Decoding Hong Kong's Protests

In this Q&A, Matthews Asia Chief Investment Officer Robert Horrocks, PhD, shares his views on the current strife in Hong Kong and how Matthews Asia is approaching the market volatility in China and macroeconomic environment.

What do the current Hong Kong protests and escalation mean for the “one country, two system” structure that's currently in place?

In some ways, the protests are all about the one country, two system structure that's currently in place. When Hong Kong was returned to Chinese governance from British governance in 1997, the “basic law”—which provides autonomy and political, democratic voting and legal right—took effect. The basic law from Beijing provides Hong Kong a high level of autonomy and freedom, for Hong Kong to maintain its legal systems, freedom to protest and strike and express its own views. One of the main drivers of the protests is the belief by those protesting that some of these freedoms and autonomy have been eroded, and that China has not yet lived up to the promises of the “basic law” that over time, it would provide for universal suffrage in Hong Kong.

How do you think the protests will play out?

It can be helpful to think about the four key constituencies involved in the protests and how they might think about them:

  • The protesters: “What do they want?” This is a hard question to answer in many respects because there doesn't seem to be a centralized leadership. Among the issues at stake were the extradition bill, which has since been shelved. Also common among the protesters is an interest in universal suffrage in Hong Kong under the terms of the basic law.
  • The Hong Kong government: “What does it seek?” They seek a peaceful resolution that doesn't include the Chinese government directly or any intervention from the Chinese military or troops, because being able to manage the protests on their own would help justify its position and its worth to China.
  • China: “What does it want?” China wants to demonstrate that it is able to deal with these situations calmly and appropriately, that it knows how to be stewards of a world-class financial center, because that is precisely what it hopes Shanghai to be. At the same time, China does not want to encourage any direct attacks on its authority.
  • The general citizenship of Hong Kong: They're mostly aligned to the protesters in terms of political demands but prefer to see less disruption. One of the reasons that the earlier 2014 protest movement in Hong Kong had fizzled out a bit is because people got tired of the disruption.