Prolonged Hong Kong protest could harm financial image, says envoy

A top Chinese envoy warned that drawn-out pro-democracy protests in Hong Kong could tarnish the city's reputation as one of the world's leading financial hubs, as defiant protesters vowed on Thursday they would not budge.

Both sides hunkered down for what could be a prolonged stand-off, although the number of protesters blocking the streets in the financial and administrative districts for the past six days tapered off on Thursday.

The mostly young protesters have demanded Hong Kong's leader, Leung Chun-ying, step down by the end of Thursday, threatening to occupy government buildings if he fails to do so.

They have also called on China to introduce full democracy so the city can freely choose its own leader.

Leung, appointed by Beijing, has refused to stand down, leaving the two sides far apart in a dispute over how much political control China should have over Hong Kong.

China's ambassador to Germany, Shi Mingde, told Reuters that the city's reputation as a financial hub was not under threat for now. "But if shares fall, if the unrest continues, then the social order and (Hong Kong's) role as a financial center will be in danger," he said in an interview in Berlin.

"This is neither in Hong Kong's nor China's interest."

The city's benchmark index, closed on Thursday for a holiday, plunged 7.3 percent in September.

Spooked by the protests, which turned violent at the weekend when tens of thousands took to the streets, some banks and other financial firms have begun moving staff to back-up premises on the outskirts of city.

Turmoil in Hong Kong has begun to affect the economy.

Hong Kong radio RTHK quoted Joseph Tung, executive director of the city's Travel Industry Council, as saying China's tourism authorities had suspended approval of tourist groups from the mainland to Hong Kong, citing safety.

A government source with ties to Leung said the pro-Beijing leader was prepared to play a long-game, intervening only if there was looting or violence.

"Unless there's some chaotic situation, we won't send in riot police ... We hope this doesn't happen," the source said. "We have to deal with it peacefully, even if it lasts weeks or months." Leung could not be reached for comment.

The "Occupy Central" movement presents one of the biggest political challenges for Beijing since it violently crushed pro-democracy protests in Tiananmen Square in 1989.

Riot police used tear gas, pepper spray and baton charges last weekend to quell unrest, the worst in Hong Kong since China resumed its rule of the former British colony in 1997.

The protests have calmed considerably since then, although an air of tension remains and the demonstrations appear far from over. A crowd of about 100 protesters on Thursday blocked the main road leading to Leung's office in the Central business district, some chanting, "Leung Chun-ying, Step Down!"

A pro-Beijing group told a news conference in Hong Kong their supporters would take to the streets to show support for Leung's administration, raising the prospect of clashes between the two sides.

The crowded suburbs of Kowloon and the neighboring New Territories are home to a vast organized network of pro-Beijing groups, some of which boast close ties to mainland companies and officials and have grown active in street counter-protests in recent months.

China has dismissed the pro-democracy protests as illegal, but in a worrying sign for the Communist Party leadership in Beijing, the demonstrations have spread to neighboring Macau and Taiwan.

China now faces a dilemma.

Cracking down too hard could shake confidence in market-driven Hong Kong, which has a separate legal system from the rest of China. Not reacting firmly enough, however, could embolden dissidents on the mainland.

Shi Mingde, the Chinese ambassador, said most mainlanders had little sympathy for the demonstrations in Hong Kong. "Therefore I don't believe that this will have consequences for the mainland."

A front-page editorial in the People's Daily, the Communist Party mouthpiece, lauded Leung's leadership and the police response to the protests. "The central government fully trusts Chief Executive Leung Chun-ying and is very satisfied with his work," it said on Thursday.

INTERNATIONAL CONCERN

U.S. President Barack Obama told visiting Chinese Foreign Minister Wang Yi, who earlier met Secretary of State John Kerry, that Washington was watching the protests closely and urged a peaceful solution.

"The United States has consistently supported the open system that is essential to Hong Kong's stability and prosperity, universal suffrage, and the aspiration of the Hong Kong people," the White House said in a statement about the meeting, also attended by national security adviser Susan Rice.

Universal suffrage is an eventual goal under the "one country, two systems" formula by which China rules Hong Kong. Under that formula, China accords Hong Kong some autonomy and freedoms not enjoyed in mainland China.

However, protesters calling for free elections reacted angrily when Beijing decreed on Aug. 31 that it would vet candidates wishing to run in Hong Kong's 2017 election.

Wang said before an earlier meeting with Kerry that countries should not meddle in China's internal affairs.

"The Chinese government has very formally and clearly stated its position. Hong Kong affairs are China's internal affairs. All countries should respect China's sovereignty," Wang said.

Protesters across the city have dug in, setting up supply stations with water bottles, fruit, raincoats, towels, goggles, face masks, tents and umbrellas. Even so, some in the crowds wondered how long the status quo could last.

The Hong Kong Federation of Students, one of the protest organizers, urged people to surround more government buildings from Friday unless the authorities accepted their demands.

But Leung has said Beijing would not back down and that Hong Kong police would be able to maintain security without help from People's Liberation Army troops from the mainland.