Dr Jonathan CHOI Koon-shum (Chairman of the 51st terms of office) August 2020
In this difficult time, solidarity within society is of utmost importance. We must all stay alert and prepared, and flexibly adjust our strategies according to the environment, with the ultimate goal of relaunching the Hong Kong economy as quickly as possible.
The Hong Kong economy is confronted by rising pressure from the recent spike in local COVID-19 cases, and the change in US policy toward Hong Kong. We hope the HKSAR government will help businesses ride out the challenges by keeping the business sector abreast of the latest developments and providing further support for businesses when necessary.
Enduring the short-term impact of the COVID-19 outbreak
Since last month, Hong Kong has been battling a third wave of COVID-19 cases. The tightened preventive measures implemented by the HKSAR government have inevitably impacted businesses. Nevertheless, we believe that concerted effort within the community will help Hong Kong out of the predicament eventually. We hope the government will enhance Hong Kong’s COVID-19 testing capacity. In fact, we support its plan to directly procure testing services from private laboratories in the Mainland, which can help to increase Hong Kong’s disease prevention capability in the future should the result this time proves satisfactory.
Another urgent matter to review is the clearance procedures at the boundary control points between the Mainland and Hong Kong. We believe that once the COVID-19 situation improves, the authorities should launch the system of mutual recognition of “health codes” as soon as possible so that people who need to cross the border because of work and family lives can be exempted from compulsory quarantine. In the long run, the HKSAR government should liaise with the authorities of Guangdong and Macao to provide quarantine exemption measures to facilitate economic and social interaction among the three places.
Adapting to changing US-Hong Kong relations
Following the gazettal and implementation of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (the National Security Law), the US congress passed the Hong Kong Autonomy Act and suspended preferential treatment to Hong Kong. Given the two economies’ close trade relations and the US’s huge business interest in Hong Kong, we believe that the Act will hurt not only the interests of Hong Kong, but also the US’s interests in the city.
Since Hong Kong’s exports to the US are limited, the US’s imposition of the same tariff on Hong Kong and the Mainland will have limited impact on Hong Kong’s trade. Despite the US’s move to end exports of defense and dual-use technologies to Hong Kong, the city can procure the related equipment and technologies elsewhere. By the look of statistics, a change in US-Hong Kong relations may have a more serious impact on the US: over 1,300 US companies, including major financial corporations and insurance companies, are currently operating in Hong Kong; and in 2019 the US had a trade surplus of USD26.1 billion over Hong Kong, the single economy with which the US has the highest trade surplus.
At present, the HKSAR government is examining World Trade Organization regulations regarding the US’s sanctions and restrictions and possible actions it can take. We believe this will secure Hong Kong’s international status, and business and legal reputation. At the same time, we hope the US government will reassess its policies toward Hong Kong and strive to maintain the close US-Hong Kong trade ties.
Capitalizing on the opportunities in the new landscape
Suffering both internal and external challenges, the Hong Kong economy contracted 9.1% and 9% year on year respectively in the first and second quarter of this year, the biggest decline in record. The unemployment rate climbed up to 6.2% between April and June, whereas tourism and retail have been on a downward trend for several consecutive months. We hope the authorities will plan ahead to help Hong Kong bounce back while supporting businesses to cope with the imminent challenges in the meantime.
In the light of the launch of a cross-boundary wealth management connect pilot scheme (“Wealth Management Connect”) announced by the Mainland authorities, it is recommended that the HKSAR government join the scheme as soon as possible. In addition, riding on the active support from the Mainland for Hong Kong to forge a global green finance hub in the Guangdong-Hong Kong-Macao Bay Area, we suggest that the HKSAR government enhance the accreditation standards of green financial products to ensure Hong Kong will have a sufficient supply of green finance talents.
Innovation and technology is going to be another key driver of Hong Kong’s economic growth. The authorities should invest further resources in this area and increase the government’s share in the “Innovation and Technology Fund” which operates on a dollar-for-dollar matching basis, as well as raise the tax exemption threshold for research and development projects by SMEs so as to attract more companies to set up in Hong Kong.
The road to economic recovery is fraught with challenges. In this difficult time, solidarity within society is of utmost importance. We must all stay alert and prepared, and flexibly adjust our strategies according to the environment, with the ultimate goal of relaunching the Hong Kong economy as quickly as possible.