Safeguarding Hong Kong
The Hong Kong economy continued to improve, with just-announced economic growth in Q2 reaching 7.6%. Although the growth was slightly lower than the 8% recorded in Q1, the economy has indeed rebounded for the second consecutive quarter, yielding a 7.8% growth for the first half of the year as a whole. Considering the robust economic performance in the first half, the growth forecast for the whole year is revised upwards from 3.5%-5.5% to 5.5%-6.5%. There should be room for the economy to further improve in the latter half of the year, though the extent will depend on the local and global epidemic situation in the next few months.
Hong Kong's total exports of goods grew for four consecutive quarters and rose by 20.2% in Q2, benefiting from strong exports to the Mainland. Meanwhile, the local epidemic situation has been stabilised in recent months, which provided favourable conditions for further economic revival. For example, fixed investment grew by 23.8% in the previous quarter. Private consumption expenditure, after having experienced contraction for a year and a half, started to improve since early this year and rose further by 6.8% in Q2 after growing by 2.1% in Q1. Private consumption should continue to gather steam as the effect of the consumption vouchers begins to kick off in August.
As shown in past data, when private consumption continues to improve, the labour market will fare better in tandem. This is because about one-third of Hong Kong's wage earners are engaged in the retail, restaurants, tourism, and logistics and transportation sectors, which are closely related to domestic consumption. It is expected that the latest unemployment rate, to be released this week, will fall further from its current level of 5.5% alongside the continuous improvement in private consumption expenditure.
Impacted successively by the violent acts in 2019 and the epidemic, the unemployment rate rose from 3.4% at the start of 2020 to the peak of 7.2% at the beginning of this year. Although notable improvement has been seen in the employment situation in recent months, it will be difficult for the unemployment rate to fall back to the low level prior to the pandemic in the near term, unless the epidemic becomes fully contained and travelling between Hong Kong and the Mainland as well as the rest of the world resumes. To support people's livelihood and protect the jobs, it is imperative to keep the epidemic under control. This fight against the epidemic has been going on for a year and a half, and time has shown that this is not only a fight for epidemic prevention and control, but also a battle to protect the economy. Protecting citizens' health and livelihood is equally important.
In order for Hong Kong to achieve steady economic recovery, we must create favourable conditions for our society and economy. While we must sustain our efforts in implementing effective anti-epidemic measures, it is equally important that we strive to maintain the safety and stability of our society and withstand external political interference. Only then can Hong Kong's economy continue to grow. Our country has been sparing no efforts in maintaining the safety and stability of Hong Kong and ensuring its prosperity and development. Following the violent acts in 2019, the Central Government has enacted for Hong Kong the National Security Law and improved the electoral system for the sake of Hong Kong's long-term stability. In the face of the disruptions to business operation caused by the arbitrary unilateral sanctions imposed by the US, an Anti-Foreign Sanctions Law was passed by the Standing Committee of the National People's Congress (NPCSC) in June. How the Law will be implemented in Hong Kong has yet to be decided by the NPCSC, but it is evident from the developments over the past two years that every move of our country is a robust response to emerging challenges and is for the good of Hong Kong's steady development in the long run.
Our country's rapid development has been met with repeated unreasonable suppression by the US. The US has even made use of Hong Kong as a pawn to interfere with our country's development, such as revoking Hong Kong's special tariff status, implementing export control on technology products, spreading malicious rumours about Hong Kong's business environment, and even imposing arbitrary sanctions against officials of both the Central Government and the HKSAR Government. All these are attempts to cause serious disturbance to our business environment and such bullying acts are intensifying. The Anti-Foreign Sanctions Law recently passed by the NPCSC aims to make available more tools in the "policy tool box", so that counter-measures of comparable strength may be taken in response to any sanctions imposed. Increasing the options in the "tool box" may be regarded as a "passive" and defensive move to ensure that we are strong enough to fight back. By doing so, we can force the barbaric opponents to face the reality and return to rational negotiation. This is a strategy of fighting a war to end wars.
The Anti-Foreign Sanctions Law performs its functions in two ways. First, it stops any attempt by an organisation or individual to enforce the so-called sanctions imposed by foreign countries. Second, it brings our country's counter-measures into implementation. Whether the law is to cut off the "long arms" extended by foreign countries through imposing the so-called sanctions or to bring our own counter-measures into implementation, its ultimate purpose is to restore market order and safeguard the development interests of corporations engaging in normal business activities. In fact, similar policies for implementing counter-measures are also in place in the European Union and the UK to protect their own interests. Before 1997, Hong Kong also countered the imposition of additional trade restrictions by other countries to mitigate their impacts on Hong Kong enterprises through legislation (Protection of Trading Interests Ordinance (Cap. 471)). Based on the same rationale, our country has enacted the Anti-Foreign Sanctions Law to safeguard our national dignity, safety and development interests.
Anti-foreign sanctions is a matter of foreign affairs within the purview of the Central Authorities, and Hong Kong has a constitutional obligation to get the Anti-Foreign Sanctions Law implemented. The law drafting approach in the Mainland is different from that in Hong Kong. Many laws in the Mainland just establish the fundamental principles, leaving the implementation details to be worked out in future or letting the relevant government departments to enforce them in the form of administrative measures. The Anti-Foreign Sanctions Law is a national law that establishes the fundamental principles. On the operational front, the law will be implemented in Hong Kong having due regard to our actual circumstances and the status of Hong Kong as an international financial, trading and maritime centre. Nevertheless, it is foreseeable that some people may make use of this issue to create publicity stunts to undermine Hong Kong's status as an international financial centre, smear our business environment, or even benefit themselves by causing market fluctuations. We must stay alert and prepared, paying greater attention to risk management under such circumstances.
August 15, 2021