December 30, 2009
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<Compare and Contrast>
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(1) For Hong Kong, 2009 was a year of great change and challenge.
Managing change successfully is the single biggest challenge facing any government in today’s world — and I believe this is the main lesson we learned in 2009.
At this time last year, we were still in the thick of the financial tsunami. We didn’t know how severe it would be, or how long it would last.
Our economic performance in the first quarter seemed to confirm our fear: Gross domestic product declined 7.8 percent year-on-year, the biggest drop in a decade.
To the surprise of many, we began to see signs of a recovery not long after. Our economy rebounded in the second quarter, with the year-on-year decline tapering to 3.6 percent, and then to 2.4 percent in the third quarter. On a quarter-to- quarter basis, GDP grew 3.5 percent in the second quarter, and rose a further 0.4 percent in the third quarter.
The labor market showed a similar trend. After a 1.1 percentage point increase in the unemployment rate to 5.2 percent in the first quarter, the rate rose to just 5.4 percent in the second quarter, and has since been on the decline.
Hong Kong’s rebound had much to do with a more stable external environment, coupled with a rapid resumption of fast growth on the mainland. Domestically, our strategy to “stabilize the financial markets, support enterprises and preserve employment” went a long way toward holding up business and consumer confidence when the crisis hit Hong Kong hardest.
Since last year, we have introduced a series of relief measures amounting to HK$87.6 billion ($11.3 billion), equivalent to 5.2 percent of our GDP and way higher than the average of the Group of 20 economies. They have helped stabilize the local economy and abate the surge in unemployment.
Although the external environment is still fluid, Hong Kong is poised to return to positive year-on-year growth in the fourth quarter. The government’s heavy investment in infrastructure projects will add impetus to the economy and generate jobs over the next five years.
Even with the dark clouds of the financial crisis, we are always confident of a silver lining. The crisis has radically changed the landscape of the global economy. The mainland has emerged as a prominent economic powerhouse. This, in turn, will present new opportunities for Hong Kong.
The past year has seen a rapid expansion of the yuan business in Hong Kong. We became the first place outside the mainland where cross-border trade may be settled using the yuan, and where the central government issued yuan bonds.
Moreover, for the first time, mainland branches of our banks are permitted to issue yuan bonds in Hong Kong. All this has strengthened Hong Kong’s position as a global financial center, as well as our unique role in the internationalization of the yuan.
We are also making full use of opportunities generated by increasing integration between Hong Kong and the Pearl River Delta, a national strategy endorsed by the central government. Hong Kong and Guangdong are pushing ahead with cooperation on many fronts. In terms of hardware, construction of the Hong Kong-Zhuhai-Macau Bridge has just started and we are seeking funding approval for the Hong Kong-Guangzhou Express Rail Link. Both of these mega-projects will enhance the efficient flow of people and goods and further deepen economic integration.
The speed at which cross-Strait relations have improved this year also exceeded the expectations of many. While this has posed major challenges for us, in terms of reduced passenger and cargo traffic via Hong Kong, it has allowed us to develop deeper economic and cultural cooperation with Taiwan. We are working hard to enrich these links.
The global financial crisis also galvanized our thinking on economic diversification. We have identified six promising industries where Hong Kong enjoys competitive advantages, including education services, medical services, testing and certification, environmental industries, innovation and technology, and cultural and creative industries.
It will take time for these industries to flourish, but an initial push by the government is often all it takes for an economic sector to get off the ground and gather momentum.
The spirit of Hong Kong is to do our best, don’t lose heart, look for opportunities and grasp them when the time is right. This will continue to inspire and guide us as we embrace the new changes and challenges awaiting us in 2010.
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(2) The year 2009 has turned out better than feared. Decisive responses by governments, and the coordinated efforts of the Group of 20, succeeded in averting financial disaster and restoring confidence.
While the worst is behind us, global prospects will depend on governments drawing the right lessons from the crisis, and taking effective and coordinated steps to address more difficult problems.
What have we learned from this year of ups and downs?
First, we live in a completely global economy. All countries are linked together – from Asia to Europe to the United States. There is no haven to hide from global storms. Governments can and must take steps to stabilize their economies, protect their citizens and prepare their countries for recovery.
Second, Asia’s dynamism is intact. Notwithstanding the crisis, Asian countries continue to transform themselves. China is re- orienting its economy toward domestic demand. It isn’t just stimulating consumption, but pursuing major infrastructure investments to enhance productivity, especially in rural areas, while reining in industries facing major overcapacity.
Third, protectionism remains a threat to recovery and future growth. In times of economic doubt and high unemployment, we must expect workers to be anxious, and countries to seek to protect their own industries and jobs. The US political mood is hostile to free trade, and Europe faces similar pressures. Fortunately, so far countries have largely avoided self-defeating protectionist measures, or worse, trade wars. They must stay the course as unemployment stays high.Fourth, after having witnessed a spectacular failure of untrammeled free markets, we must not swing to the other extreme. Governments and regulators clearly need to improve how they set the rules, supervise financial institutions, and monitor risks to the system as a whole.
What of the future? Next year should see modest but positive growth. We have to use this respite to tackle deeper issues in the world economy. As the United States unwinds its reliance on consumption and debt, countries must find new sources of global growth. They must also spread the benefits of growth more widely among their citizens. One important way is through education because knowledge is now the basis for growth everywhere.
Countries must also work together to meet major common challenges, including climate change. The Copenhagen meeting was a disappointment, but countries must persevere. Few can afford to reduce carbon emissions at the price of a drastic reduction in economic growth or living standards, but all must strive to slow global warming.
In the Asia-Pacific region, stable ties between the United States and China are critical, but fortunately the two countries are off to a good start with President Barack Obama’s recent visit to China.
Elsewhere there are the dangers of nuclear proliferation in North Korea and Iran, and the conflicts in Iraq and Afghanistan. These problems won’t be solved in 2010. But they have to be managed, so that countries can continue to devote their talents and energies to peaceful and productive purposes.
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The first article is by HK’s Chief Executive; The second is by Singapore’s Prime Minister, Lee Hsien Loong
