China’s Economic Work Directions: Implications for Hong Kong and Macau
The major elements of economic work directions emphasized by the Central Economic Work Conference of the People’s Republic of China (PRC) from December 16 to 18 have important short-term and long-term implications for the Hong Kong Special Administrative Region (HKSAR) and the Macau Special Administrative Region (MSAR).
The conference was presided over by the PRC President, Xi Jinping, together with the attendance of the core members of the Politburo Standing Committee of the Chinese Communist Party, namely Premier Li Keqiang, Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji and Han Zheng.
President Xi stressed in the conference that 2021 would be a significant year for China because of the necessity to implement the spirit and decisions of the Party’s 19thCongress and its second, third, fourth and fifth Plenums.
First and foremost, the central government will have to maintain its macro-economic policy, promote innovation and technological development, solve the problem of the “hidden debts” of local governments and their risks management, retain the quantity of money supply and the speed of social capital accumulation. Most importantly, the Chinese state at the central level will have to recover the economy and prevent economic risks, supplement the capital of banks, improve the legal framework of the bonds and securities markets, support small enterprises, develop green finance, deepen the reforms of the interest rate and exchange market, and to maintain the stability of the exchange rate of the Renminbi. Under these circumstances, the PRC’s “internal and international dual circulations” will be mutually promoted.
The immediate implications for the HKSAR and MSAR are obvious. Hong Kong and Macau must prepare for the foundation of economic recovery amid the rapid development of Covid-19, especially in Hong Kong where a fourth outbreak of Covid-19 has recently occurred and where the infectious disease must be controlled in the first place. While Macau has contained Covid-19 well, it must prepare for the foundation of the bonds and securities markets in terms of both the legal framework and their personnel. Hong Kong and Macau should also think harder to develop green finance, for the central government has repeatedly mentioned the development of green finance in 2021 and beyond.
Second, the PRC’s economic work direction points to the need to strengthen the national strategy of developing technological capability. Innovation and technology are the combined foci of the central government, which is keen to promote the creative activities of small and medium enterprises, to cultivate talents in innovation and technology, to groom more young people for scientific research.
As such, Hong Kong and Macau must establish public-private partnerships in the development of innovation and technology. Local universities in Hong Kong and Macau must foster closer collaborations with the government in their developmental blueprint and talent training in innovation and technology. Secondary school curricular will have to be reviewed and reformed to consolidate the components of innovation and technology. Young talents in innovation and technology will have to undergo more rigorous training and exchange between the mainland on the one hand and Hong Kong and Macau on the other.
Third, Beijing emphasizes the need to strengthen the supply chains, autonomy, and controllability of various industries, Ensuring the stability and safety of supply chains is, according to the economic work conference, the linchpin of economic development. These supply chains embrace not only the need to refine the technical skills and knowhow of various industries, but also the necessity of laying the foundation of developing raw materials, spare parts, design methodologies, and quality upgrading work.
The immediate implications for Hong Kong and Macau are obvious. Although the PRC is a socialist state, its well-planned economic developmental strategies should be imitated in the HKSAR and MSAR, where the supply chains of various industries will have to be reviewed and re-energized along the lines designated by the central government’s comprehensive economic direction for 2021.
Fourth, the central government in Beijing maintains the principle of expanding the domestic demands and consumption. The expansion of domestic demands and consumption entails a whole range of issues, including the improvement of the social welfare system, the perfection of income distribution structures, the expansion of the size of the middle-income groups so that they would be enriched collectively, and the need to merge the increased consumption with the betterment of the people’s living quality. The mainland has been emphasizing the need to expand vocational education training, apart from the need to improve education, social welfare, public health care, and childcare services. In China, infrastructure development is and will be stimulated through the accumulation of social capital, promoting the development of new towns and urban renewal.
The immediate implications for Hong Kong and Macau are obvious. Both special administrative regions must improve the existing social welfare system, expand the middle-class sector, improve the existing living quality, and provide better childcare services. New infrastructure projects, such as the construction plans in Hong Kong’s Lantau Vision Tomorrow, will have to be stimulated through social capital accumulation, like the issuance of bonds and the active participation of the private-sector entrepreneurs. Similarly, if Macau needs to deepen and broaden its urban renewal process, social capital will have to be gathered from big land developers and entrepreneurs. The concept of corporate social responsibility in Hong Kong and Macau may have to be revisited and revised to make it serve the socio-economic needs of the two special administrative regions.
