Financial Secretary Paul Chan took to his blog on Sunday to warn the city’s economic recovery could take longer than hoped. Photo: Nora Tam
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https://scmp.com/news/hong-kong/hong-kong-economy/article/3094748/battered-covid-19-third-wave-and-us-china-showdown Hong Kong economy
Battered by Covid-19 third wave and US-China showdown, Hong Kong recovery could take longer than expected: finance chief
- But while road ahead is filled with uncertainty, Paul Chan sees glimmers of hope, including expected improvement in June retail sales
- The financial secretary also called on landlords, particularly those accepting anti-epidemic funds, to lower rents in spirit of ‘social responsibility’
Retail sales figures for June are expected to improve from the three months prior, Hong Kong Financial Secretary Paul Chan hinted on Sunday. Photo: Felix Wong
Hong Kong’s economy could take longer than expected to recover amid the third wave of Covid-19 cases and a sharp deterioration in US-China ties, the city’s finance chief has warned.
But Financial Secretary Paul Chan Mo-po said the slump in retail sales in June was expected to narrow compared with the months prior, despite the second-quarter economic situation remaining dire.
Chan’s remarks come as the city has struggled to control the latest wave of infections – reporting record tallies for four straight days – and to respond to the recent US move to end special trade preferences for the international financial hub.
“The sharp deterioration in Sino-US political, economic and trade relations and the rising geopolitical tensions have added uncertainty to the global economic outlook,” he said in his blog on Sunday.
“In addition to the recent recurrence of the local epidemic, the local economy could take longer than originally expected to recover.”
US-China relations are at their lowest point in decades. The Trump administration last week took the unprecedented move of ordering the Chinese consulate in Houston to close, triggering China to retaliate by ordering the US to close its consulate in Chengdu.
Beijing’s imposition of a sweeping new national security law for Hong Kong last month saw the US end trade preferences in return and sign into law an act authorising sanctions against city officials.
In an article on his official blog, titled “A rugged road to recovery”, Chan said the economic situation in the second quarter remained dire, though the contraction seemed to have slowed slightly and gradually stabilised.
He hinted that the decline in Hong Kong’s retail sales would likely narrow in June, compared with March to May, when monthly figures were down 34 to 44 per cent from a year earlier. Official June numbers will be out as early as the end of this week.
Hong Kong has enjoyed a boost to its own exported goods numbers thanks to a strong economic recovery in mainland China for the second quarter. Photo: Sun Yeung
The finance chief also said that while major economies around the globe had fallen into deep recession, the rapid recovery of mainland China in the second quarter provided support for Hong Kong’s own exports of goods, partially offsetting the impact of the drop in global demand.
The year-on-year decline in the volume of exports narrowed from 9.1 per cent in the first quarter to 4.8 per cent for April and May combined, Chan said.
“However, the tourism industry continues to be frozen, the service industry exports are still hit hard, and investment activities continue to be weak due to uncertain prospects,” he added.
The city government rolled out multiple rounds of relief measures to control the unemployment during the months-long pandemic, including the Employment Support Scheme (ESS), which has disbursed wage subsidies to more than 100,000 local employers.
Chan said the authorities would make continuous, careful observations and adjust measures decisively.
He also appealed to landlords, particularly those receiving government subsidies, to cut rents to help restaurants and small and medium-sized enterprises.
“In addition to the spirit of contract, social responsibility is also very important, especially for those companies that have received large sums of government subsidies in the ESS,” he said.
“Only those companies who sincerely give back to society and fulfil their social responsibilities can truly be recognised and respected by society.”
Secretary for Labour and Welfare Law Chi-kwong, meanwhile, wrote on his blog on Sunday that details of the second phase of ESS will be announced next month to alleviate unemployment between September and November.