Hong Kong Economic News

[hkskyline]

Consumers upbeat on 6-month outlook: survey
Grace Lam, Hong Kong Standard
January 7, 2005

Hong Kong's consumer confidence soared in the final quarter of last year, aided by an influx of free-spending mainland tourists and the healthy stock market, a survey by MasterCard International has found.

The SAR scored 79.2 on the MasterIndex, up from 71.2 in the second quarter of last year. A reading of more than 50 denotes growing confidence. Respondents expressed optimism for the next six months in all five areas measured - employment, the economy, regular income, the stock market and quality of life.

Hong Kong ranked fourth in the Asia-Pacific region in confidence terms, after Indonesia, Vietnam and China.

MasterCard Asia-Pacific economic adviser Yuwa Hedrick-Wong forecast Hong Kong's gross domestic product growth would moderate to 6.6 percent in 2005 and unemployment would fall to 4.5 percent. He predicted an inflation rate of 2.5 percent and said the tsunami disaster would have little impact on consumer confidence in the SAR.

[hkskyline]

Hong Kong November Retail Sales Rise 7.3 Percent on Tourism

Jan. 7 (Bloomberg) -- Hong Kong's retail sales rose in November for a 16th straight month, boosted by a tourism boom and improving consumer confidence.

Sales rose 7.3 percent from a year earlier to HK$15.2 billion ($1.95 billion) after climbing 8.6 percent in October, the government said in a statement. That's less than the 8.3 percent median growth forecast among six economists polled by Bloomberg News.

Hong Kong's tourist arrivals, more than half of whom come from China, jumped 16 percent to 1.95 million in November and the city's tourism board said it expects the tally for 2004 to exceed 21.4 million, which would be a record. Sa Sa International Holdings Ltd., a cosmetics chain which runs 40 shops in the city, said sales increased a fifth in the Dec. 1 to 27 period, boosted by demand from Chinese tourists.

Domestic demand is also strengthening as falling unemployment and rising wages make households more willing to spend. Property sales rose 86 percent last year to HK$351.8 billion, the highest since 1997, as the city's real estate market continues to improve amid an economic recovery.

Consumer confidence in Hong Kong increased to a reading of 79.2 in the second half from a 71.2 in the previous six months, a survey by MasterCard International Inc. published yesterday showed. Among 13 Asian nation surveyed, only Indonesia and Vietnam showed higher readings.

The jobless rate stayed at a three-year low of 6.7 percent in November and companies including Standard Chartered Plc say they are raising wages.

By volume, retail sales rose 6.8 percent in November from a year earlier, the government report said.

[hkskyline]

HK falters in brand-new world
A city that lacks a clear identity can be daunting for building consumer awareness
25 January 2005
South China Morning Post

Over the next 12 months, companies in Hong Kong will spend up to $35 billion attempting to get their name, reputation, message and product through to consumers. Yet if a recent survey is anything to go by, the majority of these firms will be doing so in vain.

Of the notable homegrown brands out there - the poll included 84 of them across 18 industries - just 29 per cent managed to make the cut among nearly 500 executives and managers surveyed by The Brand Company in October last year.

Among the leading lights, there was a distinct international feel and lack of everyday products. It was not a brand-new world of local contenders, despite companies pouring billions into their advertising and marketing budgets each year.

Those who work in the industry are nevertheless pragmatic and optimistic about Hong Kong's evolving contenders. But as companies attempt to build their brands, they do so against the debilitating backdrop of a city itself scratching to find an identity and sell it on the global stage.

According to the survey, Hong Kong consumers hold luxury hotels, airlines and shopping malls in the highest regard, as far as their brands are concerned. At the bottom of the list are retailers, telecommunications companies and broadcasters.

At the top of the list was the Peninsula, followed by Cathay Pacific and Pacific Place. The only financial services firm in the upper echelon was HSBC, despite furious competition among its peers in the marketing stakes. Swire Properties was the only property company in the top 10.

What stands out among the top 10 is a pervading international tone, which can be explained partly by Hong Kong's evolution itself, according to The Brand Company partner James Stuart.

An entrepreneurial spirit and ability to reinvent itself often does not translate into long-term plans. This is evident at the company level where there is a constant shift into different product areas: a process that may not be credible or relevant to a particular brand.

A lack of appetite for patience, he explains, is the "enemy of brands". Throwing money into advertising does not simply create a brand: it takes a clear vision of what the company is about, what it can deliver and how it invests in its own people to meet these promises. A brand is "not what you say it is; it's what people think it is".

Hong Kong is thus full of logos, but short on focused brands, Mr Stuart says: "It's partly people not wanting to stick their necks out, but mainly they don't know how to stick their necks out, they don't understand singularity. It's never really mattered in the past."

Chris Jacques, chief executive of Y&R and Wunderman's Asia-Pacific operations, describes a culture of short-termism: "Hong Kong grew up as a trading post, as a property post, as a financial post and an entrepreneurial place, so everything has been built up for the maximum benefit in the short term [as opposed to other countries such as Japan and Taiwan which have stronger core brands]."

It is also a small customer market, and one that is saturated, making it difficult to differentiate between brands. Notably, the luxury travel brands such as the Peninsula and the Mandarin are occasional products in nature. Their high rankings contrast with other countries, where mass-market brands tend to top the lists.

Customers in Hong Kong are highly pragmatic - getting a deal is inherent in the consumer culture, brand loyalty often giving way to a desire for "badges". "Because everyone came here with nothing, it's an immense consumer culture in terms of the desire for badge as the obvious symbol," says Mr Jacques.

