Demonstrators use umbrellas and home made shields to protect themselves from police rubber bullets firing against them during the anti-government protest. Protests in Hong Kong, China

The impact on Hong Kong’s economy of the wave of democratic protests is becoming clearer: The Census and Statistics Department of the Hong Kong Special Administrative Region reported Thursday that June retail sales plunged 6.7 percent.

The value of total retail sales in June, which had five trading Sundays, dropped to a provisionally estimated 35.2 billion Hong Kong dollar, or $4.51 billion.

Sales of jewelry, watches and clocks, and valuable gifts took the biggest hit, down 17.1 percent, while sales of apparel and medicines and cosmetics dropped 8.2 and 4.1 percent, respectively. Electrical goods and other consumer durable goods sales were down 16.1 percent and commodities in department stores decreased 4.1 percent.

Sales of essential consumer goods remain steady. The value of sales of commodities in supermarkets increased by 1.6 percent.

Annie Yau Tse, chairman of the Hong Kong Retail Management Association, said the ongoing Sino-America trade war and protests against the proposed anti-extradition bill were major contributors to the decrease in sales. At a press conference, she said she expects the decline in sales to rise to the high-single digits or even double digits in July and August.

Rory Green, China economist at TS Lombard, said Hong Kong could be affected by the outcome of the trade war and challenge Hong Kong’s status as a free trading port. “Passage of the extradition bill could certainly provide a trigger for the U.S. to question Hong Kong’s status as a separate customs entity from mainland China. Hawks in Congress have already cited the territory’s unique status as providing China with both a trade and technology loophole through which to evade U.S. export restrictions and tariffs.”

Green added that passing the extradition bill could mark the turning point for the market’s perception of Hong Kong assets. “Hong Kong businesses and assets derive a significant part of their value from the territories’ international status, rule of law, freedom of press and trade. The realization that China is likely to eventually erode many of these privileges should lead to a structural repricing of said assets,” he added.

Tse also added, according to association members, that the Hong Kong tourism number plummeted by 30 to 50 percent and some retailers even reported a 70 to 80 percent decline in sales in tourist areas. Hong Kong’s Federation of Trade Unions said hotel occupancy rates fell 20 percent in June and probably 40 percent in July year-on-year.

Some economists say the damage of the protests over the past eight weeks is already worse than the 2014 Umbrella Revolution, which saw demonstrators protest against the pro-Beijing electoral system.

Anti-extradition bill protesters attend a mass rally in Yuen Long, New Territories, Hong Kong

Anti-extradition bill protesters attend a mass rally in Yuen Long.  JEROME FAVRE/EPA-EFE/Shutterstock

Burberry has confirmed that its Hong Kong stores have taken a hit. Julie Brown, its chief financial officer, said earlier that the company is expecting a “slight decline in the quarter” for Hong Kong.

The brand’s Queensway Plaza and Pacific Place boutiques stand to be the most impacted, being in direct proximity of the largest protests and given that the Pacific Place mall shut for at least one day. Burberry’s Sogo and Times Square locations in Causeway Bay also are located alongside the start of the routes of earlier protests.

Kering said “a combination of high comps, repatriation of Chinese demand and, more recently, some disruption in Hong Kong” impacted its second-half results. Meanwhile, Chanel is “keeping a close watch on events,” said a spokesperson for the brand, but plans to go ahead with its 2019 cruise show in Hong Kong for now.

Brokerage CLSA also downgraded Adrian Cheng’s jewelry brand Chow Tai Fook to “sell” from “outperform” on July 23, stating the protests could cause permanent long-term damage.

Layoffs and either store closures or delayed openings would also be “inevitable” if the current situation persists, Tse added. Association members are reviewing their hiring plans and canceling the openings of additional points of sale, such as pop-up stores.

She believes the industry will be happy to see the Chinese government respond to the protesters rightfully and peacefully, as employees are the biggest victims in the struggling retail climate. Some are seeing a 30 percent decrease in pay as most of their salary is commission based.

A woman try to negiotate with police collapse in the tear gas during the confrontation in Hong Kong Protests/

A woman falls during a confrontation in the Hong Kong protests.  Kevin On Man Lee/Penta Press/Shutterstock

But the tension between Hong Kong and Beijing won’t go away anytime soon. Protests have been going on since March, with the biggest turnout against the proposed extradition bill happening on June 9, with a turnout of a million people.

Demonstrations escalated the following day with police firing rubber bullets, tear gas and bean bag shots into the crowds. The government characterized the events as a riot, which has severe repercussions as those prosecuted for rioting could face up to 10 years in prison.

Since then, citizens have continued to take to the streets to call for the government to completely withdraw the bill, withdraw the characterization of these protests as a riot and to look into police misconduct.

On July 1, the 22nd anniversary of the handover from British to Chinese rule, protests erupted once more in Hong Kong and continued throughout the month at West Kowloon train station, Shatin New Plaza, one of Hong Kong’s largest shopping malls in New Territories, and in Sheung Wan train station.

On the same day as the Sheung Wan train station protests, a mob of men believed to be triad gang members and believed to be working in collusion with the Hong Kong police force, targeted and brutally attacked protesters at Yuen Long train station. At least 45 people, including a pregnant woman, were injured, according to the city’s Hospital Authority.

Since then, a fresh wave of protests has erupted, with a peaceful sit-in at the Hong Kong Airport on July 26 to condemn police violence and to rally overseas support. Since the protests have started, 44 people have been arrested and charged with rioting and on July 30, crowds gathered peacefully outside Kwai Chung police station to oppose these charges.

They were met with rounds of tear gas and pepper spray and a police officer pointing a shotgun into the crowd as a threat. On Wednesday, fireworks were shot into crowds who had gathered to protest outside the Tin Shui Wai police station, injuring many.

Since the demonstrations started, pro-democracy protesters have been urged to go digitally dark as Hong Kong’s special status is already at risk. Telegram, the encrypted messaging platform that protesters use to coordinate demonstrations and evade surveillance, suffered from a cyber-attack, which according to the company’s chief executive officer, originated from China.

On other online forums and social media platforms, people urged each other to turn off their location settings and to remove their face and finger print identification on their phones and to buy paper travel tickets with cash for fear of being arrested.

Protesters are also avoiding public hospitals. On June 17, Hong Kong’s Hospital Authority released a statement saying that patients with casualties related to the protests will need to be registered under ‘mass gathering outside Legco’. A lawmaker and public hospital doctor said at a press conference that Hong Kong’s Hospital Authority had given police access to patient records.

He revealed that the Hospital Authority had set up a backdoor in its Clinical Management System that allowed police to easily search up patients logged under ‘for police’ revealing their identity, which is a breach of physician-patient privilege.

Officials in Beijing have condemned Hong Kong pro-democracy protesters and the Chinese government has thrown its weight behind the Hong Kong police, stating publicly that the Chinese military or PLA can be deployed to Hong Kong if needed.

On an additional note, China’s recent ban on individual travel to Taiwan can be seen as a warning to Hong Kong. If the authority cut off mainland tourism from Hong Kong, the city’s retail industry will find it difficult to recover.

More on Hong Kong Protests: 

Protests to Hamper Hong Kong Retail Sales With Double-Digit Drop

Triad Threat Turns Parts of Hong Kong into Ghost Towns

Hong Kong Protests Vow To Continue Mass Rallies

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