Chillin' out till it needs to be funded
I have been wondering of late, how policy makers imagine diverse economies like Taiwan, Hong kong and Mainland China could act together as a single unit. Well, one answer, not so strangely perhaps, is that the crisis unites them in action and spirit. After the property bubble in China, it is Hong Kong’s turn to confess to a residential property bubble, showing up first in luxury properties ( why are we not surprised! We’ve heard this before..and other tweets to the effect from the pop)
The $300 billion HK economy if measured by its international connections, has been instrumental in giving a lot of trading history to the Chinese behemoth. It is also another unbridled horse right now, with money supply growing at 53% in 2009. IT’s relative insulation from the bust was inherently because of the mainland linkages with 16.9 million domestic tourists in 2008. Among other items like food and resources it imports over 11 billion units in Electricity alone.
Hong kong’s measures to tackle the incipient bubble also look like they could easily be adopted by the mainland in due course of the year. While Russia’s actions have heightened the importance of managing property rights, Hong kong’s raising of stamp duties to 4.25% from 3.75% can very well be counted as effective in the next few months and replicated by the nation.
Of course, with China’s local government bodies planning competing tourist islands despite the crisis and despite the clampdown on lending, it may be pressurised into or lured into not acting along the same lines as HK, but China does continue to use the Hangseng Index and other Hong kong infrastructure to dabble in growing an internationally stable national economy.
Apart from the arms purchases by Taiwan and the Dalai Lama’s visit to Tibet, that continue to other international media, China is pretty much united on getting on with business and because of the nature of government, unfortunately, doubly so. At one time, the middle kingdom even included villages in Korea even if just to show up its arch rival “Nippon”, but Korea’s contribution to the Chinese economy is being restricted of late and local inventories in China giving them policy strength to dump their produce in the International Markets. You can’t see much sophistication in their foreign policy and trade, lending them the difference that cannot be covered with Hong kong so easily, Hongkong however, busy with trade.
unfortunately Hong kong, much like Singapore remains steeped in real estate as a basis of growth in the Economy and thus greatly exposed to corruption and crime apart from deeper boom and bust cycles.