SCMP Saturday, September 1, 2001

A dreadful year

The economic growth figures announced by the Government yesterday were worse than predicted but no great surprise. All around the globe, economic officials have been downgrading their forecasts, and there is no reason why Hong Kong should be an exception. No matter how it's measured, 2001 is proving to be a dreadful economic year.
This poses two great problems for the SAR's economic experts: there isn't much they can do to reverse the adverse trend, and they have no clear idea about when things will get better. Hong Kong is a prosperous place by global standards but its small economy is heavily dependent upon world trade trends. Its fate is in the hands of others, beyond local control.
Officials made this clear by putting most blame on American consumers. The sharp decline in US imports has affected producers throughout Asia - with China no exception - and this has hurt Hong Kong's economic activity across the board. Comparable decreases in Japan and the European Union have made things worse.
Financial Secretary Antony Leung Kam-chung tried to spin the figures a bit by emphasising that Hong Kong has China behind it, where this year's growth is still projected to reach seven per cent. But Beijing leaders are getting a bit uneasy about this. A People's Daily editorial has warned about "many uncertain factors" overseas and "many difficulties on the road ahead". It said China must, among other things, increase exports to reach the growth target.
Every Asian nation would like to do so, but wealthy consumers have moderated their spending. The prospects for any short-term growth of exports are not good.
Perhaps Hong Kong's best support comes from the fact that its main customer, the US, has the world's largest and most resilient economy. And there are a few bright spots in America for those who look hard enough. Employment remains high, spending is still rising slightly and an inventory backlog is about gone.
If those translate into higher production, profits and imports, Hong Kong will be among the first to benefit.