TAIPEI, TAIWAN - Hong Kong and Singapore have always been rivals of a sort. Government stability and transparent legal systems have attracted thousands of multinationals to both since the 1960s, giving each the title of Asian financial center.

Antigovernment protests since June suddenly threaten the prowess of Hong Kong. The millions of people massing in the streets, shutting down the airport and setting fires in public places are eroding the sense of stability that multinationals want when they pick a base in Asia.

Singapore is standing by now to take any Hong Kong refugees.

Pro-democracy protesters react as police fire water cannons outside the government headquarters in Hong Kong, Sept. 15, 2019.

Hong Kong would start giving ground to Singapore, people close to one or both places think, if the protests show signs of going on long term and especially if they drive changes in the law or keep snarling the airport. That would mean an exodus of multinationals to Singapore or at least corporate decisions to add Singapore staff rather than Hong Kong staff during Asia expansions.

“It really depends how long this continues,” said Rajiv Biswas, Asia-Pacific chief economist at the market research firm IHS Markit. “If it becomes protracted and the disruptions are ongoing, then I think it does erode confidence in the financial center. Definitely it could undermine Hong Kong’s ability to compete with Singapore.”

The rise of two dragons

Hong Kong was described in the 1960s as one of Asia’s four economic dragons, a reference to fast industrialization and economic growth.

Under British rule through 1997, the territory attracted multinationals with rules that made business easy and transparent for outsiders. It had been described as a financial center as early as 1950. The World Bank ranked Hong Kong No. 4 this year in its worldwide ease-of-doing-business survey.

Hong Kong remains one of the world’s four largest international financial centers, though pressured by the rise of Chinese hub cities such as Shanghai and Shenzhen, Biswas says in a Sept. 9 research note. Singapore is on the list too, along with London and New York.

A woman uses her smartphone to take pictures of a lantern display depicting Singapore's iconic architecture and multiracial society during Mid-Autumn Festival celebrations at Jurong Lake Gardens in western Singapore, Sept. 9, 2019.

Singapore averaged 8% GDP growth from the 1960s to the 1990s, putting it among the Asian dragons.

About 3,000 multinationals from developed countries keep offices there. The fellow former British colony ranks No. 2 on the World Bank’s ease-of-doing-business chart and 13th on the World Justice Project’s scale for adherence to rule of law. The World Justice Project evaluation covers absence of corruption, presence of security and the transparency of government.

An historic haven in Asia

A Sept. 12 survey by the American Chamber of Commerce in Singapore found that Hong Kong was “unlikely to attract those” who don’t have any presence there now.

More than 80% of respondents said the protests had affected their decisions related to investing in Hong Kong. Among the companies eyeing a move from Hong Kong, the survey found, 91% called Singapore the backup location.

Singapore has come through as a historic “haven” when crises pop up elsewhere in Asia, said Song Seng Wun, economist in the private banking unit of CIMB in Singapore.

Despite higher costs than in much of Asia, he said, Singapore offers “strong” rule of law, he said. “Singapore has always been a neutral, safe haven place during times of uncertainties, especially around the region,” Song said.

Protesters carrying umbrellas take part in march in Hong Kong, Sept. 15, 2019.

No tipping point yet

Protests to date have a “temporary” aura, Biswas said, compared to a scenario of lasting for “years.” He doesn’t expect companies to uproot just yet from Hong Kong in favor of Singapore, but those with offices in both places might now consider focusing more resources on the Singapore side.

Protests began in Hong Kong June 9 in reaction to a proposed extradition bill that would let citizens get deported to China for political crimes and face harsh sentences. Protesters have added calls for democracy in Hong Kong despite rule by Communist China since 1997.

Hong Kong people have a way of reacting vehemently to a cause at first and then quickly relenting, said Michael McGaughy, portfolio manager with Fusion Wealth Management in Hong Kong. He recalls how people covered their faces in masks during the deadly SARS outbreak of 2002 but suddenly stopped when the epidemic showed a decline in early 2003.

Common law and the tax system that financial companies like about Hong Kong show no signs of changing, McGaughy said. Anyone tempted to leave because of the protests would “think twice,” he said. His company has not discussed pulling out.

“My gut feel is that there’s going to be a lot of talk about it, but if the legal system stays the same then I’d be surprised if people leave,” McGaughy said.