"I didn't look at the survey and find anything that blew me away with surprise. It was by and large a direct reflection of where brands are in Hong Kong, by the nature of the place and environment, and the way it grew up."

To David Ketchum, founder and chief executive of Upstream Asia, market pressures have not been such in the past that branding became a core issue. "It's just the business environment that hasn't made the brand a useful attribute in the past," he explains.

Having come out of a recession, this is slowly changing for many companies which face growing pressure to develop brands as competition intensifies.

The mobile-phone market is one example. Mr Stuart ranks SmarTone Telecommunications as a brand-savvy firm. He cites Towngas as a company that is "very relentless in what they deliver". The Post Office likewise has a simple promise about timeliness and efficiency that it meets.

Rebounding corporate confidence moreover gives much room for a brand rethink or revamp.

One brand, however, that is failing to meet the mark is Hong Kong itself. Constant changes of focus where tourism campaigns are concerned, for example, are endemic of a government that seems to be unsure as to where it is going.

"The government is a brand, its leaders are a brand," notes Mr Stuart. "Tung [Chee-hwa] doesn't understand his brand."

This national lack of direction can be a sapper in a market trying to sell a Hong Kong identity. "There has never been any government leadership for trying to create brands," explains Mr Jacques.

Hype over deals such as the Closer Economic Partnership Agreement and government doctrine on the Pearl River Delta is just tactics, he believes, and not the stuff of brands. Hong Kong has been going through its options: "How about this, how about that {hellip} as opposed to the way it developed, through there being a general view of what direction the place is heading in. In my mind there should be a crystal clear position for Hong Kong to develop."

The Peninsula for example knows exactly what it is and what it is offering, he stresses. "It starts with what you are in business for, and Hong Kong hasn't answered that question. Without answering that question, you cannot really build a brand."

Constant changes in the government's message statement - from Asia's World City to a City of Life do little to foster a concise picture of what Hong Kong stands for.

As Mr Ketchum notes: "Hong Kong is an open question."

[hkskyline]

Hong Kong sees blue skies ahead, 3 surveys reveal
Nick Gentle
1 February 2005
South China Morning Post

Hong Kongers are becoming increasingly confident in the robustness of the city's economic recovery, with three separate surveys showing both businesses and employees are feeling positive about 2005.

The surveys - two focusing on businesses and one on employee sentiment - show that many expect some tempering of growth as the year unfolds, but most remain upbeat about their prospects.

Only in the manufacturing, construction and transport sectors was there any negative sentiment, with the Census and Statistics Department's quarterly business expectations survey showing a persistent level of pessimism in the three areas.

Respondents from the construction industry were particularly downbeat about their prospects, with 24 per cent expecting a worsening of the situation against just 4 per cent who thought things would improve.

However, the negative sentiment was heavily outweighed by overwhelmingly positive results received from tourism and personal services-related firms.

In the financial and insurance sector, 60 per cent of respondents saw blue skies ahead, while just 1 per cent did not.

It was a similar story in the restaurant and hotel, wholesale and retail, and property, business services and telecommunications sectors, where positive sentiment far exceeded the negative.

"You can see that global economic growth and Hong Kong economic growth have been quite strong in recent months and this has made people a bit more positive," said Hong Kong Productivity Council general manager Vincent Li Kai-lun, whose organisation yesterday issued its own survey showing improving levels of sentiment among small and medium-sized enterprises (SME).

It showed the number of respondents feeling upbeat about first-quarter prospects outweighed those who did not by 14 percentage points, an increase of 6 percentage points on the results of its October 2004 survey.

But while businesses are looking forward to an improvement in their financial well-being, they should bear in mind that their employees are most likely doing the same after a prolonged period with little improvement in wages.

An online survey of 956 full- and part-time employees conducted by market information consultants TNS revealed that 36 per cent were expecting a pay rise this year.

And perhaps of more concern for employers was the fact the survey found just 57 per cent of respondents were satisfied with their jobs.

[hkskyline]

Number of Hong Kong Millionaires Hits 274,000




Translation
In 2004, there were 274,400 millionaires in Hong Kong. The average asset base is $3.4 million.



Translation
The average age of a Hong Kong millionaire is 37 years old. The largest percentage of millionaires falls into the age 35-39 group.


Kelvin Wong
24 February 2005
South China Morning Post

The number of people with more than $1 million in liquid assets rose to more than 274,000 last year from about 260,000 in 2003, according to a Citibank survey.

Aggregate liquid holdings - including cash, stocks and bonds but excluding physical property - held by Hong Kong millionaires jumped more than 16 per cent to $932 billion.

A typical millionaire, according to the study, is male, married, 45, - and receives no salary. After all, if you are rich, why work?

More than a third of Hong Kong's most prosperous people are retired or simply not interested in working.

That number has dropped since 2003, however, when 44 per cent of Hong Kong millionaires were not receiving salaries.

But the proportion of business owners among the wealthy has risen.

"As the economy improves, many wealthy individuals who stopped working during the downturn are finding it worthwhile to come back to work," said Weber Lo Wai-pak, chief operating officer and director of retail banking at Citibank.

Mr Lo credits Hong Kong's improving investment environment - particularly the local bourse - with swelling the ranks of the rich.

The proportion of millionaires investing in the Hong Kong stock market increased to 73 per cent, from 61 per cent in 2003.

Buoyant equity markets boosted the average holding of individual millionaires to $3.4 million, up from $3.1 million in 2003.

The millionaire head count posted its largest increase between 2002 and 2003, as Hong Kong emerged from the slump in technology stocks in 2000 and 2001.

The number of millionaires plunged to just 189,000 in 2002 from more than 251,000 in 2001.

