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Internal and External Threats


The momentum of Hong Kong’s economic growth has been weakening since last year. Economic growth has decreased gradually from 4.6% in Q1 last year to 0.6% in Q1 this year, which is the worst-performing quarter in the past decade. External uncertainties continue to plague Hong Kong’s economy, and the recent social incidents have further dampened local market situation. The short-term economic forecast is not promising.

The China-US trade disputes and conflicts in the technology arena have increased the downside risks facing the global economy. The International Monetary Fund recently revised the global economic growth rate forecast for this year downward to 3.2%, which is the fourth downward revision since October last year, with the total downward revision amounting to 0.7 percentage points. This is also the lowest growth forecast since 2009. Although the market expects a reduction in the federal funds target rate by the US’s Federal Reserve, and central banks of other countries have started to reduce their interest rate or adopting a more relaxed monetary policy, the latest economic figures of Europe, America, Japan and advanced economies in Asia reflect that their economies are indeed in a modest growth. Combining with the possibility of “Hard Brexit” in the UK and tense geopolitical situation in the Middle East, there is downward pressure on the global and Hong Kong economic growth trends.

In the last few months, impacted by external factors, Hong Kong’s export figures were weak. The value of Hong Kong's total goods exports has decreased for eight months in a row, with the decreasing rate accelerating from 1% at the end of last year to 9% last month. Regarding the tourism and retail sector, visitor arrivals on average increased by 15% per month in the first five months of 2019, but the growth was softened to 8.5% in June. Local consumption incentives have been significantly eroded, with the decreasing rate of domestic retail sales increased from 1.6% in Q1 to 3.3% in April to May combined. According to a survey by the Hong Kong Productivity Council, the Hong Kong SME Leading Business Index has dropped to a three-year low, implying a shaken confidence in doing business.

We will announce this week the advance estimates on GDP growth in the second quarter of 2019. Taking into account the external macroeconomic environment and domestic economic situation, we will conduct a midterm review of the GDP growth forecast this year, so as to bring the forecast closer to the current situation and possible changes in the coming months.

The overall economic downturn will inevitably affect the labour market, and hence the unemployment rate may rebound from the low figure of 2.8%. For those sectors which are more seriously affected, such as import and export, wholesale, and construction, the employment situations have already softened. If local consumption continues to stay weak, employment and income of sectors like retail and food & beverage will face downward pressure. The government will consider measures to “support enterprises, safeguard jobs”, so as to stabilise the economy and benefit the livelihood of people.

For the financial market, it has been operated smoothly without abnormal Hong Kong Dollar fund inflows. We will continue to monitor the market situation closely and equip ourselves for possible risks. The assets of the Hong Kong banking system are of high quality with a sufficiency rate of liquidity and consolidated capital adequacy ratio above international standards, which is very robust and healthy.

The recent controversy over the amendment of the extradition bill has provoked large -scale public processions and protests, along with a series of violent storming, affecting both large and small local traders. Many people working in the retail and catering sectors saw a notable drop in business. I believe we all understand that the longer time the protests continue, the more significant the impact will be on SMEs and small traders, which will in turn affect the livelihood of some residents. Besides, these incidents have also undermined Hong Kong’s international image and business environment. To foreign enterprises and tourists, Hong Kong seems to have become unstable and unsafe, affecting their desire to travel, do business and invest in Hong Kong. If the situation persists, our employment and livelihood will be affected.

All the people who care about Hong Kong are deeply concerned about the recent incidents and their development. Many people are experiencing emotional distress due to division and violence, as well as the tension and turbulence that filled the society. Apart from worrying about our relatives and friends, we are more worried about the future of Hong Kong. Regardless of one’s stance on the matter, we are all yearning to find ways to resolve the current crisis.

At this critical moment, the decisions of each one of us are particular important, as they would influence the present circumstances, as well as the future of the next generation. I sincerely hope that everyone can pause and think before taking any action, reject violence, and do not let hatred and violence to be rooted and proliferated in our community.

Social division, hatred and violence are a strong force that would further tighten the already tense society into a deadlock. To resolve this serious conflict, every one of us could contribute. Even with difference stance, there can still be mutual respect, accommodation, and understanding. We must reject violence, communicate with each other, seek mutual understanding and find solutions for the society. Although it might not be a simple challenge under the current social atmosphere, I would urge everyone to treasure Hong Kong as our home, and make a concerted effort to safeguard our homeland.

July 28, 2019