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Some Observations from the APEC Meetings

In the past week, I attended the Asia-Pacific Economic Cooperation (APEC) Finance Ministers’ Meeting held in San Francisco, the United States. In addition, as assigned by the Chief Executive, I attended the 30th APEC Economic Leaders’ Meeting (AELM) on his behalf.

This APEC meeting was the first one since all APEC members fully returned to normalcy after the COVID pandemic. Currently, the global political and economic situation is complex and fraught with uncertainty, and the global economy faces multiple risks. Representatives at the meetings generally considered that interest rates would remain higher for longer, and expected global economic growth to be slower in 2024 than this year, and tilted to the downside. The medium- to long-term outlook remains weak, and many countries may take two to three years to return to their pre-pandemic growth paths.

I have summarized the following observations of the APEC meetings having reflected on the meetings and events of the margins during the past few days.

Attending the AELM in San Francisco, and joining other leaders for an official photocall prior to the meeting.

Attending the second session of Leaders’ Retreat at the AELM.

(1) Global Economic Prospects and Fiscal Challenges

In the past few years, central banks in the United States and Europe have been rapidly tightening their monetary policies in response to high inflation. Many economies had no choice but to follow suit, making it more difficult to boost their economic development through loosening monetary policy in the short run. In addition, epidemic-related expenditures were substantial, leading to budget deficits for the majority of economies for consecutive years. With considerable levels of government debts, there is limited fiscal space. Under such circumstances, the strength of the economy and financial system have become more fragile. There is a need to rebuild buffers to withstand the shocks of unforeseen events.

At the same time, there is limited room to reduce necessary expenditures, such as those on social welfare and healthcare. An aging population will also increase expenditure and reduce tax revenues. Moreover, given the amount of investment needed to combat climate change and take forward infrastructure projects, the fiscal challenge in the future cannot be underestimated. Some APEC members are considering how to broaden revenue sources without compromising investments and their competitiveness.

(2) Combating Climate Change for Sustainable Development

In recent years, extreme weather events have been frequently occurring in various regions. The challenges of climate change are pressing. The investment required for green transformation is very sizable. It is estimated that Asia alone would need over US$66 trillion in the next 30 years. Governments alone would not be able to fund this.

Therefore, how to attract private market capital, and develop the related green technology industry to enhance the efficiency and effectiveness of relevant investments, is a topic being explored by many APEC members. During the conference, I shared Hong Kong’s experience with other members. As the green finance centre of Asia, together with a flourishing green technology ecosystem, we can contribute to the green transformation of the entire region and even the world, especially in terms of raising funds.

Photo with US Treasury Secretary Janet Yellen during the Welcome reception for the APEC Finance Ministers' Meeting.

Photo with Kristalina Georgieva, Managing Director of the International Monetary Fund before the meeting.

(3) Promoting a more inclusive development

For the past few decades, some advanced economies had rapidly developed thanks to global economic integration. But at the same time, the widening gap between the rich and the poor had sowed the seeds of social instability. They gave rise to populism and protectionism which have disrupted international free trade and investment as well as heightened the risk of geopolitical conflicts.

During the meetings, many APEC member economies called for the need to reaffirm the world’s commitment to the rules-based multilateral trading system, and to update the rules in response to the rapid development of the digital economy, e-commerce, etc. In addition, member economies recognised that in promoting economic development, whilst it is necessary to make the economic pie bigger, it is equally important to divide the pie more equitably so that all people can truly benefit from economic progress. Only by doing so can sustainable development and long-term stability and prosperity be achieved.

(4) Enhancing interconnectedness and multilateral cooperation, accelerating the development of digital economy

In recent years, geopolitical tensions have disrupted the stability of global industrial and supply chains, affecting profoundly the economies of many regions. Protectionism brings no benefit to any economy. On the contrary, more connectivity and cooperation would allow economies to play to their respective strengths and to cater to their needs. This is a more stable and sustainable mode of development.

The development of the digital economy and artificial intelligence is at different pace across APEC member economies. Whilst APEC member economies are keen to embrace the development on this front in a faster and better manner, we must at the same time manage the associated risks and allow the benefits of these developments to be widely distributed to the whole society. There is a need for more international communication and cooperation amid rapidly evolving landscapes in these areas.

Pictured with the Prime Minister of Singapore, Mr Lee Hsien Loong, when attending the welcome reception and cultural performance of the AELM.

Chatting with the President of Indonesia, Mr Joko Widodo, when attending the welcome reception and cultural performance of the AELM.

Chatting with the Prime Minister of Australia, Mr Anthony Albanese (second left); the President of the Philippines, Mr Ferdinand Marcos Jr. (first left); the Prime Minister of Malaysia, Dato’ Seri Anwar Ibrahim (second right); and the Sultan of Brunei Darussalam, Sultan Haji Hassanal Bolkiah (first right), at the welcome reception.

(5) Sino - US Relations

The meeting between the leaders of China and the United States was under the global spotlight during the APEC meetings, whilst the economic development of our country and its impact on the global economy are also an issue of great interest to APEC member economies. Sino - US relations not only have an impact on the politics and economy of the two countries, but also the global economic outlook. Representatives of APEC member economies paid close attention to the meeting between the two leaders in the margins of the APEC meetings. Many of them were pleased and eager to see the meeting as well as more dialogues between the two leaders in the future. Moreover, representatives of APEC member economies actively approached representatives of our country at the meetings. This demonstrates the international influence and status of our country.

Hong Kong is a free, open and small economy. Our attendance at such high-level international events through participation in meetings, exchanging views and making observations, would enable us to grasp and deepen our understanding of the international political and economic situation and latest developments. This would allow us to better position ourselves and to make friends. Leveraging our international character and the unique advantages under the “One Country, Two Systems” principle, we can make greater contributions to our country and make our own development better.

November 19, 2023