[hkskyline]

Steep fall in US exports as quotas end
Hong Kong apparel shipments drop 35% while mainland emerges as dominant garment manufacturer
Toh Han Shih
14 March 2005
South China Morning Post

The end of global textile quotas, which came on January 1, is turning out to be the final nail in the coffin for Hong Kong's decades old garment manufacturing industry as the mainland becomes the world's most dominant player.

Latest figures from the United States Department of Commerce show Hong Kong's apparel shipments to the US had fallen by a steep 35 per cent in January compared with a year earlier.

Countries such as Indonesia, Mauritius, Malaysia and Mexico also saw textile and apparel shipments to the US drop in January.

At the same time, China's textile and apparel shipments to the US grew 19.8 per cent, including a 47 per cent increase in apparel.

The drop in Hong Kong's shipments is due to the fact that many garments no longer have their final production done locally. Instead, they were entirely produced and shipped from the mainland, explained Henry Tan, chief executive of Luen Thai Holdings, the largest locally listed garment maker.

Under the now-defunct World Trade Organisation quota system, many apparel products were "finished" locally to qualify as being "made in Hong Kong" under the Outward Processing Arrangement (OPA).

There were pluses and minuses in the death of Hong Kong's garment manufacturing, Mr Tan said.

"If Hong Kong loses its garment shipments to China, it is negative for the manufacturing side, but can create lots of jobs in logistics and services. Also, Hong Kong garment companies like us benefit from having more efficient production in China."

The textile industry is Hong Kong's second biggest, after electronics, but most of the manufacturing relocated to China long ago, leaving behind services such as design and logistics. During its peak, in the 1960s and 1970s, Hong Kong's textile manufacturing industry employed hundreds of thousands of workers.

There may be a temporary reprieve for Hong Kong's OPA status as the explosive rise in Chinese exports may prompt the US government to impose one-year "safeguard quotas" on mainland apparel items under an "anti-surge" mechanism, Mr Tan said.

But after 2008, when the anti-surge mechanism expires, Hong Kong's garment shipments would fall even more significantly, predicted Peter Liu Sin-shing, chairman of the textile and apparel committee of the American Chamber of Commerce in Hong Kong.

It would not have a significant impact on workforces, as only a relatively small number of people were employed in the industry here, Mr Liu said.

But China's impact elsewhere is causing more concern. Central America's share of US textile and apparel imports dropped half a percentage point in January from the same month last year.

"The January statistics provide continuing evidence that a shift away from Central American is accelerating," said Kevin Burke, president of the American Apparel and Footwear Association.

He appealed to the US government to speed up the creation of the Central American Free Trade Association (Cafta).

"Without Cafta, apparel companies are reducing their operations in Central America. And when they stop making garments in Central America, they stop buying US cotton, US yarn and US fabric. The US textile industry needs Cafta now."

[hkskyline]

Retailers in drive against sales tax
Lee Yuk-kei, Hong Kong Standard
March 15, 2005

An overwhelming majority of businesses and most tourists believe a sales tax will kill Hong Kong's reputation as a "shoppers' paradise,'' according to a group.

The Coalition Against Sales Tax, made up of companies and 36 associations from 10 service and retail industries, said a survey found that more than 90percent of firms are opposed to the sales tax.

It found 62 percent of tourists in another survey agreeing that such a tax will mar Hong Kong's reputation as a top shopping destination.

With the release of the survey findings two days ahead of tomorrow's budget speech, the coalition urged the government to shelve proposals for a sales tax.

Financial Secretary Henry Tang set up an internal committee to appraise the sales tax proposal after delivering his budget speech last year.

The coalition's trade survey, which took in 651 retailers of different sizes and sectors,

found most companies feared there would be a big drop in their business if a sales tax was introduced.

About two thirds of the respondents were also concerned about costs for administering the tax.

More than 80 percent said a sales tax would deter consumption, slow down the economic recovery, and "tarnish Hong Kong's reputation as a shopping paradise.''

The other survey, conducted in November, also found that about half of the 205 tourists would spend less if they were charged sales tax.

"We expect the government to tone down its intention of introducing a sales tax in the coming year given its budget will record a surplus this fiscal year,'' coalition member Vincent Fang, who represents the wholesale and retail sector in the Legislative Council, said.

[hkskyline]

HK: A city with bright future
19 April 2005

[The author David Eldon is chairman of The Hongkong and Shanghai Banking Corporation Ltd. The article is an abbreviation of his speech delivered at a recent luncheon held by the Hong Kong Chamber of Commerce.]

Much has been said about Hong Kong, both prior and subsequent to its return to China in 1997.

At one end of the spectrum are the perpetually pessimistic. Think the gloomy medical prognostications such as Fortune magazine's infamous "The Death of Hong Kong" cover to morbid biology lessons.

It is said, for example, that if you drop a frog into a pot of boiling water, it will immediately jump out. However, if you put a frog in a pot of cold water and slowly turn up the heat, it will continue to paddle around blissfully. As the heat intensifies, the frog will eventually become part of the broth.

Some pessimists equate Hong Kong to such a frog. And, they say, the temperature is slowly rising.

The other extreme, of course, are those who are overly optimistic, those who believe Hong Kong should and will automatically benefit from Chinese mainland rapid economic expansion.

I am neither a raving pessimist, nor a naive optimist. Rather, I'm a realist. I want to draw your attention to four realities related to Hong Kong:

Hong Kong is no longer the gateway into or out of Chinese mainland.

Earlier, I referred to Fortune's erroneous prediction that Hong Kong was destined to become a global backwater. In the 10 years since making that bold, but misguided forecast, Fortune has made other pessimistic statements about Hong Kong's future.

