Serving Hong Kong`s Economic Life

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Transcript Serving Hong Kong`s Economic Life

Serving Hong Kong’s Economic Life
Prof. Stephen Cheung
Dean, School of Business
Hong Kong Baptist University
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Content
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Background
Current economic situation
Socio economics challenges
Implications on public finance
Regional economic cooperation
Background
Hong Kong has survived two major
international financial crises in just one
decade:
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Asian Financial Crisis (1997-1999)
Global Financial Tsunami (2007-2009)
Background
1. Proof of resilience of the Hong Kong
economy?
or
2. Call for more immediate repositioning to
adapt to the new challenges for HK?
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Current Economic Situation
The economy has somehow recovered…
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•
In 2009, GDP increased by 8.0% in 1st Quarter & 6.5%
in 2nd Quarter. Annual growth rate: 7.2%.
•
Unemployment has dropped to 4.2% (lowest since Jan
2009.)
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Chief Executive expects 2010 growth by 5-6% (Policy
Address)
Socio-economic Challenges
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High income inequality sustained (Gini coefficient - 0.43 in
2009). UN reports: No. 1 unequal city in Asia (2008) & among
developed economies worldwide (2009) (2nd: Singapore; 3rd:
USA)
Asset-bubble built up again (property prices restored to pre-97
level in some popular estates)
Inflation: imported (RMB revaluation) + ‘peg’ to depreciating
US Dollar
Competition from first and the rapidly growing 2nd-tier cities in
the Mainland
Income Gap
UNDP Human Development Report 2009
7
HDI Rank
Country
25.8
15
Spain
34.7
35.2
16
Denmark
24.7
Iceland
..
17
Belgium
33
4
Canada
32.6
18
Italy
36
5
Ireland
34.3
19
Liechtenstein
..
6
Netherlands
30.9
20
New Zealand
36.2
7
Sweden
21
United Kingdom
8
France
32.7
22
Germany
28.3
9
Switzerland
33.7
23
Singapore
42.5
24
Hong Kong, China (SAR)
43.4
25
Greece
34.3
26
Korea (Republic of)
31.6
27
Israel
39.2
HDI Rank
Country
1992-2007
1
Norway
2
Australia
3
25
10
Japan
24.9
11
Luxembourg
30.8
12
Finland
26.9
13
United States
40.8
14
Austria
29.1
1992-2007
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Income Gap
Median household income
$18,500
$18,000
$18,000
$18,000
$17,500
$17,000
$16,500
$16,000
$16,000
$15,500
$15,000
1998
8
2003
2008
Income Gap
No. 1: Hong Kong, Top 11 Countries With the
Biggest Gaps Between Rich and Poor (UNDP)
Gini score: 43.4
Share of income or expenditure (%)
Poorest 10%: 2.0
Richest 10%: 34.9
Ratio of income or expenditure, share of top 10%
to lowest 10% : about 18 times
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Income Gap
“Renowned for its high concentration of RollsRoyces, expensive real estate, and posh shops,
the Chinese special administrative region has
plenty of rich who enjoy showing off their wealth.
However, Hong Kong also has one of the largest
public housing sectors in the world, with about
half the population living in governmentsupported or -subsidized housing estates. The
city has no minimum wage - except for domestic
helpers from the Philippines, Indonesia, and
other countries. ”
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Business Week, October 16, 2009
Number of Chinese newspaper articles with these key words
Year
Disparity between the rich and the
poor 貧富懸殊
Housing prices 樓價
2001
2002
2003
2004
2005
2006
2007
2008
2009
10/2010
1546
1360
1127
2002
3042
3186
4567
3087
2908
5587
18091
20329
19764
23320
23979
21914
30409
36965
36620
42288
Income Gap
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Deep and increasing social tensions dividing HK
society
Cross-sector and inter-class conflict hampers the
overall economic vitality
Governance hindered: difficult to introduce much
needed policies
=>Are we still as efficient, adaptive and resilient as
we have used to be??
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Income Gap
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Developed economies: high percentage of
service-sector, finance & capital market and
technology/high value-adding industries.
Wealth accumulation easier IF one has
knowledge and/or capital
Recent asset-bubbles amplify the situation
(property prices surging; restored to pre-1997
level in some areas)
Income Gap
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This also implies: without capital, assets or
sophisticated knowledge, wealth creation is very
unlikely
Unlike industrial/fast-growing period: easier
promotion, pay-rise, job-change
Income gap and social inequality widened
Income Gap
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Non-professional / low-skilled migrant
communities: most obvious
Inter-generation poverty: knowledge and capital
gaps between children of the rich and the poor
households are increasingly broadened
Number of Chinese newspaper articles with these key words
Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
10/2010
828
834
1253
1305
943
698
1123
1535
1497
1463
1
1
0
10
34
6
7
18
11
619
Hatred toward the rich 仇富
9
91
517
512
578
759
738
666
965
1999
Inflated buildings 發水樓
1
0
0
1
2
5
32
56
312
921
Profiteers 奸商
Hatred toward the business sector
仇商
‘Hatred toward the Rich / Business’?
