The deep social unrest and rage displayed during the past week made clear that the escalatory cycle of violence in Hong Kong remains firmly in place. Absent a political solution, the situation in Hong Kong could worsen, with serious implications for businesses. A modest lull in the violence may occur in the lead up to District Counsel Elections on 24 November.

The Protests

The death on 8 November of a student demonstrator, who apparently fell from a height during demonstrations, prompted an outpouring of grief and anger, mostly aimed at Police. Initial protests focused on the Hong Kong University of Science and Technology, but later spread across Hong Kong during the weekend of 9 to 10 November.

An aggressive campaign to disrupt Hong Kong’s transport infrastructure was launched on Monday 11 November, and quickly descended into large scale violence after a traffic policeman shot a protester.

Mobs carried out arson attacks on Mass Transit Railway (“MTR”) trains and stations, blocked roads with barricades, and launched flash protests across Hong Kong. Protests escalated over the week, leading to the closure of schools and the universities, and severely disrupted traffic.

The protests came to focus on Hong Kong’s universities – particularly Chinese University of Hong Kong (“CUHK”) in Sha Tin, and Polytechnic University of Hong Kong (“PolyU”) in Hung Hom (close to the arterial Cross Harbour Tunnel). At these universities, students occupied campuses, fortified their positions, and engaged in violent fights with Police, making extensive use of petrol bombs and other lethal weapons, including bows and arrows.

The confrontation at CUHK focused on a walkway above the Tolo Highway, a key arterial road connecting Hong Kong to the Mainland, onto which protesters dropped bricks, petrol bombs and other objects, blocking access to the road for five days. Police battled repeatedly with protesters, until the students withdrew on Friday 15 November, leaving the CUHK in a state of destruction.

Demonstrators occupied the PolyU campus and burned toll booths at the nearby Cross-Tunnel Harbour repeatedly, halting traffic. Police surrounded the campus, saw off protester attacks, and a virtual siege of at least 1000 demonstrators occurred over the weekend of 17 and 18 November. Some demonstrators escaped, with outside assistance, but at least 600, including some secondary school pupils, were formally arrested. More may follow.

These university-based attacks were perhaps ill-advised, and have resulted in the arrest of large numbers of protesters, and in considerable alarm spreading in the local community.

Separately, protesters have dispensed mob justice. In a savage attack, demonstrators set on fire a middle-aged man who had argued with them on Monday 11 November.

A brick thrown by demonstrators killed a government cleaning contractor in Sheung Shui on 14 November. The case has been classified as murder, and is under investigation.

Demonstrators have also severely beaten up a number of people who had objected to protesters actions.

Physical attacks on Politicians have continued, with both pro-democracy and establishment figures targeted. Such attacks present a worrying trend ahead of the elections on 24 November.

Hopes for Resolution

Hopes for a resolution currently seem slim. The protestors coordinate their activities through telegram and via social media, a strategy that has proven successful in causing disorder, but does not lend itself to effective centralisation – or to negotiation.

The absence of designated leaders also makes the movement prone to miscalculations, such as the actions at the universities, which caused significant losses amongst their followers, as a consequence of arrests and injuries.

There appears to be an element of direction, if not command and control, making extremely effective use of social media to reinforce the protesters’ message, and to counter any images that they perceive as damaging to their cause.

The movement has been particularly successful in this respect, and, in some cases, has whipped up sometimes hysterical responses to incidents, perceived or genuine. The Hong Kong government appears to have no adequate response to these tactics; and this inadequacy lies at the heart of the government’s failure to win back hearts and minds.

The Hong Kong government has proffered no political solution, showing itself flat footed, unimaginative and disorganised. It has allowed this ugly clash of wills to play out in the streets, and has left the Hong Kong Police struggling with pop-up protests, violence, and vandalism. In response, Police have deployed robust tactics, in turn stoking anger towards them.

The Department of Justice has also failed to put on additional court hearings over weekends, and, consequently, police actions, resulting in large numbers of arrests, are not as effective as they should be; suspects are automatically being given bail. This lack of “joined-up” government undermines any efforts to overcome the crisis.

For its part, the Beijing government appears frustrated with the protesters, but would still probably prefer to avoid direct intervention. Despite Beijing’s comments to the contrary, though, there are indications that the mainland is becoming increasingly concerned about the competence of the Hong Kong government, and whether it can be trusted to deal efficiently with the current situation.

