Signs of stability bring hopes of recovery
Updated: 2009-07-17 07:36
By Joseph Li(HK Edition)
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Rita Lau took up her present position on July 12 , 2008. Her policy portfolios cover a wide range of things including external trade, investment promotion, industry and business support, tourism, competition policy, telecommunication, broadcasting, as well as innovation and technology. |
Economic data for the second quarter of 2009 has brought a ray of hope to the city since the financial tsunami erupted in September last year.
In particular, the unemployment rate has remained stable at 5.3 percent after rising for eight months in a row while the size of the working population has also increased for the first time, by 12,800 persons, after it had shrunk for four consecutive months.
In addition, exporters have since the end of June received new orders from buyers in the US and Europe, a sign that Hong Kong's export trade is beginning to recover.
Speaking to China Daily in an exclusive interview, Secretary for Commerce and Economic Development Rita Lau said she has seen some signs of stability recently, an indication that the government's massive rescue measures have succeeded in helping to keep enterprises in business and enabling them to retain their employees during this critical period.
As to when economy will recover, she forecast it would probably linger at the low ebb for a long time before bouncing back in the form of a 'W-shape' recovery as there will still be a lot of upheavals ahead.
"The situation was seen to be stabilizing in the second quarter," Lau said.
"The fact that exporters in Hong Kong have again received orders from US and European buyers shows there is a genuine market need, as a result of the US government's multi-billion rescue packages and similar measures by respective governments in Europe.
"The stagnation in the jobless rate is also a very important indicator, as it shows the government's rescue measures can help the enterprises to still do business and hire employees," she pointed out.
The government has launched two loan guarantee schemes after the economic recession began to aid Small & Medium Enterprises (SMEs), which constitute 98 percent of the economy in Hong Kong.
With guarantees by the government, over 10,000 enterprises, with more than 180,000 employees, have been able to borrow money from banks and the size of the aggregate loans is close to HK$30 billion.
She was aware that many SMEs could borrow no more than HK$1 million from the banks until the government launched a HK$100 billion special loan guarantee scheme and provided 70 percent guarantee to banks offering loans to SMEs in a second round of action.
Recently, the government has enhanced the scheme by doubling the loan ceiling to HK$12 million per company and increasing the bank guarantee from 70 percent to 80 percent.
"The first blood was very important to them as they needed a bigger cash flow to sustain their businesses. If not for this special loan guarantee scheme, unemployment would be under greater pressure to go up," she said.
Looking back, Lau said the local economy was doing very well in the first half of 2008, but deteriorated quickly and seriously after the financial tsunami struck, wreaking havoc across all sectors with very few escaping the effects.
In assessing the then situation, the government, she said, needed to take very quick actions on several fronts at that time.
As Chief Executive Donald Tsang said, the first thing the government needed to do was to stabilize the financial industry because it was the source of the financial crisis, and then it needed to prop up enterprises and preserve jobs.
As a result, Tsang set up the Task Force on Economic Challenges to map out measures against the financial tsunami.
"The strength and speed of our response measures were unprecedently strong and fast in launching two loan guarantee schemes and providing greater export credit insurance guarantee for Hong Kong exporters," Lau said.
In the first quarter of 2009, the impact of the financial tsunami surfaced. Hong Kong exports shrank by 22.7 percent, dealing a very heavy blow to the city as an external-oriented economy, and gross domestic product (GDP) dropped by 7.8 percent.
Unemployment was under tremendous pressure to go up to 5.3 percent between February and April 2009, as enterprises that were affected by the deteriorating business environment, were forced to cut jobs and wages, she noted.
In order to preserve jobs through saving companies, the government strengthened the loan guarantee scheme to encourage banks to throw a lifeline to the enterprises.
"The situation is beginning to improve, especially exporters that have recently obtained orders again from US and European buyers, and the decrease in export growth has narrowed to 17 percent in the second quarter," she said. "Although the orders now do not involve huge amounts and longer periods like those in the peak years, it shows that the US and European markets have not shrunk."
As to when the global economy will bottom out, Lau said nobody is very sure. "Through exchanges with our trade partners, I guess it will not be a V-shaped rebound. The most optimistic scenario is a W-shaped rebound as there will still be ups and downs," she predicted.
The government has penciled in negative GDP growth between 5.5 percent and 6 percent for this year.
Referring to the views of academics and banking analysts, she said: "I guess the contraction will not be more than 5 percent and will probably be 2 percent or a little higher."
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Rita Lau chats with Wang Yang, Secretary of the CPC Guangdong Provincial Committee and Huang Huahua, Governor of Guangdong Province at a trade fair (above left); signs a MOU on cooperation in wine-related businessees with Luca Zaia, Italian Minister of Agricultural, Food and Forestry Policies in Rome (above right). |
(HK Edition 07/17/2009 page4)