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Financial Secretary


Reinforcing Recovery Momentum and Creating Strong Impetus for Growth

Despite the recent scorching weather, flocks of people were seen inside shopping malls or on the streets, with many of them queuing up at popular restaurants, shops and tourist attractions. The Book Fair and the Ani-Com & Games Hong Kong held recently were swarming with visitors, many of whom were willing to spend a fortune on the items they loved. While the disbursement of consumption vouchers by the Government further stimulates this keen consumption sentiment, the series of events under the “Happy Hong Kong” campaign and the bazaars organised by other groups have offered more options for people to enjoy themselves during the weekends.

Among others, the “Harbour Chill Carnival” organised by the Hong Kong Tourism Board has attracted many people to join the event in the past four weekends. Last night, my friends were thrilled to enjoy the shows on the water stage and watch the pyrotechnics within a close distance at the Wan Chai Promenade against the beautiful backdrop of Victoria Harbour. They said it was just like a pleasant and surprising reunion after going through years of the pandemic. The Carnival featured street performance, X Game demonstrations, etc., offering diverse programmes suitable for all ages. In the past two weekends, many people joined the Carnival after visiting the Book Fair or Ani-com & Games. I would highly recommend that you seize the chance of the last weekend of the Carnival (5 & 6 August) to enjoy the breathtaking view of the promenade and have an unforgettable joyful moment.

Statistics show that the economic situation is gradually improving. As Hong Kong has resumed normal and convenient travel with the Mainland and the rest of the world, local consumption and inbound tourism are the main drivers of economic recovery this year so far.

Among the three driving forces of Hong Kong’s economic growth, private consumption remained the key pillar supporting growth in the second quarter. After a 24% year-on-year increase in the first quarter, the value of total retail sales continued to rise by 17% in April and May combined, recovering to more than 85% of the level in the same period in 2018. For restaurants, while total receipts for the second quarter will only be released on Thursday, they are expected to continue to grow visibly year-on-year and remain at above the average monthly level of $9 billion as in the first quarter.

However, merchandise exports, another driving force, continued to face severe pressure amid the persistently weak external environment. After an 18% year-on-year decline in the first quarter, the value of Hong Kong’s merchandise exports continued to fall by 13% year-on-year in the second quarter. Exports to the Mainland, the United States and the European Union all shrank. Exports to most other major Asian markets continued to fall by varying degrees.

As for the last driving force, fixed investment, it has recently shown signs of slowing down, after reversing a decline in the first quarter. Affected by interest rate hikes and the weaker external economic outlook, fixed investment is expected to soften slightly in the second quarter.

As the market expects interest rates in advanced economies to remain high for some time, a host of factors such as tightened financial conditions, geopolitics, and the global and Mainland economic situations have put asset market performance under pressure. The average daily turnover of the Hong Kong stock market was $102.8 billion in the second quarter, about 20% lower than in the first quarter. Last Friday, the Hang Seng Index closed 2.4% lower than at the end of March. Similarly, the residential property market was quiet in recent months, with an average of 4 066 transactions per month in the second quarter, 13% lower than the number in the first quarter. Property prices have also slightly adjusted downwards recently, though the Residential Property Price Index and the Rent Index as at end June were still about 4.3% and 3.2% higher than at the end of last year.

Although the advance estimates of Gross Domestic Product for the second quarter to be released tomorrow may show the year-on-year growth rate to be slightly slower than in the first quarter, the economy as a whole is still on the track of improvement. As a matter of fact, the road to recovery is often bumpy; while there are ups and downs, it is important that the upward trend be maintained.

Looking ahead in the near term, some positive factors have emerged in the external environment. Last week, under the leadership of General Secretary Xi Jinping, the Political Bureau of the Central Committee of the Communist Party of China analysed the current economic situation in the Mainland, and made arrangements for the work on the economy in the second half of the year. Efforts will be made to expand domestic demand and boost market confidence, which include lifting consumption by increasing household income, giving full play to the Government’s role in driving investment, and spurring private investment, while optimising the real estate market policy and stabilising foreign trade and foreign investment. These measures will lend strong support to the Mainland in attaining faster economic growth this year, and will be beneficial to different economic sectors in Hong Kong.

While remaining optimistic in general, we have to pay attention to some changes in the environment and respond proactively to new circumstances. For example, after three years of pandemic, the lifestyle of many people has changed with fewer people going out and spending at night. Meanwhile, nearby cities such as Shenzhen have developed attractive leisure spots in recent years. Coupled with the resumption of convenient travel between the two places, there has been a marked increase in the number of Hong Kong people going north for consumption. In addition, many sectors have indicated that in recent months, Mainland visitors coming to Hong Kong seem to be more interested in in-depth local cultural attractions, and their consumption patterns may have changed.

As the lifestyle and consumption pattern of our residents and visitors continue to evolve, we need to come up with more distinctive and creative marketing strategies and initiatives as well as better products and services; generate new momentum for consumption growth; enhance Hong Kong’s attractiveness and competitiveness as a tourist destination, an events capital, a culinary paradise and a city renowned for its hospitality; and attract members of the public as well as visitors to spend and enjoy themselves in Hong Kong. We hope to join hands with the industries in exploring innovative ideas, with a view to boosting the market and our economy.

In the medium to long term, I have full confidence in the development of Hong Kong. Under the “One Country, Two Systems” principle, Hong Kong has unique and irreplaceable advantages. With the staunch support of our country, we will continue to fulfil our role as the “double gateway” connecting the Mainland and the world: on the one hand, assisting Mainland enterprises to tap into international markets, and promoting mutual access between the capital markets of the Mainland and the world; on the other, attracting capital, talent and enterprises from around the globe to Hong Kong.

Taking attracting enterprises and investments for example, since the establishment of the Office for Attracting Strategic Enterprises at the end of last year, it has met with more than 150 enterprises, many of which are leaders in their respective industries, or companies engaging in cutting-edge technologies. Some of them have already confirmed landing in Hong Kong. The first batch of strategic enterprises are mainly focused on life and health technologies, artificial intelligence and data science, as well as fintech.

All in all, as the external environment remains complicated and volatile, we must respond in a flexible and proactive manner so that we can continue to reinforce our recovery momentum and strengthen our impetus for growth. With the staunch support from our country, as well as the concerted efforts of the Government and different sectors of the community, Hong Kong’s economy will definitely move forward and grow strong, along a more comprehensive and diversified direction.

July 30, 2023

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