Hands On or Hands Off?: The Nature and Process of Economic Policy in Hong Kong

Preface

Preface Hong Kong prides itself as a place where the economy is allowed to run with the minimum of government interference. Slogans ranging from the "positive non-intervention" of the 1970s to today's "maximum support and minimum intervention" and "market leads, government facilitates" epitomise the image which the government seeks to project. And the government is indeed highly sensitive about the way in which its style of economic management is perceived, both at home and abroad. How accurate are those representations of the government's own role in the economy? Is Hong Kong truly the beacon of free-market, laissezfaire economics, as one might infer not only from the government's own propaganda, but also from the accolade of the world's fi-eest economy which has repeatedly been bestowed upon Hong Kong by certain North American foundations? Even if the answer is yes, and a fortiori if it is no, how is economic policy formulated and who ultimately controls it? These are the questions which this book explores and seeks to answer. Part I provides some necessary background. Thus, Chapter 1 looks at Hong Kong's place in the world economy and its economic relationship with mainland China, which is by far Hong Kong's most important single counterpart in respect of trade and business. Chapter 2 then discusses the way in which Hong Kong projects itself to the outside world in terms of economic policies and, in turn, the way the outside world perceives it. That perception turns out to be, on balance, one of a free and reasonably competitive economic environment. However, the justification for that view comes under challenge in Part II. By examining various aspects of economic management over the years, Chapter 3 reveals that the government in fact plays a rather significant role viii Preface in directing economic activity. Chapter 4 focuses on budgetary policy, since this is the crucial channel for the financial decisions which give effect to much of economic policy. Hong Kong observes strict fiscal discipline, but the extent of fiscal intervention in the economy may be greater than the bare figures suggest. Chapter 5 looks in similar vein at monetary policy. In most economies of the world, monetary policy is used to fine-tune the economy, mainly just to maintain stable monetary conditions and low inflation, but in some instances in a more aggressive manner in pursuit of other goals. In Hong Kong monetary policy is almost entirely passive - a situation which tends to support the non-interventionist image. The focus of Chapter 6 is competition and competitiveness, as the necessary attributes of a prosperous economy. Although generally regarded as a competitive economy on the world stage, there is as yet no over-arching law in place to protect or promote competition, and several instances exist of weak competitive conditions, or worse, within the Hong Kong economy. Overall, the government emerges as having rather more than just a minimal involvement in steering the economy. There has been a discernible tendency to seek to guide activity in specific directions. Part III turns to explore the formulation of economic policies in practice. Thus, Chapter 7 examines the relevant institutional framework and discusses the possible contributions of different organs of government, and other formal or quasi-forn'lal channels, to policy-making in the economic sphere. Chapter 8 draws together the threads, and focuses on the informal but highly significant role of business leaders, in an attempt to identifY how economic policies are developed and decided. A concluding section summarises the main findings of the book. This book does not purport to present a comprehensive account of the entire Hong Kong economy. Rather, it selects a range oftopics and examples which can help to illuminate the debate on the government's role in the economy, and which can contribute to assessing the significance of different players in the determination of economic policies. In so doing, it provides a quite wide, albeit partly selective, overview of economic policy and its formulation, which may be of interest to the general reader as much as to the student of Hong Kong's political economy. The book goes to press as Hong Kong marks the tenth anniversary of its return to Chinese sovereignty, and as Donald Tsang, re-elected as chief executive, prepares his new team. There have been hints of new strategies and procedures, but only time will tell how the various issues raised in this book may evolve. ...