Upbeat jobs market helped by partnership
Unemployment in Hong Kong has dropped to an eight-year low and demand for skilled labour from the mainland will continue to pour money into the wallets of consumers and keep the economy growing at more than 5 per cent a year, economists forecast.
'Employment has been growing at a strong pace for three years running,' noted Goldman Sachs economist Enoch Fung, with the unemployment rate having fallen to 4.3 per cent in February as demand for jobs grew across all sectors.
Goldman Sachs was confident that its top-of-the-consensus gross domestic product growth forecasts of 5.5 per cent for 2007 and 5.7 per cent for 2008 were achievable on the back of strong consumption growth, which in turn was driven by the links between Hong Kong and China.
'In the long run, we foresee positive synergies to Hong Kong's labour market from further economic integration in the Pearl River Delta region,' Mr Fung said.
'We believe this is driving towards greater labour exchanges in Guangdong province, Hong Kong and Macau.'
Hong Kong's special ties with China were written into the Closer Economic Partnership Arrangement (Cepa), a free trade agreement that granted Hong Kong companies preferential treatment when it came to dealing with China. The agreement effectively gave Hong Kong companies a head start over their rivals into the huge mainland markets for goods and services.
According to Hong Kong's Trade & Industry Department, this has 'greatly enhanced the already close economic co-operation and integration between the mainland and Hong Kong'.
That partnership is even more graphically captured by the dominant role played by mainland companies on the Hong Kong stock exchange, and in the flow of skills and employment from both sides of the border.
Meanwhile, the symbiotic relationship between Hong Kong as gateway and China as the world's fastest-growing economy has consolidated Hong Kong's status as a premier global financial centre.
Addressing a financial conference in Hong Kong last month, Martin Wheatley, chief executive of the Securities and Futures Commission, noted that Hong Kong was the premier fund-raising centre for mainland enterprises.
In terms of market capitalisation, Hong Kong's stock market is the sixth largest in the world and the second largest in Asia after Japan. Fund-raising by new listing candidates - the great majority of which are China-related companies - amounted to US$43billion last year, Mr Wheatley said.
This mainland booster ranked the Hong Kong market second in the world by this measure after London and ahead of New York.
The links between Hong Kong and the mainland have also contributed to the explosion of hedge fund activity in Hong Kong, which has become a leading asset management centre for traditional funds and hedge funds. The magazine AsiaHedge reported that Hong Kong attracted the largest number of new Asian hedge funds in Asia over the past two years.
This has created a vast jobs market with added benefits to the Hong Kong economy.
With the world's biggest savings pool (US$2trillion, according to market sources) and the world's largest foreign currency reserve of more than US$1trillion, China has ensured a sustained interest among investors, many of whom have elected to serve the marketplace from Hong Kong.
At the end of December last year, there were 1,173 companies listed on the Hong Kong market, which had a total market capitalisation of about US$1.7 trillion. Of these, about 31 per cent were mainland enterprises, and their aggregate market capitalisation came to US$860billion, or about half of the total market capitalisation. Mr Wheatley said that although Cepa gave preferential access to mainland markets for Hong Kong companies, the flow came in both directions, and under the agreement mainland brokers were also establishing a presence here.
In recognition of the strong and growing ties with the mainland, the Hong Kong Monetary Authority, the territory's de facto central bank, earlier this month launched a dedicated research series on economic, monetary and financial developments in China.
The authority's chief executive, Joseph Yam Chi-kwong, said there was increasing recognition that developments in the mainland economy had important implications for Hong Kong's economic well-being and financial stability, and its role as an international financial centre.
'This recognition is reflected in the HKMA's efforts to foster financial co-operation between Hong Kong and the mainland, and expand our country's financial markets,' Mr Yam said.
'As part of our efforts on this front, we have strengthened our monitoring and research on the mainland economy.
This week we are launching China Economic Issues - a dedicated research series that aims to provide a detailed analysis of economic and financial market issues on the mainland.'
