The news came earlier that Hong Kong’s government would, as a part of its annual budget, distribute a free HK$10,000 (US$1,286) to every single adult permanent resident over the age of 18, tax-free. The announcement is part of a larger HK$120 billion stimulus package. It comes amid a series of shock waves to the city’s economy which have included the impact of months of violent protests, and then in addition the impact of COVID-19, which has further damaged business, logistics and tourism in the special administrative region. By doing so, the government hopes to boost consumer spending in the city and thus avoid a protracted recession which appears to be all but inevitable.

In the last two quarters of 2019, in the climax of riots within the city, Hong Kong’s gross domestic product fell by 2.9 percent and 2.8 percent respectively, resulting in a 1.2 percent loss for the entire year. Because of the protests as well as actions by the American government to provoke business uncertainty, many people lost confidence in the city as a hub of tourism, culture and also finance. The COVID-19 outbreak has only worsened this damage, with activists placing the government under pressure to prohibit arrivals from the Chinese mainland, with all visitors now subject to a mandatory quarantine. 

The challenge to secure Hong Kong’s economy is going to be long, adversarial and tough. Authorities in the special administrative region must exert great willpower and vision in overcoming multiple political and economic headwinds to preserve Hong Kong’s famed prosperity

With the mainland being the area’s primary source of inbound visits, more turbulence lies ahead.

The data don’t lie. From the 2019 pre-protest total, Hong Kong’s visitor arrivals have plunged from 225,000 a day to 3,000; that’s a 98.7 percent fall. Service exports have fallen by 25 percent; the hotel industry faces a potential staff reduction of up to 40 percent due to falling rates and increased vacancies, while the city’s signature airline Cathay Pacific has placed over 25,000 staff on unpaid leave and has been forced to reduce 90 percent of its capacity going to the Chinese mainland. The question thus arises in the city: Where do things hit the bottom? And how in turn do you prevent a total collapse of the economy?

In the short term, the answer is through stimuli. The new budget, revealed by Financial Secretary Paul Chan Mo-po, increases government spending by 77 percent by the year previously and in turn increases the city’s fiscal deficit to as much as 4.8 percent. The additional spending will be geared toward a new private equity fund, a HK$30 billion assistance scheme to help unemployed families pay rent, additional care and social support for the elderly, increased infrastructure spending, and of course the iconic handout of HK$10,000 to each adult resident. These might prove helpful in mitigating the short-term impact of the COVID-19 on consumer-leaning businesses and buttress the fallout of decreased tourist revenue.

But what about in the long term? Although headlines about Hong Kong have died down, political issues and unrest in the city remain in small pockets, which is the primary driver of the city’s economic decline than a temporary event such as the outbreak. The bid to restore the city’s economy is therefore not so much a fiscal question, as it is a question of confidence. Also, how can the city’s leaders make the international community confident that Hong Kong remains the world-class hub that it was once, before it was marred by extreme levels of political unrest?

In this case, the challenge is bigger than it seems because not everything is within the government’s scope of control. The United States, by passing an act that mandates potential stipulations on Hong Kong’s special status and overtly politicizes its relationship with the Chinese mainland, has in some ways damaged the city’s reputation and induced instability. 

Although US President Donald Trump himself has been pragmatic, a number of American senators continue to ferment unrest and actively undermine the efforts of law enforcement in the city. While this is not a red flag for tourist industries, it is for the financial sector.

This, of course, complicates things further when the obvious reality is that the city’s economic success hinges on deeper commercial integration with the Chinese mainland and plans for the Pearl River Delta. Although some individuals continue to provoke trouble, the government itself has to be firm and decisive on this position and continue to drive forward infrastructure tailored to this goal. This requires political resolve from Chief Executive Carrie Lam Cheng Yuet-ngor, but in turn a greater ability to share out economic benefits in the city and to combat inequality, an aspect of the budget which was criticized by opposition.

In this case, the challenge to secure Hong Kong’s economy is going to be long, adversarial and tough. Authorities in the special administrative region must exert great willpower and vision to overcome multiple political and economic headwinds to preserve Hong Kong’s famed prosperity.

The author is a British political analyst, writer and columnist. 

The views do not necessarily reflect those of China Daily.