Let's Just Cross Our Fingers!

In predicting the economic future, a feng shui master and Chinese astrologer found that clues provided by his clients were probably a more helpful tool than his feng shui gadgets, according to this New York Times report. People are naturally more inclined to pay visits to feng shui experts when the chips are down than at any other times. When they ask a feng shui master questions like “When am I going to get laid off”, he doesn’t really need his professional expertise to make an accurate forecast.

Other more down-to-earth signs include data like the stock market indices, the number of bankruptcies, precipitous price drop in luxury car sales and connoisseurs’ delicacies, and layoff stories picked up at international schools.

Perhaps this sentence sums up the current situation that Hong Kong has found herself in:-

“The Hong Kong wealthy remain wealthy, and stratospherically so. But for people a few rungs down the economic ladder, the impromptu weekend trips to Bali or Tokyo, the jewelry binges, the full-on lush life — that is mostly over.”

If that NYT report is not enough of a dire warning, this Marketwatch.com story would sound the horns even louder.

“Merrill Lynch's latest survey of fund managers says China remains the biggest global growth wildcard in 2009. Only 10% of regional fund managers say they expect the Chinese economy to improve in the next 12 months.

While much of Asia feeds off China's growth, Hong Kong is perhaps the most directly exposed. China's factory workshop to the world in neighboring Guangdong province has seen tens of thousands of businesses close.

To try to stem the chain of corporate collapse, the Hong Kong government last week announced plans to restart stalled legislation on a bankruptcy-protection law. Intended to be similar to Chapter 11 in the U.S., the move would give companies a cooling-off period to restructure and avoid unnecessary bankruptcy.”

With such a grim outlook, and with belt-tightening measures (e.g. wage cuts in the civil workforce) already in place in other developed economies like Singapore, the U.K. and the U.S., one would have expected the SAR administration led by Donald Tsang to take similar steps. Don’t hold your breath!

“In Hong Kong, civil servants are some of the highest paid in the world, but also the only large organized-labor group in the territory, which might explain why there is little talk of sacrifice here.”

It must feel good to be on government payroll right now, when civil servants are in the snug knowledge that there is no legal way of enforcing wage cuts without an amendment to the Basic Law first.

The article concludes that simply putting on a brave face is not enough – as economic woes deepen in the new year, Hong Kong citizens and investors are likely to demand better policy response from the government.

I would beg to differ a little from that concluding comment - it is not that the Tsang administration is putting on a brave face that irks Hong Kong people most – it is the out-of-touch, almost callous, attitude of senior government officials that does (like urging citizens to spend like they do as they parade their purchases in trade fairs; like asking citizens to work harder in the Year of the Ox and hope for the best; like repeatedly warning about the depressing employment scene ahead without the slightest hint that belt-tightening would apply to the insulated civil service).

In case Hong Kong officials missed this: senior civil servants in Singapore are taking a 12 to 20 percent pay cut this year, says the article.