Hong Kong Braces for Democracy Rally Amid Warning of Turmoil

June 30 (Bloomberg) –- Bloomberg’s Zeb Eckert reports on the tension in Hong Kong over Beijing’s White Paper claiming that Hong Kong’s autonomy isn’t Inherent. He speaks to Angie Lau on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Hong Kong is bracing for a mass rally tomorrow that will be a litmus test of popular opposition to China’s insistence on controlling a leadership election.

Civil Human Rights Front, the main organizer, expects at least 150,000 protesters to march as a show of support for full universal suffrage and to oppose China’s insistence that it vet candidates for the city’s leadership election in 2017. Division over the issue threatens to bring about Hong Kong’s biggest political turmoil in a decade since half a million people marched against a planned anti-subversion law.

Occupy Central With Love and Peace, an activist group, has threatened mass sit-ins at the city’s financial district and drew almost 800,000 people to vote in an unofficial referendum against China’s election demands. Such tactics will paralyze the city, drive away tourists and companies and damage Hong Kong’s reputation as a global financial center, according to tycoons, foreign business leaders, brokers and accounting firms.

“We have to remain determined to fight for genuine universal suffrage in a cool, calm, collective and peaceful way,” said Anson Chan, formerly the city’s No. 2 official, who plans to march tomorrow. “We ask no more than what Beijing has promised to the people of Hong Kong.”

Photographer: Kin Cheung/AP Photo

A student leader in the Occupy Central movement handouts leaflets near a polling station to urge people to vote on the last day for an unofficial referendum on democratic reform in Hong Kong, on June 29, 2014. Close

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Photographer: Kin Cheung/AP Photo

A student leader in the Occupy Central movement handouts leaflets near a polling station to urge people to vote on the last day for an unofficial referendum on democratic reform in Hong Kong, on June 29, 2014.

Rising Tensions

Tension in the city has ratcheted up after the Chinese government issued a white paper on June 10 saying the city’s high degree of autonomy isn’t an inherent power and its leader must be a patriot, prompting an angry reaction from pro-democracy parties, former officials and lawyers.

The July 1 rally is an annual event on the anniversary of Hong Kong’s return to Chinese rule in 1997. Under terms agreed between the U.K. and China, Hong Kong enjoys its own freedoms and legal system until 2047 as a special administrative region, under the principle of “One Country, two Systems.”

The peaceful procession has served as a bellwether for the city’s leaders, attracting interest groups pushing different causes. This year, Benny Tai, an associate professor of law and one of the leaders of Occupy Central, has urged protesters to unify over demands for universal suffrage.

“The White Paper definitely provoked a lot of common folks,” said Cyd Ho, a Labour Party lawmaker. “A lot of people are worried our rights and liberty won’t be guaranteed anymore and there will be increasing interference from the central government.”

Poll Response

Occupy Central leaders hailed the turnout in its unofficial poll that ended yesterday as support for its demand that the public should be able to nominate candidates in the election. The poll drew a sharp rebuke from China’s official media which called the exercise “illegal.”

Photographer: Lam Yik Fei/Getty Images

People vote at polling center for an unofficial referendum on democracy in Hong Kong, on June 29, 2014. The event drew more than 780,000 people. Close

People vote at polling center for an unofficial referendum on democracy in Hong Kong,... Read More

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Photographer: Lam Yik Fei/Getty Images

People vote at polling center for an unofficial referendum on democracy in Hong Kong, on June 29, 2014. The event drew more than 780,000 people.

In 2003, half a million people marched July 1 to demand Tung Chee-hwa, the then-chief executive, to step down over plans to introduce anti-subversion laws and the mishandling of the Severe Acute Respiratory Syndrome outbreak. Tung resigned in 2005, citing declining health.

Last year, the July 1 rally organizer said 430,000 took part to demand the government address a widening wealth gap and introduce broader democracy. The police said there were 66,000. Both figures were the highest in at least nine years.

