Hong Kong on the road to economic recovery
Updated: 2009-08-07 07:16
By Joseph Li(HK Edition)
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Paul Yin believes the worst is over and Hong Kong will slowly recover from the economic downturn. In his view, Hong Kong needs to pursue a diverse economy that is less dependent on the finance and property sectors. |
Paul Yin, as president of The Chinese Manufacturers' Association of Hong Kong (CMA), has a clear perspective on the damage the financial tsunami has wrought, much like a modern Noah surveying the aftermath of the Flood from the deck of the Ark.
The Hong Kong economy has passed the worst of times, he says. And as to when the economy will bounce back from the global financial tsunami, he says nobody is very sure, but he is hoping that it will be stable.
In the meantime, he urges employers and employees alike to stay in the same boat to endure the difficult times, as he disagrees with enterprises using the economic downturn as an excuse to lay off their staff.
As for the minimum wage bill that will be scrutinized by the Legislative Council, he reckons the initial level should not be set at a very high level, or else it will be the workers who eventually suffer.
Speaking to China Daily in an exclusive interview, Yin said the business environment for Hong Kong-funded manufacturing plants in the Pearl River Delta region was already less than satisfactory before the financial crisis broke out.
A series of new laws, including the Labour Contract Law and more stringent environmental protection regulations have increased the operating costs of the Hong Kong manufacturers and made them struggle to cope.
Not only the onset of the financial tsunami, but also the far-ranging damage it inflicted, was shockingly sudden, he recalled. As the global economies quickly deteriorated, consumption and people's purchasing power both weakened, and the Hong Kong manufacturers were receiving much fewer orders from buyers in the US and Europe than before.
At the same time, the banks tightened their credit line, thus making life even more difficult for the Hong Kong manufacturers. "As the cost of business was also increasing, they had no money to purchase raw materials for production, even though they had received a few orders from their foreign buyers," he lamented.
Fortunately after a few months, the SAR government's measures to rescue small and medium enterprises gradually paid off, giving Hong Kong manufacturers breathing space. In addition, the mainland authorities have also delayed the implementation of harsh laws affecting Hong Kong-funded enterprises.
Export orders returning
"Yet there were very many factories that could not survive the financial crisis and had to be closed," Yin said.
In fact, because of a lack of export orders, the workers of many of the factories did not have enough work to do before the Lunar New Year and, as a result, were either laid off, subjected to pay cuts, or were asked to take extended unpaid leave.
The adverse situation began to improve only in April or May this year, when a small number of overseas orders were restored. "Yet this is far from being a full-scale recovery, as the quantity of the orders is rather small and the prices have been talked down to a rather low level," he said.
Speaking of a March survey, conducted by the CMA, among the Hong Kong manufacturers operating in the Pearl River Delta, he said that most of them believed that it was time they consolidated their strengths through inputting new capital, exploring new markets, enhancing productivity, building brand names and making greater use of innovation.
"They hoped they would be able to enhance their competitive edge when the economy picks up again," he said.
Time to consolidate
He also noted some enterprises have started hiring again, although the salaries on offer are comparatively lower than the pre-crisis level. In his opinion, graduates should secure a job as quickly as possible and not be too concerned about the salary. "They will at least get HK$7,000 or up to HK$8,000 per month, and that's not too bad," he said.
As to the new Internship Programme for University Graduates, he said that it is a good idea, but that the government has ignored the associate degree holders and secondary graduates.
However, there were a huge number of Hong Kong manufacturers quitting because they found the business environment in the Pearl River Delta region most difficult and did not want to invest any further.
"We estimated that about 10 percent of the 40,000-strong Hong Kong manufacturers have chosen to leave the playing field," he said. There were also some factories switching to the mainland's domestic market from the export market, and some switching to the trading business.
"We hope the situation will slowly get better in July and August, as we have seen signs of improvement lately and feel that the worst is behind us," he said. "As we haven't seen any more big US enterprises collapsing in recent months, we hope the US economy will start to improve in September and that the global economy will come back next year."
Yin, somehow, expressed concerns that a very huge volume of hot money is being thrown into Hong Kong's stock and property markets, triggering stock and property price increases.
He said: "What I fear most is the 'big crocodiles' (i.e., the notorious foreign speculators) who bring in the hot money to reap big profits from our stock market and then run away. That's the problem of over-reliance on the finance and real estate sectors so it is important for Hong Kong to pursue balanced and diverse economic development.
More than six industries
"The government does not attach great importance to industrial development in Hong Kong. Following the decline of the manufacturing sector, Hong Kong is unable to absorb workers with little education and few skills, thus generating very serious unemployment and wage disparity problems," he commented.
While on the subject of industries, he felt that the six key industries identified by the Task Force on Economic Challenges are not a bad idea, but that there must be more than six industries in Hong Kong that have great potential.
He questioned: "Does it mean the other industries are not good enough or not worth trying?" In his opinion, the government should elaborate by saying there are more than six industries in Hong Kong that have a competitive edge, but that they will be further developed at a later stage.
(HK Edition 08/07/2009 page4)