A few years ago, for example, Fortune used a cover story to pose the rhetorical question: "Who needs Hong Kong?"

The existential pondering in the article was straightforward sort of. The premise being if Chinese mainland is opening under the World Trade Organization (WTO), barriers for foreign companies must be coming down, and Hong Kong's exclusive franchise will no longer be exclusive.

If Hong Kong's franchise is no longer exclusive, more foreign companies will set up their shops in Shanghai, and nobody really will need Hong Kong as a gateway.

Let me deal with the two key assertions Hong Kong's decline and Shanghai's rise in reverse order.

Certainly, Shanghai is well placed geographically to gain considerable momentum from China's continued economic expansion. Shanghai is rapidly building on its physical infrastructure, and it is also becoming increasingly international.

However, Shanghai faces a number of challenges in its efforts to become an international financial and business centre.

The city must increase the flow of unfiltered information that is so vital to financial decision-making and the confidence of international markets.

It must adopt international codes of conduct, develop a full range of qualified people in critical areas such as legal, finance, accounting, trading, regulatory and support services and maintain the appropriate pace of reform to allow markets to develop while minimizing the side effects.

It must also overcome at least for the foreseeable future the lack of convertibility of China's currency, the renminbi.

Personally, I do not believe there are many advantages in Shanghai attempting to try to duplicate Hong Kong. And I do not think officials in Shanghai, or elsewhere in Chinese mainland, do either.

What I do believe is in the longer term, Hong Kong and Shanghai will continue to build on their respective strengths.

Some suggest and I share the view Shanghai is destined to be more like the "Tokyo of China," mainly dedicated to serving the country's massive domestic economy.

Hong Kong, on the other hand, will be more akin to London. It too will continue to play a key role in the domestic economy, but it will also maintain its status as an international and offshore financial centre.

As a result, the relationship between the two centres will be more about mutual co-operation and less about direct competition. In fact, Hong Kong and Shanghai represent a natural pairing of financial centres, which together can make considerable contributions to the further growth of China.

Hong Kong has multiple personalities.

Hong Kong has been described as a "congested, crazy, wall-to-wall skyscraper piece of capitalistic ingenuity;" a "midwife to an economy of 1.3 billion people;" a place where East meets West; and a blend of old and new akin to a "spice rack."

But the adjectives don't end there, as Hong Kong means different things to different people.

To numerous companies from Chinese mainland, and those who lead them, Hong Kong will always be, first and foremost, a place to raise capital. This is not surprising given the Hong Kong stock market was ranked first in Asia and third in the world in terms of capital raised last year.

To many other Chinese mainland firms, Hong Kong is more much more than a prime fund-raising centre. It is also a source of talented managers with international experience; a place where Chinese mainland companies can access market intelligence and access other markets; and a "window to the world" to use the words of one Chinese business person.

Meanwhile, to an ever-increasing number of multinational companies, Hong Kong is still seen as the ideal base for their regional headquarters and offices. The city, at last count, was home to more than 3,600 such headquarters and offices.

Overseas, Hong Kong is, of course, still seen as a leading international financial centre and regional trade hub. At the end of last year, there were 208 authorized banks and 84 representative offices operating in Hong Kong.

Hong Kong remains home to the world's busiest airport, in terms of international air cargo, as well as the world's busiest container port.

To many companies in many other parts of Asia, Hong Kong is also seen as a troubleshooter. As one Japanese business person noted a while back: "When I've got a problem in Chinese mainland, I send my Hong Kong managers." To many international companies just entering the Chinese mainland market, Hong Kong is the ultimate tour guide.

Hong Kong is changing and staying the same.

Most people in business and in government in Hong Kong recognize the city must change to survive. We must find ways to attract investment. We must also strengthen economic synergies with the Pearl River Delta, in particular, and all of China in general.

By this, I am referring to enhancing transportation and other links to ensure the smooth flow of goods and services, products and people, and, of course, capital.

The signing of the Closer Economic Partnership Arrangement (CEPA) is a case in point. The two phases of CEPA grant tariff-free treatment on some 1,100 products.

In addition to opening doors for certain products, CEPA also provides a two-way street for business. Hong Kong companies can promote their businesses in the Chinese mainland easier. Mainland companies can identify suitable business partners in Hong Kong faster.

The latter, of course, makes it easier for Chinese mainland companies to expand their business networks into overseas markets.

As for the other side of this third and paradoxical reality, Hong Kong also recognizes it has certain strengths that must not change.

Those strengths include a strong, transparent and well-regulated financial system, a well-developed transportation and telecommunications infrastructure, the rule of law, the free flow of trade, capital and information, a level playing field for all companies, and low and predictable taxes.

Hong Kong is not just another Chinese city, nor is it about to become one.

Recently, a visitor to Hong Kong described the city as being "Chinese, but not very Chinese." This is, as others observed, a welcomed, albeit somewhat backhanded, compliment.

After all, one of the things that make Hong Kong attractive is Westerners see it as having many Chinese characteristics. Meanwhile, many Chinese find Hong Kong to be quite Western.

[hkskyline]

Despite the rebound, HK still needs a sales tax
5 May 2005
South China Morning Post

The economic good times are rolling again. The news gets better and better as the rebound continues. It is becoming easy to forget the dark days of the downturn.

Deflation has gone, the budget deficit is going and the property market is buoyant again. Yesterday, credit rating agency Standard & Poor's reacted to these developments by upgrading Hong Kong's foreign currency rating from stable to positive. The move came a day after record salaries and profits tax receipts were revealed by the Inland Revenue Department. More than $96 billion was collected in the last financial year, a 20 per cent increase on 2003-04.

