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Impact of Hong Kong Protests on Hong Kong’s Economy

Authors: Ace Chua, Agrima Jain

Research Head: Tanvi Johri

Editor: Praharsh Mehrotra

Illustration by Isshaa Tusnial


The ongoing 2019 Hong Kong protests had resulted in the economy contracting by -3.2% into a recession in Q3 2019 (Fig 1), which is second to the worst during the 2009 global financial crisis. This worsens the economic impact of the US-China Trade War in 2018 that led to Hong Kong’s slowing economic growth before the protests. (CNA, 2019). This article will go into detail in how the Hong Kong protests impact the areas of tourism, retail sales volume, unemployment, business confidence and trade, that ultimately leads to Hong Kong’s economic recession.

1. Background Information

The Hong Kong protests were simply a result of three factors - The “One Country, Two Systems” (1C2S) governance, Extradition bill and Democratic Reforms.

In 1997, following 150 years of British Colonial rule, Hong Kong was ceded back to China’s administration under the principle of 1C2S, which states that Hong Kong, as a special administrative region of China will enjoy a high degree of autonomy such as having their own legal systems, borders and rights like Freedom of speech and assembly, with the exception of foreign and defense affairs (BBC, 2019).

With the release of the Extradition Bill in 2019, there was a fear in the general public of Hong Kong that they will no longer enjoy the freedom granted to them by this principle. Extradition Bill basically allowed

criminal suspects to be extradited to mainland China. This raised the risk of exposing Hong Kongers to violent and unfair treatment, fear that bill would give China greater control over Hong kong and fear of reduction in Hong Kong’s autonomy . Not only this bill but the democratic reforms prevailing in Hong Kong further increased the fear among common masses. They started demanding Universal Suffrage because half of the lawmakers are elected through voting and others got the post because of geographical and functional constituencies (Cheong, 2019).

Even when the governor Ms Carrie Lam withdrew the extradition bill, the protestor’s aggressiveness still escalated over 2019. This anger was fueled by police brutality and abuse of power (Amnesty, The Guardian, 2019). Protestors resorted to blocking roads and disrupting local businesses, public transport and traffic infrastructure, using dazzling lights and molotovs to disrupt the police (SCMP, 2019).

Table 1 shows a summary of key events that happened during the protests.

2. Economic Impact Analysis

2.1 Tourism

The total number of visitor arrivals declined sharply by 65% during Q3 2019 (Fig 2a) when the protests disrupted the safety and security of Hong Kong, as seen in a negative relationship between the fall in visitor arrivals and increasing crime rate (Fig 2b).

This was further worsened when travel warnings against Hong Kong were issued by 40 other countries, like the United States, Australia and Japan. (CNA, 2019).

Ocean Park, a popular Hong Kong tourist attraction, faced an 80% fall in tour groups, and Hong Kong Disneyland ticket prices fell by 16% (Kanis et al., 2019). Hotel rates also fell to as low as USD 25 per night (Hutton, 2019).

As tourism revenue makes up to 4% of Hong Kong’s GDP (HKTB, 2019), a fall of visitor arrivals would be associated with fall in GDP growth rate, as seen in the positive correlation between visitor arrivals and GDP growth rate (Fig 2c).


Unemployment rate worsened from 2.8% in early 2019 to 3.2% by Q4 2019. This was mainly due to the unemployment in the food & beverage industry rising to 6%, and the tourism-related industries at 4%, (HKFP, 2019) as the protests resulted in a fall in foreign visitors and tourism.

2.3. Retail Sales

Most local businesses were disrupted due to the chaos and violence of protestors clashing against police. This resulted in a sharp decline in retail sales growth in the start of Q3 2019. This led to most local businesses to struggle due to the firing of tear gas that affected the workers health, and to raise sufficient revenue to cover the high rental cost of operation (Kanis et al., 2019).

As Hong Kong’s retail sales are related to private consumption expenditure that amounts to 79% of its GDP (World Bank, 2018), a fall in retail volume will lead to a fall in GDP growth.

2.4. Impact on Business Confidence, Money Supply and Trade

Due to the riots disrupting traffic infrastructure, safety and security of Hong Kong, this resulted in a plunge in business confidence in 2019 to -25% (Fig 5), which is the second to the worse of -53% in 2009’s global financial crisis (Trading Economics, 2019)

Hong Kong is also ranked the lowest in 2020 Asia-Pacific property investment prospects, behind Singapore, Vietnam and Tokyo (PWC, 2020). Many investors in Hong Kong are also starting to flock to Singapore as an alternative, safer financial hub to invest their capital. (Straits Times, 2019).

This results in an increase in the money supply of HKD over Q3 and Q4 2019 (Fig 6a), contributing to a depreciation of the HKD (Fig 6b). This depreciation had implications towards Hong Kong’s trade sector, as its exports and imports increased over Q3 and Q4 2019 (Fig 6c).

3. Recommendations

As Hong Kong is a small and open economy, with almost zero import tariffs (WTO, 2019) and a 377% trade to GDP ratio (World Bank, 2018), Hong Kong can use its HKD depreciation to its advantage by focusing towards its export and tourism-oriented industries for short run growth.

Due to the disruption of flights and public transportation in Hong Kong, stranded tourists and visitors can subscribe to a Telegram channel that identifies protest hotspots (Cimpanu, 2019) and taking necessary safety precautions when traveling around Hong Kong.

Hong Kong’s long run economic growth is only sustainable with a safe and stable environment, which can be achieved by minimizing political violence, as the root cause of the Hong Kong protests are political in nature. For example, the Hong Kong government can meet the demands of the protestors to reduce their aggressiveness, similarly to how the French President Macron cuts taxes to prevent the aggressiveness of the Gilets Jaunes protestors (The Guardian, 2019), so as to maintain peace and stability in the country that will make Hong Kong attractive to foreign investment.

However, with the ongoing violence of the protests, it is unknown if Hong Kong can achieve economic stability in the short run.

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