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Some Points of Mine Concerning Hong Kong's Economy 

(Apr 2003)

 I attempt to strategically analyze and foresee Hong Kong’s economy in this short essay. 

Brief Retrospect

 Yesterday’s glamour of Hong Kong economy largely attributed to the proactive policies exercised by the colonial British government. Laisse faire, Hong Kong was able to capture development opportunities in sectors of finance, light manufacturing and logistics, left by the economic powerhouse Japan in its own pursuit of capital-intensive industries in the 70s of last century. With local resident’s inherent character of being industrious, hard working and tenacious, Hong Kong soon achieved double-digit growth and became a regional hub of finance and logistics. Yet this legacy gradually vanished away with the looming fear of Turnover around 1997. Property prices went irrationally high and financial markets were exuberant, without regarding the bubbles over there. This resulted in the unprecedented sliding of our economy and I see no hope that Hong Kong would recover its historic success.

Current Crisis

 Unlike British government, the SAR one has actively sought its slave-like role under Beijing’s preference. As a result, we have no longer a free, small and tidy government. Large expenditure in infrastructure and property provision in some sense helped Hong Kong attract overseas capital and sooth public poverty, yet the potential cost of the resultant budget loophole, as evidenced now, far exceeds the economic benefits that the extravagant government has brought. Big tycoons and entrepreneurs have got larger and more important says in the regional government and even the central one in Beijing, equipped with powerful fangs to influence fiscal policies to get their own sweeties. Some obvious and disgusting examples are the strong support to build a huge bridge from Lantau to Macau and northwestern Canton by Superman Lee and the also strong opposition to a proposal to open direct flight from Taiwan to the Mainland, in fear that the cake leaving for local airlines will be rapidly diminishing.

 Our economy should not be directed in the interest of the very few tycoons, regardless of how much tax they pay, though.

 I see SAR government’s incompetence as to follow Japan’s stupid idea to build infrastructure to nowhere, witnessed by the failure of Cyberport and money-losing MTR.

 I see its incompetence in artificially pushing up the property and stock market with the belief that they are the backbones of economic recovery. Market index is only an indicator of economy shape, rather than the propeller, whose role should rather fall upon real investment and demand. Our property boomed to an economically unsustainable and irrational height around 1997, and that level must be lowered to normal one. During the painful adjustment period, there must be those who suffered, eating their own fruits of speculating the property market greedily instead of investing rationally around the ’97 peak. Our investors are largely crazy and hot-minded, as we see in the mad queuing for Tom.com shares. Government should rectify the investment mood or direction rather than directly intervening the market like clumsy. 

I see the government incompetence as to sustain the current peg and resist issuing debt. Suffering from the famous “impossible trinities”, Hong Kong has no monetary policy and due to the fact that its GDP is dominated by overseas trading, the current globally weak demand cannot support local economy and fiscal reserves therefore, peg is deemed no longer appropriate for the HK dollar. Of course, the shrinking exchange fund and budge deficit could be solved by issuing long-term government bond at any cost (so that bond price could be serving as a convenient indicator of confidence in the government). Why not? 

I see the government’s incompetence in dumping its money in low yielding project and in the mean time, putting money out of its mouth (Miller Merton argued it should put money exactly in its mouth to win public trust) and lose the important trust, further negating the potential effect of introducing sovereign monetary policy in the aftermath of delinking.

 Above all, the SAR is doing nothing as a proactive economic propeller and doing everything to render itself a target to attack by public.

 Current Edges

 Economists and socialists argue that we still hold systematic advantages in legal systems, tax systems and freeness of corruptions. But the former two are under threat posed by the looming legislation of Article 23 in the Basic Law and the introduced tax policy that already sparked prevalent resentment.

 I deem however, our edges lie in the internationalism (openness), free economy and our currency, which deserve to be preserved and enhanced.

 Compared to our bloody competitor, Mainland China, we have large proportion of foreign permanent citizens with their fundamental interests over here, rendering us an already ideal appeal to overseas investors. No. 2, our businesses are not subject to the government and the later could at most influence their decisions instead of make decisions on their behalf, a fact ubiquitous in the state-government-dominating hinterland economy. Lastly and most importantly, HK dollar is readily exchangeable and the transaction is seen to be highly liquid with large volumes, while RMB is still struggling to win some unimportant licenses to be exchanged with severe restrictions northward. 

Overhauled Roles to Play

 The phantom of Turnover has passed more than six years already but Hong Kong people are still groping for new directions to be taken to boost and revitalize its economy, which is a serious disappointment and shame. The paramount role of HK should lie in promoting its international appeal and stabilize its currency as a key factor in international interactions, in turn a key contributor to our GDP. Tourism and logistics thus play far more important roles than any other. Government officials, do not let PRD cooperation, whose prospects are largely vague due to Canton’s reluctance, shift your vision from the most important task: promote internationalism glamour! IT IS BLOODILY COSTLY TO WIN MAINLANDERS WHILE LOSE THE WHOLE OUTSIDE WORLD!!! I strongly oppose to the unilaterally active seeking for the so-called “win-win” cooperation without regarding how much mainlanders could get from sharing the cake.

 With the British legacy passing away, Hong Kong is now facing an overhauled mission to develop itself as a freest economy and financial center, helping flowing capitals and goods into and out of its hinterland of China. It should no longer follow the unwise strategy to compete against (or the so-called “cooperate with”) Canton to get a small and unessential share of manufacturing base and employ high costly labors to build upon. 

We’ve come to a crucial point of time to re-prioritize our economic mission otherwise Hong Kong will never be revitalized.