Hong Kong’s Economy Set to Contract in Fourth Quarter, Chan Says
(Bloomberg) -- Hong Kong’s economy is set to contract in the fourth quarter as the city reels from six months of violent social unrest, the financial chief said Sunday.
“Based on the situation of these few months, it is inevitable that negative growth will continue,” Financial Secretary Paul Chan said in a blog post. “This means the government will be less flexible in using financial resources under an economic recession.”
The increasingly violent pro-democracy protests have undermined Hong Kong’s economy, discouraging tourists from visiting and slashing retail sales. Although this weekend’s gatherings were relatively muted, a mass rally approved by authorities is scheduled for Jan. 1.
Wednesday’s gathering is being organized by the Civil Human Rights Front, which has held some of the biggest rallies since unrest began. Smaller protests this weekend targeted a mall frequented by mainland Chinese shoppers and led to clashes with police.
The number of mainland visitors, who comprise the biggest group of tourists in the city, has plunged by almost half during the unrest, while retail revenue has dropped by about a quarter.
Chan said his budget speech to be delivered in February will focus on supporting business, safeguarding employment, reviving the economy and relieving social distress as the city also faces international turbulence such as protectionism and geopolitics. The “core competitiveness” of Hong Kong’s financial market including the banking and securities system, the dollar peg and free flow of capital remain robust and orderly, Chan said.
Visitor arrivals from China fell a record 46% in October to slightly more than 2.5 million, less than half of the record set in January. The most recent data for retail sales in Hong Kong, once a mecca for shoppers, showed a 24.3% plunge, the biggest ever.
In a separate statement, Hong Kong’s Chief Secretary Matthew Cheung said the city’s institutional strengths such as the rule of law, clean government and a level playing field for businesses have remained strong and intact. The government will broaden its channels of communications with the public, listening and responding more to people’s views and concerns in the coming year, he said.
The city is establishing an independent review committee comprising experts and community leaders to look into the causes and full circumstances of the social unrest, examining deep-seated issues including unaffordable housing and the wealth gap, Cheung said.
The government has launched four rounds of relief measures since August, which will not solve the economic problems but could help businesses and Hong Kong people “stay afloat while we strive to heal our divided community and battered economy,” Cheung said.
“The year 2019 has been a year of unremitting shocks and turbulence to our community and our economy,“ Cheung said. “The past six months have been tough for us, but we will soldier on.”
The government forecasts an annual economic contraction of 1.3% for 2019. The unemployment rate rose to 3.2% in November, the highest level since July 2017. During the protests, more than 2,600 people have been injured, including more than 500 police officers, Cheung said.
Multiple rail stations were vandalized, and almost 21,000 square meters (226,042 square feet) of paving blocks from walkways were ripped up and used to attack police officers, he said. More than 52,000 meters (170,604 feet) of street-side railing were removed and 740 sets of traffic lights were destroyed.
While the social unrest has taken its toll on the economy, the divide between the government and activists is growing. The protesters initially demanded the withdrawal of a proposed extradition law that would have allowed fugitives to be sent to China to stand trial. By the time the bill was pulled months later, the demands had expanded to include more democracy and direct elections for the city’s leader.
The perceived threat to Hong Kong’s autonomy from China’s expanding influence in the former British colony that was returned in 1997 has been central to the protests. Those fears were fanned further this week with the release of a video showing Chinese troops based in the city carrying out sea and air patrols in the waters of Hong Kong.
The protesters have also shifted their focus to Beijing-friendly businesses, a lot of which have been vandalized and disrupted by demonstrators. Police said officers arrested 20 people on Saturday in the Sheung Shui district where about 150 people protested at a shopping mall near the Chinese border. The protesters targeted mainland shoppers, whom locals blame for buying up goods to resell in China, driving up prices and leading to shortages.
On Sunday, a couple of hundred people gathered in Edinburgh Place, a square in the city center, for a “Pray for Hong Kong” rally. Buddhist monks led chanting and prayers for calm to return to society and the demonstrations remained peaceful.
Lawmakers and government officials have so far been unable to satisfy the demands of protesters or to arrest the growth in the movement’s popularity. Last month, pro-government candidates were roundly defeated in district council elections, with almost 90% of seats going to pro-democracy candidates.
Regina Ip, a member of Hong Kong Chief Executive Carrie Lam’s top advisory body, said in an interview with Cable TV Sunday that some members of the Executive Council had offered to resign if it would help calm protesters down. Lam turned down the offer, saying the members were “on the periphery” of roles that would need to take responsibility. Ip didn’t say when the council members had made the offer.
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