China Pressures Business Over Hong Kong. Workers Get Caught in the Middle.

on Aug18
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As Hong Kong seethes with protests against China’s rule, Beijing is increasingly pressuring the business world to take its side. Businesses, both global and local, are falling in line — and their employees are caught in the crossfire.

The most dramatic example came on Friday, when Rupert Hogg, the chief executive of Hong Kong-based Cathay Pacific Airways, resigned in the face of Chinese pressure after some of the airline’s workers participated in the demonstrations.

Now, global accounting firms are coming under the same pressure.

The Big Four firms — PwC, Deloitte, KPMG and Ernst & Young, now known as EY — put out statements distancing themselves from a full-page ad supporting the demonstrations that appeared in Hong Kong’s Apple Daily newspaper on Friday. The ad was signed and paid for by a group of anonymous employees of the firms.

“We will never fear or compromise with injustice and unfairness,” the text of the ad read. In response, PwC declared that the ad “does not represent the firm’s position,” adding, “We firmly oppose any action and statement that challenge national sovereignty.”

On the other hand, Hong Kong’s importance to China has dwindled, but Beijing still needs it as a financial hub. Most foreign investment into China flows through the territory. Mainland Chinese companies also raise money through Hong Kong, where global investors have put $2.6 trillion in Chinese company stocks.

Beijing has warned that the protests threaten Hong Kong’s future prosperity. On Sunday, it said it approved a plan to further open up the economy of Shenzhen, a booming city just across the border from Hong Kong, suggesting that it wants to increase competition between the two cities.

For years, businesses in Hong Kong have been able to prosper by staying out of politics. But under China’s current leader, Xi Jinping, the Communist Party has amassed more power and intruded into more parts of Chinese life, including business. It has also taken an increased interest in Hong Kong affairs since protests in 2014, known as Occupy Central, that also challenged China’s policies toward the territory.

Mainland Chinese consumers and businesses, often egged on by state media that criticizes any foreign business that does not appear to show the country proper respect, have also emerged as forces in their own right. The result has been a near-daily campaign to prod companies like Versace, Coach and Givenchy to apologize to China for implying in their products and websites that Hong Kong was a separate country.

On Weibo, the Chinese social media platform, mainland Chinese internet users started a #BoycottCathayPacific hashtag, which was viewed half a million times. Analysts at the state-owned Industrial and Commercial Bank of China put a “strong sell” rating on the stock because of what it called “poor crisis management.”

On the other hand, companies risk going too far in placating China. When the actress Liu Yifei last week publicly supported the Hong Kong police, protesters called for a boycott of “Mulan,” the live-action Disney film set to be released next year in which she will play the title character.

While Cathay has been the most visible example of pressure on Hong Kong business, it was by no means the first.

This was not the first time that the employees of the Big Four accounting firms have broken ranks with their bosses. In 2014, during the Occupy Central protests, the companies published an ad saying the protests would harm Hong Kong’s status as a financial center. The employees responded with another ad in the Apple Daily that said, “Hey boss, your statement doesn’t represent us.”

For any company, restraining employees from speaking out can be tough. But in Hong Kong, it could become a necessity.

“For any of these organizations, it is necessary for them, within the framework of the law, to constrain or to require their employees not to touch the bottom line of the law,” said Wang Jun, chief economist at Zhongyuan Bank, a commercial bank based in central China. “I think that is very important.”

— Zoe Mou and Albee Zhang provided research.

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