(Bloomberg) — Hong Kong’s leader Carrie Lam faces no shortage of issues to tackle when she delivers her delayed economic policy address Wednesday after another tumultuous year for the Asian financial hub.
The city’s chief executive must grapple with a new wave of coronavirus cases and renewed social-distancing restrictions, which threaten an economy just starting to show signs of recovery after being rocked by protests in 2019 and the pandemic this year.
Carrie Lam addressing the press earlier in November.
Photographer: Billy H.C. Kwok/Bloomberg
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Lam also must balance political demands from China amid its clampdown on Hong Kong, and seek ways to integrate the city’s economy more closely with the mainland. This will be Lam’s first policy address since Beijing imposed the national security law on the city earlier this year; she delayed her annual policy speech from October to consult with mainland leaders.
Here’s a look at some of the key areas Lam will likely focus on in the speech set for 11 a.m. local time:
Chief among Lam’s concerns is a spike in virus infections in the past week, with daily confirmed cases returning to levels not seen since the last wave in August. The city reported 80 cases Tuesday, including more infections tied to a cluster at dance studios and nightclubs.
The resurgence in the virus prompted new restrictions Tuesday, with the government shutting down bars and nightclubs and limiting the number of people at banquets. The outbreak has already delayed a Hong Kong-Singapore travel bubble in a blow to the economy and efforts to reopen the city.
Lam said in a press briefing Tuesday that any policy measures would depend on the city’s ability to reduce the number of infections. “If we cannot effectively keep the epidemic under control these initiatives will be difficult to start,” she said.
In his November meeting with Lam, China’s Vice Premier Han Zheng emphasized Hong Kong should make “virus prevention and control the top priority,” according to Xinhua.
Outside a Community Testing Center in Hong Kong on Monday.
Photographer: Chan Long Hei/Bloomberg
Lam again warned Tuesday of the “tight financial situation of the government” given the budget and more than HK$310 billion ($40 billion) in virus stimulus already announced this year.
“We would like to make use of reform, streamlining, synergy to implement these new initiatives without using additional monetary resources,” she said.
Economists are expecting the address to be light on spending initiatives, even though gross domestic product is on track to decline 6.1% this year.
“Lam hinted that the government has already rolled out large stimulus packages and the recovery path would depend on external conditions, which I think is implying that she is not in favor of rolling out further large stimulus,” said Tommy Wu, senior economist with Oxford Economics in Hong Kong. He said while the recovery has begun, “it is too early to tell whether employment conditions will stop deteriorating before getting better.”
Closer ties with mainland China are a key priority for Lam, made clear by her delay of the address in October to pursue support measures from Beijing. Instead, she attended celebrations for neighboring Shenzhen’s 40th anniversary with President Xi Jinping on Oct. 14, the initial date of the address.
A news report on Xi Jinping’s speech in the city of Shenzhen on a public screen in Hong Kong on Oct. 14.
Photographer: Roy Liu/Bloomberg
“Our economic recovery lies in cooperating more fully with the mainland, which has regained its economic momentum,” Lam said in a Nov. 18 speech at the Greater Bay Area Conference.
On Tuesday, Lam dismissed questions about Beijing’s involvement in the speech given her trip to the capital, saying she compiled the address on her own.
Greater Bay Area
Lam is set to announce several plans to support integration in the Greater Bay Area, China’s initiative to connect Hong Kong more closely with Macau and Guangdong province.
Lam plans to expand the scope of the Stock Connect program with mainland exchanges to include shares of secondary-listed companies and biotech firms, Sing Tao reported, citing unidentified people.
She may also announce a jobs program in the Greater Bay Area employing several thousand young Hong Kong residents in China for a year in sectors including technology and finance, local media reported, citing unidentified people. The Hong Kong government would subsidize their monthly salary, the report said.
Xi called for “deepening integration” between young people in Hong Kong, Macau and Guangdong province to “increase their sense of belonging to the motherland” in his Oct. 14 speech in Shenzhen.
Read More: Xi Looks to Attract Hong Kong Youth to China After Protests
Such programs could be part of the government’s efforts to reduce Hong Kong’s reliance on mainland tourism and spending alongside its integration.
“The focus could be attracting more Hong Kong residents to go to the mainland for jobs, for retirement and for tourism,” said Iris Pang, chief economist for Greater China at ING Bank NV. “It may not be attracting more people from the mainland coming to Hong Kong, except for study.”
Hong Kong may also announce a “joint policy package” with Shenzhen covering the flow of talent, capital, resources and data between the two cities, according to a question-and-answer exchange in the Legislative Council.
Longstanding domestic issues also demand attention, including the city’s stubborn housing shortage, as well as social support for the elderly and other vulnerable residents.
Hong Kong’s persistent wealth gap and lack of social safety net has become an even greater concern as unemployment has surged to an almost 16-year high this year.
Read More: Hong Kong’s Yawning Wealth Gap Grows Wider Amid Pandemic
“The economy is not yet out of the woods and will not be until the border with China opens,” said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis SA. “I think Lam will extend wage and transport subsidies for longer. She will also go back to increasing the housing supply.”
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