1. Business cycles and Hong Kong K C Kwok Government Economist 3 June 2005

2. 2 Notes to readers: This is the powerpoint file used by Mr K C Kwok in a short presentation made during The Sun Hung Kai Properties Nobel Laureates Distinguished Lectures held on 3 June 2005. This presentation is a response to other speakers who talked about the business cycles in the world and in China, addressing the impact of business cycles on Hong Kong. The role Hong Kong plays in managing China risks and cycles is also looked into.

3. 3 HK’s evolving role vs Mainland Bring in FDI, management & overseas markets Bridge for the outside world to go into China; and then in both directions Develop new industries & markets Financing Mainland’s development Source of information & ideas A platform for PRD A platform for China, and the world

4. 4 China’s need to improve economic efficiency China’s increasing need to allocate its resources efficiently, particularly in financial resources, land resources & natural resources mis-pricing of risk need to improve governance further reform needed in many areas These will help to tackle : –low investment efficiency –short product cycles; sharp business cycles –quantitative rather than qualitative growth –sustainability problems

5. 5 HK’s role in managing China risks Role of HK’s financial services Role of HK’s professional services Role of HK staff in companies in Mainland HK as a source of information, ideas and values HK as the focal point of a global network HK as a regional headquarter/office Role of HK in normal times vs exceptional times (safety valve?)

6. 6 Hong Kong dealing with business cycles HK subject to business cycles of OECD economies all the time Impact of Mainland’s business cycles on HK increasing (diversification?) Will China’s cycle synchronize with that in the “West”? Magnitude & frequency of China’s cycles Mainland as a production base & a market Need to maintain strong market institutions in HK, especially in financial services