A higher rate of profits tax played a part, but the surge was due mainly to increased economic activity. The property market was a big source of the extra income - the receipts from stamp duty increased more than 40 per cent. Stock market transactions contributed almost $6.4 billion. Total tax revenue came in at more than $127 billion.

These strong figures confirm an outcome Standard & Poor's described as a boost both to the government's revenues and its fiscal prospects. But the agency's report also carried a note of caution. It is one which should focus minds as we look ahead.

The report noted that much of the improvement in Hong Kong's fiscal position can be attributed to "cyclical factors" such as rising land sales and increasing economic growth. What goes up can, of course, also go down. This is why we should not be too quick to forget the economic downturn.

If the property market takes a turn for the worse or the days of deflation return, the government will be back to square one. The budget deficit would start to grow again.

As Standard & Poor's points out, there is a need to put our city's finances on a firmer footing by establishing a more stable source of revenue. This means broadening Hong Kong's narrow tax base. Currently, only 300,000 income earners pay around 90 per cent of salaries tax revenue received by the government. Most wage-earners pay no tax at all.

A goods and services tax (GST) is the preferred option. During the downturn it was easy for the government to justify moves to introduce this new tax. All officials had to do was to point to the spiralling deficit. They frequently did.

This is understandable. But it is no longer possible. By the time a GST is introduced, we will probably not have a deficit any more. The real reason for bringing in the new tax is to tackle structural problems. Financial Secretary Henry Tang Ying-yen conceded this in November, when he said the GST was about reform, not eliminating the deficit.

It would be tempting for the government to sit back and do nothing except watch the revenue roll in. But it must get on with the job of broadening the tax base - and that means a GST.

A public consultation on the tax will not be launched until after the new chief executive is in place. Officials have spoken of the need to listen to the views of the public. But it will be more a question of selling the need for the tax and persuading the public that it is in Hong Kong's best interests. People do not generally accept new taxes easily.

Other countries have found that the extra revenue which a GST brings allows other tax concessions to be made. This should be possible in Hong Kong. The government has made it clear that the GST will be revenue neutral. Such a step could prove invaluable in convincing the public that the new tax should be accepted.

The introduction of a GST should also lead to a big reduction in the government's reliance on land sales - and all the volatility such a dependency involves.

Hong Kong requires an efficient, modern and equitable tax system which ensures a steady flow of revenue. We cannot rely on the economic news always being so good.

[hkskyline]

Trade Sector Boosts Hong Kong Economy
Fri May 27, 8:07 AM ET

HONG KONG (AP) - Hong Kong's economy expanded moderately in the first quarter of 2005, the government said Friday, driven by robust domestic consumption and a buoyant trade sector.

Compared with the same period last year, gross domestic product grew 6 percent during the period that ended in March, down from 7.1 percent in the previous quarter, the government said.

"The latest data shows that the economy is still expanding nicely," said Tai Hui, an economist at Standard Chartered Bank. "The growth is supported by both domestic and external demand."

Exports rose 8.9 percent on year in the first quarter, thanks to strong trade flows from China and the earlier weakness of the U.S. dollar, said K. C. Kwok, a government economist. Exports rose 12.6 percent in the fourth quarter last year.

"Consumption demand held firm along with the more entrenched economic recovery, improving labor market conditions and a strong property market," Kwok said.

[hkskyline]

June 4, 2005
Government Press Release
Hong Kong 2005 GDP growth forecast at 4.5% - 5.5%

If the economy continues to thrive the forecast GDP growth for 2005 will be 4.5% to 5.5%, Government Economist Kwok Kwok-chuen says, adding property prices and interest rates may not see drastic adjustments.

Speaking on a radio talk show, Mr Kwok noted Hong Kong's economy has bounced back from the 1997 financial crisis, with strengthened domestic economic activities.

Despite a number of risks in the external environment, Mr Kwok said the economic outlook will be fine as Hong Kong is an outward-oriented economy and the Government has been upholding the "big market, small government" principle.

However, he said Hong Kong's population is aging, and there is a need to attract overseas talent and professionals to work here. The move also may help bring in more low-skilled jobs.

On the recent surge in property prices, Mr Kwok noted the increase relates to economic improvements rather than speculation. If there is any adjustment in property prices, the revision will not be drastic, he added.

Mr Kwok revealed studies are underway to cut red tape on licensing of cinemas and facilitate business operation, stressing the Government will strike a balance between public safety and business facilitation.

[hkskyline]

The outlook's sunny for HK consumers
Nick Gentle
10 June 2005
South China Morning Post

After 18 months of solid economic growth, Hong Kong consumers are now among the most optimistic in the world, an online survey shows. Only consumers in India and the mainland are more enthusiastic about their prospects.

The survey, conducted by research firm ACNielsen, found that 75 per cent of Hongkongers felt the economy had improved in the preceding six months, and 71 per cent believed it would continue to improve over the next year.

Eighty-eight per cent of Indians and 80 per cent of mainlanders believe things will get better in the next 12 months.

Three-quarters of Hong Kong respondents felt their job prospects to be good or excellent during that time.

But those good feelings did not necessarily translate into optimism about personal finances, with just 57 per cent considering them to be good or excellent. Respondents in India, New Zealand and the mainland were the happiest in this department.

The survey of 21,261 consumers was conducted in 38 markets from April 11 to May 10. There were 501 respondents in Hong Kong and 1,009 on the mainland.

[hyacinthus]

Originally Posted by hkskyline

HK: A city with bright future
19 April 2005
...
After all, one of the things that make Hong Kong attractive is Westerners see it as having many Chinese characteristics. Meanwhile, many Chinese find Hong Kong to be quite Western.

