Blog

4‧3‧2‧1‧0 …^*

Every time when a typhoon is drawing near to Hong Kong, many people would stock up food to make sure they have plenty to eat at home if the weather becomes severe. So if there is an “economic typhoon” facing us, should we get prepared in a similar way? With this thinking, we decided to launch a series of support and relief measures last week to assist small and medium-sized enterprises (SMEs) and residents to cope with the economic challenges ahead of us.

Since Q1 last year, the economic momentum of Hong Kong has been slow, with the year-on-year growth rate gradually falling from 4.6% in Q1 2018 to 0.5% in Q2 2019. On a quarter-on-quarter comparison, there is a 0.4% negative growth last quarter, weaker than the advance estimate of negative 0.3%. If the quarter-on-quarter growth in Q3 continues to be negative, the economy of Hong Kong would technically enter into a recession. Due to the continuously weak economic momentum over the past year, economic forecast is expected to be even worse. Therefore, the Government has revised downwards the economic growth forecast in 2019 as a whole from 2-3% to 0-1%.

The core reasons for the suffering economy include external factors like the China-US trade conflicts, which have caused external trade to shrink and directly impacted the trade, logistics and transportation sectors. Domestically, the recent social incidents have hit the retail, restaurants and tourism sectors. Violent disturbances have also seriously damaged Hong Kong’s international image. This not only impacts people’s freedom to travel and consumption incentives, but also weakens the incentives for foreign people to travel, do business and invest in Hong Kong.

From large corporates to small stalls, all have experienced the pressure brought by this “economic typhoon”. Yesterday I chatted and exchanged views with vendors, shopkeepers and grocery shoppers when I walked along the street in Wan Chai. They expressed concerns about the decreased number of customers and declining business, and some employees in restaurants shared with me their difficulties to make ends meet as underemployment hits their income. They would be substantially benefited from the series of relief measures just announced to different extents, such as a $2,000 electricity charge subsidy and a $2,500 subsidy to each kindergarten, primary and secondary day-school students. There are also other measures which could briefly alleviate the pressure of the grassroot families, such as paying one month's rent for public housing tenants, providing extra allowance to social security recipients, equal to one month of the standard rate Comprehensive Social Security Assistance (CSSA) payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance, Working Family Allowance and individual-based Work Incentive Transport Subsidy recipients, and inviting the Community Care Fund to provide a one-off living subsidy for the "N have-nots". In addition, the increase in the reductions of salaries tax from 75% to 100%, subject to the same ceiling of $20,000, could waive all taxes for some 1.2 million “wage-earners”.

And with the aim to alleviate enterprises’ pressure on operating cost and financing, we will waive 27 groups of government fees and charges for 12 months, reduce the rental for government land and property as well as public market stalls leased by the Food and Environmental Hygiene Department by 50 per cent for six months, and introduce a new 90 per cent guarantee product under the SME Financing Guarantee Scheme. In addition, we will inject $1 billion each to the Dedicated Fund on Branding, Upgrading and Domestic Sales (“BUD” Fund) and the SME Export Marketing Fund to better support enterprises in exploring business opportunities and building brands. We will also increase and expedite a number of minor works projects to create more employment opportunities for the construction sector. The above measures aim to prevent SMEs from dismissing staff and cutting salaries, so as to safeguard the jobs of wage-earners.

This series of measures (excluding public works expenditures) will cost a total of 19.1 billion. Together with the one-off relief measures announced in the Budget earlier this year, which cost 42.9 billion, the sum of 62 billion is expected to provide impetus for our economy by 2%.

Besides, the Hong Kong Housing Authority, Airport Authority Hong Kong, Hong Kong Science and Technology Parks Corporation, Cyberport, as well as the Construction Industry Council, are also formulating their own relief proposals. Details of their arrangements will be announced separately.

Some described the just announced relief measures as a “mini-budget”. Indeed we have been closely monitoring the changes in the economic environment. In the past few months, both the external and internal economic environments have been constantly weakened. A warning signal number 3 is already issued for this “economic typhoon”. With its path directly pointing to Hong Kong, we must brace ourselves for the storm, build breakwaters for the economy and keep more money in the pockets of the people so as to stabilise confidence, safeguard jobs, encourage spending and support the economy.

Yesterday when I was walking in the market and having breakfast in small restaurant, many citizens chatted and exchanged views with me. They said the just announced measures would be able to alleviate some of their living pressure. However, they also expressed their candid concerns about the current atmosphere, opposition and conflicts in the community, which had led to anxiety and tension among friends and in families. It is common for different people to have different views, but violent storming would undermine personal safety, affect the livelihood of the public and business of merchants, making these days tiring and frustrating to all. They all hope to stop the violence and give Hong Kong a chance to start afresh through consultation and discussion to resolve the crisis.

The “economic typhoon” is drawing near. I hope everyone can set aside differences for now, work together and equip ourselves to cope with the storm, with a view to minimizing the harm that may be caused.

^* Remark: Since the first quarter of 2018, the year-on-year quarterly growth rate of GDP is 4.6%, 3.6%, 2.8%, 1.2%, 0.6% and 0.5% respectively, showing a declining trend.

August 18, 2019