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Hong Kong Commissioner for Economic and Trade Affairs, USA, Donald Tong, today (April 13, Washington time) spoke at the Paul H. Nitze School of Advanced International Studies (SAIS) of the Johns Hopkins University to offer an update on developments in Hong Kong and the city's response to the current financial crisis.
Mr. Tong reported that Hong Kong's economy performed reasonably well in 2008 with signs of a significant slowdown in the second half of the year. He said total exports of goods grew by 2 percent and the value of imports of goods increased by 5.5 percent. In addition, he said foreign direct investment (FDI) continued to blossom with some US$34 billion in FDI coming in the first half of 2008. "Hong Kong's intake of foreign direct investment underscores Hong Kong's appeal as a platform for international companies to reach the Mainland of China and Asia Pacific markets," Mr. Tong said.
Mr. Tong commented that Hong Kong, as a highly externally oriented economy, was not immune to the effects of the global financial crisis. He reported that the onset of the financial crisis eventually derailed Hong Kong's economic upswing since mid-2003, causing the economy to contract in the fourth quarter and slowing economic growth for 2008 as a whole to 2.5 percent. He said the growth rate was lower than the trend growth rate over the past 10 years and lower than GDP growth of 6.4 percent in 2007.
Mr. Tong remarked that the city's economy was forecast to contract by 2 percent to 3 percent in 2009 under the drag of shrinking external demand and weakening consumer sentiment.
Mr. Tong remained optimistic in Hong Kong's ability to withstand the current financial crisis having learned hard lessons from the Asian financial crisis over a decade ago.
"Since the Asian financial crisis of 1997-1998, Hong Kong has improved its risk management and created a more transparent regulatory environment while still encouraging financial innovation to maintain our competitiveness," Mr. Tong said.
In addition, he remarked that the city's fundamentals include high capital adequacy ratios in the banking sector, prudent fiscal policies and healthy fiscal reserves.
In response to the current crisis, Mr. Tong reported that the Hong Kong government had put in place a full range of measures to lessen its impact.
A US$12.8 billion loan guarantee program was introduced to help unfreeze credit for the business community, in particular, for small and medium enterprises.
In addition, to boost public confidence and to help ease the liquidity for the business community, he said the Hong Kong government had guaranteed all bank deposits – with no ceiling – and established a mechanism to provide additional capital to banks, if requested, until at least 2010.
Mr. Tong also said the Hong Kong government had fast-tracked public infrastructure projects and introduced other measures with a view to creating more than 120,000 jobs, training places and internships in the next three years, including over 60,000 this year.
Noting support from the Mainland government, Mr. Tong said that Hong Kong had entered into a currency swap pact with the Mainland to provide short-term liquidity to Mainland operations of Hong Kong banks and the Hong Kong operations of Mainland banks, if needed.
In addition, Mr. Tong announced that the Mainland government would launch a pilot program for Hong Kong and five other cities in the Mainland whereby selected companies could settle cross-boundary trade in Renminbi. The program would enhance Hong Kong companies' flexibility and reduce the risk of currency fluctuations for companies doing business with the Mainland. It would also create new opportunities for Hong Kong's banking sector, diversify local Renminbi assets, and increase the capital liquidity of the yuan in Hong Kong.
"No doubt, this will facilitate Hong Kong as a regional Renminbi clearing center and strengthen Hong Kong's position as an international financial center," Mr. Tong said.
Mr. Tong also highlighted some of the new initiatives Hong Kong was undertaking, including increased promotion of Hong Kong as a destination for "Meetings, Incentives, Conventions and Exhibitions" and development of the city as a regional hub for wine-related business following the scrapping of wine duty last year.
Acknowledging the need for Hong Kong to remain adaptive in an increasingly competitive global market, Mr. Tong outlined the following six key economic areas for further development: testing and certification, medical services, innovation and technology, cultural and creative industries, environmental services, and educational services.
"Hong Kong already enjoys clear advantages in these economic areas and we intend to further explore how best to realize their full potential to ensure Hong Kong's long-term competitiveness," Mr. Tong said.
Mr. Tong concluded his remarks by noting that Hong Kong had overcome several major challenges in the past decade or so, including the Asian financial crisis and the outbreaks of SARS and avian influenza. "We have confidence in Hong Kong's ability to rebound due to its sound fundamentals, can-do spirit, quality workforce, the great support from the Mainland, and the new opportunities arising from the Pearl River Delta development," Mr. Tong said.
Ends/Tuesday, April 14, 2009
Issued at HKT 22:56
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