Yam Says Hong Kong Protests Threaten Financial StabilityFion Li and Dominic Lau
Hong Kong’s former top central banker said the city faces financial instability if pro-democracy protests persist, even as the stock market rallied to its highest since demonstrations began.
“Hong Kong’s prosperity is built on the foundation of being the middleman between China and the rest of the world, especially in the financial sector,” Joseph Yam, the former chief of the Hong Kong Monetary Authority, the city’s de facto central bank, said in an e-mailed statement. If the city was viewed as uncooperative, the Chinese government would “reduce preferential policies toward Hong Kong in the reform process,” he said.
Yam’s remarks came as a rally in the city’s stocks erased losses on the Hang Seng Index, rising 0.6 percent since Sept. 26, the day student activists kicked off their protests over how the city’s chief executive is elected.
Business leaders have continued to warn that the political unrest -- the worst since Hong Kong’s return to China in 1997 -- will eventually take its toll on the financial center.
Yesterday, the Hong Kong Federation of Students, one of the groups leading the movement, called on the government to submit a report to the central government in Beijing reflecting their demands for free elections. The students said such a report was necessary to make “fruitful” talks between the two sides to end the monthlong occupation of major city thoroughfares.
The government should include a demand for the reversal of an Aug. 31 decision by China’s legislature on the structure for the 2017 leadership elections in the city, the student federation said. It should also set up a platform to discuss reforms such as allowing for civic nomination and direct elections to the city’s legislature, the federation said.
K.C. Chan, secretary for financial services and the treasury, said in a written response today to a lawmaker’s question that “prolonged protests would inevitably affect the confidence of local and overseas investors, which would in turn increase the potential risk to our financial market.”
The damage to the financial industry had so far been limited to the closing of bank branches and the resulting public inconvenience, Chan said, “The linked exchange rate system is robust, interest rates remain steady, and there is no evidence of abnormal outflow,” he said.
The Hong Kong dollar has strengthened 0.02 percent since the protests began on Sept. 26. The Hang Seng Index has risen 0.82 percent during the same period.
Jasper Tsang, president of the Hong Kong Legislative Council, said in an interview with Cable TV that the students’ demands had shut the door to further talks with the city’s government.
“The central government cannot send a signal to the Hong Kong people or the people of other parts of China that if you have a lot more people take to the streets, you can force the central government to compromise,” Tsang said. “How can there be a way out?”