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Hong Kong Economy

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  1. Hong Kong Economy Stephen Yan-leung Cheung Professor of Finance (Chair) Department of Economics and Finance City University of Hong Kong October 9, 2001

  2. Contents • Hong Kong Economy: Current Situation • Internal and External Factors • Thoughts and Suggestions Hong Kong Economy

  3. Hong Kong Economy • Macro-economic GDP 4%3%1%? Unemployment 5% (?) Total export (Aug 01) 7.7%  Deflation 1.1%  Hong Kong Economy

  4. Hong Kong Economy • Stock Market • Main Board • Figure 1.1: Market Capitalization of Main Board and Hang Seng Index • Figure 1.2: Average Daily Turnover in Value Hong Kong Economy

  5. Hong Kong EconomyMain Board - Figure 1.1 Hong Kong Economy

  6. Source: http://www.hkex.com.hk/markdata/markstat/equity0108.htm Hong Kong EconomyMain Board - Figure 1.2 Hong Kong Economy

  7. Hong Kong Economy • Stock Market • Growth Enterprise Market (GEM) • Figure 1.3: Market Capitalization of GEM and GEM Index • Figure 1.4: Average Daily Turnover in Value Hong Kong Economy

  8. Hong Kong EconomyGEM - Figure 1.3 Hong Kong Economy

  9. Source: http://www.hkex.com.hk/markdata/markstat/equity0108.htm Hong Kong EconomyGEM - Figure 1.4 Hong Kong Economy

  10. Problems • ‘Knowledge-based’ economy • Confident in economic future • Low consumption level • Asset deflation in stock and property markets • Mismatch in labor market Hong Kong Economy

  11. Problems • Loss of Asian Financial Crisis (Stock market + Property market) • Government reserve ~ 380 billion Trade liberalization • + Financial market strengthening Hong Kong Economy

  12. Internal Factors • Too much changes • Too ambitious • Coordination among senior officials • Ordinary people blame the Government • Creditability Hong Kong Economy

  13. Internal Factors • Depend more on Government • Different fractures • Budget deficit • Additional pressure on Government Hong Kong Economy

  14. External Factors • Other Asian markets are in bad shape • Singapore • Taiwan • Major markets • US • European • Japan Hong Kong Economy

  15. External Factors • Major market – US • All incidents: Risks • A collapse in US consumer and business confidence • Influence on other economies • How long this war will last Hong Kong Economy

  16. External Factors • Major market – US • Military action • Increase defense spending • Reconstruction • Airline industry • Increase welfare spending • 100 billion – 150 billion package Hong Kong Economy

  17. External Factors • Major market – US • Recovery takes time • Long-term implication • Future government deficit • US Treasury securities market Hong Kong Economy

  18. External Factors • Major market – US • US economy negative growth for 2001 • US consumer and business confidence are low • Strong US dollar • US interest rate , but not for long Hong Kong Economy

  19. External Factors • High premium for cargo from Jakarta, Bangkok, Kula Lumpur, and Manila • Beneficial for goods from HK, Pusan, Singapore, Yokotama, and Singapore Hong Kong Economy

  20. Thoughts & Suggestions • How to regain people’s confidence in: • HK Economy • HK Government Hong Kong Economy

  21. Thoughts & Suggestions • Short-term measures • No significant impact on recurrent expenditure • No significant administrative burden • Effective stimulation Hong Kong Economy

  22. Thoughts & Suggestions • Short-term measures • Tax rebate • Rate concession • Rescue package for ‘negative’ asset class? Hong Kong Economy

  23. Thoughts & Suggestions • Singaporean package • Corporatize the government • Distribute the ‘government’ stock to every citizen • Dividend payouts depend on the government budget Hong Kong Economy

  24. Thoughts & Suggestions • Corporatization • Chairman: C H Tung • Executive directors: Policy secretaries • Independent, non-executive directors = Legislative Councils Hong Kong Economy

  25. Thoughts & Suggestions • Corporatization • Everybody becomes a shareholder • Payouts depend on the public finance • Share the same objective • Government makes ‘profit’ Hong Kong Economy

  26. Thank You