Fifth, the central government in Beijing emphasizes the need to promote reform and openness. State-owned enterprises will continue to be reformed in the coming three years. The business environment of private enterprises will have to be continuously improved, while corporate governance must be perfected. Fairer competition will be promoted, together with the need to protect intellectual property rights amid the process of marketization and legal reforms. The central government vows to fight against the behavior of tax avoidance. Most importantly, the conference stresses the need for the PRC to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to elevate the PRC’s domestic standard of governance, safety supervision, and the maintenance of national security.
Clearly, Beijing is keen to maintain reforms and openness, and to seek to join the CPTPP as an instrument of stimulating the modernization of domestic governance. Although the economies of Hong Kong and Macau are more capitalistic than the mainland, both special administrative regions should combat against any attempt by the private sector to evade tax. Most significantly, the business environment of the HKSAR and MSAR will have to be continuously improved along the principle laid out by the central government in Beijing.
Sixth, the central government in Beijing stresses the need for protecting food security and agricultural development. Agricultural land in China will have to avoid the process of being misused for other purposes. Food security must be retained through the improvement of soil quality, irrigation system and environmental protection.
Although the HKSAR and MSAR are relying heavily on the motherland for their food supply, the agricultural products, fisheries, and seafood nurtured in Hong Kong and Macau should ideally be improved. Both governments need to consider the security of food supply, especially during the typhoon season and any period of environmental hazards.
Seventh, the central government in Beijing vows to strengthen anti-monopolistic practices and prevent the uncontrollable expansion of capital. Specifically, Beijing is keen to improve the socialist market economy, curbing “inappropriate competitions” and supporting the co-development of the economies of both public ownership and non-public ownership. Digital economies must be developed, while the rights of consumers continue to be protected legally.
Again, although Hong Kong and Macau are more capitalistic than the motherland, both cities should prevent their economies from being monopolistic. Specifically, the HKSAR has been criticized as nurturing monopolistic capitalism, leading to exploitation and unfair practices. The HKSAR government must prevent monopolistic capitalism to persist, especially in the land development sector where some critics have pointed to the existence of “land developers’ hegemony.” If tax reforms will be considered in the HKSAR in the long run, especially as its financial reserves are reduced drastically after the subsidies are given to the private sector amid Covid-19, the land developers should perhaps reconsider their corporate social responsibility in a far more self-critical manner than now. On the other hand, Macau must prevent the casino industry from returning to the monopolistic era, implying that the forthcoming casino tenders will have to be competitive and pluralistic, bringing about internal checks and balances among all the stakeholders and potential bidders.
Eighth, Beijing is keen to solve the housing problem in the mainland, preventing the misuse of land and ensuring that housing units are used for residence rather than for speculations. In Hong Kong and Macau’s capitalistic housing markets, speculations have been natural and rampant. Such speculative activities may have to be curbed. Hong Kong must do more in terms of effective government intervention rather than adopting a lasses-faire approach that led to not only “land developers’ hegemony” but also the wide income gap and acute contradictions between the rich and the poor.
Ninth, Beijing is determined to control the emissions of carbon dioxide with a timeline fixed in 2030. Similarly, Hong Kong and Macau should do more by introducing green vehicles to control the emissions of carbon dioxide in a far more effective way in the coming years.
Tenth, Beijing emphasized the need to improve governance, including the control of Covid-19 in which the principle of “preventing the transfer of external cases and the emergence of internal cases.” In this aspect, Macau has been performing far better than Hong Kong. The HKSAR government is criticized as being weak in leadership, planning and implementation of preventing both the spread of Covid-19 internally and the transmission of such cases externally.
In short, the PRC’s Central Economic Work Conference has important directions most of which are applicable to Hong Kong and Macau. It is high time for the ruling authorities of the HKSAR and MSAR to ponder the profound implications of Beijing’s economic work directions, especially in the realms of green finance, innovation and technology, supply chains, domestic demands and consumption, food security, the prevention of monopolistic sectors, housing supply and policy, control over carbon dioxide, and the improvement in governing capability.