Interesting... I wouldn't say quite Western. But, HK does show a more modern and cosmopolitan outlook than other Chinese cities in general.

[hkskyline]

CIBC hooks up with Bank of East Asia
Canadian Press
10 June 2005

Canadian Imperial Bank of Commerce has announced a co-operation agreement with Hong Kong-based Bank of East Asia to provide CIBC commercial clients with BEA services in China.

The accord "directly supports CIBC's Canadian clients with access to China-based corporate deposit accounts in both local and foreign currencies as well as trade finance facilities," the banks said in a statement yesterday.

The Bank of East Asia, whose international operations include six branches in Toronto and Vancouver, will provide services to CIBC commercial banking clients, who will deal through CIBC relationship managers in Canada.

"Many of our clients have, or are in the process of establishing, a presence in mainland China," said John Hunkin, chief executive of CIBC. "This agreement with BEA will better enable us to assist our clients in identifying and leveraging opportunities in China, and it furthers our objectives of providing our clients with access to a wide range of financial services and products to help them meet their unique business goals."

BEA chairman David Li said the link between his bank, with assets of $27.1 billion (U.S.) at the end of 2004, and CIBC, with its $288 billion (Canadian) at April 30, is "of great importance given the number of investors in Canada who are keenly interested in exploring business opportunities on the mainland." The banks said they intend to explore other areas of co-operation.

[hkskyline]

June 20, 2005
Q1 gross national product up 3.3%
Government Press Release

Hong Kong's first-quarter GNP surged 3.3% over a year earlier to $322.3 billion, while GDP, estimated at $314.2 billion, rose 4%.

The external factor income inflow and outflow remained sizeable in the quarter, equivalent to more than and nearly one third of Hong Kong's GDP. This reflected not only the highly externally-oriented nature of the Hong Kong economy, but also its positions as an international financial centre and a regional business hub.

The Census & Statistics Department said today that GNP grew solidly in the quarter, amid sustained strong growth in the economy and continued net inflow of external factor income.

Compared with GDP, the value of Hong Kong's GNP was larger by $8 billion, representing a net external factor income inflow of the same amount, and equivalent to 2.6% of GDP in the quarter.

After netting out the effect of price changes, Hong Kong's GNP grew 5.2% in real terms over a year earlier, lower than the corresponding increase of 6% recorded for GDP in the same quarter.

Investment returns improving

The slightly slower growth in GNP than in GDP was mainly attributable to a surge in direct investment income outflow, which signified improved investment return from Hong Kong in tandem with its robust economic performance.

Both the inflow and outflow of external factor income continued to register robust growth in the quarter, albeit at a less rapid pace than in the preceding quarter.

Total factor income inflow into Hong Kong, estimated at $110.6 billion and equivalent to 35.2% of GDP in the quarter, went up 16.2% over a year earlier.

Total factor income outflow, estimated at $102.5 billion and equivalent to 32.6% of GDP of the same period, recorded a 20.4% year-on-year increase.

Taking the inflow and outflow together, the net external factor income inflow was $8 billion. The income surge was particularly notable in other investment income flows due to higher interest rates on entering the US interest rate uptrend.

Mainland largest source of external factor income inflow

Analysed by country or territory, the Mainland was the largest source of Hong Kong's external factor income inflow, accounting for 24.1%.

The British Virgin Islands came next, with a share of 20.1%, reflecting continued investment income inflow from this tax haven economy where Hong Kong companies have set up a considerable number of holding companies. Other major sources were the UK and the US, at 12.1% and 9.4%.

The Mainland and the British Virgin Islands were also the most important destinations for Hong Kong's external factor income outflow in the quarter, accounting for 24.5% and 17.2%. Other major destination countries or territories included the US, at 12%, and the Netherlands, at 9.9%.

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Inflation Climbs in Hong Kong in May
Thursday June 23, 6:36 am ET

HONG KONG (AP) -- Hong Kong's consumer inflation rate climbed 0.8 percent in May from the year before, the government said Thursday. It rose from 0.5 percent in April.

The government attributed the higher rate to price hikes for package tours, jewelry and fresh vegetables.

However, "overall inflationary pressure remained modest," the government statement said.

It said prices are expected to advance gradually in the coming months as consumer demand strengthens.

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June 27, 2005
Value of total exports up 16.9% in May
Census & Statistics Department

The value of total exports of goods surged 16.9% in May, over the same month last year, to $193.4 billion after a year-on-year increase of 7.8% in April.

Within this total, the value of re-exports rose 18% to $183.5 billion, while the value of domestic exports fell 0.5% to $9.9 billion.

In the same period, the value of imports of goods soared 16% over a year earlier to $202.7 billion in May, after a year-on-year increase of 3.8% in April.

A visible trade deficit of $9.3 billion, equivalent to 4.6% of the value of goods imports, was recorded in May.

Across-the-board growth

The Census & Statistics Department said the growth in merchandise exports accelerated notably in May. The strong growth occurred virtually across-the-board among all major markets, including the Mainland, Japan, the EU and the US.

Comparing the three-month period ending May with the preceding three months on a seasonally adjusted basis, the value of total exports of goods rose 0.3%.

Within this total, the value of re-exports rose 0.6%, while the value of domestic exports fell 4.9%. Meanwhile, the value of goods imports rose 1%.

The department said the increase in value of total goods exports suggested export growth has regained some momentum lately, despite the increasing uncertainties in the external environment.

Trade outlook caution

It cautioned that a number of developments likely to affect the near-term trade outlook still deserve close monitoring, including the recent strengthening in the US dollar, rising protectionism from the US and EU against Mainland imports, the impact of high oil prices on the world economy, and growing pressure on renminbi revaluation from the US.

