Blog

Getting prepared for challenges ahead

A gist of the blog:

Last week, I briefed Members of the Legislative Council on Government’s latest assessment on economic impact on Hong Kong arising from the trade conflict between the United States (US) and the Mainland, as well as the follow-up actions taken by the Government. Members generally agreed with the Government’s support measures targeted at the trade and the small and medium enterprises. Some Members suggested that Hong Kong should expedite the diversification of economy, and support local companies in exploring more markets.

The trade conflicts will affect business environment, investment and market sentiment, and may in turn reduce global trade volume and slow the economic momentum, and leading to changes in the global supply chan. Hong Kong’s economy may face broader and faster impact, both directly and indirectly, in the next year.

The escalating trade conflict between the Mainland and the US has also created uncertainty for the financial market and added volatility to the stock market. Having gone through the several financial crises in the past, Hong Kong’s financial system now is much more resilient against external shocks.

The banking system in Hong Kong currently has an overall liquidity coverage ratio of around 150%. Its capital adequacy ratio is over 19%, which is among the highest in the world and way above the international minimum requirement of 8%. The Hong Kong Monetary Authority (HKMA) also regularly conducts on-site and thematic supervisory reviews and stress tests on banks.

In respect of leading statistics, as at the end of March 2018, the overall classified loan ratio of the Hong Kong banking sector’s Mainland-related lending portfolio stood at 0.06%, which stays in a very low level internationally. As for the securities market, the Securities and Futures Commission (SFC) will conduct stress tests for the intermediaries, and will work closely with the Stock Exchange of Hong Kong and HKMA to address potential systemic issues.

In light of the potential risks arising from the trade war, we will stay vigilant and closely monitor the developments and be prepared for necessary actions.

July 22, 2018