HK Govt Weakness Throws Economic-Policy Plans Into Doubt
Political turmoil in Hong Kong is likely to have far-reaching effects on economic policy and could slow the government's efforts to get its ballooning budget deficit under control.
This year's budget has already been passed, but as Chief Executive Tung Chee-hwa's government reels from a public uproar over security legislation - and his inept handling of it - the government's hopes for economic growth and sounder public finances appear to be in trouble.
"Given the fact that the government now needs to concentrate on dealing with political problems, economic policy - and especially cutting the fiscal deficit - will be moved to a low priority on its agenda," Citibank senior economist Joe Lo said Wednesday. "In fact, the government is unlikely to raise taxes next year."
Indeed, a pro-Beijing party here is using Tung's weakness to press him to reverse course and open the government-spending taps to bolster the flagging economy.
Ma Lik, secretary general of the Democratic Alliance for the Betterment of Hong Kong, told Dow Jones Newswires this week that Tung should replace Financial Secretary Antony Leung with a team that will increase spending to kick-start Hong Kong's faltering economy.
Citibank's Lo predicts the government will have to delay its target date for fiscal reform.
"The government might chose to tolerate a higher fiscal deficit for a longer time and let the recovery of the economy reduce the fiscal deficit naturally," he said. "The government will wait until public discontent eases before introducing new measures."
Tung's support cratered even as he lurched toward major concessions in recent days over the hugely unpopular anti-subversion bill - which many residents fear as a threat to Hong Kong's freedoms of speech, press and assembly.
He insisted in a hastily convened news conference Wednesday, "I'm confident that we as a team will be able to ride out the challenges to remain united, to learn from experience, to improve government effectiveness and to win back support and trust of the public."
But Tung clearly faces the biggest crisis of his six years in office since 500,000 people - 7% of Hong Kong's population - poured into the streets July in peaceful protect against the so-called Article 23 legislation.
Walks Like A Lame Duck
After insisting for weeks he would push through unchanged the so-called Article 23 legislation, Tung watered down the anti-subversion bill over the weekend, only to see a key ally leave his cabinet. Tung then indefinitely withdrew the bill in the wee hours of Monday morning and hasn't set a timetable for its passage.
He is widely expected to reshuffle his cabinet or even - if he can win permission from the central government in Beijing that tapped him to run this former British colony upon its 1997 return to China - resign.
Much of Tung's political strength has ebbed to the Legislative Council, whose support he would need to proceed with his economic policies.
The finance secretary argues Hong Kong must get its fiscal house in order now, while its reserves are strong. Failure to do so, he says, could threaten the stability of Hong Kong's currency peg to the U.S. dollar, a cornerstone of the city's economic policy for 20 years.
Leung, seen by many as a likely casualty in any cabinet reshuffle, has even hinted at introducing value-added taxes to help widen the tax base.
It was never going to be easy achieve the government's goals for an economy that has limped along for several years and more recently been battered by SARS. Now it may be impossible - Tung needs Legco's support for spending cuts and tax increases in order to balance the budget by the 2006/07 fiscal year.
"Simply no one will believe in (Tung's) measures to boost property prices, no one will have the confidence to buy shares in privatized government assets," said Ivan Choy , a political scientist at City University of Hong Kong. "The Tung administration has become a lame-duck government."
The government is counting on 3% annual growth over the next three years to meet the budget goal and throw off its city's economic malaise. But sentiment and economic data are lining up solidly against Tung.
Hong Kong's economy is expected to grow an anemic 1.5% this year, unemployment is a record high 8.3%, property prices are down two-thirds from their 1997 peak and retail prices have fallen for more than four and a half years.
More Policy Formed In Beijing
With the economy and government so week, Legco may prove unwilling to cooperate with ever-unpopular tax hikes, suggested National Australia Bank economist Kevin Lai.
It will be more difficult for the government to introduce measures aimed at lowering the budget deficit, which is now expected to reach HK$90 billion to HK$100 billion for the fiscal year ending next March 31, the economist said.
The government forecast the budget deficit at HK$67.9 billion for the 2003/04 fiscal year at the beginning of March, but spending increases and a blow to revenue from the SARS outbreak have left that plan in tatters.
Standard & Poors, which lowered the outlook on Hong Kong's AA- local currency rating to negative from stable last October, warned this week the government may face opposition to such policies as its medium-term fiscal strategy. "Without sufficient support in the legislature, the government would be largely ineffective, and this would lead to a worse policy environment," S&P said.
To maker matter worse, City University's Choy said Tung has also lost the trust of the central government.
Choy said Beijing may increasingly take economic matters into its own hands and formulate important policies itself - as it did with a deal signed last month to promote trade and economic exchanges between Hong Kong and mainland China.
Some observers also think the central government, eager to woo Hong Kong public opinion, might loosen curbs on capital outflows from China. There have been indications in recent months that Beijing is considering an eventual easing of restrictions on currency trade and foreign investment by its companies or individuals.
Such an easing could prompt large flows, perhaps hundreds of millions of dollars, of Chinese funds into Hong Kong - a major carrot that Beijing could offer if it wants to help rebuild public trust in the Hong Kong government after the political upheaval.
