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Some thoughts about Hong Kong’s recent economic development KC Kwok Honorary Senior Research Fellow School of Economics & Finance University of Hong Kong 28 November 2012 Agenda Major changes around us unprecedented challenges unprecedented opportunities The HK economy – structural changes; “深 层次矛盾” A brief discussion of some important financial market developments some economic concepts and thoughts 2 新世纪头十年，是世界政治经济格局大调整、大变革的十 年，是中国工业化、城镇化快速发展的十年，也是我们全 面推进改革开放和现代化建设取得辉煌成就的十年。 这十年，中国经济年均增长10.5%，国内生产总值由世界 第六位上升到第二位，对外贸易总额由第七位上升到第二 位;产业结构优化升级，农业基础不断加强，中西部地区发 展加快，各具特色的区域发展格局初步形成;各项社会事业 蓬勃发展，城乡居民收入大幅提高。中国经济实力、综合 国力、人民生活水平迈上新台阶，国家面貌发生了翻天覆 地的变化。 中国国务院总理温家宝, 2011年9月14日 3 4 Source: Economist The Global Financial Crisis 5 Source: FinancialCrisis.org 资料来源: www.money.cnn.com “As long as the music is playing, you’ve got to get up and dance …We’re still dancing.” Chuck Prince, former Citigroup Chief Executive, July 2007. 6 US Property Price Index, 2001-2012 August 7 Source : MIT & Standard & Poor’s … My dad died when I was young. He was a good and decent man. I still remember a couple of things he would say that have really stuck with me. ‘Son you are either part of the problem or part of the solution.’ Regrettably, President Obama has become part of the problem,...and Mitt Romney is the solution. The other thing my dad would say is that every generation of Americans leaves their children better off. That's the American legacy. Sadly, for the first time in our history, we are on a path which will undo that legacy. … Paul Ryan, 11 Aug, 2012. 8 9 Source: Google 10 Source: European Trade Union Confederation website “OCCUPY WALL STREET” 11 Source: Wall Street Journal Will China escape the middle-income trap? 12 Source: “China 2030” China – Exports and Imports value index (2008=100) 13 Source : CEIC China – FDI Inflows and Outflows Source : UNCTAD, “World Investment Report, 2012” 14 Number of people with higher education China (Junior College & above) US (College, Degree or Above)* 1964 2.89 18.43 1982 6.20 44.74 1990 16.12 61.37 2000 45.71 89.29 (101.54) 2010 119.64 111.76 (126.63) (mn) *People 25 Years and Over ; ( ) People 18 Years and Over Source: China Statistical Yearbook 2011 & U.S. Census Bureau 15 16 Source : The Daily Beast Paul Romer’s New Growth Theory "Old growth theory says we have to decide how to allocate scarce resources among alternative uses." "New growth theory says, 'Bullxxxx!' We're in this world, it's got some objects, sure, but it's got these ideas, too, and all that stuff about scarcity and price systems is just wrong.'“ “People are reasonably good at forming estimates based on addition, but for operations such as compounding that depend on repeated multiplication, we systematically underestimate how fast things grow.” 17 Size Matters China is a world on its own; momentum built up in a continental size economy is not easy to reverse The rolling stages of development The resilience to downturns The speed, non-linearity and complexities of development The attractions of sizeable markets to investors - the opportunities for scaling up, agglomeration and economies of scale; and the opportunities and potentials for innovation and ideas China and the Rest of the World have to learn how to live with each other 18 Source: OECD Development Centre 19 Source: OECD Development Centre 20 GDP per Capita 21 Source : CEIC Impact of Mainland’s development on HK The rapid growth & evolution of the Mainland dimension in HK’s economy & businesses The Mainland factor in making HK more global Growth in Mainland-related demand on HK’s producer services consumer goods & services; healthy, education, social services fixed assets Rapid structural transformation of the HK economy winners & losers; income disparity competition & cooperation 22 Cross boundary issues in public policy Hong Kong searching for its role 23 Supporting China’s economic integration with the world financial services; trade; investment; “going out” Headquarters economy From helping China’s hardware development to promoting China’s soft power ? social services, rule of law, anti-corruption & open government, governance, NGOs, etc. the overseas Chinese network nurturing mutual understanding & cooperation between China & the rest of the world HK’s 4 “pillar industries” 24 Source: C&SD Making HK’s financial centre international -Equity funds raised through HKEx 25 Source: CEIC & HKEx Hong Kong : RMB Deposits 26 Source: HKMA 27 Source: World Economic Forum website 28 Source: InvestHK, Regional Headquarters Survey 29 Source: InvestHK, Regional Headquarters Survey Hong Kong dealing with some of its “deeprooted contradictions” 30 Inflation & asset price bubbles Income disparity Coping with demands from and integration with the Mainland Internal restructuring - rising sectors vs declining sectors Conservation vs development Values and expectations of the younger generations vs traditional beliefs Ageing & population policy Property Price, Rental and Nominal GDP 31 Source: CEIC Age Profile of HK’s Population 32 Source : C&SD Population Aged 15 and Over by Age Group and Educational Attainment, 1996 1996 33 Source : C&SD Population Aged 15 and Over by Age Group and Educational Attainment, 2011 2011 34 Source : C&SD WORLD DEBT GUIDE 35 Source: Economist 36 Source: Economist 37 Source: Economist 38 Source: Economist Yield on US 10-year treasuries Source: Wall Street Journal website 39 Source: Andrew Filardo & James Yetman, BIS 40 M2 – EU, USA and China 41 Source : CEIC 中国 : 贷款与M2对GDP 比例, 1978 – 2011 资料来源:CEIC及中华人民共和国2011年国民经济和社会发展统计公报 42 China & Hong Kong – M2 43 Source : CEIC Some conceptual and theoretical issues “The Great Moderation”, “Financial Triumphalism”& the “Minsky moment” “irrational exuberance” – what should monetary policy target? George Soros – theory of reflexivity & “the Super Bubble” Reforming financial market regulations and supervision Rethinking the “Washington Consensus”, capitalism, and the welfare state? Debates about “austerity”, tax cuts, and “QE” 44 资料来源: YouTube 45 资料来源: YouTube 46 资料来源: YouTube 47 48