The Sino-US trade war has cast a cloud over the global economy, bringing many uncertainties. As an international trade and financial hub, Hong Kong is at the receiving end of some pressure, with the territory’s special status possibly used by the United States as a bargaining chip to pile pressure on Beijing. Amid this situation, how should we respond to the brewing crisis?
There is no doubt that the current Sino-US tensions will put the Hong Kong government’s vigilance and capacity for contingency planning to a severe test.
As David Lipton, the first deputy managing director of the International Monetary Fund (IMF), has warned earlier, storm clouds are gathering over the global economy.
If Beijing and Washington can resolve their differences and reach a solid trade agreement during their talks within the 90-day “truce” period, things would definitely take a turn for the better for the entire world.
However, if the talks between the two great powers end up in a stalemate, then chances are, the global economy could have a “fragmentation” and possibly head toward recession.
Let’s take a look at Hong Kong. After the city enjoyed a seven-year-high economic growth of 4.6 percent in the first quarter this year, the GDP growth fell into a downward trajectory, falling to 3.5 percent in the three months to June and 2.9 percent in the following quarter. Now, one can hardly be optimistic about the prospects for the final three months of the year.
If the economy takes a turn for the worse, it is likely that the 1.2 million people working in micro, small and medium-sized enterprises in Hong Kong will be the ones who will first bear the brunt.
With regard to the volume of initial public offerings (IPOs) in the stock market, Hong Kong has once again topped global rankings this year.
But, as KPMG has pointed out, given the volatility in the global stock market and the persistent trade frictions between China and the US, the IPO number in the city could fall by one-third next year.
So, in the face of the political and economic onslaughts mounted by the US, such as the US-China Economic and Security Review Commission report that suggested a review of Hong Kong’s status as a separate customs area from China, how should Hong Kong respond?
In my opinion, the Hong Kong government must first of all firmly reiterate the “one country, two systems” principle, i.e. defending our free market economy on one hand, while preventing some people with hidden agendas from taking advantage of the space allowed under “two systems” to affect “one country”.
In the meantime, when it comes to responding to incidents that are intended for this sinister purpose, the government should stop pulling standard answers or clichés and instead, take decisive actions to handle the crises and “put out fire”.
The “passport saga” surrounding Huawei executive Sabrina Meng Wanzhou makes for a classic example of how one should deal with controversial allegations swiftly and decisively.
Second, I hope the government, in its budget, can come up with risk projections and propose measures to “stockpile supplies” accordingly amid the ongoing global market volatility.
Also, the government should provide support for the local business sector in the form of financial and tax allowances according to the magnitude of the economic risks.
In particular, the administration should take extra care of micro, small and medium enterprises, which mostly lack the ability to respond effectively to emergency situations, so as to stabilize society and protect jobs.
Third, amid the ongoing “G2” rivalry, the Hong Kong government should consolidate its economic foundation, while also coming up with more pro-active initiatives to help the business sector explore new markets.
By putting our eggs in different baskets, we can alleviate the impact of the Sino-US trade war, strengthen our economy and facilitate long-term profits for our local businesses.
The most convenient and handy way for us to do so is to tap into the huge business opportunities of the Guangdong-Hong Kong-Macao Greater Bay Area.
But we should remember that business opportunities will remain visions only unless the government takes solid and tangible actions immediately and starts coordinating and planning ahead along with the local business community.
This article appeared in the Hong Kong Economic Journal on Dec 13
Translation by Alan Lee
[Chinese version 中文版]
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