HK warns of political un­rest as econ­omy weak­ens

The Pak Banker - - MARKETS/SPORTS -

Hong Kong's fi­nan­cial sec­re­tary warned Wed­nes­day that political un­rest would "un­avoid­ably" dam­age the econ­omy af­ter ri­ots rocked the city ear­lier this month, pre­dict­ing a growth slow­down for 2016.

In an un­usu­ally emo­tive bud­get speech John Tsang -- tipped as a pos­si­ble con­tender to be the semi-au­ton­o­mous city's next leader -- said the street bat­tles had left him "dis­tressed and an­gry".

Tsang, who is part of a Bei­jing-friendly govern­ment and met with China's Pres­i­dent Xi Jin­ping last year, used his speech to weigh in on Hong Kong's re­cent tur­moil.

Vi­o­lence broke out on the first night of the Lu­nar New Year, Fe­bru­ary 8, af­ter pro­test­ers gath­ered around il­le­gal food hawk­ers in the busy com­mer­cial district of Mong Kok to pro­tect them from health of­fi­cials.

Masked demon­stra­tors hurled bricks at po­lice, who in turn fired warn­ing shots in the air - - a rare oc­cur­rence in Hong Kong.

More than 30 pro­test­ers face charges of "ri­ot­ing" and some have also com­plained of po­lice vi­o­lence. Among those charged are lead­ers of "lo­cal­ist" groups push­ing for more au­ton­omy, or even in­de­pen­dence, from Bei­jing.

It came against a back­drop of grow­ing fear over China's in­flu­ence on the city, which has wors­ened since the dis­ap­pear­ance of five book­sell­ers known for pub­lish­ing ti­tles crit­i­cal of Bei­jing. Four of the men are now of­fi­cially un­der crim­i­nal in­ves­ti­ga­tion on the main­land.

"I was shocked that our city could have turned overnight into such a strange and alien place that I hardly recog­nised," said Tsang.

"We an­tic­i­pate that political dis­putes will only in­ten­sify over the com­ing months," he added, warn­ing of pos­si­ble "chaos".

"Political volatil­ity will un­avoid­ably im­pact on our econ­omy." Tsang said up­com­ing leg­isla­tive elec­tions in Septem­ber would ex­ac­er­bate ten­sions and traced the city's woes back to ma­jor prodemoc­racy ral­lies in 2014.

De­scrib­ing the eco­nomic out­look as "far from promis­ing", Tsang said growth for 2016 would be be­tween one and two per­cent -- down from last year's 2.4 per­cent -- weighed by US in­ter­est rate in­creases, a lull in ex­ports and a slow­down in tourism to Hong Kong.

The prop­erty mar­ket in Hong Kong had also taken a hit, with prices fall­ing nine per­cent since Oc­to­ber, Tsang added.

The bleak fore­cast comes as China's econ­omy slows, im­pact­ing re­gional and global mar­kets.

In a city where the wealth gap is widen­ing, Tsang an­nounced a HK$38.8 bil­lion ($5 bil­lion) re­lief pack­age, in­clud­ing a 75 per­cent re­duc­tion in salaries tax. But an­a­lysts said the give­aways may not be enough.

"With a grad­ual eco­nomic de­cline in Hong Kong, this may not be suf­fi­cient to win the hearts and minds of peo­ple, es­pe­cially with ris­ing lo­cal­ism," Sonny Lo, a so­cial sci­en­tist at the Hong Kong In­sti­tute of Education, told AFP. "The pub­lic ex­pect a bolder ap­proach to hous­ing prob­lems and the in­come gap," he said.

Tsang also un­veiled stim­u­lus mea­sures for in­dus­try and said the long-awaited Shen­zhenHong Kong Stock Con­nect -- de­signed to open up stocks to in­vestors both sides of the bor­der -- was ready to go, sub­ject to Bei­jing's green light. He fin­ished with a quote from late US pres­i­dent John F. Kennedy, say­ing: "Our prob­lems are man­made, there­fore they can be solved by man." Lo said for­mer civil ser­vant Tsang's speech was an at­tempt to ap­pease Bei­jing and woo res­i­dents.

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