The highly external oriented economy of Hong Kong is said to have taken a heavy blow from the global credit crisis in the past 18 months. But you won't notice any sign of recession if you happen to be visiting Hong Kong, like I did last week.
The upmarket malls in the city center as well as those street side bazaars in the more modest districts are packed with shoppers. Even on weekdays, restaurants, where an average dinner can cost up to HK$300 per head, are turning away guests who have not made a booking.
Take a walk in the central business district or the commercial stripe in Causeway Bay and you'd be surprised that there are more people driving Mercedes and Lexus than Volkswagens or Toyotas.
Oh yes. You probably knew that already. Hong Kong is an expensive city to stay. The room rate in a hotel within walking distance of Causeway Bay starts from more than HK$1,000 per night. But the supply of luxury hotel rooms is said to be trailing demand.
While the rest of the developed world is still struggling to reflate its economy, Hong Kong seems to be flying high. Its stock market has recovered smartly from the initial shock of the US credit crunch. The property market is practically on the boil with prices surging to higher peaks.
Some economists have warned that these obvious signs of prosperity have glossed over the underlying economic plight of rising unemployment and dwindling salaries of many workers in the service sector. They have also noted that property prices, fuelled by the low cost of funds, have risen to levels that fewer and fewer people can afford.
Not surprisingly, the call for direct and decisive action by the government, especially in creating jobs, has been getting louder. The government, partly on its own initiative, has introduced various training programs designed to help laid-off workers find alternate employment. Other than that, there is really not much more the government of an economy as open and free as the one in Hong Kong can do.
This is not supposed to be an excuse for non-action. The government can pursue a more ambitious public housing policy to provide shelter to more people at affordable rentals.
In Hong Kong's free economic environment, the government doesn't have the means to and shouldn't get directly involved in creating jobs or re-distribution of wealth. The government can help pump up the economy and indirectly create more jobs by increasing public expenditure on low-cost housing and other civil engineering projects. But any attempt to spend out of a recession is constrained by the need to maintain a balanced budget as stipulated in the Basic Law.
Market forces, operating in a relatively free and competitive economic environment, will, in time, enable the filtering down of wealth. The signs of prosperity a casual visitor sees on the streets and in the malls are indicative of the working of Hong Kong's free economic mechanism.
Presumably, the free spenders in our shops, restaurants and auto salesrooms are people fortunate enough to have cashed in on the stock and property boom. Their increasingly lavish lifestyle is helping to enrich many shop owners, restaurateurs and other service providers, leading to increased competition among these establishments for qualified workers to meet the needs of their customers.
The government has done its part in facilitating the smooth running of the market mechanism by giving taxpayers a noticeable break in the past two fiscal years. From what I saw during my trip to Hong Kong last week, the long-standing government economic policy of "positive non-interventionism" or "small government, big business" has once again proved its effectiveness in the city's unique economic environment.
All that is need is, perhaps, more aggressive measures to bring relief to those people, especially the unskilled workers, who aren't in the position to benefit from the recovery.
(China Daily 12/04/2009 page9)