational harm is real.

Of course, different businesses have widely varying requirements, and thus all plans should be practically tailored to meet specific needs.

SVA stands ready to assist companies as may be necessary. SVA has a team dedicated to support firms with a presence in Hong Kong.