Three-pronged Strategy to Tackle Financial Crisis
Hong Kong Financial Secretary John C. Tsang (second from right, first row), in a group photo with his counterparts at the APEC Finance Ministers' Meeting in Singapore
Hong Kong has introduced a basket of targeted stimulus measures to tackle the financial crisis, Hong Kong Financial Secretary John C. Tsang said November 12 at the Asia-Pacific Economic Cooperation (APEC) Finance Ministers’ Meeting.
The measures are based on a three-pronged strategy: stabilizing the financial system, supporting enterprises and preserving jobs.
Speaking at the first plenary session, “Global Economic Developments and Implications for Fiscal Measures,” Mr. Tsang said Hong Kong’s stimulus and relief spending amounted to US$11.23 billion. “This is equivalent to about 5.2% of our GDP. This does not include the commitment for the 100% deposit insurance and the special loan guarantee scheme” Mr. Tsang said.
Mr. Tsang reported Hong Kong had seen GDP rebound 3.3% in the second quarter of the year compared to the first quarter. He noted that the decline in exports had narrowed and expected further improvements when the third quarter results were announced.
Mr. Tsang pointed out that the springing of “green shoots” might be partly the result of the stimulus packages launched so far. At the G20 meeting in St. Andrews, Scotland, in early November, finance ministers agreed to maintain support for the economic recovery until it is assured.
“We should watch out for the cumulative effect on our financial system of the host of reform measures that are being deliberated in the various international financial institutions, in the wake of the financial crisis.
“The last thing that we want to see is a relapse of a credit squeeze in the market as a result of the implementation of the basket of banking reform measures,” he said. “There is a need to strike a balance and, definitely, we do not want to nip the ‘green shoots’ in the bud inadvertently.
“In this respect, there is merit in conducting an impact analysis on the cumulative effect of the various reform measures that are now being contemplated.”
Mr. Tsang said regional cooperation would help smooth exit strategies and avoid any adverse shocks to recovery. In this regard, the Hong Kong Monetary Authority has set up a tripartite working group with Bank Negara Malaysia and the Monetary Authority of Singapore to work out a smooth exit strategy.
Noting that APEC is the ideal platform to discuss a coordinated and concerted approach to exit strategies, as well as to a sustainable recovery for the region, Mr. Tsang said Hong Kong is happy to work with others in the coming year to contribute to the process and to share the experience.
In the second plenary session, “Facilitating Finance for Sustainable Growth,” Mr. Tsang discussed Hong Kong’s strategy for sustainable growth while improving the environment.
With Hong Kong in a new phase of economic growth and integration with the Mainland of China, Mr. Tsang said, its 10 major infrastructure projects would enhance the city’s and the region’s long-term competitiveness.
“All these projects will not only upgrade our infrastructure and create employment, they will also enhance our long-term competitiveness and spur economic growth in the region,” he said. “A rough estimate indicates that the 10 mega projects, when fully developed to a mature stage, would bring about US$13 billion of added value to our economy each year, which is equivalent to 5% of our GDP in 2008. About 250,000 jobs would be created.”
Mr. Tsang also attended a Ministerial Retreat, in which ministers discussed new sources of growth and how APEC could further advance structural reforms to raise the potential output growth rate.
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