The Chinese government must stay vigilant over the negative spillover effects from current perceptions of Hong Kong. Media spotlights of violence between protestors and police following the suspension of China’s extradition bill have framed Hong Kong as “unsafe and unstable.”
 
The damaged perception of Hong Kong as a gateway to China for tourism and foreign investment should be a warning sign for China. Hong Kong contributes to its economy significantly and negative perceptions of its brand decrease the likelihood of economic support from foreign audiences. Unfortunately, China’s response to protestors, with the recent accusations of  “terrorism,” reinforces the negative associations around the territory. Now, Hong Kong is reeling from the backlash and China is facing potentially disastrous options to bring these protests to an end.
 
Below are two ways current perceptions of the territory affect China’s economy.
 
Tourism
Considered a travel hotspot, Hong Kong transfers millions of overseas travelers into mainland China each year. In 2018, China’s tourism statistics reported that the majority of its visitors transferred from Hong Kong, Macau, and Taiwan. Hong Kong transferred 28.2 million tourists who stayed at least one night. This changed with negative perceptions now floating around the territory and at least 28 countries like Australia have issued warnings to travelers. The Hong Kong Tourism Board already reported a "double-digit drop" in visitors. Additionally, this drop affected the hotel industry, with revenue from room sales estimated to plunge as much as 50% in August alone.
 
Foreign Direct Investment
Hong Kong serves as China’s largest source of foreign direct investment (FDI). The territory has attracted millions of overseas investors and is seen as a “gateway into China.” In 2018, 46.3% in reported foreign investment flowed through Hong Kong into mainland China. However, this changed as well. As protests continue, stocks have fallen with the Heng Seng Index dropping 13% since April and money managers now warning investors of Hong Kong’s instability.
 
Hong Kong is a critical asset to China’s economic prosperity. Above are just two examples of how the current perceptions of the territory affects China. The full extent of damage from continuous protesting has yet to be determined. However, with the ongoing trade war with the US already impacting its economy, China can’t afford to allow negative spillover effects from perceptions of Hong Kong to become a permanent stain - leaving Hong Kong’s brand battered with no recovery in sight. 

Referring to a brand as just an “image” is an understatement. Brands create perceptions which influence a consumer’s decision to buy. That’s why companies like Coca-Cola and Starbucks persistently manage their brands.
 
This concept is no different for countries. While a nation’s brand is a perceived image of the country, it’s also an influencer of economic prosperity. For example, South Korea shares its cultural assets like Korean music with foreign audiences to shape its brand. This allows audiences to view Korea through a favorable lens and embrace the country, which impacts its economy.
 
Here are three ways Korea’s image demonstrates a nation brand’s economic impact.
 
Exports
For the past few years, Korea has invested in R&D for Asian skincare, positioning itself as a global standard in cosmetics. Products like Korean face masks took audiences by storm, attaching “high-quality cosmetics” to its brand. This caused a halo effect around its exported goods, bolstering support from foreign audiences. Korea’s customs service reported that cosmetic exports grew from $1 billion to $2.64 billion over five years. To date, Korea continues to enjoy this level of support with cosmetic exports now surpassing $6 billion.
 
Tourism
As positive perceptions of Korea surged, so has its tourism. One example of this is K-pop or Korean pop music. Popularity around K-pop influenced millions to view the country as a travel destination. A Korea Tourism Organization (KTO) survey in L.A. reported that 70% of respondents wanted to visit Korea after viewing the pop-culture phenomena “Gangnam Style”. Additionally, Korea’s Culture Minister reported that Korea saw an increase in tourism by 13.4%, crediting the Gangnam Style superstar PSY.
 
Foreign Investment
Aside from piquing consumer interest, Korea’s brand attracted billions in foreign direct investment (FDI). Last year, investments by US companies increased by 24.8% as they pursued partnerships and acquisitions in high-tech industries and tech start-ups. This is a result of Korea’s image as a home to high-tech innovations and tech giants like Samsung. In 2016, Bloomberg ranked the country as having the world's most innovative economy, embellishing Korea’s image for years to come.
 
Nation brands are more than just managing an image - the economic impact is unquestionable. In the case of South Korea, this means a competitive edge in exports, tourism, and FDI. However, as strong nation brands bring a variety of benefits, they require maintenance. Unmanaged nation brands are surface-level applications waiting to be smeared. When nurtured, they become powerful economic assets deeply rooted in a country’s identity.