Hong Kong’s economic woes are almost entirely the result of three years of Covid-19 self-harm
- Hong Kong must not look to blame a challenging external environment now when its severe zero-Covid regime has strangled its vital travel, tourism and services industries, leaving damage that may be permanent
With so many countries beleaguered by soaring inflation, crippling debt, unprecedented droughts and floods, food and energy shortages, and armed conflict, it seems curmudgeonly to wring hands over Hong Kong’s seemingly modest travails.
My concern is that he seems to make light of the challenges, and has been obfuscating the severity of harm inflicted on our economy over the past three years, some of it perhaps permanent.
The indirect cost of this tourism collapse is huge. At its worst in 2020, the hotel occupancy rate for the first five months of the year averaged 38 per cent. After several rounds of Tourism Board local promotions last year, the occupancy rate was still just 62 per cent for the first 11 months of 2021.
According to the Tourism Board, visitors to Hong Kong spent HK$5,820 per trip and stayed 3.3 nights on average in 2019, which generated HK$260 billion and employed 256,900 people. In the first half of this year, about 76,000 visited Hong Kong; if they each spent HK$5,820, our tourism earnings would amount to about HK$440 million – a drop compared to the 2019 six-month average of HK$130 billion.
That amounts to HK$129.56 billion lost to the economy – lost spending in shops, in restaurants, in bars, in taxis, on the MTR, and job cuts and lost earnings for everyone employed in them.
According to the Census and Statistics Bureau, employment in Hong Kong’s import-export businesses has collapsed from 2016 by 150,000 jobs to about 315,000 today, with people employed in the retail sector down by 120,000 to 479,000.
Only financial services saw growth – up by 91,000 to 853,000, and one has to wonder how sustainable this may be with the stock market 39 per cent lower than its peak in February last year. Certainly the net wealth, and therefore spending power, of the thousands of Hong Kong’s middle-class equity investors has taken a formidable hit.
In downgrading his economic forecast, Chan is no doubt taking account of some of these numbers. In his latest economic report, he warned that “the markedly deteriorating external environment will weigh heavily” on Hong Kong’s economy.
But is it not disingenuous to place blame on the undeniably horrible external environment? Most of the harm I see is self-inflicted – by an unjustifiably severe zero-Covid regime and wilful strangulation of large parts of our economy. If and when we recover depends much more on policies within our domestic control than on a horrid external environment.
David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades