Can Hong Kong Avoid Tragedy?

Nearly six months after they began, the protests in our city have reached fever pitch. On one particularly devastating day earlier this month, police fired more than 1,500 rounds of tear gas, a police officer shot a demonstrator at point-blank range while being attacked, and protesters immolated a man who disagreed with them. More than 4,000 people have been arrested, infrastructure has been destroyed, and the economy has sunk into recession. And for what?

Hong Kong's government withdrew the extradition bill that triggered the protests. Yet the protesters rage on, lacking any coherent strategy or demands. They claim that they are fighting for democracy, but it is hard to reconcile that lofty goal with medieval-style catapults launching bricks and firebombs. In truth, the protesters' scorched-earth strategy can lead only to more chaos, destruction, and death.

It does not have to be this way. To help find a solution, we have conducted a PEST (political, economic, sociocultural, and technological) analysis of Hong Kong's current situation and future prospects.

On the political front, the main lesson is that it is up to the government to ensure order and security. Within the "one country, two systems" framework, Hong Kong's own government has powers to address internal security matters. But where its actions are inadequate, it is the right and responsibility of China's central government to intervene. By allowing peaceful demonstrations to escalate into large-scale riots, Hong Kong's protesters have made such intervention unavoidable.

Economically, Hong Kong is paying a high price for the protracted protests. In July-September, the city's GDP shrank by 3.2% quarter on quarter – the worst economic performance since the 2008 global financial crisis.

Yet all is not lost, as the city's stock market continues to function. Alibaba – China's largest e-commerce company, which holds the world record for the largest initial public offering – has followed through on its plan for a secondary listing in Hong Kong, where it is on track to raise nearly $13 billion.

For most of the last two decades, IPOs in Hong Kong have raised more than those in the United States or mainland China. The market capitalization of all listed companies in Hong Kong amounts to about half that of the mainland. Hong Kong is also an essential platform for China's management of offshore financial assets, and a critical link to global supply chains, with about 60% of China's inflows of foreign direct investment channeled through the city.

Yet these economic advantages have had unintended social consequences, driving the city's highest level of inequality in 45 years. As in many Western economies, while property owners, developers, and elite professionals amass wealth, Hong Kong's lower-middle-class workers have faced stagnating incomes and surging housing prices. The resulting frustration is at the root of the current upheaval.

Persistent governance failures aggravated public sentiment further. In the face of massive social, geopolitical, and technological disruptions, Hong Kong's government needed to adopt proactive policies that could both respond to new developments and anticipate future challenges – beginning with the lack of affordable housing. But it remained committed to the outdated colonial-era principle of "positive non-interventionism," so the problems festered, and popular anger grew.

That anger found a home on social media.

Technology shook the foundations of the "one country, two systems" arrangement by facilitating "information disorder": the spread of overwhelming volumes of biased, misleading, and outright false information, often designed to stoke anti-China sentiment in Hong Kong. The formation of filter bubbles and echo chambers compounded the problem, inundating young people with the message that mainland China was to blame for their every woe.

When these ideas began to be translated into action, protesters used social media to organize, document, and spread awareness of their activities, often anonymously. For both the demonstrators and their opponents, social media have been a crucial means of shaping the narrative, enabling them to share images of, say, police brutality or protester violence.

But social media are a weapon as well as a battleground. In August alone, more than 1,600 police officers and their family members were victimized by "doxxing" – the publication of private information online, in order to invite harassment or worse. In some cases, even the addresses of children's schools were shared. (Some journalists and opposition figures have also been doxxed.)

Despite these provocations, Hong Kong's police have shown considerable restraint. Yes, two people have died in the chaos. But compare that to the 22 protesters who were killed in just two weeks of demonstrations in Santiago, Chile, or the more than 100 who were killed during recent protests in Iran.

If protesters in the US or France were rioting for six months, the government would send in the national guard to quell the unrest. Yet China has exercised strategic patience, recognizing that direct intervention could help those who seek to paint the conflict as a "clash of civilizations," especially at a time when China is locked in a complex trade and strategic rivalry with the US.

But the longer the violence persists, the fewer options for all. Indeed, the latest district council election, with a turnout rate of 71.2%, showed that people voted peacefully for change. If the protesters had avoided violence and opted to wait patiently to express their preferences at the ballot box, the same message could have been sent. The election result is an opportunity for all to reflect carefully on the need to end violent protests and work together to address genuine grievances. All sides must show empathy, humility, and a willingness to compromise as they design and implement governance reforms that are consistent with Hong Kong's Basic Law and China's constitution.

The alternative is not some fantasy of an independent and thriving Hong Kong. It is a devastated economy, a divided society, and a lost generation. Pretending otherwise will only make that outcome more difficult to avoid.

Andrew Sheng is Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance. Xiao Geng, President of the Hong Kong Institution for International Finance, is a professor and Director of the Research Institute of Maritime Silk-Road at Peking University HSBC Business School.