articles and commentaries

Oct 12, 1999. S. KARENE WITCHER. "Hong Kong's Job Market Is Improving, Survey Says," Asian Wall Street Journal.

Oct 1, 1998. Duncan Hughes. "IMF does U-turn on HK growth forecast," South China Morning Post.

"An IMF forecast said the economy was projected to contract 5 per cent this year, compared with estimates of 3 per cent growth, and will show no growth next year.

"That compares with the Government's revised estimate of a 4 per cent contraction in real terms this year."

Sept 28, 1998. Jim Rohwer. "Hong Kong: Another Free-Market Casualty," Fortune.

"If anyplace in Asia over the years symbolized laissez-faire capitalism, it was Hong Kong. No longer. In August, Hong Kong spent $14 billion of its $95 billion of foreign-exchange reserves to buy stocks on its exchange--all in a failed attempt to stop a speculative run on its markets. Some traders say the city-state spent as much again in the money markets to drive down the high interest rates that were depressing its economy. Both gambits failed: Whenever the government stops intervening, stocks fall and interest rates rise."

August 18, 1998. Bloomberg News. "Hong Kong buys stock to hold line," printed in Seattle Times.

August 14, 1998. Bloomberg News. "Hong Kong government buys stocks, futures for first time," printed in Seattle Times.

June 16, 1998. Stephen H. Dunphy, "Hong Kong leader: MFN for China would steady Asia," Seattle Times.

"The vote on most-favored-nation status for China is more important this year than in the past because a favorable vote would help stabilize the Asian economic crisis, Hong Kong's No. 2 official told a conference in Seattle.

"Loss of most-favored-nation (MFN) status would have a large impact on Hong Kong, forcing the loss of billions of dollars in business and job losses as high as 87,000."

Feb 16, 1998. Jim Rohwer, with Tony Paul and Neel Chowdhury reporting. "Asia's Meltdown: The Risks Are Rising," Fortune.

"Hong Kong's dollar peg is doing exactly what it was intended to do: When there's pressure, the currency stays protected. Unfortunately, that also means that capital, land, and labor take the hit. With changes this huge, the adjustments are painful. The stock market has almost halved, and property prices are down 20% to 30%, with an ultimate fall by half not out of the question.

"Retail firms are also weak, with many failures likely after the Chinese New Year's holiday in late January. Jobs are going too: At the top end it is a reasonable guess that 2,000 to 3,000 investment brokers will be thrown onto the streets. Cathay Pacific, Hong Kong's flag-carrier airline, has fired 700 ground staff. Economic growth may fall to 2% to 3% this year, from over 5% in 1997."

Jan 2, 1998. "Taking China's pulse with the Hong Kong flu," Seattle Times editorial.

"The central government in Beijing surprised the Hong Kong banking and investment community by suggesting Hong Kong itself was best able to gauge its own response to the regional economic tremors.

"Mainland officials also pledged to back the Hong Kong dollar with huge cash reserves to fend off currency speculators."

Nov 24, 1997. Jim Rohwer. "The Dollar Rules," New York Times.

"For anyone worried about market volatility, Hong Kong's struggle to defend its currency has emerged as a key battle to watch. At the center of that fight: the Hong Kong dollar's 14-year-old fixed link to the U.S. dollar, a link locals universally refer to as "the peg." Speculators are betting billions that the peg cannot hold, that Hong Kong's leaders will prove unable to resist the huge pressures to devalue that have battered the rest of Asia's once bustling economies. Indeed it was speculators' mid-October assault on the peg that sparked the Dow's historic 554-point drop on Oct. 27. Many others, citing the peg's shortcomings as an economic policy tool, agree that Hong Kong would do itself a favor by abandoning it.

"They're wrong. In light of Asia's present turmoil--and given Hong Kong's unique position as Asia's (and especially China's) financial and managerial service center--the peg, for all its flaws, remains one of the best things Hong Kong has going for it and is worth fighting tooth and nail to preserve. Should it go down, the tumult in both Hong Kong's and the region's financial markets may well surpass anything we've yet seen.

"Hong Kong is the best-positioned place in Asia to take advantage of this new era. Thanks to the peg, it is not only willing but also congenitally committed to absorbing the lessons that the global economy metes out to it. That is why now more than ever, Hong Kong is likely to remain Asia's financial and managerial center. And maybe more than that: a prototype for the thriving early-21st-century city-state."

Nov 24, 1997. Neel Chowdhury and Anthony Paul. "Where Asia Goes From Here," Fortune.

"As far as the citizens of Hong Kong were concerned, Wednesday, Oct. 23, couldn't have been a more inauspicious day. In the city's financial center, a plumbing fault suddenly drained an ornamental pool holding a school of carp, a Chinese symbol of prosperity. As the fish lay gasping, the local stock market was reaching the low point of its heaviest drubbing ever--the loss of nearly a quarter of its value in four days."

Nov 3, 1997. Political and Economic Risk Consultancy, Ltd. A risk report.

"Risks have risen sharply for Hong Kong during the past month due mainly to external problems. Hong Kong has been unable to isolate its financial or stock markets from the stampede that has trampled Southeast Asian markets. It is also vulnerable to setbacks in the US market. Since conditions in Thailand remain so unsettled, the external shocks show every sign of continuing. The resulting slowdown in the Hong Kong economy and hardships caused by share losses could result in greater social unrest. No large demonstrations are likely, but certain groups might stage relatively small, isolated protests.

"The government is not about to alter the Hong Kong dollar peg. The real question is how long speculative pressures will prompt the government to keep short-term interest rates at unusually high levels. The pain for many companies could be considerable. Although the short-term impact of the financial sector turmoil will be to slow the economy, one effect in the medium term should be to enhance Hong Kong’s reputation as the best financial center in the region. The SAR cannot avoid the type of turmoil that has affected every market in Asia in recent months, but it can demonstrate that it knows how to navigate through troubled times without making serious policy mistakes.

"One silver lining to the current crisis is that it could make it easier for the government to reach its goal of building 85,000 new homes a year from 1998. High interest rates will force down property prices and help save on building costs, while the government’s ambitious housing program should help to stimulate activity in the construction industry at a time when such stimulation would be welcome and should not contribute to inflationary pressures."

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This page was last revised on October 12, 1999.