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New Year New Outlook

Today is the ninth day of the Lunar New Year.  A few days ago, it was the Start of Spring day.  While a sunny Start of Spring day is a sign of good harvest, we are also pleased to see an indication of a new economic outlook for Hong Kong.  Just like me, you might have felt the bustling and festive atmosphere surrounding the streets, shopping malls, restaurants and stores during the recent Chinese New Year holidays.

In fact, Hong Kong’s economic growth picked up notably in the fourth quarter of 2016, and a double-digit growth was recorded in the value of goods exports in December last year.  With the labour market sustaining full employment, some citizens tended to spend more, which has helped stimulate local consumption.  Entering 2017, visitor arrivals have been growing steadily.  There was a year-on-year increase of 4.8% in total visitor arrivals in January, with Mainland tourists increased by 7.5% year-on-year.  Local consumption and visitor arrivals have spurred the performance of retail and sales business.  According to the figures released by the Census and Statistics Department the day before yesterday, Hong Kong’s retail sales began to stabilise in the fourth quarter of last year after two years of decline.  The year-on-year decrease in sales volume moderated to 2.8% in December, and the decrease narrowed to 3.6% in the fourth quarter.  I hope that the positive developments since the beginning of this year will give a strong boost to the tourism and related industries.  We will continue to proactively enhance the appeal of our tourist attractions and attract high-yield visitors by offering a diverse range of travel experiences.  For instance, the Ocean Park is planning to organise night events to tie in with the opening of the MTR South Island Line, and the Hong Kong Disneyland launched “Iron Man Experience” recently to draw visitors.  On the other hand, the first batch of 11 long-awaited food trucks have commenced business successively in eight tourist locations starting from last week.  Many people have already been to these locations to enjoy the creative local cuisine.  The Tourism Commission has also thoughtfully launched a mobile app, “HK Food Truck”, to provide citizens and tourists with the whereabouts and information of the food trucks.

Just like all Hong Kong people, I certainly hope that the good momentum brought by the Year of the Rooster can be sustained.  However, in the face of a highly volatile global political and economic environment this year, Hong Kong, as a small-scale externally-oriented economy, must stay vigilant and closely monitor changes in the external landscape.  While the US Federal Reserve (Fed) decided, as the market expected, to keep the US interest rate unchanged at its meeting several days ago,  the Fed is poised to proceed with the interest rate upcycle.  The timing and pace of interest rate hike is still uncertain, and will depend on the US’s economic performance and other factors.  The trade and economic policies of the new administration is the key source of uncertainty.  Donald Trump, the new US President, and his team have been making controversial remarks and decisions almost every day since taking office.  These together with their frequent criticisms of some major economies for using currency devaluation to their advantage in trade have aroused concern about a growing protectionist tendency in the US policies that may give rise to international trade conflicts.  In Europe, although a clearer picture is emerging regarding Brexit, the negotiation with the European Union is likely to be lengthy, complicated and full of uncertainties.  The results of the general elections in some major European economies such as Germany and France this year may also trigger turmoil in the global financial market.  The good news is that the exports and manufacturing activities in most Asian economies have shown visible improvement recently and recorded growth generally in the fourth quarter of 2016.  The Mainland, the world’s second largest economy, sustained steady growth in 2016, with economic growth rate accelerated to 6.8% in the fourth quarter and meeting the annual target of 6.7%.  More importantly, the Mainland’s tertiary industry, i.e. the services industry, grew by 7.8% in real terms in 2016, a rate higher than that of the overall economy.  This proves that the Mainland economy is undergoing a structural transformation with remarkable success.  Apart from being the key driving force for the global economy, the resilient and stable Mainland economy also presents a wealth of unique opportunities for the professional services industry where Hong Kong enjoys clear advantages.

Lately, I have received a lot of opinions calling for the Government to make good use of the relatively abundant financial resources to ease people’s burden by launching short-term measures.  Many people also suggest that from a long-term perspective, we should channel resources to support the development of new industries, thereby giving fresh impetus to the economy.  I fully appreciate the community’s expectations and will consider opinions from different sides carefully with a view to proposing balanced and appropriate measures in the Budget to be announced in late February, having regard to the macro-economic environment.  By “spending only when necessary”, we seek to sustain growth, riding on the favourable trend since the beginning of the Year of the Rooster.  This will also enable us to remain sufficiently strong in the long run so that in the event of sharp gyrations in the external economy, we can respond swiftly to stabilise our economy and employment market, while maintaining economic vibrancy.

February 5, 2017