Earlier this month, Hong Kong witnessed the Global Financial Leaders’ Investment Summit, Hong Kong Sevens, and Hong Kong Legal Week 2022 being held in the city. The success of these global events is a clear sign of recovery from the COVID-19 pandemic and the return of normalcy to the city. Chief Executive John Lee Ka-chiu affirmed this sentiment when he addressed financial leaders at the Investment Summit, saying that the worst is over and that business opportunities are emerging in Hong Kong.
Returning to normalcy, however, is not simply reverting to the past. Hong Kong will need to meticulously inspect the changing global landscape while leveraging residents’ wisdom and resilience in its journey to recovery. There are four aspects the city must take care of in the process of recovery.
First, the road to recovery should begin with an assessment of the global landscape. Under the influence of the US, the world has become much more divided than three years ago, the globalization process is drastically challenged, and ideological warfare trumps international rules. The West continues to wax lyrical about decoupling from China, and such remarks that fly in the face of economic reality are well-received by many politicians in the West. This heightened political hostility has added much uncertainty to the world’s economy.
Right now, the global economy bears the brunt of the Russia-Ukraine conflict, which has plunged Europe into its coldest winter since World War II, notably because of the shortage of natural-gas supply. Capital and businesses have been flowing out of Europe and other regions and into the US amid rising energy costs in those regions and aggressive interest rate hikes by the Federal Reserve in the US. The US, after spending a little amount of money in aid to Ukraine, is the main beneficiary of this war, with the influx of capital and businesses. Other economies have more or less felt the pinch of the negative consequences of the war.
Being a small, highly open economy, Hong Kong will have to endure the shock waves of volatility in the international financial market, energy market, global trade, etc. It’s a matter of great urgency for Hong Kong to carefully examine the global political and economic landscapes so that it can formulate suitable development strategies and leverage its institutional advantages to hedge against external risks.
Second, Hong Kong should prepare itself for the resumption of quarantine-free travel between the city and the Chinese mainland, as signs are emerging that cross-boundary travel is likely to normalize in the near future.
Meanwhile, China’s recent efforts to strengthen diplomatic relations with other countries have attracted worldwide attention. State leaders of Vietnam, Pakistan, Tanzania and Germany, which are China’s four major partners from three different continents, visited Beijing and met with President Xi Jinping. Premier Li Keqiang, on the other hand, attended the China-ASEAN (10+1) leaders’ meeting and the ASEAN+3 Leaders’ meeting, and visited Cambodia. Vice-Premier Han Zheng also visited Singapore earlier this month. It’s believed that there will be more upcoming diplomatic exchanges between Chinese and foreign leaders. These visits signify China’s diplomatic activities are slowly returning to normal as COVID-19 restrictions ease.
It’s a matter of time before Hong Kong and the mainland resume quarantine-free travel. Is Hong Kong fully prepared for the opportunities ahead? For instance, the Guangdong-Hong Kong-Macao Greater Bay Area is a major national development project for the three places; Qianhai is a pilot zone for deepening the cooperation between Hong Kong and Shenzhen; the Chinese mainland is a vast market Hong Kong wants to tap into; and the Belt and Road Initiative is a “rich mine” Hong Kong and the mainland can jointly explore. Hong Kong will need to formulate plans to better seize these opportunities and advance its development once cross-boundary quarantine restrictions are completely lifted.
Third, Hong Kong should keep reviewing and strengthening its intrinsic advantages as COVID-19 slowly bows out. While the success of the Global Financial Leaders’ Summit attests to the city’s robust international financial standing, we must not forget that Singapore overtook Hong Kong as the largest foreign exchange market in the Asia-Pacific in April with a daily transaction volume of $549.5 billion, reminding Hong Kong of the need to go the extra mile in enhancing its competitiveness.
At the Investment Summit, Financial Secretary Paul Chan Mo-po stressed that the future of finance lies with financial technology. With the release of the Fintech 2025 Strategy and the policy statement on the development of virtual assets, a conducive environment will be created for the sustainable development of the virtual-asset sector. Chan added that the development of financial infrastructure will remain a core focus, and to better leverage the city’s superconnector role, an online platform will be launched to connect the fintech companies to users in the mainland, Southeast Asia and beyond. Mainland financial experts at the Investment Summit remarked that China is building a high-quality capital market at full speed, and Hong Kong as a highly mature capital market will play an irreplaceable role in the process.
These announcements bode well for the financial industry and will hopefully propel the sector to reach new heights when put into practice, and this will take long-term commitment. Meanwhile, the post-pandemic recovery of the financial industry alone is not enough to drive an economic rebound. The special administrative region government should meticulously assess Hong Kong’s strengths and weaknesses, and adopt a proactive governance philosophy so that a proactive and capable government and efficient market complement each other. When the market is not functioning well, the government should intervene; and the government should play a dominant role in fostering those sectors in which Hong Kong has no advantages. Only by expanding the city’s advantages can Hong Kong sustain its economic development in long run.
Four, Hong Kong should be committed to removing the pain points of the community. The waves of business closures during the pandemic contributed to salary cuts and rising unemployment. Sectors like tourism, retail, hotel, catering and transportation are among the worst hit. The clouds over the global economic landscape also do not bode well for the local labor market. It will take painstaking efforts to eradicate this woe.
Don’t forget we also have other deep-seated problems in housing, elderly care, poverty alleviation and youth development involving education, employment, entrepreneurship and homeownership. As soon as the pandemic peters out, these problems will need to be addressed quickly.
Returning to normalcy is not as straightforward as many people perceive. It’s not just about life getting back to normal but also about returning to the prime period before the pandemic struck. It will take wisdom and concrete measures from the government.
The author is a Hong Kong member of the National Committee of the Chinese People’s Political Consultative Conference and chairman of the Hong Kong New Era Development Thinktank.
The views do not necessarily reflect those of China Daily.