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Together we will overcome the challenges

Distribution of consumption vouchers under Phase II has begun since last Sunday, injecting about $13 billion of purchasing power into the local market instantly. Over the past week or so, whether it was on the streets or at big shopping malls or small shops, people commonly talked about how to use their consumption vouchers. There was also more business for restaurants and shops. As I visited some exhibitions earlier to show support to the exhibitors, I was able to learn about the latest market and business conditions. Many exhibitors said that they were under operational pressure; and while the disbursement of consumption vouchers did help stimulate sales, Government subsidies for exhibition participants also played a supporting role. They hoped that measures to support the trade could continue to be rolled out.

Last week I officiated the joint opening ceremony of Food Expo and various Expos, hoping to show support to the exhibitors and learn about the latest market and business conditions.

Following the full implementation of evidence- and precision-based anti-epidemic strategies, the Government put in place the “Red and Amber Codes” and adjusted the quarantine requirements to the “3+4” model last week. While effectively controlling the epidemic risk, we hope to offer facilitation to returning Hong Kong residents and tourists so that our external economic activities can regain momentum. The distribution of consumption vouchers at this juncture is expected to boost our economy to a certain extent. Yet, it is true that we are also faced with a weakening global economy and rising interest rates which will bring pressure on Hong Kong’s economy.

The economic data freshly released also reflect the latest situation. Although the economy recorded a quarter-to-quarter growth of 1% in the second quarter this year, the situation is still worrying when compared to the same period last year. The economy contracted by 1.3% year-on-year in real terms in the second quarter following a year-on-year contraction of 3.9% in the first quarter, representing negative growth in two consecutive quarters. Geopolitical tensions, together with intensifying inflation and weak economic performance around the world, have dragged Hong Kong’s export performance substantially. While consumption vouchers under Phase I were disbursed in April and had injected over $30 billion of purchasing power into the local consumption market, with private consumption having become a major supporting force of the economy, it is not sufficient to offset the adverse effect brought by weak export performance.

Last Friday, taking into account the worse-than-expected economic performance in the first half of the year and the sharp deterioration of global economic prospects, we lowered our economic growth forecast for this year as a whole to -0.5% to 0.5%, as opposed to 1%-2% as previously announced in the round of review in May. This figure is hardly ideal, but considering that the economy had already contracted by 2.6% year-on-year in the first half of the year, this means that the economy should improve slightly in the rest of the year. Of course, the actual situation would depend on changes in the external environment and the local epidemic situation.

In fact, maintaining business confidence is also a crucial element that underpins our economy. Amid the suddenly worsening epidemic situation earlier this year, rental enforcement moratorium, which was promulgated in the Budget, sought to halt any loss of confidence caused by massive closures of small and medium enterprises (SMEs) and waves of layoffs thus triggered. The measure gave some breathing space for tenants in the retail and catering sectors which had been hard hit by the epidemic, and eased the pressure on them as the economy contracted further in the second quarter.

Enacted by the Legislative Council, the rental enforcement moratorium law became effective in early May, and the three-month “protection period” just ended at the end of July. Quite a number of trade organisations from the retail, catering and service sectors have expressed that the measure had helped many members of their trades to withstand pressure for immediate closure and secure jobs for their staff. It provided prompt assistance at a time when they urgently needed help.

There were once concerns that rental enforcement moratorium would impact on a large number of individual landlords and they would be unable to repay their mortgages on time. However, such a phenomenon did not materialise. For the interest-free Personal Loan Guarantee Scheme specifically available to individual landlords with financial needs, only three applications had been received.

In the past few months, rental enforcement moratorium successfully motivated some tenants and landlords to agree on restructuring their rental agreements or adjusting the rent, so that merchants could continue to operate their business and seize the demand brought by consumption vouchers. Still, in the past week, some merchants already received demand letters from their landlords seeking to recover the outstanding rent.

At times of economic hardship, we must balance various factors in light of the circumstances and seek to deploy public resources efficiently and roll out measures to stabilise the economy. Rental enforcement moratorium was an exceptional measure at an exceptional time when our economy was in a critical condition. Our economy has emerged from the most difficult period – albeit it is still under downward pressure – and it is necessary to adjust our support measures. Now that the protection period of rental enforcement moratorium has ended, and enterprises may still have liquidity problems as their business may have yet recovered fully. I have thus asked the Hong Kong Monetary Authority and the Hong Kong Mortgage Corporation Limited to strengthen their communication with banks, SMEs and trade organisations and provide assistance as far as possible to enterprises with short-term liquidity problems. For instance, by expediting the processing of applications for the Special 100% Loan Guarantee Scheme, or helping businesses to restructure their debts. We also hope that landlords could show compassion and be willing to negotiate with tenants so as to help them overcome the current challenges.

Last week, the Government introduced adjustments to the quarantine arrangements for persons coming to Hong Kong. Inbound persons from overseas places or Taiwan are subject to quarantine under the “3+4” model, i.e. quarantine in designated quarantine hotels for three days, followed by medical surveillance at home for four days. They are also subject to Amber Code restrictions under the Vaccine Pass during the surveillance period. I have noticed that both local and overseas stakeholders welcome this arrangement as it would reduce inconvenience for returning residents and travellers, and be beneficial to our economy. Let’s continue to work together to fight the epidemic. The Government will continue to closely monitor the development of the epidemic on the one hand, and take care of the needs of our economy on the other, so as to secure the room for different trades and industries to survive and thrive.

August 14, 2022