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Yes, rising public skepticism, grievances and even
confrontation against a few tycoons, business groups
and sectors, particularly developers
‘Hate Rich’ is NOT in HK’s culture and mindset; decades
of pro-business and ‘get-rich’ ethics developed
Global Giants (e.g. Bill Gates and Warren Buffet) are
respected not only for wealth and power, but more for
their corporate social responsibilities and personal
philanthropy
‘Hatred toward the Rich / Business’?
Real problems:
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‘oligopoly’ by some developers & ‘giant’ groups
Taking huge profits, appears to be an obstacle
to improve social justice, e.g. minimum wage,
anti-trust, effective privacy protection, antidiscrimination etc.
‘Hatred toward the Rich / Business’?
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Asymmetrical power over consumers and
even government: manipulation of market
price
Changing HK values: highly developed, HK
people (esp. new generations) pursue goals
of social justice, fair-play, consumer-rights,
market transparency etc. as in other
advanced societies
Number of Chinese newspaper articles with these key words
Year
Social enterprises 社會企業
Wealth comes before virtue
發財立品
Corporate social responsibility
企業社會責任
2001
2002
2003
2004
2005
2006
2007
2008
2009
10/2010
163
173
164
255
348
611
2367
2090
1935
1750
59
66
56
88
97
113
169
110
98
187
35
98
205
622
1118
2512
4426
6751
4963
4347
Corporate Social Responsibilities
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Business has a role to play in building a
harmonious society
These are joint or shared responsibilities of the
government & business in any developed
societies
Only responsible to the shareholders could be
an excuse
Tri-partite relation among NGOs, Govt, and
business sector
Consequences: Social Tensions
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Income inequality + occasional economic
setbacks  social tensions and discontents
Problems severed with recent inflation and
asset-bubble. Simple livelihood needs for grassroots, youngsters and even lower-middle class
become tougher
Recent asset bubbles and the forthcoming
inflation
Policy Address
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The Government is making efforts to address the most pressing
socio-economic issues within the current budgetary
resources:
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Right direction, new thinking - practical livelihood needs of
majority of the population & long-term needs of the
economy better define the Government’s economic
principle
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Home Owners’ Scheme remain controversial, with HK
public split in vested interests, but measures and
innovation are still needed, e.g. ‘My Home Scheme’ and
‘Community Care Fund’, etc
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More human-oriented, less social tension
Policy Implications
Immediate actions needed to resolve social
tensions
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Re-assert the Government’s primary economic
roles as ‘provider’, ‘facilitator’ and ‘regulator' to
ensure a fair and open level-playing field exists
Deal with ‘working poor’/wide income inequality
Care for the underprivileged groups
Implications on Public Finance
Roles of the Government
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‘Laissez-faire’ / ‘non-intervention’
Market leads and government facilitates
Big market and Small Government
Number of Chinese newspaper articles with these key words
Year
International Finance Centre
國際金融中心
Offshore Financial Centre for RMB
離岸人民幣中心
2001
2002
2003
2004
2005
2006
2007
2008
2009
10/2010
3240
4393
6508
8132
9682
10600
12865
13401
21068
12580
0
115
1183
296
158
84
186
335
468
1235
Marginalization 邊緣化
1052
2458
3329
4440
7371
10943
8654
7644
8863
9382
From Competition to Collaboration
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Hong Kong can work in collaboration with other
financial centres of China and leverage our
respective strengths
Specifically, with our highly open and
internationalized market, a well developed and
highly governed regulatory regime as well as the rule
of law, HK is set to enjoy a comparative advantage to
attract international talent, capital, financial
products and services
Hong Kong can also be a testing ground for the
internationalization of the RMB, and to become a
market offering a broad range of RMB products and
services
From Isolation to Engagement
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Hong Kong can engage other financial centres in the
Mainland by encouraging more exchange of financial
products, capital and talent
As the bridge head for Mainland enterprises, Hong Kong
can serve as the preferred capital raising centre outside
the Mainland, providing equity listing, bond issuance and
international asset management services
Hong Kong can engage the other financial centres of the
Mainland in the areas of financial market infrastructure,
information sharing, and regulatory co-operation to
enhance the financial security of cross-border capital
flows
Zero-sum game or Win win situation
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The development of Shanghai as a financial
centre in the Mainland is a reality
Hong Kong stands to gain with the
competitive advantages that we have built so
far
Hong Kong Government needs to re-steer its
role differently to pave the way for HK to
sustain its role as a international financial
centre as China continues to mature and
other of its mainland financial centres
continue to develop
End
Thank You!
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