I suspect that Beijing isn't too happy with events in HK but as long as they don't spread to the rest of the country there is some mileage in letting things run - it shows people that a capitalist society isn't all roses, it means business will bypass HK and go direct to China proper and there is nothing like the threat of anarchy to eventually bring about a severe, local reaction.
Mr Xi meanwhile doesn't get branded as an oppressor or butcher but as a (fairly ) reasonable man allowing "devolved govt" run things - badly admittedly.