How to guard against the looming 'economic typhoon'

September 02, 2019 18:54
Given the Sino-US trade war and the social unrest in the city, Hong Kong’s policymakers need to come up with ways to limit the economic damage. Photo: HKEJ

Financial Secretary Paul Chan Mo-po warned recently that the worsening external situation and the ongoing social unrest in the city threatens to land an "economic typhoon" on Hong Kong.

In a post on his official blog, Chan urged businesses and industries to adopt “protective measures” against the upcoming storm.

As we all know, even before the current protests, Hong Kong had been facing an economic challenge and a potential calamity as a result of the Sino-US trade war.

Unfortunately, as a small and externally oriented economy, all Hong Kong can do is to remain on the sidelines and watch as the two largest economies in the world take on each other. There is not much the city can do to avoid being caught in the Washington-Beijing crossfire.

Given the circumstances, what should be the course of action for Hong Kong authorities?

Well, I would say that the focus should be on avoiding decision-making mistakes on the part of local policymakers, so as to ensure that the economic problems don't go from bad to worse.

Ever since both Hong Kong and Beijing governments have toughened their stance on the anti-extradition bill movement, it has become apparent that US President Donald Trump has knowingly or unknowingly tried to seize on the issue and drag Hong Kong into the trade war.

On numerous occasions, the White House and Congress have both claimed that they would need to review Hong Kong’s status as a separate customs area given the unfolding developments in relation to the city.

In other words, the United States is now threatening China that it may revoke Hong Kong’s special economic status.

If, in the worst-case scenario, Washington does indeed repeal Hong Kong’s special economic status and the international community considers the place as just another Chinese city, Hong Kong's role as an international financial, trading and logistic hub would vanish overnight.

It is because we must understand the fact that Hong Kong’s special economic status isn’t determined by any “Five-Year Plan” devised by the central authorities, but instead, by the recognition of the governments around the world, multinational businesses and global investors.

As such, once the US, which still remains the global economic powerhouse, has decided that Hong Kong is no longer the same international city it used to be, the city will be doomed no matter how omnipotent and almighty Beijing might be.

As Hong Kong has remained China’s gateway to the rest of the world when it comes to inbound and outbound capital flow over the years, once the city can no longer fulfill this role, the mainland economy will suffer a lot as well.

So what exactly can we do to prevent Hong Kong from getting discarded by the international community?

In my opinion, the most crucial thing we must do is to prevent our economic activities from getting mixed up with politics in any way.

It is a pity that it now seems that Hong Kong’s economic activities are headed towards exactly the opposite direction, and are becoming increasingly politicized, which is a very worrisome trend.

For example, Cathay Pacific Airways recently sacked some cabin crew employees due to pressure from mainland authorities to crack down on staff who were supportive of the Hong Kong protests.

Their dismissals have provoked a widespread backlash in society, with the airline company accused of unleashing “white terror” on employees.

In other developments in Hong Kong, the police have been stepping up the use of force against anti-extradition bill protesters in recent weeks.

If the violence continues, it will just be a matter of time before someone could lose a life. If such a tragedy takes place, the international community is likely to respond by imposing economic sanctions on both the mainland and Hong Kong, which will spell doom for the local economy.

Given the situation, I strongly urge the Hong Kong government to stop engaging in a public opinion war or incite ill-feelings among citizens toward each other for narrow political ends.

Also, there must be an end to the situation where the public and the police find themselves on opposite sides, squaring off against each other

What we, instead, need are concrete political measures to de-escalate the conflicts in society.

This article appeared in the Hong Kong Economic Journal on Aug 28

Translation by Alan Lee

[Chinese version 中文版]

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HKEJ contributor