SCMP Friday, October 5, 2001
Economist warns of long recession
Updated at 5.30pm:
Hong Kong could face quite a long recession due to a weakening global economy and internal economic restructuring, a leading economist said on Thursday.
Hang Seng Bank's senior economic research manager Vincent Kwan said the SAR's economy currently faced great uncertainty.
''It is difficult to say when Hong Kong will recover from this downturn and when the global economy will recover,'' Mr Kwan told SCMP.com.
Unemployment was likely to rise and domestic consumption would be weakened.
''Many people's incomes are going to be affected in the economic slowdown. They should understand that the uncertain economic situation would last a long time,'' he added.
Mr Kwan would not elaborate on whether the Hong Kong-US dollar peg should be abolished, but said the SAR still remained competitive with the peg.
Meanwhile, the latest issue of the Hang Seng Economic Monthly, argues that greater ''economic convergence'' between the SAR and China may be the key to recovery.
''When the mainland embarked on economic reforms in the 1980s, the export sectors of China and Hong Kong underwent convergence through the revival of re-exports. The process was accelerated in the run-up to the territory's re-unification with China in 1997 and further thereafter,'' the report said.
''However, the domestic economic sectors of the mainland and Hong Kong are still far from fully interfaced, handicapping the ability of Hong Kong to benefit from the prosperity of the mainland,'' it said.
Flows of capital, goods and people across the boundary northward were ''practically unrestricted'' but reverse flows still subject to administrative measures.
''Only when this handicap has been overcome will Hong Kong fully capitalise on its potential and value as the mainland's metropolitan city and Asia's world city,'' the report said.