Hongkong Economic Report 2010 (May 31, 2011)
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Economy + Finance
Financial Secretary warns of property market bubble: Financial Secretary John Tsang said HK might face a bubble in its residential property market later this year. He said rising property prices were the overall trend, even if they had eased slightly since June. “Property prices in August fell slightly by 3 per cent compared with June. But, despite this decline, prices were still 74 per cent higher than the low positions in 2008 and five per cent higher than the peak levels in 1997,” the financial secretary explained. HK had to be careful because major economies were expected to maintain low interest rates for some time, he said.
Yuan gold trading debuts in HK: The world's first offshore yuan-denominated spot gold market was launched in HK, opening a new window for trading the Chinese currency and enabling the city to strengthen its role as a global gold market. "It provides a new alternative in leveraged trading of renminbi, which has been lacking until now," said CGSE president Haywood Cheung. Yuan deposits in HK surged to 609 billion yuan in August, accounting for 10 per cent of total deposits in the city's banking system. However, these yuan deposits usually sit idle in the bank since there are not enough investment channels apart from dim sum bonds, or yuan bonds issued in HK. HK is the world's third-largest gold-trading centre, with average daily transactions at 10 million ounces, after London and New York.
Squeeze on offices costing HK: A serious shortage of Grade A office space endangers HK's competitiveness vis-a-vis regional rivals, says an international industry body. Saying that other cities are doing much more to accommodate future expansion, David Faulkner, chairman of the Royal Institution of Chartered Surveyors (RICS) HK working group on a Grade A office study, called for a strategy to increase supply of office space in Central and non-core areas to meet demand.
More pay on way, but it'll be eaten up by inflation: The good news is that many HK employees can expect pay rises next year of about 5 per cent. The bad news is that a 5 per cent increase is not enough to keep up with inflation. Ninety-two local companies, with a total of 69,260 employees, were polled from July to September by the HK People Management Association and Baptist University's Centre for Human Resources Strategy and Development. Sixty-six firms said they planned increases, on average, of 4.5-5.1 per cent. Yet prices in July were 7.9 per cent higher than in the same month last year. Inflation slowed in August and September, but remains above 5.7 per cent year on year.
Rich splash the cash despite boom or bust: From fine wines to swanky watches, HK's most affluent consumers are leading the way in the region when it comes to splashing the cash. They are the top consumers, among 10 other markets across the Asia-Pacific region, for items such as high-definition televisions, watches and financial products. The Pan Asia Pacific Cross Media Survey, conducted annually by global market research firm Synovate, polled 20,000 affluent Asians, including 1,747 Hongkongers. The survey confirms that the rich are not only recession-proof but are also early adopters of new technology. More than half of the city's affluent consumers hold stocks, securities and bonds which is above the regional average of 33 per cent.

Domestic politics
Should Donald Tsang have looked at the bigger picture?: Chief Executive Donald Tsang's final policy address was filled with measures aimed at easing Hongkongers' discontent over issues such as housing, the problems of the elderly and the wealth gap. But political analysts were unimpressed by Tsang's efforts to alleviate grievances and bridge class divisions, saying he also needed to address political issues. Ma Ngok, a Chinese University professor of politics, said the view that unhappiness related only to housing and old age was simplistic. "People are also dissatisfied with political reform, the government's attitude to public opinion, and a widening wealth gap. The policy address says little on these aspects," Ma said. Ivan Choy, a political scientist at the same university, criticised the U-turn on building subsidised homes for sale. "Tsang had said repeatedly that the government would not do this," he said. "The move gives an impression that he bowed to pressure from Vice-Premier Li Keqiang and director of the HK and Macau Affairs Office Wang Guangya , who told him to pay attention to social grievances stemming from housing needs." Housing, identified as the most pressing issue for HK people as property prices soared, was the focus of the policy address.
Chief Executive defends unpopular new chief secretary: Chief Executive Donald Tsang defended his appointment of unpopular Stephen Lam as chief secretary, saying top officials might not maintain high popularity while doing tough jobs in HK's best interest. Lam, constitutional affairs minister, was appointed chief secretary as part of a reshuffle in the administration's top echelon in the wake of Beijing's approval of the resignation of Henry Tang as chief secretary. Tang resigned to run for the post of chief executive. Tsang praised Lam as "a man of resolve and perseverance" whose feats included securing a timetable for attaining universal suffrage. Lam's popularity, flagging in recent years, hit a new low when he came under fire for his handling of the plan to scrap Legislative Council by-elections. Lam will be replaced at constitutional affairs by Raymond Tam, director of the Chief Executive's Office. In turn, Tam's post in the Chief Executive's Office will be filled by undersecretary for food and health Professor Gabriel Leung.
Angry exchange sparks mass walkout in Legislative Council: A livid exchange between Donald Tsang and two radical democratic lawmakers in the Legislative Council Legco sparked a mass walkout by fellow democrats after the pair were ejected from the chamber for unruly behaviour. The uproar during a question-and-answer session a day after the chief executive's policy address saw Tsang accuse People Power legislator Wong Yuk-man of "thug-like" behaviour and tell him there was no place for "triad societies" in the legislature. Legco president Tsang Yok-sing ejected the maverick lawmakers for disorderly conduct. His controversial ruling prompted 14 pan-democratic lawmakers to walk out. Lee Cheuk-yan, a lawmaker from the Confederation of Trade Unions, said Donald Tsang's remarks amounted to offensive words against Wong.
Leung leaves Executive Council to prepare for CE bid:  Executive Council convener Leung Chung-ying formally left his job to prepare for next year's chief executive elections – after serving 14 years on the government advisory body. The contest is expected to be between Leung and former chief secretary Henry Tang. Leung said he was now working his election campaign. He plans to announce more details at a later date.
Regina Ip moves closer to joining race: New People's Party lawmaker Regina Ip edged closer to joining the race to be the next chief executive by revealing plans to form an exploratory committee to consider a campaign. But she insisted any decision to run would be subject to the approval of party members after next month's district council elections. The former secretary for security ranked fourth among potential candidates for the city's top job with 13.8 per cent support in a recent University of HK survey. Former Executive Council convenor Leung Chun-ying topped the poll with 29.1 per cent, Rita Fan was second on 19.2 per cent and former chief secretary Henry Tang third with 14 per cent.

