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Hong Kong shoppers at Festival Walk in Kowloon Tong. Photo: Edmond So

Hong Kong set for ‘mild’ growth in first quarter amid upbeat consumption, smaller exports decline: Paul Chan

  • Financial secretary says overall consumption has recently surged 17 per cent on the back of Covid curbs being lifted
  • Chan sounds hopeful note on tourist spending as flight capacity takes off

Hong Kong’s economy could record a “slight or mild” growth in the first quarter of this year and an even better performance in the next period amid a more optimistic consumer outlook and smaller exports decline, the city’s finance chief has said.

Financial Secretary Paul Chan Mo-po on Sunday said the reopening of the border and the lifting of social-distancing measures had boosted spending, contributing to economic recovery.

“As people are able to go out and have fun in the past two months, overall consumption has increased by 17 per cent,” he told a radio programme.

Hong Kong Financial Secretary Paul Chan. Photo: SCMP

With data on total exports for March not yet available, Chan said the observation from import-export declaration records was that the drop in outgoing goods had narrowed to single digits.

He noted that total exports of goods in January and February 2023 had dropped 25 per cent compared with the same period last year as the Covid-19 pandemic hindered the global economy and supply chain.

“Along with consumption going strong, we hope the economy will have a slight or mild growth in the first quarter,” he added.

Chan added a better economic performance in the second quarter was expected.

“We are hopeful about consumption by tourists. As the flight capacity continues to increase, more tourists are expected to visit. We will also organise a number of mega events, which can attract many people to come,” he promised.

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With the new round of consumption vouchers issued on Sunday, Chan said he expected a boost to the economy by 0.6 per cent, with an injection of nearly HK$20 billion (US$2.5 billion) into the market.

Hong Kong’s economy shrank by a worse-than-expected 3.5 per cent last year following a drop in its gross domestic product for four quarters in a row amid the continued weak performance in external trade.

Chan previously forecast the economy would grow from 3.5 per cent to 5.5 per cent this year as the city returned to normality.

Since the pandemic eased at the end of last year, the government has dropped all Covid-19 curbs and travel restrictions, as well as reopened the border with mainland China.

Cross-border travellers at the Hong Kong-Zhuhai-Macau Bridge. Photo: Edmond So

But Chan on Sunday said that as the external environment remained grim and interest rate hikes persisted, economic recovery had to be further strengthened and the government had to strive to “hold the economy together”.

While tourist consumption could bring short-term growth, he said authorities had to plan for mid or long-term strategies to promote high-quality economic development.

“In the financial budget, we have mentioned three areas to focus on, namely, digital economy, Web3 and making Hong Kong the international green tech and green finance centre,” he said.

Asked why Hong Kong had spent less on scientific research than Shenzhen, Chan explained that the latter had more technology enterprises, especially leading ones such as Huawei and Tencent which had contributed a lot of resources.

He said that, while the government had played a guiding role by setting up seed funds or providing investments, more innovation and technology companies had to be established in Hong Kong to promote the development of scientific research.

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Besides focusing on basic scientific research, he added, the innovation and technology sector had to be industrialised to benefit the economy and boost tax revenue.

Chan expressed a wish to lure more midstream and downstream players – responsible for the transformation and commercialisation of research and development results, as well as industrial development respectively – to Hong Kong.

Even if such companies set up production lines in neighbouring regions, Chan said they could conduct their research and register intellectual property licences in Hong Kong.

Chan will head to Beijing on Monday to meet with central government ministries, authorities and organisations in areas ranging from finance to technology.

He will also deliver a speech at Peking University before returning to Hong Kong on April 21.

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