香港经济计划因立法风波受阻
香港的政局动荡也许会对经济政策产生深远的影响，并可能会延缓政府控制预算赤字的进程。
尽管今年的预算案已获通过，但如今董建华政府正面临公众对国家安全立法的激烈抗议，而董对此又应对乏力，这使得港府对经济增长和改善公共财政的希望变得十分渺茫。
花旗银行(Citibank)资深经济学家Joe Lo周三称，鉴于政府的当务之急是应对政治危机，那么经济问题、尤其是削减财政赤字的问题可能就要退而居其次了。他称，从现实情况看，港府不太可能在明年上调税率。
事实上，香港的某个亲北京的党派正在利用董建华的弱点向他施压，要求他转变作风，划拨财政资金，支撑疲软的经济。 香港民主建港联盟(Democratic Alliance for the Betterment)秘书长马力(Ma Lik)本周向道琼斯通讯社(Dow Jones Newswires)表示，董建华应该撤换财政司司长梁锦松(Antony Leung)，而代之以一个能够增加财政开支的团队，从而带动香港经济从萎靡不振中重新起飞。
花旗银行的Lo预计，政府将不得不推迟财政改革的日程。
他说，港府可能会选择在较长时间内容忍财政赤字的日益扩大，将会著力发展经济，藉经济的复苏来自然而然地降低财政赤字。他称，港府将等到公众的不满情绪逐渐缓和后再推出新的举措。
尽管董建华近日在招致极大异议的反颠覆法案问题上作出了重大让步，但他在民众中的支持率却依然江河日下。许多香港市民担心，反颠覆法案一旦实施，可能会威胁到香港的言论、新闻和集会自由。
但董建华在周三匆匆召开的新闻发布会上却坚持表示，他相信他的团队能够同心协力，应对挑战。他们将总结经验、汲取教训，尽快对市民的诉求作出积极回应和相应的部署，纾缓社会不满情绪，提高施政能力。
然而，董建华显然正面临著他执政6年以来最严重的一场危机。7月1日，共有50万港人涌上街头，对《基本法》第二十三条立法举行和平示威，抗议者的数量占到了香港总人口的7%。
"跛脚鸭"政府
数周以来，董建华一直坚持要毫不动摇地推行第二十三条立法，但到了上周末，当一名关键幕僚宣布退出行政会议之后，他终于在这一法案的问题上作出让步。
他不得不在周一凌晨宣布无限期取消对立法的表决，且没有设定何时通过该立法的时间表。
公众普遍认为，董建华需要重组内阁，若是得到北京政府的允许，他甚至可能辞职。
董建华的很多政治权利已被分散到立法会，他所实施的经济政策都须得到立法会的支持。
香港财政司司长梁锦松认为，尽管香港的财政储备实力雄厚，但现在却亟需整顿。他说，如果不能做到这一点，将会令港元与美元的联系汇率制受到威胁，该汇率制度20年来一直是香港经济政策的基石。
被许多人看作可能成为内阁改组牺牲品的梁锦松甚至还暗示要引入增值税，以帮助扩大税基。
香港经济疲软已有数年，而最近又饱受非典型肺炎(SARS)疫情的打击，在此情况下，港府要实现其预算平衡的目标真是谈何容易。从当前形势来看，这一可能性几乎已经变为零，因为董建华必须得到立法会的支持，才能够削减支出，提高税收，以在2006/07财政年度达到预算平衡的目标。
香港城市大学(City University of Hong Kong)社会科学部讲师蔡子强(Ivan Choy)说，没有人相信董建华提振地产价格的措施会取得成效，也没有人有足够的信心来购买私有化后的政府资产。他说，董建华政府已经蜕变成为一个"跛脚鸭"政府。
为了达到预算平衡目标、并带领香港摆脱经济困境，港府必须使经济在未来3年内达到3%的年增长率。然而，当前的人气乃至经济数据都对董建华大为不利。
香港今年的经济预计仅增长1.5%，而失业率却达到了创纪录的8.3%，地产价格从1997年的峰值跌去了三分之二，零售价格更是持续下跌了4年半有余。
澳洲银行(National Australia Bank)经济学家Kevin Lai认为，鉴于当前的经济和政府都如此虚弱，立法会可能不愿在从来都不受欢迎的提税问题上予以配合。 他说，要推出旨在降低预算赤字的措施则更是难上加难。在截至明年3月31日的财政年度，香港预算赤字预计将达到900亿至1,000亿港元。
香港政府在今年3月初曾预计，2003/04财政年度的预算赤字将达到679亿港元，但财政开支增加及SARS疫情对港府收入造成的影响却使得这一希望化为泡影。
标准普尔(Standard & Poors)在去年10月份将香港AA-本币评级的前景由"稳定"下调为"负面"，它在本周警告说，香港政府可能在其中期财政战略等政策方面面临质疑。该公司称，在没有获得立法会足够支持的情况下，香港政府将在很大程度上变得无所作为，而这将导致政策环境更加恶化。
香港城市大学的蔡子强说，更为不妙的是，董建华也已失去中央政府的信任。
蔡子强表示，北京政府可能会日益将经济问题掌控在自己手中，并会亲自制定重要的经济政策，上个月签署香港与大陆之间更紧密经贸关系安排协议就是一个例证。
一些观察人士还认为，渴望赢得香港公众支持的中央政府可能会放松对大陆资本外流的控制。最近几个月的迹象表明，北京正在考虑最终放宽大陆公司及个人在外汇交易及外国投资方面的限制。
限制的放宽可能会引发大量、或许是数以亿计的资金从大陆流入香港。如果北京政府想要帮助港府在此次政治危机中重建公众信心的话，这一政策将是北京所能给予香港的一大馈赠。
