Hong Kong is starting to resemble a “failed state”, says Clara Ferreira Marques on Bloomberg. There is “palpable anxiety” in the coronavirus-hit city, where a bungled official response, shortages of masks and toilet-paper panics remind me of Russia during the “chaotic summer of 1998”. A failing state is one that cannot protect its citizens, provide basic services and command the trust of its people. With the city reeling from anti-government protests, it “is ticking most of those boxes”.
The city is failing to provide the safety and stability that a global financial centre needs. The contrast with Singapore is stark: the prognosis for Hong Kong’s “future as a financial hub looks poor”.
Last year’s protests and a sharp decline in tourism had already pushed Hong Kong into recession, with GDP contracting 2.9% year on year in the final quarter of 2019. Now the coronavirus epidemic is making things even worse. UBS bank analysts predict a year-on-year fall of over 6% in the first quarter of this year, says The Economist. The local Hang Seng stock index is down more than 3% since 1 January and property prices are 5% below their peak. The risk now is that “speculative capital might quit the market and the city”. Falling property prices would put pressure on the banking system.
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Meanwhile, the loss of international and mainland visitors is inflicting a “double devastation” on local retailers, notes The Guardian. While the number of coronavirus cases in Hong Kong is relatively low for now, a more serious epidemic risks triggering a Wuhan-style lockdown. Macau and Thailand, where Chinese arrivals account for 2.7% of GDP, are also vulnerable, says Trinh Nguyen of Natixis. Other economies in Southeast Asia with significant Chinese tourist traffic include the Philippines and Vietnam.
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