January has seen a series of student protests throughout Hong Kong, driven by concerns over Beijing’s growing influence in Hong Kong’s domestic affairs. These political developments create several risks for investors.
Protests in Hong Kong throughout January have called attention to what many see as a campaign by Beijing to establish greater influence over Hong Kong’s internal affairs. Although Hong Kong has belonged to the People’s Republic of China (PRC) since 1997, its status as a Special Administrative Region (SAR) in a framework popularly known as “One Country, Two Systems” has previously afforded it a significant degree of autonomy.
This framework puts Beijing in charge of Hong Kong’s foreign policy and defense but allows Hong Kong to maintain a separate economic system and significant independent legislative, executive, and judicial authority over its domestic affairs. Under this system, Hong Kong citizens have enjoyed significant political and economic liberties unavailable to mainland PRC citizens.
Recent events, however, indicate that Beijing is looking to exert greater influence over Hong Kong’s domestic affairs, undermining the “One Country, Two Systems” arrangement.
One of the main areas where Beijing appears to be exercising more influence in Hong Kong is through the governance of Hong Kong University (HKU).
In March 2015, Hong Kong’s Chief Executive CY Leung appointed Arthur Li Kwok-Cheung to the University’s Governing Council, despite widespread opposition among university staff worried that Li would undercut academic freedom. Li almost immediately became embroiled in political controversy in the fall of 2015 when he played a major role in blocking Johannes Chan from becoming pro-vice chancellor at HKU. Li allegedly vetoed Chan’s appointment due to Chan’s ties to pro-democracy political groups. This decision led to several students protests at HKU.