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Financial Secretary

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A bumpy road to recovery

Hong Kong is now facing a new wave of COVID-19 infections with local cases surging, disrupting life in the city and our economy. The imminent task of the Government right now is to bring the pandemic situation under control by adopting a comprehensive and targeted approach, as protecting people’s health is always on top of our agenda. Although the Government’s latest series of anti-epidemic measures have brought inconvenience to people’s daily lives and impacted the business of enterprises, we hope that the short-term pain can lead to a long-term gain by relieving the pandemic situation.

Over the past few months, many places around the globe have been struggling with the pandemic. To brace for a long battle against the virus, we have to keep up our vigilance and endurance and strike a right balance between epidemic control efforts and economic dynamic. When the situation gets worse, we have to prevent imported cases and break the chain of infection quickly. Once the situation is brought under control, we should resume economic activities timely, so as to avoid “pandemic fatigue” or damage to the economy.

The Government announced to further limit public gatherings last week. Restaurants are not allowed to provide dinner dine-in services, and some premises have to close temporarily. As the COVID-19 virus are highly infectious with a longer incubation period, it may take some time for the latest round of measures to show their effect through figures. During this period, we have to continue to monitor the situation closely, conduct dynamic assessment and be decisive in adjusting the measures. We need to have determination and endurance in carrying out the measures, as well as the vigilance in making swift response.

On the economic front, the already recovering business and economic activities are facing another blow due to the new wave of infection. I appeal to property owners again to reduce rents to help the retail shops, restaurants and other small and medium enterprises to tide over testing times. In the business world, apart from honouring the spirit of contract, shouldering social responsibilities is equally important. This is particularly the case for corporations receiving substantial amount of Government subsidies under the Employment Support Scheme. Only by making sincere contributions to the community and be socially accountable, enterprises could truly win the recognition and respect of the society.

Economic conditions in Hong Kong remained austere in the second quarter, though the contraction seemed to have eased somewhat and gradually stabilised. Retail sales volume still fell visibly by 33.9% in May, but the decline narrowed from that of March (-44.0%) and April (-37.5%). While retail sales figures for June are yet to be released, the decline might have narrowed further as the local epidemic abated and economic sentiment improved during the month.

As for exports, the external environment remained challenging with major economies sinking into deep recession. On the positive side, the swift recovery of the Mainland economy in the second quarter rendered support to Hong Kong’s merchandise exports, partly offsetting the sharp fall-off in global demand. The year-on-year decline in the volume of merchandise exports narrowed from 9.1% in the first quarter to 4.8% for April and May combined. Nevertheless, as tourism remained at a standstill, exports of services still took a big hit. Investment activities also stayed weak amid uncertain outlook.

In the short run, the COVID-19 pandemic remains a key threat to the global economy and the economic outlook continues to face huge uncertainties. Furthermore, the abrupt worsening of China-US politico-economic relations and heightened geopolitical tensions also added uncertainty to the global economic outlook. These, together with the recent recurrence of the local epidemic, suggest that it may take longer than originally expected for the local economy to recover.

Nevertheless, the development course of the city in the past few decades demonstrate that there lies new opportunities in every crisis, and every difficulty holds the key to future development. Although COVID-19 has taken a toll on the economy, it also highlights the direction to which economic activities should be reformed or strengthened in the future.

For instance, thanks to our advanced digital infrastructure, our financial services sector and certain economic activities have been operating as usual during the epidemic. Digital technologies have enabled a wider range of industries to work from home or maintain effective operation in a remote mode. Besides, under social distancing restrictions, online shopping and foods delivery have become increasingly popular. Shops with online sales channels could hence partially offset the blow dealt by the epidemic. Conceivably, exploring how to develop and strengthen online sales channels would be the way forward for many industries and companies. In this regard, it is necessary for us to promote innovation and technological application in a holistic manner to possibly stand out from competition. On tourism, as we navigate through the epidemic, we should make early plans to explore the new model of operation and development under the “new normal”, and putting priority to promoting high-value added tourism projects should be the future direction.

On the other hand, in the face of escalated China-US tensions, profound changes in the international landscape and the signs of de-globalisation, in addition to the Mainland economy having the domestic economic network taking the primary role while having the dual domestic and international economic networks complementing each other, how Hong Kong enterprises should position and transform themselves to better grasp the opportunities is also worth pondering.

July 26, 2020


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