As you say, the chinee can't afford to mess with HK too harshly for financial reasons if nothing else, but on the other hand they can't afford to be seen to give in to protestors' demands, that could open the door to a billion fúcking rioters.
Rock and a hard place, innit.
My guess is that it won't end well.
Have you read the British embassy reports from Tianenman Square?