The normally gridlocked thoroughfare in front of the main Lamborghini dealership here is now quiet and carless. Guests at the $600-a-night Mandarin Oriental hotel had to enter through a lowered metal security gate on a few recent evenings, and several jewellers and luxury handbag shops are temporarily shuttered.
The unusual lull in high-end business seems a fitting contrast to the public protests that began September 26, when hundreds of students first took to the streets, the crowds later swelling to tens of thousands of young people who fought off tear gas to call for greater democracy, in open defiance of the Chinese government.
China is grappling with a political problem in part because Hong Kong is dealing with an economic one. Underlying the current unrest in Hong Kong, an affluent city of 7.2 million that was a British colony for 155 years before it was returned to China in 1997, is a widening wealth gap.
Growing closer to China has brought a bonanza to Hong Kong's finance, trade, retail and real estate industries. Despite this, average wage growth in the city has stagnated for years, while the costs of housing and daily goods have surged.
Hong Kong's silent minority of elite tend to fall in line behind the Beijing leadership on political or economic policies that touch the city. Now, it appears to be largely the squeezed middle class, and a younger generation discovering its political voice, driving the unprecedented demonstrations that have shut down major routes in some of Hong Kong's busiest districts over the past week.
China's leaders "have ignored the man on the street for so long because everyone told them Hong Kong people aren't interested in politics, that it's all about business, and they haven't realised that society has clearly changed," said Fraser J T Howie, a co-author of Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise.
"Even if protests just fizzle out, that's not a victory for Beijing, and I don't believe by any means it puts the democratic genie back in the bottle," Howie said. "It's going to be a maelstrom of governance for a long time to come."
How Beijing chooses to respond to the sweeping protests is complicated by Hong Kong's role as a major financial centre for China. While the city's economic output has diminished compared with China's spectacular expansion over the years, it remains a particularly important gateway for foreign investors.
Nearly two-thirds of mainland China's foreign direct investment, which has been in decline this year, is channelled through Hong Kong. And Chinese companies raise a significant amount of funding on the city's stock exchange.
The Chinese leadership and local officials in Hong Kong must walk a fine line as they seek to suppress calls for more democracy. Already, local police have been criticised for their liberal use of pepper spray and tear gas against peaceful demonstrators. Over the weekend, the situation turned violent as unidentified men assaulted protesters and tore down their encampments in several locations around the city, triggering dozens of arrests, including of individuals identified by the police as suspected members of triads, or organised crime groups.
By Sunday, fears had spread that the police would use force to remove demonstrators at the government's headquarters. Leung Chun-ying, Hong Kong's chief executive, pledged on Saturday to "take all necessary actions" to reopen the government building by Monday morning.
Despite the tensions, Hong Kong so far has seen only limited economic fallout from the protests. Dozens of banks were forced last week to temporarily close a few branches, offices or A.T.M.s. The local stock index fell 2.6 percent for the week, which was shortened by a two-day holiday.
The temporary shuttering of some luxury shops was expected to hurt sales in Hong Kong during mainland China's weeklong National Day holiday, which began Wednesday and traditionally has brought a huge influx of shoppers. Those closures may cost retailers as much as 2.2 billion Hong Kong dollars in lost sales, or around $280 million, for the month of October, according to Raymond Yeung, an analyst at the Australia and New Zealand Banking Group.
China temporarily suspended visas for group tours on Wednesday, a move that could have additional effects on hotel and restaurant receipts in the city. Such tours account for about 30 percent of all mainland visitors to Hong Kong.
The broader economic risk is that the situation on the streets deteriorates further and, in a worst-case situation, the authorities respond with the use of greater force or even call in the Chinese military, the People's Liberation Army. Not only would that hurt the financial interests of Hong Kong's influential tycoons and prompt a potential relocation of multinational companies away from the city, it would have far-reaching effects for China's own economic development.
"Such a turn of events would do irreparable damage to Hong Kong's special status as a regional financial centre, which owes much to the city's strong rule of law, its transparent legal system, and its reputation as a safe place for expatriates to live and do business," Gareth Leather and Julian Evans-Pritchard, analysts at Capital Economics, wrote Friday in a research report.
Hong Kong has been a useful economic hub for distant rulers ever since the British established a trading colony here in 1842, a concession won from the Chinese after the First Opium War. But for Beijing, Hong Kong has proved far more financially vital than it ever was to London. Since Deng Xiaoping began opening China's economy to the world more than three decades ago, the city has played a crucial role as a place for Chinese companies to raise funds, and as a model for the mainland's economic and financial overhauls.
As China seeks to broaden the city's use for trade finance and loans among overseas investors, Hong Kong operates the biggest offshore centre for the use of the renminbi, the mainland's currency. China is also moving forward with plans for a two-way trading link between the Hong Kong and Shanghai stock markets, which would give foreign funds and individual investors their first direct access to buying shares in hundreds of mainland companies.
"Hong Kong has been acting as a reference point for China - whatever they want to do, they come to Hong Kong to take a look first, and if it is good they pick it up," said Li Kui-Wai, an associate professor of economics and finance at the City University of Hong Kong. "In a sense, they are trying to catch up with us."
Being at the centre of this give-and-take with China has proved immensely profitable for Hong Kong's elite, who have voiced few objections to Beijing's tightening grip on the city. The result has been that Hong Kong's tycoons have increased their dominance over the sectors of the city's domestic economy that produce the biggest and steadiest profits. That includes utilities, telecommunications, transportation, shipping, logistics, even supermarkets and convenience stores - but most of all, real estate.
Land prices are effectively set by the government, which controls the supply, and in recent years, prices have soared to levels that prohibit all but the wealthiest developers from bidding on prime plots. The city's 10 richest men all have vast interests in Hong Kong real estate; they control a combined fortune of around $130 billion, according to data from Forbes.
That wealth is not getting spread around. Real wages in Hong Kong have risen less than 3 percent in the past decade. Over the same period, home prices have more than tripled. As a result, Hong Kong's official Gini coefficient, a measure of income inequality, has risen from 0.518 index point in 1996 to 0.537 point in 2011, the most recent data available - among the highest in the world for a developed economy.
"Hong Kong is supposedly an open window to the world for China," said Heman Cheung, 24, one of hundreds of protesters who camped out in the middle of the street last week in Causeway Bay, one of the city's busiest shopping districts. "Monopolies control everything, and I don't see any ceiling on how high they can go."
The sky may well be the limit, given the recent signals of the Chinese leadership. Last month, President Xi Jinping hosted a meeting in Beijing with dozens of Hong Kong's elite to emphasize the government's opposition to calls for political reform.
In an unusual public statement, a top Chinese academic who works closely with the central government said in a speech in August that democracy in the former colony must be limited in order to protect the interests of its capitalist class. "The business community is a reality," said the academic, Wang Zhenmin, dean of the law school at Tsinghua University in Beijing, "even if it is a small group of people, a very small group of people."
"They control the destiny of the economy in Hong Kong," Mr. Wang said. "If we just ignore their interests, the Hong Kong capitalism will stop."
©2014 The New York Times News Service
