Last year, Hong Kong entered the worst economic recession in its history. While the Sino-US trade war is the external political factor contributing to the current downturn, the “black revolution”, which has lasted for more than half a year, is the internal political factor contributing to the slump. These two causes were absent in the previous three recessions since the Hong Kong Special Administrative Region was established on July 1, 1997. Consequently, the current politically induced downturn is different from the earlier economically induced recessions. To further complicate matters, the Sino-US trade war and the “black revolution” are just the prelude to the “new Cold War” waged by the US on China. Though both parties have signed the first-phase trade agreement, they remain divided on many issues that can hardly be resolved with ease, let alone the fact that America is making an all-out effort to contain China in other areas as well. As for the “black revolution”, which is expected to continue through 2020, it will go on in 2021 and 2022 unless the SAR government stops it this year.
The course of events also differentiates the scale of the current economic slump from the previous ones, which were triggered by financial crises in 1998, 2001 and 2009. In those years, the stock and property markets in Hong Kong plummeted, which then impacted consumer spending and commercial activities. This time, the recession was caused by a trade dispute and reduction in local consumption. When Hong Kong’s GDP began to fall in the second quarter of 2019, the stock and real estate markets were on the rise, with private-apartment prices rising 12 percent in the first half, approaching the 12.8 percent increase in 2017. With the economic recession worsening in the second half, Hong Kong’s GDP fell for three consecutive quarters; nonetheless, the Hang Seng Index rose 9 percent throughout the year.
If the stock and property markets in Hong Kong turn from rising to falling in 2020, the economic recession is bound to worsen, especially the stock market, whose rise is anything but certain this year. In general, the stock market can reflect economic recession even though it may not necessarily be the barometer of a downturn. In December, Hong Kong’s property prices fell back to the level of the first quarter of the same year. If the “black revolution” is not quashed in 2020, property prices will certainly decline further. Unfortunately, it is quite likely that the riots will take a turn for the worse this year simply because Washington will not watch the central government and the Chinese people achieve the “first centennial goal” on the way to the great rejuvenation of the Chinese nation — building a moderately well-off society to celebrate the 100th anniversary of the Communist Party of China in 2021. The US is expected to continue playing the “Taiwan independence card” and the “Hong Kong ‘black revolution’ card”. Now that Tsai Ing-wen has been re-elected as the leader of Taiwan, the pro-independence fervor in Hong Kong will become even more rampant. With the political landscape in Hong Kong shaken violently, how can its stock and property markets be spared from turbulence?
In view of such prospects, the SAR government has to pay close attention to the livelihood of the grassroots communities in Hong Kong. The announcement of 10 subsidies for the public is welcome, but they need to be reinforced.
To start with, the SAR government should avoid raising any government fees. The flashpoint for the yearlong “yellow vests movement” in France was the Macron administration’s decision to raise gasoline and diesel taxes. The protests that led to the cancellation of the 2019 Annual APEC Economic Leaders’ Meeting in Chile were triggered by a slight increment of bus fares by the equivalent of just HK$0.36 (4.6 US cents). Drawing a lesson from these unrests, it would be best for Hong Kong to refrain from increasing electricity tariff and public transportation fares this year.
The next move is to expedite the abolition of the Mandatory Provident Fund offsetting mechanism. Let the financial difficulties of small businesses be shouldered by the SAR government. This needs to be done without delay since the anti-China and anti-communist political faction is setting up many tiny trade unions, composed of at least seven members as required by law, to compete with the Hong Kong Federation of Trade Unions for the functional constituency seats in the upcoming Legislative Council election in September. If the government does not abolish the MPF hedging mechanism in advance, it is likely that the opposition camp will establish more micro trade unions in the name of protecting labor rights.
Last but not least, we need to relate the cause of the rapidly spreading “black revolution” with the deep-seated economic and social issues in Hong Kong. The widening wealth gap has added fuel to the already intense confrontation between different social strata. Against this backdrop, grassroots communities are seeking change instead of stability, and with pessimism rather than optimism. If the living conditions of grassroots communities get worse, the “black revolution” will surely thrive and make the political environment worse and murkier.
The author is a senior research fellow of China Everbright Holdings.
The views do not necessarily reflect those of China Daily.