International affairs
Beijing warns U.S. over HK affairs: The war of words between China and the United States over the work of the US consulate in HK was stepped up a notch as Beijing warned Washington it was watching closely. A spokesman for the commissioner's office of the mainland's Foreign Ministry in HK said that it had taken note of a US diplomat's comment on continuous "deep engagement". "We wish to emphasise again that HK is China's HK and we do not allow intervention by any external force in HK's affairs. We will continue to follow the situation," the spokesman said. He was referring to remarks made by US Assistant Secretary of State Dr Kurt Campbell. Campbell, who was in HK as part of an Asian tour, said the US consulate would continue its "deep engagement in all aspects of life" in the city, and its role was "understood and appreciated" by Beijing."

Transborder affairs
Delta bridge can go ahead as legal challenge ends: The legal challenge to construction of a bridge across the Pearl River estuary to Macau and Zhuhai is over. The government will now be able to press ahead with the project. Lawmakers will now discuss a request from the government for funding to build the bridge and related works. Officials have put the cost of a border post, to be built on 130 hectares reclaimed from the sea, at HK$33 billion and say a link road will cost HK$16 billion.
HK agrees to pay Guangdong more for water: HK will pay HK$11.2 billion to continue importing water from the Dongjiang, or East River, in Guangdong under a three-year deal that locks in the flow of up to 2.46 billion cubic metres as competition for water grows among Chinese cities. Inflation and the strengthening of the yuan are behind the increases. The government has proposed building a water desalination plant at Tseung Kwan O, which would initially be able to produce 50 milliion cubic metres of potable water a year. Officials say there are no plans to replace the water supplied from the Dongjiang through desalination.

