Midst of a Crisis
An Economic Success Story…with a Caveat
Wider Issues
Wider Issues
In an August 7th meeting with the media at the ninth meeting of the Financial Leaders Forum, Financial Secretary Paul Chan in answering a reporter’s question said, “Our [Hong Kong’s] second quarter economic data indicates that, on a quarter-to-quarter basis, the GDP has decelerated in the second quarter, and in fact has come down to negative 0.3 per cent. The economic situation, both externally and domestically was challenging in July. Domestically we are still struggling with our own social issues and externally there are increasing external uncertainties caused by escalating US-China trade conflict as well as other geo-political situations. For the third quarter of this year, if we were to have a negative growth again, then we would be technically in recession…”
Of course, the economics of Hong Kong are tied to the much wider issues facing the community. With recent protests closing the Hong Kong airport, Lam in an interview in the South China Morning Post said, “From what happened in the past week, I am afraid that Hong Kong’s reputation, as a safe society that respects the rule of law, will be in a very dangerous [situation],” she said. “Hong Kong, as an open, free, inclusive, and economically stable city, will also suffer from all kinds of problems.”
The “reputation” of the City could be collateral damage in the overall wrestling match between the protesters and PRC interests. Hong Kong ranked 1st in the Heritage Foundation’s annual “economic freedom score” with a 90.2 tally. On the other hand, China ranked 100th with a 58.4 score just behind Namibia and ahead of Papua New Guinea. If Hong Kong was to become more like any other Chinese city, it is highly likely the ranking would correspondingly fall. Some cracks have already appeared in the distinctiveness of Hong Kong as the City’s ranking in World Press Freedom Index has fallen from 18th in 2002 to 73rd. China is 177th out of 180 nations.
A recent update on the Hong Kong situation from SVA (Steve Vickers Associates), a Hong Kong based company specializing in risk mitigation, corporate intelligence and risk consulting, pointed out that it was unlikely that the PRC would allow the protest to continue past the “70th anniversary celebrations on 1 October 2019. This date may be a “drop dead” deadline.”
How, and indeed when the protests will end is an open question at this writing.
Hong Kong has had to reinvent itself many times and weathered many storms from the initial handover in 1997 and the Asian Financial Crisis in 1998 and the Great Recession in 2009. But the current crisis is a great deal more about how the community measures itself – an existential crisis - than one of any economic event.
It all begs the very large question of what will be the post-crisis new normal in Hong Kong, as the space between a rock and hard place can become suffocatingly narrow.
