• Wed
  • Oct 1, 2014
  • Updated: 9:37am
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ECONOMY

Hong Kong Monetary Authority chief Norman Chan adds to gloom on economy

Norman Chan says higher rates in US may spur capital flight in region and hurt city

PUBLISHED : Monday, 11 August, 2014, 11:28pm
UPDATED : Tuesday, 12 August, 2014, 7:54am

Hong Kong's de facto central bank chief Norman Chan Tak-lam warned that the city's financial system could come under pressure when the United States raises its interest rates - a day after Financial Secretary John Tsang Chun-wah said the city's economy may face a "perfect storm".

Their comments came as some economists warned that the outbreak of Ebola had added extra uncertainty to Hong Kong's economic outlook, which is already clouded by political turmoil, stubbornly high home prices and sluggish retail sales.

In the Hong Kong Monetary Authority's bulletin yesterday, Chan warned of the possibility of capital flight from emerging economies if the US Federal Reserve raised rates next year.

Tsang warned on Sunday that the government would lower its forecast for Hong Kong's gross domestic product growth this year, after a disappointing second quarter that saw growth slow and unemployment rise slightly. GDP growth was originally predicted to range between 3 and 4 per cent for 2014.

The government is due to reveal second-quarter economic data, including GDP, on Friday.

Terence Chong Tai-leung, an associate professor of economics at Chinese University, said he was concerned about Ebola's impact if the deadly virus reached Hong Kong. "The impact could be comparable with that brought by Sars in 2003," he said.

Simon Wong Ka-wo, chairman of the city's Chamber of Food and Beverage Industry, was also worried about the impact of Ebola on the catering industry.

"Hundreds of restaurants were forced to close down during Sars. That was a dreadful experience and we don't want to see it again," Wong said.

Chong expects GDP growth for the whole of this year to be between 2.5 and 3 per cent, taking into account factors like Occupy Central and a potential interest rate rise - but provided the city can avoid Ebola infections.

"After Beijing comes up with a decision on electoral reform [for the 2017 chief executive poll], the political uncertainties will be dispelled and the market will be back to normal," Chong said.

"Even if the organisers of Occupy Central are unhappy with Beijing's decision, they are likely to organise another round of campaigning instead of staying in Central for months or years. Therefore, it's very unlikely the economic impact of Occupy Central will be long-lasting."

 

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This article is now closed to comments

roy.lau.0083
Many people think about this announcement which is a "The Boy Who Cried Wolf". Federal central bank rise interest rate, Ebola virus outbreak around the world, geopolitical situation is increasingly unstable.
If all bad news occur on one time. There is the most disastrous situation since the beginning of human history. Furthermore, if it existed there situation is irreversibly and running out of control. I'm deeply convinced not man or woman can settled it in short period,Even Janet Yellen, excepted superman.
In myriad people have read this article will concern about, that Is it exaggerate the outcome? how many possibility will occur? But by the standpoint of Norman Chan, the Hong Kong's de facto central bank chief, He one of duty is maintaining the Hong Kong Finance system stabilization. So he need to find out the most far-reaching influence elements and eliminate its. Thereby, I think that he is doing his duty due diligent. Don't forget it in 2008 financial tsunami, US government slightly inferior to bankrupt.On the this moment, myriad people gradual forget the punishment. Norman Chan give a foreshadow of next finance crisis to us and remind us to manage ourselves investment risk control. Certainly, you can see him as a "The Boy" of the "The Boy Who Cried Wolf" keep on to ignore. After all, there is your freedom.
sunnymedina
This whole Ebola thing is totally blown out of proportion. Outbreaks are happening in arguably in some of the most remote spots of West Africa, no Asian airlines fly to any of these places. Why will there be a capital flight from HK anyway if the HKD/USD peg remains? A rise in interest rates will be welcome for most HKers, a correction in property prices is long over due.
53d75753-a73c-4283-9ccc-52c00a3209cb
"The impact [of Ebola] could be comparable with that brought by Sars in 2003" - Terence Chong Tai-leung needs to stop appearing in the press and choose a different career path, because this statement is so stupid on so many levels that it warps reality.
dienw
Agreed. Good job he wasn't on that Virgin flight.....
KwunTongBypass
Is this THE 'Norman Chan', or just A 'Norman Chan'?
virokick
Even if we deposited another $1 trillion dollars - these people will still warn of risk.
Risk for who? Protecting the wealth for who ?
In HK, the rich tycoons get systematic protection - a free government insurance, incase the market corrects , incase rates go up.
Ant Lee
To think interest rate increase will cause a storm is ignorant and naive. The US will only increase interest rate when there is improvement in the economy with solid growth - definitely not to blindly follow a predetermined timetable (like our HK officials). It is obvious that John Tsang's hidden agenda is to mindlessly increase our reserves and prepare for one day when Beijing configure out a way to channel our reserves into mainland china.
cleareye
More irresponsible comments from the MA. Dare I ask Mr. Chan that capital flight to where, if global interest rates were to follow the U.S.? What about all the RMB sitting in Hong Kong, are they going to fly back to China? Howe big is Hong Kong's debt market? Hong Kong is predominantly a service economy hence loans towards industries are very little, which industry will the rise in interest rate affect? Perhaps only the property market whereby the developers will face higher land carrying cost, and may bleed their inventory into the housing market. Would that be bad? Please run some real, instead of imaginary, numbers, and revise your B.S.
chuchu59
It takes no Einstein to predict that there will be adverse consequences on HK's economy if USA raises interest rates but then it can be said our economy had blossomed for many years due to a low-interest rate environment and which had led to insane housing prices. Sooner or later, interest rates will have to rise and we have to cope with it. The same applies for Ebola or for that matter any deadly viruses. We need to take all preventive measures known to mankind to lessen the effects if this does reach HK.
Meanwhile, I beg to disagree with CHONG that after Beijing comes out with a decision on electoral reform the political uncertainties will be dispelled. This will only be true if the decision is not forced on the opposition. If the decision contains elements which are against the wishes of the population in general there is likely to be even more rows resulting in even more political uncertainty. There does not seem to be any likelihood of a compromise so should Beijing come up with a hardline decision the outlook may be bleak.
aplucky1
oh shut up norman
maybe you should save another trillion dollars for a rainy day you massive BUFFOON

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