HK economy and businesses hit by social unrest: Financial Secretary

Hong Kong

SOCIAL unrest gripping Hong Kong has affected the city's economy and businesses, and the unemployment rate is likely to rise from current levels, Financial Secretary Paul Chan said in a blog post.

His warning came as thousands of Hong Kong demonstrators and police clashed for a second straight day as the city's China-backed government struggles to quell growing discontent and amid violent clashes that have marred the historic movement in recent weeks.

In the Chinese-language post on his website, Mr Chan said that many local retail and catering businesses had experienced a "sharp decline" in business, and he warned that the longer the historic protests go on, the more pressure they will pile on small and medium enterprises.

"For foreign tourists and enterprises, the unrest in Hong Kong dampens their appetite for travelling and investment," Mr Chan said in translated comments. If the movement lasts, he said, "everyone's employment and livelihood will be at stake". The Hong Kong government will consider countermeasures to stabilise the economy, Mr Chan said, without providing details.

The overall economic downturn that Hong Kong is experiencing, including external factors such as the US-China trade war and frictions in the technology sector, will "inevitably be transmitted to the job market". The jobless rate will likely rise from its current 20-year low of 2.8 per cent, Mr Chan wrote. The import and export, wholesale and construction industries are among the most affected and their situations have begun to deteriorate, he said.

Over the past eight weeks, hundreds of thousands of people have demonstrated against proposed legislation that would ease extraditions to mainland China. While the planned law has been suspended, the movement has grown to include calls for Chief Executive Carrie Lam's resignation, causing a political crisis in the city.

Hong Kong is set to report preliminary second-quarter gross domestic product on July 31. The government will also conduct an interim review of the year's economic growth forecast to reflect possible changes in the coming months more accurately, Mr Chan said.

There have been signs this month that the mass demonstrations are starting to take a toll on the financial hub's economy as big-spending travellers stay away. Some global luxury retailers said the unrest weighed on sales due to store closures and fewer tourists. The Hong Kong Retail Management Association expressed concern that civil unrest could damage the city's image as a safe environment, culinary capital and haven for shoppers.

Police fired volleys of tear gas at hundreds of black-shirted protesters on Sunday in Sai Ying Pun, a residential and business area where the Chinese government's liaison office in Hong Kong is located. Protesters vandalised the liaison building last week, drawing stern warnings from Beijing and sparking fears that China's military would be called in to restore order.

A number of stores in the neighbourhood were closed ahead of the tense standoff, as riot police carrying shields marched in rows down a main street. Police said they used tear gas to disperse protesters who hurled bricks at officers, in a situation that was "drastically deteriorating". Thousands of people initially gathered at centrally located Chater Garden and marched without a definite plan towards the Admiralty, Wan Chai and Causeway Bay areas that were ground zero for previous mass rallies.

They had chanted slogans including "liberate Hong Kong, revolution of our time," "shame on police who beat people" and "return us the right to demonstrate". The sprawling Sogo department store in Causeway Bay, owned by Lifestyle International Holdings, was closed though the situation in that area remained peaceful.

Sunday's march came the day after thousands of protesters descended on the suburb of Yuen Long near the Chinese border to condemn a mob attack against train commuters and demonstrators that shocked the city last weekend. A Friday sit-in at Hong Kong's international airport also drew thousands and underscored the economic risk of continued unrest.

Police early on Sunday said that the protesters disregarded the personal safety of residents and the public. The demonstrators used metal poles and self-made shields to attack officers and charge the cordon line - they even removed fences from roads to form road blocks, according to a police statement.

Many protesters wore helmets. Some wore body armour and gas masks and carried make-shift shields and sticks.

"I have been to every protest and I never wear a mask," said Phong Luk, who came to the protest wearing a Spider-Man suit to match one that his six-year-old son wore. "I'm doing nothing wrong. It is those in power that are wrong ... At this point, there is nothing to be done except for Carrie Lam to step down, because she obviously cannot rule." BLOOMBERG, REUTERS