For the first five months this year, the value of total goods exports rose 11.4% over the same period last year. Within this total, the value of re-exports rose 12.5%, while the value of domestic exports fell 6.1%.

In the same period, the value of imports of goods surged 8.8%. A visible trade deficit of $44.5 billion, equivalent to 5% of the value of goods imports, was recorded in the first five months of 2005.

Exports to Australia up 96.3%

In May, year-on-year increases were registered in the values of re-exports to all major destinations, in particular the Netherlands (+59.8%), France (+31.7%), Germany (+25.8%), the UK (+23.9%) and the Mainland (+23.2%).

At the same time, values of domestic exports to some major destinations fell, in particular to Germany (-50.3%) and the UK (-49.9%).

But significant growth was registered in the value of domestic exports to Australia (+96.3%), Singapore (+75%) and the Netherlands (+53.6%).

Also, there was growth in the value of imports from most major suppliers, in particular the US (+24.7%), Thailand (+23%), Singapore (+23%), India (+21.5%) and the Mainland (+18.5%).

Exports to Germany down 54.9%

For the first five months this year, year-on-year growth was registered in the value of re-exports to most major destinations, particularly the Netherlands (+29.5%), Germany (+25.5%), France (+19.4%), the UK (+18.4%) and Singapore (+13.3%).

At the same time, falls were registered in the value of domestic exports to some major destinations, such as Germany (-54.9%) and the UK (-42.7%).

But significant growth was registered in the value of domestic exports to Australia (+54.8%), the Netherlands (+35.4%) and Singapore (+35.3%).

Moreover, there were increases in the value of imports from most major suppliers, in particular India (+20.5%), the Mainland (+14.3%), Thailand (+13.7%) and Singapore (+13.3%). But a fall was registered in the value of imports from Germany (-13.2%).

Office machine exports soar 168%

In May, year-on-year increases were registered in the value of re-exports of most principal commodity divisions, in particular office machines and automatic data processing machines (by $8.4 billion or 51.1%), electrical machinery, apparatus and appliances, and electrical parts (by $7.5 billion or 23.3%) and telecommunications and sound recording and reproducing apparatus and equipment (by $4 billion or 18.6%).

During the month, values of domestic exports of many principal commodity divisions fell, in particular clothing (by $1.9 billion or 41.3%). But there were increases in the value of domestic exports of electrical machinery, apparatus and appliances, and electrical parts (by $814 million or 75.2%) and office machines and automatic data processing machines (by $679 million or 168%).

Also, there were increases in the value of imports of most principal commodity divisions, in particular electrical machinery, apparatus and appliances, and electrical parts (by $8.2 billion or 20.7%), office machines and automatic data processing machines (by $4.6 billion or 26.7%) and telecommunications and sound recording and reproducing apparatus and equipment (by $2.6 billion or 12.3%).

Clothing exports fall

Comparing the first five months this year with that of 2004, the value of re-exports of most principal commodity divisions grew, particularly office machines and automatic data processing machines (by $26.6 billion or 33.1%), electrical machinery, apparatus and appliances, and electrical parts (by $17.5 billion or 11.8%) and clothing (by $15.5 billion or 33.9%).

During the period, falls were registered in the value of domestic exports of some principal commodity divisions, in particular clothing (by $7.4 billion or 37.3%). But there was growth in the values of domestic exports of office machines and automatic data processing machines (by $2.3 billion or 115.2%) and electrical machinery, apparatus and appliances, and electrical parts (by $1.5 billion or 29.9%).

The value of imports of most principal commodity divisions also grew, particularly office machines and automatic data processing machines (by $15.6 billion or 19.3%), electrical machinery, apparatus and appliances, and electrical parts (by $13.9 billion or 7.7%) and non-metallic mineral manufactures (by $7.9 billion or 29%).

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Constant Price Gross Domestic Product by Economic Activity for the first quarter of 2005
Government Press Release
Tuesday, June 28, 2005

The Census and Statistics Department released today (June 28) the preliminary figures of constant price Gross Domestic Product (GDP) by economic activity for the first quarter of 2005.

2. GDP by economic activity shows the value of production for individual economic activities. The value of production is measured by net output or value-added, which is calculated by deducting intermediate input consumed in the process of production from the gross value of output. Constant price GDP by economic activity enables analysis of the growth profiles of individual economic sectors in real terms, by removing the effect of price changes. It also enables analysis of the contributions of different economic activities or sectors to the overall economic growth in real terms.

3. Gross Domestic Product (GDP) increases by 6.0% in real terms in the first quarter of 2005 over a year earlier, compared with the 7.1% growth in the fourth quarter of 2004.

4. Analysed by constituent sector and on a year-on-year comparison, net output in all the service sectors taken together rose by 6.2% in real terms in the first quarter of 2005 over a year earlier, after a 7.4% increase in the fourth quarter of 2004.

5. Net output in the wholesale, retail and import and export trades, restaurants and hotels increased by 9.4% in real terms in the first quarter of 2005, following a 9.9% increase in the fourth quarter of 2004. Sustained growth in consumer demand, continued surge in offshore trade, and buoyancy in inbound tourism all contributed to the growth.

6. Net output in transport, storage and communications increased by 11.8% in real terms in the first quarter of 2005 over a year earlier, after a 15.0% rise in the fourth quarter of 2004. This was related to a continued expansion in transportation services, on the back of the strong trade flows.

