Passengers pass by closed stores in Tsim Sha Tsui during the weekend, when black-clad protesters clashed with the police in the area. Photo: Chen Qingqing/GT

A plan by Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor to end persistent violence that has dented image of the major financial hub has offered some relief for rattled businesses, as they count on the step to help restore order and peace and to revive the economy.

In a major announcement on Wednesday, Lam said that she will take four actions to start dialogue and end unrest in the city - a prospect that could help restore confidence among businesses, which requires a stable operating environment, in the city.

The positive reactions from the business world to Lam's plan were instantly on display on Wednesday afternoon, as stock markets rallied.

The Hang Seng index surged nearly 4 percent on Wednesday - the biggest gain in 10 months - reflecting the bullish view of investors of the Hong Kong Special Administrative Region (HKSAR)'s efforts to ease social unrest, according to media reports.

The HKSAR government is making efforts to end the violence, and "hopefully, it could help the economic recovery," Peter Shiu Ka-fai, a legislator, told the Global Times. 

The Federation of Hong Kong Industries said it respected the latest decision of the HKSAR. It said that it expected that society could get out of the current dilemma, as small and medium-sized enterprises (SMEs) have been facing tremendous pressure lately and their livelihoods have been seriously affected. 

The Hong Kong economy continued to suffer from ongoing social unrest in August, as business activity dropped to its lowest point since the end of 2008 and various sectors including retail, construction and manufacturing shrank, heavily weighing on the prospects of the global financial and trading hub.  

While a growing number of business representatives are keeping a close eye on escalating social tension, they highly value business ties with the Chinese mainland, which is expected to help them weather the chill of the impact of radical protests.

The latest purchasing managers' index (PMI) survey indicated that Hong Kong's private-sector downturn deepened in August as escalating trade wars and local protests dampened demand, IHS Markit Hong Kong said in a report send to the Global Times on Wednesday. Meanwhile, business activity fell at the steepest rate since the end of 2008 - the start of the global financial crisis - and pessimism spread to more companies, with business confidence slumping to a record low.

The Hong Kong PMI plunged from 43.8 in July to 40.8 in August, according to the report.

Months of anti-government protests in Hong Kong have escalated into violent attacks, which officials said have shown signs of terrorism. Rioters attacked police offices, vandalized government buildings and smashed shops and stores, seriously hurting the stability of the city. From tourism to retail to services, almost all the major industries have been seriously affected by the ongoing social unrest. 

The latest PMI data reveal a Hong Kong economy risking recession in the third quarter as business activity is increasingly aggravated by protest-related paralysis, Bernard Aw, principal economist at IHS Markit, said in the report. 

Such an economic chill is also reflected in daily business activity in Hong Kong. 

"Some investors are now holding a 'wait-and-see' attitude, and we've seen capital outflow to neighboring markets, especially when they have come up with favorable policies. It's a major blow to the Hong Kong economy," Chan Ben, a Hong Kong-based business representative who has expanded his footprints in various sectors like capital investment, marketing and retail, told the Global Times Wednesday.

Over the past two months, the number of orders has slumped by more than 40 percent year-on-year, he said, noting that as the manufacturing sector has always been sluggish, the overall economic downturn is looming, weighing on business confidence. 

Confidence strengthened

Hong Kong Financial Secretary Paul Chan, who announced HK$19 billion ($2.4 billion) worth of relief measure to support the city's economy amid social turbulence in mid-August, said on Wednesday that more favorable policies would support SMEs involving HK$6 million.

In addition, there will be more than 40 government-backed funds to provide millions of Hong Kong dollars of financing support for SMEs, he said.

"An economic storm has formed that will hit Hong Kong. The HKSAR government will be well prepared," he told a press conference on Wednesday. 

The urgent task is to restore the stability in Hong Kong, a major factor to attract business to invest in the city. 

Hong Kong is facing an increased unemployment rate, and the housing market - one of its core sectors - is expected to face a downturn after September, according to various industry analysts. 

Mainland-HK ties

The mainland and Hong Kong have been forging close ties in business, trade and finance in recent decades. Mainland-Hong Kong ties in finance are reciprocal and mutually beneficial, Norman Chan Tak-Lam, chief executive of the Hong Kong Monetary Authority, told the Global Times in a recent interview.

"While supporting Hong Kong to develop offshore yuan business, the mainland could also make use of Hong Kong's platform to gradually open up its capital market and investment channels for international investors in a risk-controlled manner," he said. 

The ongoing social events have drawn the attention of investors. It took years for Hong Kong to build its institutions, the rule of law and market advantages, which are key to investors' confidence and smooth operation of the financial markets. "It was not easy for Hong Kong to become an international financial center. We hope that disputes could be resolved, allowing social order to return to normal as soon as possible," he said.

As for the future, for the convenience of the public and cooperation between the mainland and Hong Kong, the Guangdong-Hong Kong-Macao Greater Bay Area is well-positioned to test cross-border yuan flows, the chief executive said, noting that the HKMA will work with authorities in the mainland to study appropriate measures to support the development of the Greater Bay Area, "which we believe would further boost the yuan business."


Newspaper headline: New HK moves lift biz sentiment