The "umbrella revolution" is starting to weigh on Hong Kong's domestic economy as protests escalate but the real concern is over the city's status as an international financial hub.

Transport has been disrupted, banks have shut and business trips have been cancelled in a region of seven million people with an economy as big as Chile, Egypt or the Philippines.

If the protests continue, "tourism and retail, which together account for around 10 percent of the territory's GDP (gross domestic product) would be badly affected," said Gareth Leather from the Capital Economics research firm in London.

Leather warned Hong Kong could "easily be pushed into recession" as its economy contracted last quarter and the formal definition of recession is two consecutive quarters of contraction.

There is more concern, however, on the reputational damage for Hong Kong and the fallout for a stable capitalist system vital to the local economy as well as surrounding regions of China.

Hundreds of billions of dollars (euros) flow through the city's foreign exchange, commodity and inter-bank markets every day.

The stock market lists heavyweights including banking giant HSBC, telecoms titan China Mobile and energy behemoth PetroChina.

The Hong Kong stock market is considered the third most efficient after New York and London in a rating by the Z/Yen research centre in London based on professional opinions.

- Singapore to benefit? -

The city's status as a financial hub was built up in the second half of the 20th century by its residents -- a mixture of Hong Kong locals, Chinese people fleeing the Communists coming to power in 1949, the British and other Westerners.

"As it had been during the centuries of British colonial rule until the colony was ceded to China in 1997, Hong Kong has been a peaceful place and one that through the last century has thrived," said Howard Wheeldon, an independent analyst.

Wheeldon said there had been tensions between different parts of the population over the years but these had never imperilled the city's image of stability as a crossroads between American, Soviet and Chinese power during the Cold War.

The colony's handover to China 17 years ago did not break the equilibrium for investors, despite regular tensions between the pro-democracy camp and Chinese officialdom.

Ivan Tselichtchev, an economy professor at Niigata University of Management and a specialist on the region, said Hong Kong's status was not at risk because China could step in hard.

"The Chinese government and Hong Kong authorities currently have enough power and resources to prevent a substantial unrest and will undoubtedly use them once the demonstrations go beyond a certain limit," he said.

But he said the protests do "elevate the level of political risk stemming from the 'one country, two systems' formula" -- at the heart of the handover agreement between the Chinese and British authorities which enshrined a capitalist system for Hong Kong for 50 years until 2047.

Everything depends on how the authorities handle the protests and Beijing is fully aware of the impact for the economy of Hong Kong and of China as a whole of any violent crackdown.

"The Hong Kong government is unlikely to tolerate the main business district being occupied by protesters indefinitely and at some point could authorise the police to use force to clear the streets," Leather said.

"It is even possible that the Chinese government could call upon the army to disperse the demonstrators," he said.

"Such a scenario would deal a blow to Hong Kong's status as an international financial centre, which depends on rule of law, a stable system of governance and being a safe and pleasant place to live."

For investors, the business beneficiaries in a worst-case scenario would be the city state of Singapore -- and to a lesser extent the growing Chinese economic hubs of Shenzhen and Shanghai.