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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (24528)	10/25/2002 12:08:09 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

HK Economic situation isn't bright: All over the world is the same: Government costs too much. Tax-payer is disappearing. Governments can't adapt to the new realities and are always behind the times. Giant public deficit, stagnated economy and deflation. Rumor of increase of 15% on income tax. Possible downgrade by Standard & Poor on long-term debt. HK can contemplate four alternatives -none of them easy- to brake public deficit: Reduce spending, this reduction already happened with a reduction in salary form public servants. This can make economic growth even less than today's meager 1% and send HK into recession. Increase taxes, which also will put in danger economic growth and will force companies to leave HK to places with less taxation Singapore or South of China mainland. An alternative could be selling land, which in its turn could let property prices plummet, which would make the power owners of middle class flats angry. The fourth would be to devaluate the HK dollar to make exports cheaper and kick off export lead growth and make it attractive for international firms to settle there. But that would increase fuel costs and would make international finance markets uneasy since they have been for too long adjusted to a stable currency. At 7,8 to the USD Hong Kong is the most expensive city in the world, much higher than Tokyo and Osaka. (Hey I need to look how much I am going to spend there Jay!!) According to Mercer Human Resource Consulting. Manhattan is cheaper than HK. But prices are in free fall consumer prices index registers 3,7% September this year if compared to September last year. Even though prices are dropping, the drop can't make a dent on the competitiveness of the big cities of mainland were renting property costs a third of that prices practiced in HK. According to Chew Ping, from Standard & Poor's, the population opposes public cuts and tax increases. Perhaps devaluation would be the only way out. Fiscal situation pointing to deterioration, pressure on fixed exchange rates will only intensify. Agency Moody's says in the long term there are economic benefits on devaluation but with financial problems in the short term.