Economy
“It’s the economy, stupid” was the slogan devised by political consultant James Carville in 1992. A framed sign with these words hung on the wall of Bill Clinton’s presidential campaign office. Its purpose was to remind staffers – and indeed the candidate himself—to stay on message. It worked. Clinton defeated the elder Bush’s bid for re-election despite the latter having had approval ratings of over 90 per cent immediately after the Gulf War.
All ministers in the Hong Kong administration would do well to put the sign up on their walls too. They each have plans to improve the different aspects of life in our city for which they are responsible. Chief executive John Lee Ka-chiu spelled out the main points in his recent policy address for housing, infrastructure, education, health care, investment in industry etc. They are all different but they all have one thing in common: they need money. If the economy is healthy, public finances will tend to be healthy too. Only a growing economy will generate the revenues needed to pay for the things we want to do.
Hong Kong’s economy was already in recession when Lee took office and the third quarter GDP figures – negative 4.5 per cent – show a further deterioration. How do we turn things around? We have to be realistic and accept there are some things we can’t control and focus on those we can. The war in Ukraine, the spike in oil prices, decisions on US interest rates, all these things happen above our heads. Like everyone else, we just have to live with them. Communities everywhere were caught out by the Covid pandemic, but how well governments responded differed, and how well economies are coping now, these things we can control.
The next step is to recognise who and what we are. In case anyone had forgotten, president Xi Jinping spelt it out for us during his visit in July and the message was repeated in last week’s Investment Summit: we are the natural jumping off point for foreign businesses wishing to engage with China and the launchpad for mainland companies wishing to go global. In short, the “super connector” -- one of the slogans deployed last week.
To connect the mainland with the rest of the world, we must be open to both. Beijing makes policy for entry to the mainland so we have to live with whatever the Central People’s Government decides, though we have the same right to lobby as cities and provinces in the rest of China. But we are in control of our international borders, so that is where we should start.
We have to open up to the rest of the world as a matter of urgency. That will mean dropping virtually all the current Covid-related restrictions, in testing, checking and masking. Our present regime in these matters is a deterrent to visiting Hong Kong whether for business or pleasure. The government has indicated the direction of travel, but what concerns me is the indicative speed. We are a long way behind the curve and moving far too slowly.
At present all incomers require a negative test before boarding a plane, and 11 further tests in the first week after arrival. None of our competitors in the region do any of this. The rest of the world has moved on. How about cutting back to a single PCR test on arrival, then eliminating even that after a month. Registering our entry to various premises, and repeatedly proving our vaccination status, is tiresome for residents and a turn-off for visitors. The justification for the system was to drive up vaccination rates until we achieved herd immunity. In mid-2021 we were being told the magic figure was 70 per cent, but the goalposts have been repeatedly moved. We are now at 90 per cent but with no end in sight. Is it any wonder depression is now a major health problem particularly among the youth.
Finally there is the issue of masking. Many people in Asia are happy to wear a mask for part of the day, for example on public transport in peak hours, though patience is wearing thin after three years. Many westerners are not prepared to mask up at all but there is some voluntary masking on public transport even in countries that have dropped other restrictions. There is no justification for the outdoor mask mandate on health grounds. There must be a happy medium here. Ultimately it is up to us: do we want to be a super connector or not.
Public finances everywhere have taken a huge hit from the pandemic because of the slowdown in economies and the need to spend large sums on vaccines, PPE and relief measures. Hong Kong has not bucked this trend, but in one aspect at least we are exceptional. Where USA, UK and other places have extensive accumulated debts and must now try to borrow more to cover deficits, we are in the happy position of having built up extensive reserves through decades of prudent budgeting. Even though the deficit for this financial year now looks more likely to exceed $100 billion instead of the original estimate of $53 billion, there is no need to panic, we can still cope without leaving behind huge debts to be paid by off by future generations.
People pay tax when they make an income, or a profit, or undertake a transaction subject to stamp duty. Volume matters in all these things. The more lively the economy, the more activities, the more tax collected. Sometimes there are so many “priorities” for a government to undertake, ministers feel swamped. But thanks to James Carville the focus is clear: the writing is (literally) on the wall.