Even in these turbulent times, Hong Kong has reasons to count its blessings. I refer to the fundamentals of our global competitiveness, which will protect us from the fiercest storms of the current cycle of economic and geopolitical turmoil. We cannot be immune, given that many economies worldwide face challenges more severe than at any time in the past four decades, but we should be grateful.
Critics have in the past predicted the death of Hong Kong. Our government officials often rebut them by referring to numerous sources of our competitive advantage, from our Western-rooted rule of law to the potency of our professional services sector.
I take these as a given, and want instead to focus on three other sources of competitive advantage that are less often talked about, and which in the coming decade are likely to be significantly more important: our lack of debt, the absence of any need to spend on defence, and our reliance on services rather than manufacturing.
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At a time when economies worldwide are seeing government debt rise to record levels, acutely squeezing their spending power, Hong Kong can thank the colonial legacy of small government for debt that sits around the lowest in the world.
Latest data from the International Monetary Fund says Hong Kong’s general gross government debt amounts to 11.7 per cent of gross domestic product. That compares with over 200 per cent in Japan, 125 per cent in the US, 116 per cent in France and 103 per cent in the UK.
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Such high debt levels mattered little between the global financial crash in 2008 and the Covid-19 epidemic in 2020, during which time quantitative easing policies worldwide kept government debt service costs close to zero. But as inflation since then has pushed up interest rates, many governments have watched their debt service costs rise into the unsustainable stratosphere.