Faber offers 'borderless' solution to HK's woes
INVESTMENT ADVISER Marc Faber has come up with a radical solution to Hong Kong's seemingly intractable economic problems: tear down the border.
'One country, two systems' could be done away with in a stroke.
Creating the Special Administrative Region may turn out to be an unfortunate legacy left behind by Hong Kong's former colonial masters - the British.
'They have kind of built this wall around the economy. It may be better for Hong Kong if it was formally integrated into the Chinese economy, used the [yuan] and became just another city in China,' said Mr Faber, who is famed for his bearish views on the SAR.
Some sectors of the economy, such as property, might suffer if the border was knocked down, Mr Faber said. He estimated it could cause flat prices to drop another 30 per cent, but at least the overhang from the ongoing arbitrage with lower real estate prices across the border would be ended in one fell swoop.
'Property prices would diminish, that would be quite likely. Then they would become cheap enough to attract buyers again,' he said.
He believed the gains in other sectors might outweigh the pain elsewhere, with tourism and transport, for example, getting a boost from better access to the mainland's booming economy. Hong Kong's port operations should see more throughput if there were no border to slow shipments, particularly if handling charges were lowered.
Trade could be further enhanced if the opening of the border was accompanied by building better links, including the Zhuhai bridge.
With manufacturing already moved across the border, Hong Kong was now 90 per cent a service economy, with that 90 per cent split 70:30 between trading and financial services, Mr Faber said. Modern communications and the opening up of China were eroding Hong Kong's traditional middleman role, making its position as an enclave increasingly untenable.
A borderless Hong Kong shorn of its own currency could still retain its role as a financial centre by running a US dollar capital market, he said.
Without doing something radical, 'I don't see where a catalyst can come from to lift the economy out of the doldrums', he said.
Under the Sino-British agreement, Hong Kong would eventually lose its special status anyway, said Mr Faber. As for the loss of the government, that should not be a burden as at 'international meetings nobody takes them seriously . . . everybody knows it is a puppet government'.
Opening the border might not be the complete solution for Hong Kong's problems but 'it's something people ought to consider', said Mr Faber.