Hong Kong has really had only one economic policy during the past two years: Buying off discontent and hoping like crazy that property prices stop falling and demand recovers. An unlucky chief executive looks to have finally got a break with a stirring cyclical recovery, driven by a booming mainland economy and a return to normal spending patterns. The bounce-back may have little to do with free-trade deals, 'visionary' technology parks, multiple 'hub' initiatives or the incessant chanting of the 'value-added' mantra, but it does, all the same, look to be real. Financial markets barely registered yesterday's monotonous recital of the government's claimed role in an improved outlook. Markets look forward not back and Tung Chee-hwa's promise to give the community a break from new initiatives was enough to refocus everyone back on whatever they were doing. For much of the working population that means busying themselves in an economy thriving on buoyant capital markets and increased consumption resulting from a reasonably certain belief that deflation has run its course. Mr Tung can be forgiven for seeking a little political sheen from the recovery, but the reality is that a sharp weakening of the US dollar has had more impact on Hong Kong's externally orientated economy than any single public initiative. That he continues to see his grand vision as having cruelly fallen victim to nasty globalisation forces and a malign pre-handover 'bubble' economy points to a continued suspension of disbelief. Fretting that Hong Kong's costs remain too high sends mixed signals that people should think twice about buying anything but life's necessities. A continued belief in the grin-and-bear-it school of cost adjustment via collapsed real wages and household wealth apparently runs deep even while cartel abuse by firms, perversely, barely registers on the agenda. Fortunately, it doesn't matter that much. Hong Kong's economy faces a return to normalcy as households cease precautionary saving and generally go about their business. Simon Pritchard is the Post's Business Editor
