Earlier in the year, the Cambridge Centre for Risk Studies ran a stress test to factor the global economic risk of a hypothetical ‘Millennial uprising’ – that is, a far reaching anti-austerity protest, helmed by the young, the educated and the unemployed, modelled on the Occupy and indignados movements.
Our social unrest scenario was centred in the West and played out over a period of a few short months to the tune of $1.6 – 8.6 trillion in global GDP at risk. It was designed in order to inform investors and corporations of how best to defend their interests against such an emerging threat.
Back in June, Hong Kong’s former chief secretary, Anson Chan, told the Wall Street Journal that she expected, ‘a very long hot summer this year,’ when it came to civil tensions in the city.
In September, the arrival of student protestors in Hong Kong’s Civic Square protesting the Chinese government’s electoral reform policy turned up the heat in the Asian markets. Four major international accounting firms published a half-page ad in the local newspapers ‘voicing concerns’ over the wider impact of the movement. There were fears that the growing crowds of young people would chase off mainland visitors in Hong Kong’s busiest tourist months, or else damage the city’s international reputation as the economic gateway to China.
But the summer is now coming to a close. After three weeks of protest action, violent clashes and international attention, talks between the student leaders and members of the Hong Kong government are set to begin tomorrow afternoon.
Up until this point, the movement’s economic impact has been much smaller than expected – smaller, by far, than the comparatively catastrophic ‘Millennial uprising’ scenario. Much of the disruption in Hong Kong’s stock market has been precipitated by China’s crackdown on corruption, which has seen a ‘broader slowdown’ throughout all the East Asian markets.
Hong Kong’s international businesses, for the most part, have good contingency plans already in place to combat work absenteeism in the face of the city’s regular threat from tropical typhoon. Many companies maintain back-up offices in the New Terrorities for this reason and workers have been able to clock in from home and conduct meetings over Skype with little difficulty. The economic forecast for the region has been corrected, but not by much. Goldman Sachs, for example, recently lowered its 2014 growth forecast from 2.3% to 2.1%.
The protest’s greatest impact on the financial sector has thus far been in its disruption of traffic. Blockades and occupations have paralysed roads into the financial district; the barricades and violence in Mong Kok, a favourite shopping spot for tourists and locals alike, has meant a drop in foot traffic and losses for retail and hospitality businesses. Hotel occupancies in early October, Hong Kong’s peak month in the tourist calendar, are down 10%. Shop owners have reported an apparent 80% fall in predicted sales so far this quarter, particularly in the market for jewellery and luxury goods — but the rates of retail sales have been diminishing consistently for the last seven months.
Whether or not the Umbrella Revolution derails the local economy depends on how much longer the movement lasts. October and November are the city’s peak tourism months. Hotel bookings are already down by 10% and, given the disruption to key shopping districts, the continued student occupation of the city centre could ultimately become a major deterrent to mainland visitors and international business in the coming months.
For now, however, it is a waiting game.