Swiss companies keep watchful eye on Hong Kong protests

The pro-democracy protests in Hong Kong began in early June and intensified earlier this week when protestors clashed with riot police, leading to major transport bottlenecks. Keystone / Miguel Candela

Democracy protests in Hong Kong have disrupted flights, closed shops and have placed the global spotlight on the Chinese territory. Swiss companies are monitoring the situation, wary that the chaos could impact their bottom line.

While Hong Kong’s economy has stagnated in recent months, the recent turmoil’s impact so far appears mostly sartorial.

Sally Yan, a Switzerland-based Chinese executive travelled through Hong Kong’s international airport earlier this week wearing pink to make sure that she didn’t signal affiliation with either side of the conflict. “I didn’t want to be confused with the white or black colours worn by either side of the protests,” she said in an interview.

The protests began in early June and intensified earlier this week when protestors clashed with riot police, leading to major transport bottlenecks. At least five major trade partners including the US, Japan and Australia, have issued travel warnings for the former British colony.

The Swiss government hasn’t issued an advisory, but the government’s travel advice for ChinaExternal link is to avoid any demonstrations in Hong Kong.

For Swiss companies, Hong Kong is important as a crucial access point to the vast Chinese market. A look at Swiss official trade figures show just how much that is the case: While Switzerland exported CHF29 billion worth of goods to China, it exportedExternal link more than half as much, about CHF15 billion, to Hong Kong, the small, but densely populated tropical territory of less than eight million people.

Howard Yu, a professor at the IMD business school in Lausanne who was born and raised in Hong Kong, told swissinfo.ch that “the turbulence around the protests is dampening investor confidence in a direct way.” However, he hasn’t heard of any companies pulling out of the region.

The Zurich-headquartered bank UBS sent a letter to employees asking them to carefully monitor the situation and make appropriate decisions to avoid putting themselves at risk.

Mark Panday, a bank spokesman based in Hong Kong told swissinfo that “employee safety is our primary focus.” The Swiss bank continues to operate business as usual, said Panday, but it is “offering employees flexible work arrangements.”

Industry effects

The protest movement is hitting Hong Kong in a moment of economic malaise. Economic growth slumped to 0.6% last month – much lower than the expected 2.4%. “The Hong Kong economy is facing a very difficult situationExternal link,” Hong Kong Finance Secretary Paul Chan said on Monday. In June, the turnover of stores declined by 6.7% compared to the same period last year.

Swiss companies also suffered. The French-language newspaper Le TempsExternal link reported that sales in the Swiss watch industry have taken a dive in recent months. While the US-China trade war and other factors play a role, some companies report that the demonstrations have already started to impact business and could particularly affect this industry.

Many Mainland Chinese customers go to Hong Kong to purchase Swiss watches. Protests against policies by the central government in Beijing have previously led to drops in arrivals of mainland tourists to the territory. Should this happen again, Swiss watch makers would suffer.

The Hong Kong territory alone generated over CHF3 billion in sales of Swiss-branded watchesExternal link in 2018 compared to CHF1.7 billion in mainland China. In June alone, Swiss watch exports to Hong Kong fell by around 27%, according to Swiss Centers ChinaExternal link.

Le Temps reported that Swatch had to temporarily close stores in some neighbourhoods, which it said contributed to a double-digit declineExternal link in sales in Hong Kong. 

Swiss luxury goods company Richemont reported a 9% increase in sales for Asia-Pacific reflecting double-digit sales growth in key markets, with the exception of Hong Kong, where sales retreated.

Yan, the Switzerland-based Chinese entrepreneur, said that many foreign and Chinese companies thought that they had little risk exposure in Hong Kong. But in the current climate companies that have wealth management arms in Hong Kong or had been thinking about moving there are now considering places like Switzerland and Singapore as alternatives.

She arrived at the Hong Kong airport earlier this week to find that protestors had blocked the rail line to the city center. Once in town, she switched hotels after the first night because she said she was worried about her safety.

Yan is originally from mainland China but had studied in Hong Kong. She is now a market entry advisor for Switzerland and China and based in the Canton of Zug.

“Hong Kong is known as a very peaceful, professional place,” she said of the international trade hub. “Even locals want to avoid uncertainty.”

Updated with additional company perspective.