Hong Kong businesses on edge as democracy protest threatens financial hub's shutdown

As activists vow to shut down Hong Kong's financial district in protest at China's attempt to hobble democratic elections in the city, businessman Bernard Chan is preparing for the worst.

Chan's investment company has added backup phone lines, bought extra laptops and stockpiled instant noodles in case its headquarters downtown is caught in the middle of the protest.

Activists have threatened for more than a year to rally 10,000 protesters to freeze the Asian financial center's central business district to press their demands for full democracy. Chan drew up contingency plans after the chances of such a showdown escalated in recent months.

The former British colony came back under China's control in 1997 but retains its own legal and financial systems and a high degree of control over its affairs. Beijing has promised to let voters, rather than an elite committee, elect the city's leader starting in 2017 but democracy groups and authorities are edging closer to confrontation over who can select candidates.

The protest plan has set Hong Kong's business community on edge. Companies operating in the financial district, where skyscrapers line narrow, winding streets, have scrambled to make sure they've got adequate backups in place while trade groups have taken out newspaper ads voicing their objections. Financial analysts have issued reports fretting about possible disruption.

Chan, president of Asia Financial Holdings, said he realized his company needed an emergency plan because its headquarters sits at one of the Central district's busiest intersections, making it a potential ground zero for the "Occupy Central with Love and Peace" group's protest.

"My office is in the core of the core downtown," said Chan, also a member of Hong Kong's de facto cabinet. "So if there are going to be any activities, it's going to be right in front of it."

Last month, the Hong Kong Monetary Authority held an emergency drill with 55 banks to test contingency plans and communication links in case their headquarters or other offices in the financial district became inaccessible due to "unexpected events."

Financial institutions got a small taste of what the Occupy Central shutdown might look like when several thousand demonstrators, most of them students, held an overnight sit-in following a massive pro-democracy march on July 1. The group promised to clear out of the financial district by 8 a.m. but police moved in before that, arresting more than 500 people.

Big banks such as HSBC and Standard Chartered say they already have "business continuity plans" in place to make sure they can continue to operate in case of major incidents.

Beijing has promised to let Hong Kong elect its own leader starting in 2017 but pro-democracy groups worry that candidates will be screened by an elite committee loyal to China's communist leaders, making any election meaningless. No date has been set yet for Occupy Central's shutdown plan, which is intended as a last ditch effort should authorities fail to come up with a satisfactory electoral proposal.

"The leverage we have is the uncertainty," said Benny Tai, a Hong Kong University law professor and protest organizer. "All sides, especially business, they should do something now to try to convince Beijing that it is totally unhealthy for Hong Kong to have this situation continue. They have more say and more influence over Beijing than us."

In a research note earlier this month, Citibank analysts speculated that the protest could take place as early as August.

The report forecast "significant clogging of streets and transport hubs in the Central and government office areas, disrupting traffic and potentially leading some businesses to close offices or use backup premises." While the disruption would be temporary, the bank expected businesses and investors to factor in a "higher perception of operational risks" in Hong Kong.

The democracy protest is unrelated to the global anti-capitalist Occupy movement, which included dozens of activists who camped out for about a year in a public passageway underneath HSBC's Hong Kong headquarters before being evicted in Sept. 2012.

Officials at Hong Kong's stock exchange, Asia's second biggest after Tokyo, have told reporters contingency plans are in place. As part of normal operations, it has a specialist team coordinating response plans for scenarios that could threaten operations, it said.

Hongkong Land, which owns 11 properties in the area including an upscale mall with a Mandarin Oriental hotel, said it's keeping a close eye on Occupy Central and preparing for possible scenarios.

A hotel owners group and a construction industry trade association took out separate newspaper ads last week saying they were opposed to Occupy Central. The four big international accounting companies, several foreign business chambers and some billionaire tycoons have also spoken out against it.

Nightclub mogul Allan Zeman, who owns dozens of bars and restaurants in the area, said he feared it would be "impossible" to keep the protest peaceful because of the sheer numbers expected.

"People do things they don't normally do because of the electricity of so many bodies around," he said.

Many of Zeman's friends with businesses in Central are also watching warily. Shop owners plan to close up at the first sign of trouble while those running service companies are relocating to other neighborhoods, he said.

Chan said his company has spent about $13,000 on preparations, including extra phone lines to its back office, four new laptops for key staff and a stash of instant noodles in case the nearly 100 employees are blocked from leaving the building.

"This is definitely suicidal," Chan said of the protest. "It ends up with every side a loser."