7. Net output in financing, insurance, real estate and business services rose by 3.8% in real terms in the first quarter of 2005 over a year earlier, moderating from a 6.6% increase in the fourth quarter of 2004. The growth was partly attributable to improved performance of the real estate sector.

8. Net output in community, social and personal services increased by 1.6% in real terms in the first quarter of 2005 over a year earlier, after a 2.7% rise in the fourth quarter of 2004.

9. Net output in the local manufacturing sector fell back slightly by 0.6% in real terms in the first quarter of 2005 over a year earlier, having picked up to a 5.0% rise in the fourth quarter of 2004. The decline was related to a plunge in domestic exports of textile and clothing products to the US and European markets in the first quarter upon the removal of quotas on such products as from January 2005.

10. Net output in the construction sector increased modestly by 2.5% in real terms in the first quarter of 2005 over a year earlier, after nine straight quarters of fall-off. The pick-up in private sector building output underpinned the moderate rebound in building and construction activity in the first quarter of 2005. Meanwhile, output in the public sector registered a lesser decline in the first quarter, attributable to the intensified works on several major civil engineering projects.

11. As to the electricity, gas and water sector, net output rose by 4.7% in real terms in the first quarter of 2005 over a year earlier, after an increase of 1.1% in the fourth quarter of 2004.

Further information

12. The year-on-year percentage changes in constant price GDP by economic activity from the first quarter of 2004 to the first quarter of 2005 are shown in Table 1 (http://www.info.gov.hk/gia/general/2..._t1_e_text.htm) . For enquiries about statistics on GDP by economic activity, please call the National Income Section of the Census and Statistics Department at telephone no. 2116 5115.

13. The figures on constant price GDP by economic activity for the first quarter of 2005 are only preliminary. When more data become available, the preliminary figures will be revised. Users may obtain a copy of this press release at the Website of the C&SD (http://www.info.gov.hk/censtatd/). More detailed figures can also be found at the Frequently Asked Statistics section of the website.

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CEPA creates 29,000 jobs, says financial secretary
9 July 2005
South China Morning Post

The Closer Economic Partnership Arrangement (Cepa) has created 29,000 jobs in Hong Kong in the past two years, Financial Secretary Henry Tang Ying-yen told a trade forum yesterday.

Guangdong vice-governor Tang Bingquan told the same event that the province had issued 7.5 million visas for individual travellers to Hong Kong by the end of last year, of which 6.7 million had already taken their visits to the city.

Salaries taxes and duties raise surplus to $21.4b

A $21.4 billion surplus has been recorded for the 2004-05 financial year, largely a result of additional receipts from land premiums, salaries tax and stamp duty.

The surplus was $9.4 billion above the revised estimate of $12 billion announced in the 2005-06 budget, with spending $7.5 billion lower than forecast. Revenue amounted to $263.6 billion while spending totalled $242.2 billion. Fiscal reserves stood at $296 billion on March 31, $20.7 billion more than in the previous year.

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Hong Kong's Jobless Rate Probably Fell to 5.6 Percent in June

July 18 (Bloomberg) -- Hong Kong's unemployment rate, already at a 3 1/2-year low, probably fell further in June as companies involved in tourism and financial services expanded.

The seasonally adjusted jobless rate probably fell to 5.6 percent in June, according to the median forecast of 10 economists surveyed by Bloomberg News. That would be the lowest rate since October 2001. The government is due to release unemployment data at 4:15 p.m. local time today. The rate was 5.7 percent in May.

Improved employment prospects are encouraging Hong Kong's citizens to spend more freely, helping sustain growth in the $164 billion economy. The government estimates that the September opening of Hong Kong Disneyland will create 18,000 jobs, helping reduce unemployment further.

"The big hope is Disneyland," said Standard Chartered Bank economist Mike Moran, who predicts the jobless rate will fall as low as 5.2 percent by year-end. "The new jobs will come from the retail and tourism sectors."

The city received a record 21.8 million visitors last year, and the government expects the number to rise again in 2005. Hong Kong's retail sales rose 7.2 percent from a year earlier to HK$17.7 billion ($2.3 billion) in May.

Hong Kong's consumer confidence ranked second among 13 Asia- Pacific economies in the past quarter, MasterCard International Inc. said July 14, citing a biannual survey of shoppers around the region. The credit-card company said confidence in the city was the second highest it's been since the surveys began in 1993.

Financial Services

A surge in initial public offerings is helping create jobs in the financial services industry, said Henry Tsoi, an economist at Hang Seng Bank Ltd. China Cosco Holdings Co., China's biggest container shipping line, raised HK$9.52 billion in its first share sale in Hong Kong last month. Bank of Communications also plans to sell shares in Hong Kong this year.

Still, Tsoi said he expects the unemployment rate to have risen to 5.8 percent in June.

"We're expecting a bigger rise in the size of the labor force because starting in June more school leavers joined the job market," Tsoi said. "The increase will be larger than accounted for in the seasonal adjustment."

The jobless rate will resume its decline later in the year, and should fall to 5.5 percent by year-end, Tsoi said.

The following table shows economists' estimates for Hong Kong's seasonally adjusted unemployment rate for the three months ended June 30. All figures, except the number of forecasts, are in percentages.

                                  Jobless Rate
-----------------------------------------
       Median                         5.6
       Average                        5.7
       High                           5.8
       Low                            5.6
       Number of forecasts            10
------------------------------------------
       Action Economics               5.7
       Bank of East Asia              5.6
       Capital Economics              5.7
       Citibank NA Hong Kong          5.6
       DBS Bank                       5.6
       JPMorgan Chase                 5.6
       Standard Chartered             5.6
       Hang Seng Bank                 5.8
       Thomson IFR                    5.6
       UBS                            5.7