Legal affairs and human rights
Maids' victory faces challenge: The government has vowed to follow all means of appeal against landmark court ruling against an immigration law that prevents domestic helpers from seeking the right of abode. High Court Judge Johnson Lam, sitting in the Court of First Instance, declared as unconstitutional the exclusion of foreign domestic workers from a rule that allows foreigners to apply for the right to settle in the city after seven years of uninterrupted residency. That provision, in the Immigration Ordinance, contravenes the Basic Law, Lam ruled. "The government respects but is disappointed with the ruling," said Secretary for Security Ambrose Lee, adding that an appeal was imminent. The ruling carries far-reaching implications for 300,000 foreign domestic helpers in the city, possibly clearing their path to apply for permanent identity cards, which is required by all foreigners before they can settle in the city permanently. According to government sources, as of May this year there were about 125,000 domestic helpers who had lived in HK for seven years or more.
Filipino couple take their residency fight to court: A Filipino couple fought in court for their right of abode, in the first case following the victory of a domestic helper last month. The judicial review at the Court of First Instance was brought by Daniel and Irene Domingo, who have been living in HK for 26 and 29 years respectively, with three children born here. The couple are challenging the Commissioner of Registration's decision to reject their application for permanent identity cards in August 2008 and the decision by the Registration of Persons Tribunal to dismiss their appeal in June 2010. At issue is whether the couple's acceptance of an offer of unconditional stay meant they have to accrue their period of ordinary residence only after November 2007, ignoring their previous stay in HK. The case came after a judgment last month that found in favour of domestic helper Evangeline Banao Vallejos and ruled unconstitutional an immigration provision that excludes foreign domestic helpers from being "ordinary residents" in HK.
Competition bill is weakening, watchdog says: The Consumer Council said it was disappointed that the government had watered down the competition bill, warning that it should not be weakened further. Thomas Cheng, chairman of the council's working group on the competition bill, said that it was especially bad that the government removed the right of individuals to file lawsuits complaining of anti-competitive behaviour. "The right for private legal actions was an important part, to protect the rights of consumers and of small and medium enterprises," Cheng said. In the original draft, individuals and companies could either lodge anti-competitive complaints with the proposed competition commission - which will transfer cases to the future competition tribunal - or take their case to the tribunal directly. The revision the government announced - amid overwhelming concerns from the business sector - means all cases would have to go through the commission. The bill aims to outlaw anti-competitive agreements such as price fixing, bid rigging and market sharing.

HK to show the world how to stop smoking: The World Health Organisation has handed HK a key role in the global battle against smoking, in recognition of the city's success in cutting tobacco consumption. A combination of higher taxes, social factors and effective anti-tobacco campaigning has seen the number of people aged 15 and above who smoke in HK drop to a current level of 11.1 per cent, down from 12 per cent in 2009, and one of the lowest rates in the developed world. The low rate of smoking has won praise from the WHO, which says HK's achievements can serve as an example not only to the mainland - which is home to the highest number of smokers in the world - but the wider region.

HK ranks last on key measure of air quality: HK emerged as the worst offender for emissions of the toxic pollutant nitrogen dioxide among major cities in the Pearl River Delta region, according to the latest report on regional air quality. Jointly presented by the environmental protection authorities of Guangdong and HK, the report showed the region's air quality got slightly worse in the first half of the year compared with the same period a year ago. Edwin Lau, general affairs head at the Friends of the Earth, urged the government to tighten control over car emissions, one of the major sources of nitrogen dioxide.

Culture and Education
Arts hub not a cure-all, boss warns: Michael Lynch, new head of the West Kowloon arts hub, may have a blueprint for the giant development, but he warns that the project will not solve all the problems of the local arts scene. Lynch points to the art-market boom, rocketing construction costs and HK's lack of an overall policy on culture as key issues that could hold back the project. The city's leaders had hoped that the arts hub would lead HK's arts development but Lynch says not everything depends on West Kowloon. For example, the future of arts education would not depend on the arts hub, but on educators and policymakers, said Lynch.
Catholic diocese loses school reform challenge: The 357 schools that have not reformed their school managements must do so after the Catholic diocese of HK lost its final battle against the government in the Court of Final Appeal. The diocese, which had its five-year challenge to the government's reforms of 2004 thrown out by the highest court, operates 80 aided schools. Giving the decision in the Court of Final Appeal, Mr Justice Kemal Bokhary wrote: "The challenge fails because the challenged legislation leaves religious organisations free to nominate a majority of persons serving on the incorporated management committees of aided schools which they sponsor." Bokhary said the challenged legislation made no direct attack on religious activities at schools. As long as religious organisations were free to nominate most of the members of its committees, then religious activities were acceptably safe from indirect attack and from erosion.
Vice chancellor Tsui denies he was forced to quit university: University of HK vice chancellor Tsui Lap-chee insisted that his decision to stand down next summer had nothing to do with politics. Tsui said he would not renew his contract next year after serving two five-year terms. The decision gave rise to speculation as it happened just weeks after he was caught up in a political storm over the visit of Vice-Premier Li Keqiang. Tsui was criticised for allowing police to use heavy-handed tactics to contain protesters during the visit. Democratic lawmakers are calling for a special Legislative Council meeting to discuss Tsui's departure. But the vice-chancellor insisted his decision was not politically motivated. He was supported by University Council chairman Leong Che-hung, who  denied rumours of a clash with Tsui.

This is a review of the Hong Kong media and does not necessarly represent the opinion of the Consulate General of Switzerland. The Consulate General of Switzerland in Hong Kong does not bear any responsibility for the topicality, correctness, completeness or quality of the information provided. Liability claims regarding damage caused by the use of any information provided, including any kind of information which might be incomplete or incorrect, will therefore be rejected.


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