Writing in the SCMP, Regina Ip sees…
Hong Kong … at risk of splitting up into two economies. On one end, Hong Kong’s financial, professional and business services are being revived on the back of China’s resurgent, tech-driven economy and the shifting balance of power between Washington and Beijing.
…Hong Kong’s stock market is positioned in the right place at the right time. As tariff chaos and policy flip-flops erode the US’ credibility and moral standing, China has emerged as an oasis of certainty in an increasingly volatile and dangerous world.
…Hong Kong’s consumer services data tell a totally different story. In April, Hong Kong’s retail sales dropped for a 14th consecutive month. Local restaurant receipts dipped in the first quarter of this year, with total receipts by value falling by 0.6 per cent.
…The economic integration of Hong Kong with [nearby cities] has contributed to a divergence between the local economy and the city’s internationally connected sectors.
The improvement of cross-boundary transport … has practically turned Hong Kong and nearby mainland cities into a single market. The free movement of people from Hong Kong and the much better value-for-money offered by services in neighbouring cities have seriously dented local demand for consumer services.
I’ve cut quite a few paras of thinly disguised pro-China/anti-US stuff on financial services because it is, at best, unnecessary background in a column supposedly focusing on the potentially interesting ‘splitting into two economies’ theme. As a result, Reg has little space left to propose solutions. A pity – because this is a real issue that probably adds to Hong Kong’s economic inequality.
She says…
Chinese restaurants cannot compete with their counterparts on the mainland on price or variety. There is not much the government can do to prop up these ailing sectors except to allow market forces to produce new demand for more attractive offerings. Even consumption vouchers … would only have a short-term effect. The best hope for resuscitating Hong Kong’s local consumer services lies in price adjustments and innovation.
…However, it will be a long and painful process if markets are left to regain competitiveness solely based on price adjustment. New products, service delivery innovation and the creative redesign of shopping malls are key to offering greater customer satisfaction.
As a former career civil servant, she knows little about how to run a business, so it’s no surprise that we get no more on what sort of ‘innovation’ might be needed. My weekly ‘mall hike’ yesterday was at Airside, near Kowloon City. This is perhaps a glimpse into a more locally-oriented retail future. In this case, aimed at the people of the new Kai Tak development area: a slightly odd sort of community, heavy on dogs, kids, middle-aged folk – many of them Mainlanders, of the resident rather than tourist variety. Sort of Disco Bay, but high-density and looped with unwalkable freeways, and with more Mandarin.
If the developers ever had hopes of attracting high-rent-paying luxury brand outlets, they seem to have given in gracefully. The mall includes a cinema, a CitySuper, a Muji, tons of dog accessories, kids’ clothes and amusements, plenty of pop-up stalls, flashy but unexciting food outlets and some amusing household goods places.
Reg’s last sentence addresses what government can do…
Government planners cannot rely on old models. They must work with business to be bold and forward-looking, or else Hong Kong will be left behind.
This could have been a slightly-exciting climax to the piece, urging officials to ditch their obsessions with tourists and high property prices. Why not tax empty properties, to speed up the adjustment? But the word-count is up.
Not that I read many these days, but this looks like a case study in SCMP op-eds: a promising subject, a huge up-front chunk of pointless irrelevant background, and voila – no space left for what might have been some original or provocative ideas. Presumably, the structure suits both contributors and editors.
What are senior officials looking at? Culture etc Secretary Rosanna Law aims to fight ‘soft resistance’ wherever it might appear. …
Hong Kong will strictly vet applications for event subsidies and performance venues, as well as exhibition content and library collections, to better safeguard national security, the city’s culture minister has said.
Hong Kong is still facing threats from “soft resistance,” which may take the form of performance content, song lyrics, and storylines, Secretary for Culture, Sports and Tourism Rosanna Law said in an interview with Beijing-backed newspaper Wen Wei Po published on Friday.
Law said the authorities must “remain vigilant” at all times and that safeguarding national security was an “ongoing process.”
“There is no completion, only continuation. We must continue to take national security work seriously and carry it out diligently,” the minister said.
The Culture, Sports and Tourism Bureau has stepped up training for its personnel to “deepen their sense of national awareness,” Law said. The bureau also vowed strict vetting of event subsidies, venue performances, exhibition content, and library collections to “eliminate any elements that may harm national security,” she added.
And the Chief Secretary also suggests NatSec will go on and on…
Chief Secretary Eric Chan said on Sunday that safeguarding national security is always an ongoing process.
He stressed that the SAR government will keep improving the legal system to construct systemic safeguards for long-term peace and stability.
NSL rap, anyone? If you didn’t hate rap already…
As long as HK’s cartel-dominated rents remain detached from reality, people will continue gravitating toward doing their shopping and dining where more of their dollar ends up in their shopping bag or on their plate, as opposed to in the landlord’s pocket.
This trend will continue as long as the border remains open.
The system is irretrievably broken for everyone except civil servants, public housing tenants and money launderers.
So what is the end game for the retail sector?
They are stuck between a rock and a hard place because locals will continue to go north for the value meanwhile landlords will not reduce rent because lowering rent will reduce the value of their property’s equity with the banks.
And HK govt will never force landlords into action with a vacancy tax.
So will our retail space be vacant for the next 10 to 20 years??
Vag says “China has emerged as an oasis of certainty in an increasingly volatile and dangerous world.”
Well, that is until Xi Pooh finally gets tired of putting off his legacy and legend and finally invades the Nation of Taiwan.
@Mark Bradley
Yes, good question.
In other words, will HK landlords capitulate?
In the absence of a shock to the market, whether by policy or an external event, the answer would appear to be “no”.
Once the older generation shuffles off this mortal coil, the heirs will flog off the property or set the rents at a market-clearing level.
Until then? The mantra will continue: “HK has always bounced back before!”
That’s what the Carthaginians used to say, too.
@Mark Bradley – If rents are immovable the only “price adjustment” to be had is the downward suppression of wages to mainland levels. Who cares if they have to live in subdivided fla-, sorry, Basic Housing Units?
Plus there’s plenty of opportunity for further technological adoption in the retail field like replacing human staff with QR codes, self-service kiosks, unmanned claw machine parlours, algorithmic scheduling software to shave staffing levels to the bare minimum on an hourly basis thereby making it impossible retail workers to have a remotely predictable schedule, and AI driven performance monitoring software to dock wages for failing to meet upselling targets, spending 15 seconds too long in the loo, and frowning.
It’ll be great!
@Chinese Netizen You could be onto something there. World Police are currently reaching peak distraction levels between domestic chaos, attacking Iran and trying to deal with Ukraine. This would be a good time for Xitler to acquire that long-awaited bit of lebensraum for the fatherland.
China is an “oasis of certainty”?!?
Someone should probably tell that to all the now unemployed migrant workers who haven’t been paid and are sleeping on the streets in Dongguan; all the owners of unfinished houses; the shareholders, bondholders and lenders of all the downgraded and restructuring property companies and LGFVs; the disappearing CEOs and celebrities; the Ugyhurs; the missing party officials and army heads; and Hu Jintao at the 20th National Congress of the Chinese Communist Party.
I’ve been saying this for over a decade – Hong Kong is progressively becoming a place of the super rich on one end and the serfs who serve them on the other end. (the super-rich sector is expanding by Mainland migrants escaping the Mainland tax system). The middle class is being eviscerated. If this continues, the only middle class people left will be Government civil servants.