Macro interpretation
Written by: Jingjing He
2020-03-17 12:15
Last updated: 2020-03-17 12:15The number of newly diagnosed patients with new coronary pneumonia in China and Hong Kong has declined recently. For the time being, Hong Kong is expected to avoid a large-scale community infection like SARS. However, the decrease in the number of infections does not mean that the impact of this epidemic on Hong Kong's economy is less than that of SARS. As the epidemic spread to Europe and the United States, it triggered a global stock market disaster.
As an international financial city, Hong Kong's economy is closely related to finance. Since the reunification in 1997, many major economic downturns have occurred after the stock market disaster. The Asian financial crisis in 1997, the Internet bubble burst in 2000, and the United States in 2008 After the financial tsunami, Hong Kong has entered a recession. In terms of economic growth, the worst impact was the Asian financial turmoil. Hong Kong's gross domestic product (GDP) still increased by 5.1% in 1997. However, due to the financial turmoil, it experienced a negative growth of 5.9% by 1998. The unemployment rate has also risen from about 2% in 1997. Later, Hong Kong was hit by both the Internet bubble and SARS. The unemployment rate rose above the 8% mark in 2003, the highest level in recent years. The current situation in Hong Kong is similar to that in 2003, and it is even more serious. It must not be taken lightly.
The outbreak triggered a global stock disaster. The Dow once fell nearly 3000 points in a single day. (Reuters)
Hong Kong Economic Miracle V bomb after SARS
Looking at the retail, catering, and accommodation industries alone, they account for a limited proportion of Hong Kong's GDP, which together account for less than 7%. It seems that no matter how much the decline, it is difficult to shake the Hong Kong economy. But in fact, although the output value of these industries is not high, they employ a large number of people. Accommodation and catering services employ more than 290,000 people. Retail also employs more than 270,000 people. Together, they account for 15% of the employed population. Once these industries fail, the unemployment rate will increase sharply, and consumer confidence and other industries will also be damaged.
And the epidemic is affecting the entire service industry. Take SARS in 2003 as an example. At the time, the epidemic killed 299 people, school suspensions, market consumption, and economic activity fell sharply. The service industry was the first to suffer. At that time, the service industry accounted for 85% of GDP, but the growth rate plummeted from 5.6% to 0.8 %, Which caused Hong Kong's quarterly GDP to decline rapidly to negative growth in 2003, and the unemployment rate subsequently rose to 8.5%, reaching its peak since the transfer of sovereignty.
The impact of SARS on the financial industry is relatively minor. In addition, after the outbreak was controlled in May of that year, in June China and Hong Kong signed the "Continent and Hong Kong Closer Economic Partnership Arrangement" (CEPA) and opened up freely, so that Hong Kong's economy quickly stabilized. Of the four quarters of 2003, only the second quarter fell into recession (-0.6%). By the third and fourth quarters, economic growth had rebounded sharply to 4% and 4.7%. For the whole year, the economic growth rate in 2003 was as high as 3.1%, which was higher than 1.66% in 2002 and 0.56% in 2001.
After SARS, Hong Kong's economy rebounded rapidly. (Profile picture)
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Difficult to find strong measures to help Hong Kong economy
However, after SARS, Hong Kong's rapid economic recovery is a special event. At that time, the central government gave a "big gift" and introduced CEPA and an open and free travel policy, so that all industries in Hong Kong (especially retail and tourism) could benefit from the huge market in the Mainland. With less integration, it is difficult for the central government to launch more such powerful "opening up" measures to help the Hong Kong economy. Even if the Mainland further relaxes the travel and consumption of mainlanders in Hong Kong and has experienced the contradictions between China and Hong Kong and social conflicts in recent years, whether Hong Kong people still welcome mainland tourists and whether mainlanders are still willing to come to Hong Kong for consumption is still a big question.
And unlike SARS, the current Hong Kong economy is even worse. GDP growth in the first quarter of 2003 was as high as 3.9%. However, before the outbreak of the new crown pneumonia, Hong Kong ’s economic GDP fell by 1.2% in real terms last year, the first time since 2009. Annual decline, the fourth quarter GDP fell by 2.9% in real terms. The economic situation is already poor, and there is a lack of measures like "freedom" to save Hong Kong's economy. Hong Kong's economy this year will be worse than 2003. It is not hard to imagine.
Hong Kong's economy owes new growth points. (Profile picture)
Hong Kong's economy owes new growth points
If the epidemic is only a temporary problem, the more fundamental problem of Hong Kong's economy lies in the singularity and aging of the industry. Real estate, trade and finance-related industries account for nearly 60% of Hong Kong's GDP. With the global economic slowdown and the financial turmoil caused by the epidemic, The growth of several industries will inevitably slow down or even reverse.
Other industries also lack new growth points. The fastest-growing retail tourism industry in the past has peaked and declined. The government has promoted the so-called six emerging industries in the past, but the climate has not yet formed. In the past ten years, the proportion of each emerging industry in GDP has increased significantly. limited. The cultural and creative industries remained at about 4%, the medical industry increased from 1% to 2%, the education industry remained at about 1%, and the innovative technology industry, testing and certification industry, and environmental protection industry all remained below 1%. It is hoped that these industries with such small scales and limited growth rates will become the "locomotive" of Hong Kong's new economy. Hong Kong's economic future is not optimistic.
The above is an abridged version of the "Hong Kong 01" weekly report (March 16, 2020), "[Pneumonia Bear Market] New Crown Pneumonia Hits Hong Kong Baiye SARS Difficultly to Reappear".
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