Hong Kong may have run out of luck in terms of its economic performance.
But perhaps people of this city, a place that has never lost faith in capitalism for more than a century, should not succumb to such a sinking feeling.
As with anything else, the only thing that won’t change is change itself.
The economy can never go up forever, as it is always encumbered with periodical vicissitudes.
So panic or pessimism is by no means warranted.
The recent wave of closures and price markdowns seen in the retail sector, in particular among jewelry stores, is a case of belated adjustments after retailers lost their heads during years of burgeoning sales.
Firms can now, while the market is experiencing some reversion to the norm, streamline their operations and structure.
And, while the rent in Hong Kong’s prime shopping precincts is retreating from being among the world’s most expensive, small businesses are seeing a chance to enter the game.
Home prices are falling, as well, and the government has stated its cooling measures, greater production of flats and increasing land supply will remain.
While the retail sector may already be halfway through the tunnel, there’s no sign that the housing market will get over its downturn any time soon.
Hongkongers have for long taken it for given that home prices will only go up thanks to the authorities’ policy of high land premiums.
As a result of the ubiquitous wealth effect from rising home prices, consumption was also buoyant.
But now, with a reversal in expectations, there are fewer buyers as people postpone their investment in a home, yet supply remains robust.
Again, Hongkongers are being taught the lesson that, just as with any other commodities in a free economy, the prices of homes will rise and fall.
This article appeared in the Hong Kong Economic Journal on April 12.
Translation by Frank Chen
[Chinese version 中文版]
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