Hong Kong - Chilly in the Red Shadow
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Hong Kong
Chilly in the Red Shadow
By KAREN RICHARDSON
HONG KONG -- Roy Ma feels a little ill at ease as he hands out pamphlets on a crowded Hong Kong pedestrian overpass, jostling for space with counterfeit-handbag hawkers and crippled beggars.
One of thousands of fresh graduates from the city's most prestigious university, Mr. Ma is making US$640 a month in his first job as a stockbroker, about half of what older friends were commanding just two years ago. But business is slow, so his boss has ordered him outside to hand out flyers for three hours a day in an effort to drum up more clients.
He isn't complaining. "I feel very fortunate to have a job," he says.
More than at any time since this former freewheeling British colony was ceded back to China in 1997, Hong Kong's economic future is uncertain. For young Hong Kong people like Mr. Ma, the specter of joblessness is the new reality as the city's economy languishes, with only dim hopes of recovery.
Once hailed as a powerhouse of the Orient and a model of capitalist efficiency, Hong Kong's export-oriented economy has been limping in and out of recession during the past four years. Compared with its neighbors South Korea, Malaysia and the economic juggernaut of China, its recovery in the near term looks to be slow and painful. Lagging economic growth and persistent deflation have walloped property prices and wiped out jobs, giving China a relative luster that isn't only captivating the rest of the world, but Hong Kong itself.
Slow Growth
The government predicts the city's gross domestic product will rise by 1.5% in real terms this year compared with last year, when the economy managed to eke out a 0.6% increase. No official predictions for GDP have been made yet for 2003.
Hong Kong: Economic Overview1
Judging by private-sector and nongovernmental estimates, though, a recovery next year could be slow. Private-sector analyst Ben Simpfendorfer at J.P. Morgan Chase & Co. expects a slight increase to 2.2%.
That modest expectation for growth lags behind the 5.7% growth rate expected by the Asian Development Bank for the Asian region, excluding Japan, next year. The multilateral agency cut its 2003 growth forecast for Hong Kong to 3.5% from 4.8%, ranking it the slowest-growing economy in the region next year.
What is holding Hong Kong back? For one, exports have yet to fully recover from a drastic reduction in 2001: a loss of 5.8% from a gain of 16.6% in 2000. The slowdown in U.S. and European demand, exacerbated by the Sept. 11 terrorist attacks, has resulted in decreases in the amount of exports and re-exports through Hong Kong. In the first half of this year, exports to North America comprised 22.4% of total exports, down from 23.3% one year earlier. Exports to Western Europe eased to 13.9% from 15.3%.
Unlike many other Asian countries such as South Korea and Thailand that manufacture goods and can rely heavily on domestic demand to drive their economies forward, Hong Kong's economy is still largely dependent on export and re-export of goods made just across the border in China. Exports to the rest of Asia rose to 57.3% of total exports from 55% in the same period last year. Still, those few percentage points in export growth pale to consumer-driven gains of Hong Kong's neighbors.
Making the Rent
Another factor weighing on the economy is deflation. Prices have been weak or falling during the past three years, and although the government is predicting a small upturn next year to 0.3% from an estimated fall of 2.8% in 2002, people aren't eager to spend.
Young people including Mr. Ma are loath to part with the little they earn in order to buy or upgrade apartments. "I'll move out once I'm making at least HK$20,000 per month [about US$2,564]," says Mr. Ma, 22 years old, who still lives at home with his parents. Right now, he is just happy to be making enough to pay for his bus fare to the office, never mind contemplating a mortgage. Naturally, the jobless are even less interested in buying.
At 7.6%, Hong Kong's unemployment rate is hovering at near-record levels, and average wages for workers in the finance, insurance, real-estate and business services sectors fell more than 11% between December 2001 and March of this year alone, according to the latest government statistics.
In this environment, the outlook property is dismal. With average property prices falling 50% to 60% since 1997, the government has said it would do "something" to support them. Free-market advocates and landlords are skeptical of the government's success.
"I just don't think the market will ever return to 1997 levels," says landlady Mabel Lok, who rents her 14 Hong Kong apartment units mostly to single expatriates. "It has just fallen so much."
Ms. Lok recalls with nostalgia the boom times of pre-crisis 1997, when a Thai chef at one of Hong Kong's busy eating establishments paid her HK$12,000 per month to live in one of her 480-square-foot flats. Today, he is back in Bangkok and she is renting out his flat for HK$7,500 per month, counting herself among the fortunate.
"There is demand for my flats because they are small and convenient," says Ms. Lok, who has been a landlady for the past 20 years. "But my friends are not able to fill their vacancies because so many foreigners are moving back home, or to China."
Indeed, even the property market is reflecting Hong Kong's insecurity and uncertainty relative to China.
And so Hong Kong should be concerned as China's rapid growth threatens the very core of the "Fragrant Harbor's" existence: The mainland's ports and service sector has emerged as a competitive threat that could render much of Hong Kong's ports business obsolete.
Cargo traffic in neighboring Guangdong province and up the coast in Shanghai has soared from negligible levels in the early 1990s to a combined volume that in 2000 surpassed Hong Kong's. Back-office jobs, from telephone operators to accountants, have also begun moving to Guangdong, just as manufacturing jobs did a decade ago.
Only three years ago, Hong Kong Chief Executive Tung Chee-hwa touted information technology as the brass ring toward which Hong Kong had to reach to compete in the new millennium. But now, as Hong Kong's economy slumps and China zooms ahead, more residents can be heard practicing their Mandarin, the dialect of most of mainland China, than seen exercising their software-development abilities.
Mr. Ma, who is able to converse in his native Cantonese, switch into English and revert effortlessly to Mandarin, isn't considering moving to China yet, even though he is breaking a sweat and handing out few pamphlets on the walkway. "At least I didn't study information technology," he says.
--Ms. Richardson is a Hong Kong-based reporter for The Wall Street Journal.
Write to Karen Richardson at karen.richardson@wsj.com2
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Updated October 28, 2002 |
