Hong Kong protests ‘could have ripple effects very easily into China,’ Eurasia Group’s Hirson says – Yahoo Finance

This post has been updated.

The situation in Hong Kong escalated further on Monday and Tuesday, and the protests could have “ripple effects” into the mainland.

“Instability in Hong Kong could have ripple effects very easily into China,” Eurasia Group Director for China Michael Hirson told Yahoo Finance’s On The Move. “What we need to watch for is a real further deterioration of the security situation … the kind of moves that would leave Beijing to decide that it needs to step in … as a guarantor of Hong Kong’s stability.”

Protester are seen climbing onto the airport express station in Hong Kong International Airport in Hong Kong on August 12, 2019. (Photo: Vernon Yuen/NurPhoto via Getty Images) Protester are seen climbing onto the airport express station in Hong Kong International Airport in Hong Kong on August 12, 2019. (Photo: Vernon Yuen/NurPhoto via Getty Images)
Protester are seen climbing onto the airport express station in Hong Kong International Airport in Hong Kong on August 12, 2019. (Photo: Vernon Yuen/NurPhoto via Getty Images)

On Monday, anti-government demonstrators in Hong Kong shut down the city’s airport, leaving thousands of passengers stranded. The same happened on Tuesday.

The move is the latest in a series of clashes between the financial hub and mainland China.

China sees Hong Kong protests as an act of ‘terrorism’

The protest is seen to be the biggest challenge to Chinese control since the British gave up the former colony in 1997.

The protest began in March and April over an extradition bill, and is ongoing. The issue has been a touchy subject for the former colony, which has a different judicial system from China.

A Pro-Democracy protester looks at the flight information board showing cancelled flights following a protest against police brutality and the controversial extradition bill at Hong Kong's international airport on August 12, 2019. (Photo: MANAN VATSYAYANA/AFP/Getty Images) A Pro-Democracy protester looks at the flight information board showing cancelled flights following a protest against police brutality and the controversial extradition bill at Hong Kong's international airport on August 12, 2019. (Photo: MANAN VATSYAYANA/AFP/Getty Images)
A Pro-Democracy protester looks at the flight information board showing cancelled flights following a protest against police brutality and the controversial extradition bill at Hong Kong’s international airport on August 12, 2019. (Photo: MANAN VATSYAYANA/AFP/Getty Images)

The Hong Kong government has said that the extradition bill — which would allow criminal suspects to be extradited to jurisdictions that Hong Kong doesn’t have formal agreements with, which includes mainland China — was prompted by the case where a Hong Kong man who allegedly murdered his girlfriend in 2018 in the self-governed Chinese island of Taiwan fled back to Hong Kong and authorities were left with no legal avenue to send him back to Taiwan to face investigators.

Protests that had ensued over the proposed bill are now running into their fourth month.

Some of the posters created by the demonstrators express their situation — and precarious environment — as they battle the authorities:

Another poster alluded to Les Miserables, a French classic novel by Victor Hugo, with its lyrics:

The Chinese government has strongly condemned the demonstrations.

Wall Street Journal report stated that the government’s Hong Kong and Macau Affairs Office Spokesperson declared at a news conference that “[r]adical Hong Kong protesters have repeatedly used extremely dangerous tools to attack police officers… The first signs of terrorism are starting to appear.”

Hirson noted that the numbers of protesters “seem to be falling a bit in terms of overall participation” and “that’s an important watch point, because the Hong Kong authorities and Beijing to some extent are hoping that these protesters exhaust themselves.”

He added: “I think that’s probably wishful thinking, but if we do see a substantial shrinking of the protests, that might be a sign that at least the situation is becoming more manageable, and there might be a path to deescalation.”

Police officers fire a tear gas during a demonstration against a proposed extradition bill in Hong Kong, China June 12, 2019. REUTERS/Athit PerawongmethaPolice officers fire a tear gas during a demonstration against a proposed extradition bill in Hong Kong, China June 12, 2019. REUTERS/Athit Perawongmetha
Police officers fire a tear gas during a demonstration against a proposed extradition bill in Hong Kong, China June 12, 2019. (Photo: REUTERS/Athit Perawongmetha)

‘We have to stop the violence’

The local economy is already showing signs of pain.

“It’s affected business tremendously — all businesses basically,” Allan Zeman, chairman of Hong Kong’s Lan Kwai Fong Group, which operates restaurants and bars in the city, told Bloomberg. “We have to stop the violence. That’s the most important thing. Then we can talk.”

Hayman Capital Management’s J. Kyle Bass also warned that the world needed to “pay attention” to what’s happening in the financial hub.

“I think, unfortunately, it takes a million to 1.5 million people to march in the streets of Hong Kong to get the world’s attention,” the hedge fund manager told Yahoo Finance in a previous interview.

A protester makes a gesture during a protest on June 12, 2019 in Hong Kong, China. (Photo: Anthony Kwan/Getty Images) A protester makes a gesture during a protest on June 12, 2019 in Hong Kong, China. (Photo: Anthony Kwan/Getty Images)
A protester makes a gesture during a protest on June 12, 2019 in Hong Kong, China. (Photo: Anthony Kwan/Getty Images)

Bass added that there was no doubt that Hong Kong’s financial center status would be in jeopardy because of the bill and could cause a “mass exodus” of wealthy residents.

“There are 85,000 Americans that live in a city of 7.5 million, and if you’re an American investment banker or British investment banker, or a CEO, you’re not going to subject yourself and your family to the arbitrary and probably politicized allegations of the Chinese government,” Bass said.

“You’re going to move, and you’re probably going to move to Singapore, or you move to somewhere else that actually has a rule of law, and that’s the key here.”

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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