Shanghaied Markets?

What’s happening in Hong Kong?

Source: Wikipedia

Last month Beijing made it clear that while Hong Kong’s population may be free to vote for their next chief executive, the Chinese government will control who gets to run. This decision has sparked a series of protests in the Hong Kong financial district, bringing tens of thousands to the streets.

The protests have been organized by a group of professors, students, and church leaders. They want to persuade Beijing to allow truly free elections. Good luck with that! Many of us have chilling memories of what happened to the last massive protests against the Chinese government 25 years ago in Tiananmen Square. That did not end well.

But there are reasons to hope that these protests may prove more effective. For one, they started with a petition drive that drew 1.5 million signatures—over 20% of Hong Kong’s population. For another, the ubiquity of digital and social media means that organizers can quickly mobilize protesters and share images, despite Chinese censorship.

But the biggest cause for optimism may be the aspirations of Beijing’s leaders themselves. The most important observers of what is happening in Hong Kong may be Taipei, Taiwan‘s capital. Beijing wants to bring Taiwan into its orbit; how it deals with peaceful protest in Hong Kong will show the world—and especially Taipei—whether it is truly committed to “one country, two systems.”

So far, markets have been sanguine about the protests, with Hong Kong’s exchange off only 10% from its recent peak. But don’t be complacent: if China’s leadership gets nervous and initiates a violent crackdown, things will get awfully volatile, awfully quickly.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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