In that context, and in a cleverly coordinated public relations move, People’s Liberation Army (“PLA”) troops from the Hong Kong garrison in Osborne barracks (close to the Baptist University) deployed in gym kit on clean up duties on Saturday 16 November. They assisted in cleaning up rubble left by demonstrators, so reminding observers that a direct intervention by mainland Chinese forces was possible, should Beijing deem it necessary.

A Divided House

A further concern is that divisions within Hong Kong’s society are intensifying. Those backing the protesters tend to be younger, more liberal, and perhaps better educated; they are moving towards demands for Hong Kong’s independence, or at least more recognition of its unique status. The movement is undoubtedly opposed to mainland China, and increasingly radical.

Those supporting the government and police are older, more conservative, and perhaps less educated; they also tend to stress loyalty to China, or at least an acquiescence in Hong Kong’s status as a part of China.

Both sides have strong support within Hong Kong society, notwithstanding claims to the contrary; and, worryingly, both sides are gravitating towards irreconcilable interpretations of events, not least as they inhabit separate social media echo chambers.

Looking Forward

The situation thus remains inherently combustible, particularly with the approach of the District Council polls on 24 November. These elections are the “most democratic” in Hong Kong, and can have an indirect impact on the selection of any new Chief Executive, on which district counsellors can vote.

The legal system is also becoming a focus of dissension. Protesters may come to target the courts or judges, perhaps in the event of demonstrators receiving heavy custodial sentences – especially given the large number of persons arrested for rioting in the universities, and in recent events.

Indeed, an arson attack on Sha Tin Magistrates Court on Wednesday 13 November came seemingly in response to a refusal to grant an injunction prohibiting police access to university premises.

However, Beijing has also criticised a recent High Court decision rendering unconstitutional a law banning face masks. The Standing Committee of the National People’s Congress may yet intervene, as is its right under Hong Kong’s Basic Law. Doing so would further anger people, and provide oxygen for protesters and the international media.

The Risks to Business

The risks to businesses in Hong Kong are escalating. Unrest is not dissipating, and remains driven by events. Violence may moderate in the short term, but cancellation of the district council elections, or other events, could reignite protests, vandalism, and attacks against perceived opponents.

In this context, companies must take account of staff safety, of the risks of damage to plant and property, and of any potential denial of access to office premises. The targeting of key transport infrastructure, especially the MTR and arterial roads, may once again severely disrupt operations.

The stark divisions in Hong Kong’s society are a further risk, with both sides demanding that businesses make clear their allegiance – “yellow” or “blue”; there is no room for nuance, and no patience for those “sitting on the fence”. In such a context, companies can inadvertently trigger criticism, vandalism, or even arson attacks.

Looking forward, the authorities will likely step up their actions to tackle protesters. Efforts by the Hong Kong government to impede protesters’ lines of communication could have unintended consequences that hinder businesses’ day to day operations. Further use of force also seems likely.

In the medium to longer term, the protest movement seems likely to fail, but, as it does, so it may become more aggressive, geared towards small, angry protests, violent attacks, and even extreme acts, such as bombings, with the use of improvised explosive devices (“IEDs”).

Despite the extreme pressure under which it is operating the police force morale is holding up, and a new Commissioner of Police has taken over.

Needless to say, the continuation of unrest akin to that in the last week, or evidence of the emergence of an insurgency in Hong Kong, would markedly diminish the city’s appeal to international business and would affect tourism, private banking and other exposed businesses.

What to Do

Businesses must adjust to this situation. Key actions to mitigate risk might include:

• Testing of contingency plans to take account of the rising physical threat.
• Establishment of plans to deal with sudden transport disruptions.
• Development of redundancy within existing communications systems.
• Large companies that rely heavily on operations in Hong Kong may wish to disperse certain capabilities around the region.
• Tighter management of social media and advertising activities, so as to limit the prospect of inadvertently provoking a boycott, or even attacks on premises.
• More thorough training of staff in dealing with difficult or hostile situations including how to behave in circumstances where large-scale force is deployed by the police or where improvised explosive devices are suspected.

SVA (www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. The firm serves financial institutions, private equity funds, corporations, high net-worth individuals and insurance companies and underwriters around the world.

SVA has a dedicated crisis management team which, for our retained clients, stands ready to assist companies during crisis situations. Retained clients pay an annual fee for a 24-hour response capability.

SVA is based in Hong Kong and is the only firm with the local and senior expertise drawn from Intelligence, Operations and research functions of the former Royal Hong Kong Police Force.