The concern is that tomorrow’s protest turns violent, with the police setting up a makeshift detention center in case of mass arrests, according to the South China Morning Post.

Student Protest

The Hong Kong Federation of Students and a student activist group called Scholarism are planning for a sit-in at Chater Road in the business district from tomorrow till 8 a.m. on July 2, Radio Television Hong Kong reported, citing spokesmen Chow Wing-hong and Joshua Wong. The students, who expect 2,500 people, plan to leave by 9 a.m., RTHK said.

Li Ka-shing, Asia’s richest man, Chow Tai Fook Jewellery Group Ltd.’s Henry Cheng and Wharf Holdings Ltd.’s Peter Woo have all come out against Occupy Central’s plans. Cheng said the protests may offend Communist Party leaders in Beijing and hurt the company’s jewelry sales in Hong Kong.

Li on June 27 told students at China’s Shantou University that a widening wealth gap and waning public trust has kept him awake at night. He said the government needs to act quickly to “enable dynamic and flexible redistribution policies.”

Retailers in the city have already seen a slowdown, with Chinese tourists curbing spending as China tightens credit growth and cracks down on corruption. Overall retail sales fell 9.5 percent in April, the third month of decline.

Commerce Chambers

The Canadian, Indian and Italian chambers of commerce in Hong Kong, KPMG LLP, Deloitte LLP, Ernst & Young, PricewaterhouseCoopers, the Institute of Securities Dealers and the Hong Kong Securities Professionals Association have taken out advertisements in newspapers asking the Occupy Central organizers to rethink their plans.

“If Occupy Central happens, commercial institutions such as banks, exchanges and the stock market will inevitably be affected,” the accounting companies said June 27. “We are worried that multinational corporations and investors will consider relocating their headquarters from Hong Kong or even withdrawing their businesses.”

Banks including HSBC Holdings Plc (HSBA) and Standard Chartered Plc have business continuity plans in place and the Hong Kong Monetary Authority recently held a contingency drill with more than 50 financial institutions.

Refusal Rights

China may refuse to appoint the leader elected by the city’s people, Hong Kong Chief Executive Leung Chun-ying said last June in an interview. Leung this year has said the reforms need to comply with the Basic Law, the city’s mini-constitution.

Leung is expected to submit a reform proposal to Beijing for approval, before starting a second public consultation before the end of the year. He will submit the final plan to lawmakers.

About 87.8 percent of the voters in the unofficial referendum said lawmakers should reject any proposal that doesn’t meet international democracy standards. Tai has said Occupy Central won’t stage any sit-in until the legal process for amending the proposal is exhausted. The government will launch the second round of public consultation on the specific proposals by the end of this year, a spokesman said yesterday.

Under a worst case scenario of a protracted protest that turns violent, “foreign firms’ confidence to invest in Hong Kong could be undermined,” analysts from Bank of America Merrill Lynch wrote in a June 19 report.

“There will also likely be asset market volatility while tourists will be discouraged from coming to Hong Kong,” the analysts wrote. The base case scenario considers an impact to the economy of three working days, which may translate to 0.18 percent of the city’s gross domestic product.

Troops Fear

Zhou Nan, the former director of Xinhua News Agency’s Hong Kong bureau, raised the prospect of China sending in troops to restore order if civil disobedience cannot be controlled, the South China Morning Post reported June 8. The People’s Liberation Army of China has soldiers stationed in the city, including a base in the central business district, though they are rarely seen.

“If Hong Kong police couldn’t manage the situation and the assistance of the PLA Hong Kong garrison has to be enlisted, it’ll severely affect business confidence and cause huge loss of faith in the city’s governance capacity,” said Ding Xueliang, a professor of political economy at the Hong Kong University of Science & Technology. “If that happens, the damage would be deep and sweeping.”

To contact the reporters on this story: Fion Li in Hong Kong at fli59@bloomberg.net; Ting Shi in Hong Kong at tshi31@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net; Andrew Davis at abdavis@bloomberg.net Neil Western

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