China is more likely to send its army to Hong Kong, says the Economist Intelligence Unit's latest forecast

• The odds of China sending the People's Liberation Army to Hong Kong have crossed 50%.
• Simon Baptist, Chief Economist and Asia Managing Director at the Economist Intelligence Unit revealed the latest forecast on Tuesday night on Twitter.
• The crushing of the pro-democracy protests by the Chinese army may force multinational corporations in Hong Kong to slowly shift base.

The odds of China sending the People's Liberation Army to Hong Kong have crossed 50%, according to Simon Baptist, Chief Economist and Asia Managing Director at the Economist Intelligence Unit.

This may be very bad news for businesses in Hong Kong as well as for market sentiment in Asian markets. The crushing of the pro-democracy protests by the Chinese army may force multinational corporations in Hong Kong to slowly shift base, he added.



Breathtaking images of over a million people marching the streets of Hong Kong protesting against the Chinese government have captured the world attention in recent weeks. Many people around the world have shown solidarity with the protesters.

Presumably to influence the global perception, the Chinese government launched an online disinformation campaign casting the protesters as members of ISIS, according to Twitter and Facebook on Monday.

Now, if China decides to send in the army to end the agitation, it may be a significant move. The protests have built up to this point over months, and simultaneously China is fighting a trade war with the US.

The rising risks from increasing uncertainty is something that businesses will find it tough to stomach. For example, the unexpected exit of Rupert Hogg, CEO of Cathay Pacific, Hong Kong's leading airline caused a lot of worry among other executives and corporations.

A lot of investor wealth has been lost in the share market in the last six months. The Hang Seng index has lost nearly 9% in the last one month and over 7% in the last six months.

Even Alibaba Group, China's biggest e-commerce company, has delayed its $15 billion initial public offering (IPO) of shares in Hong Kong due to the tensions, according to a Reuters report citing sources.

As Baptist put it, it may not be a rush to the exit but multinational companies may consider reducing their risks by moving some of the business out to some other country that is less volatile, politically. The risk aversion in markets due to any heightened tension may spread across the region, if not further.

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