Security and stability crucial to Hong Kong’s economic resurgence
Recently released statistics show that Hong Kong’s economic environment has suffered greatly from the yearlong social unrest, unstable foreign trade and the COVID-19 pandemic. For example, the city’s gross domestic product in the first quarter fell by 8.9 percent year-on-year and 5.3 percent quarter-on-quarter; both were the biggest quarterly declines on record. At the same time, the seasonally adjusted unemployment rate rose to 5.2 percent in the three months to April, which is at a 10-year high. The underemployment rate is 3.1 per cent, a 15-year high. In addition, retail sales also struck a new record for declines. People are wondering when Hong Kong’s economy will see the dawn of recovery.
COVID-19 has dealt a heavy blow to major economies around the world. Hong Kong should benefit from the early containment of the novel coronavirus in the city as well as on the Chinese mainland and East Asia by gradually promoting the recovery of local economic activities and consumption and restarting economic and trade exchanges with neighboring regions. Unfortunately, investors and businesspeople are still deterred by worries about a return of violence after a lull due mainly to the pandemic. With the epidemic basically having been brought under control in the city, the lack of a safe and stable business environment seems to be the main hindrance to economic recovery in Hong Kong. This explains the business sector’s strong desire and support for national security legislation for Hong Kong.
There is no doubt that social harmony, political stability and security are key elements of a good business environment, the absence of which would lead to the deterioration of the business environment, for sure. This is evidenced by Hong Kong’s falling rankings in various indexes over the past six months. Hong Kong first suffered a setback in the global economic freedom ranking. According to the Heritage Foundation’s 2020 Economic Freedom Index released in March, Hong Kong lost the “freest economy” title to Singapore after having held it for 25 years. The ranking report unmistakably states that continued political and social turmoil has begun to undermine Hong Kong’s reputation as one of the best places to do business and has reduced investment inflows. The city also slid back three places to sixth in the Global Financial Centres Index published in March by the United Kingdom’s Z/Yen group and the China (Shenzhen) Research Institute for
Integrated Development. A legal director with a Hong Kong investment management firm is quoted in the report as saying: “Due to social unrest, it is expected that talents will continue to be drained and the supply and demand for skilled labor will decrease.” In early June, Hong Kong was dealt another blow when it fell from second place last year to fifth place this year in the Institute for Management Development’s Annual Report on World Competitiveness. IMD says in its report that Hong Kong’s fall is due to its weak economic performance and social unrest besides its exposure to the mainland economy. “Social unrest” is the most critical and common factor behind Hong Kong’s fall in all these highly regarded international rankings.
“Businessmen want stability and certainty. They want to make sure that their businesses will not be disrupted by social unrest. So most businessmen welcome the (national security) legislation,” Stephen Phillips, director-general of investment promotion at InvestHK, said in a recent interview with Xinhua News Agency.
Netease and JD, two mainland companies listed in the United States, came to Hong Kong for their second listing on the local stock market earlier this year when violent protests subsided amid the COVID-19 pandemic. Other US-listed mainland companies including Baidu and Ctrip have also queued up to list in Hong Kong. This suggests Hong Kong is still an attractive destination for fundraising and doing business as long as social stability is restored and the business environment improves.
To the relief of Hong Kong people, the timely enactment of the national security law for Hong Kong will boost business confidence for sure as it will help restore social and political stability, which are crucial to the existence of a good business environment. When the most serious problem in the city, which is political in nature, is resolved, all other problems will have a better chance to be tackled effectively. Hong Kong has overcome various kinds of challenges before and after the handover in 1997. It will continue to move forward.
Edward Liu
The author is the vice-president of the Hong Kong and Mainland Legal Profession Association. Hong Kong has overcome various kinds of challenges before and after the handover in 1997. It will continue to move forward.