Hong Kong must deepen integration with mainland China to survive the erosion of its maturing economy

Dan Steinbock says with its growth drivers in eclipse, Hong Kong must intensify integration with Guangdong

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Without the mainland, Hong Kong would be left with only half its trade, and a quarter of its foreign investment and visitors.

Dan Steinbock

Published: 11:00am, 18 Oct 2015

Financial Secretary John Tsang Chun-wah said recently that Hong Kong is "looking at a new normal, at the current level, at about 2-4 per cent [growth]". That may prove to be an understatement.

Before the global financial crisis, Hong Kong's growth still exceeded 6 per cent on the back of mainland China's double-digit growth. Between 2009 and 2013, the expansion was more than halved, to 2.8 per cent. Last year, growth slowed further, to 2.5 per cent. Hong Kong's old growth drivers are in eclipse.

Hong Kong needs a radical new vision, accompanied by decisive political leadership, intensified regional economic integration and an aggressive pro-growth strategy

Recently, Chief Secretary Carrie Lam Cheng Yuet-ngor lamented that tackling poverty, with Hong Kong's rapidly ageing population, would be "an uphill battle". With the plunge in growth in the post-crisis years, elderly poverty has soared by a fifth, to nearly 440,000 last year.

However, that's only a prelude to the future because Hong Kong's growth continues to rely on mainland tourism, low interest rates and trade, which are in eclipse.

Four of every five visitors are from the mainland. In the first half of the year, the number of visitors increased only 2.8 per cent over the same period in 2014. Hong Kong is losing favour with mainland tourists. Meanwhile, over the recent National Day golden week, Chinese visitors' long-haul trips to the US, Russia and France surged.

The retail outlook remains uncertain. Photo: Bloomberg