[updated on Oct. 17, 2015]
It is often argued that Hong Kong is an economic city, not a political city: “Let’s focus on making money and set aside democratic aspirations.” Well, the HK government now gets what it wished for!
It is certainly true that many HK people care about making money above all else. Indeed, it is not coincidental that many “winners,” who have benefited from HK’s growing integration with the mainland economy, tend to be pro-establishment. In contrast, young people who have nothing to lose tend to be pro-democracy. But what happens when the “winners” lose in a “made-in-China” stock market crash? Worse, what happens when those traditional regime supporters blame the visible hands of the state rather than the invisible hands of market forces for their losses (cf. the causal mechanism of “attribution” in theory of contentious politics)? In trying to stabilize the Shanghai and Shenzhen stock exchanges, mainland investors are moving money out of the HK stock exchange, thus further driving down HK stock prices and hurting its traditional supporters. Whether or not Beijing could stabilize the mainland stock markets, HK’s smaller investors are sure to suffer. Meanwhile, HK as an international financial center could regain its advantage over Shanghai and Shenzhen (after all the talk “that HK is becoming just like Shanghai and Shenzhen” or “that HK is to be surpassed by Shanghai and Shenzhen”). If Beijing would learn from HK on how market forces work, there could be some silver linings in the long-term.
As if one made-in-China crisis is not enough, the HK government is suddenly confronted with another crisis that touches on a wide spectrum of HK people: Tainted water saga reveals how China SOEs do business in HK. More on the water crisis below.
[July 27] China stocks plunge, suffer biggest one-day loss since February 2007; Shanghai ends at 2-week low in biggest daily drop in 8 years, Shenzhen and Hong Kong tumble ; China’s support measures crumble as Shanghai stocks dive 8.5 per cent in biggest daily drop for 8 years
[August 24] From Asia to Wall Street: China’s stock market meltdown goes global in one of the worst trading days for eight years. “What we witnessed [on Monday] was an absolute meltdown on China stocks and the search for a safe haven continues,” said Stephen Innes, a senior foreign exchange trader at Oanda. (Frantic selling batters Shanghai and Hong Kong equity markets)