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Jake Van Der Kamp

'Facing rising inflationary pressure, we must watch various policies pragmatically, taking into consideration whether such measures would overstimulate consumption, thereby further increasing inflationary pressure ...
'To avoid creating a continuous and heavy burden on the government we cannot see the giving out of sweeteners as the only solution to problems.'
Financial Secretary John Tsang Chun-wah 
Speech to the Chinese General Chamber of Commerce 
January 5 
So says the biggest candy merchant of them all, a man who showers out sweeteners like a hail storm when the boss takes a fright and then calls it all prudent and pragmatic policy.
But let's examine some of his premises more closely, starting with that one about how he (although, like the Queen, he uses the royal 'we' for pronouncements) must watch various policies pragmatically to resist inflationary pressure.
His predecessors had an opportunity to do this in the 1970s and early 1980s but they muffed the job and turned it over to the US Federal Reserve Board in 1983 by adopting the peg to the US dollar. Financial secretaries ever since have been at liberty to watch monetary policies as closely as they wish but from the spectator stands alone.
This does not sit well with the glory and majesty of the post of financial secretary, of course, and  Tsang is therefore subject to the delusion that, although he sits among the spectators, he does so as a Roman emperor, high above the gladiators in the Coliseum, turning a thumb up or down at the  end of every bout. Allow him the delusion, if you choose, but don't share it.
Then we have his resolve not to overstimulate consumption, a motherly anxiety for our welfare, which may conceivably be proper at times, well, maybe. Let us be grateful, however, that we do not need to be mothered by him on this occasion. There is scant evidence that we overconsume.
Not only is the growth of personal consumption expenditure still less than the growth of overall gross domestic product at present but the biggest consumers in this town are visitors. The value of their purchases over the past year is up 35 per cent from the previous year.
We rip them off quite nicely, too. Inflation in tourist spending is about 10 per cent, more than three times as high as it is for residents. Save your tender concerns for others, Mr  Tsang. 
And now to that bit about avoiding a continuous and heavy burden on government. You may have seen the two charts here before but they need emphasis. Our government's fiscal balance is at present running at a sizzling 12-month surplus of HK$82 billion while our fiscal savings (past budget savings and investment gains combined) now stand at a record HK$1.2 trillion. That's a savings of more than half a million Hong Kong dollars per household.
Go ahead. Say, 'wow, you gotta be kiddin!' No, I'm not.
Now I can't tell you what  Tsang's idea of continuous and heavy burden might be, but the only one I see at present is the burden of too great a collection of revenue from the tax-paying public at a time when savings for a rainy day have already far exceeded requirements. This isn't prudent. This is just miserly.
But not to worry. The candy showering machine remains in full operation and is called out for all deserving corporate beggars. This is how it comes about that someone across the border can say 'boo' and  Tsang will immediately demand that we shower out HK$67 billion for a high-speed railway that we never knew we needed.
This is how billions can be allocated to build a new university on contaminated mud at the remote Lok Ma Chau Loop for the benefit of the mysterious owners who are annoyed at how long it has taken them to turn a speculative profit on the land. 
It is how our government has come to guarantee more than HK$100 billion in loans to small and medium-sized enterprises that can prove they are poor loan risks.
The danger is not that Tsang's policies may overstimulate consumption. Have no fear. The only danger is that his policies may overstimulate investment.
But it is not a real danger, at least not an inflationary one. Given the wasteful nature of many of these investment projects, most of the money will just vanish anyway. How's that for an anti-inflation policy?



Tsang's policies aren't prudent or pragmatic, but miserly