Page 1 of 2

The crisis in Hong Kong is far from being resolved as China increasingly relies on its own economic prowess and needs Hong Kong much less as a door to the world, says Daryl Liew of Bank Reyl in Singapore, in an exclusive interview with finews.asia.

Daryl Liew, have the protests in Hong Kong reached their climax with the elections and started to abate?

No, the protests have restarted in recent days after a lull following the landslide victory of the pro-democracy movement. It is difficult to see how the situation can be solved. Both sides appear to have hardened their stance.

The dissatisfaction with the administration of Carrie Lam and with what Beijing is doing is extremely strong. My friends are telling me that 80 percent of their staff are participating in the protests.

Do you believe that the Chinese will use the army to end the protests?

An army crackdown is a worst-case scenario. I don’t think that China wants to do that, because the international push-back would be extremely harsh.

What are the other options open to the Chinese government?

Beijing could actually do a lot. It could replace Carrie Lam, who is really hated by the people and put somebody in charge with more charisma that people could support.

They could start a judicial inquiry into police actions. Whether just for show or not, this would appease some of the protestors.

«There is a lot that Beijing could do»

And China could solve some of the economic problems of Hong Kong, with the housing crisis first and foremost. There is a huge shortage of affordable housing in the city, which makes the young people disillusioned.

There is a lot they could do but they haven’t taken any of these steps and instead been digging in their heels.

What’s the rationale behind doing nothing more concrete?

Beijing maybe doesn’t mind that much what is happening, as onshore China is developing very strongly. With all the trouble that Hong Kong is causing, it would not be unreasonable to just maintain the status quo. If they let the crisis fester, Hong Kong will die a natural death.

«The lull will also hit banks»

Hong Kong was a key market for the offshore renminbi operations and a testbed for opening up certain industries. But China now starts to open up onshore anyway. So you can question whether Hong Kong still is so relevant for China.

What does this all mean for the economy of Hong Kong?

Hong Kong is already in recession, with terrible retail sales figures, hotel occupancy rates at historic lows, and a tourism industry overall hit really hard.

The Hang Seng Index has been underperforming this year compared with rival stock exchanges.

If the troubles continue, it is hard to see how the retail and tourism companies will be able to continue. And the lull will also hit banks because they essentially are the proxies of the broader economy.

So the banking industry is set for trouble?