Has Hong Kong become a failed state?

Hong Kong cannot protect its citizens, provide basic services or command the trust of its people, and it is failing to provide the safety and stability that a global financial centre needs.

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. 

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.

Recommended

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
Best regular savings accounts – January 2023
Savings

Best regular savings accounts – January 2023

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
27 Jan 2023
Equity release v downsizing – which is best?
Personal finance

Equity release v downsizing – which is best?

Equity release hit a record high in 2022. But is downsizing a better way to hold on to your money?
27 Jan 2023
Self-assessment tax returns: what you need to know about getting your tax bill right
Income tax

Self-assessment tax returns: what you need to know about getting your tax bill right

Understanding how self assessment works can help you ensure you pay the right amount of tax, as well as avoid penalties for missing the deadline.
27 Jan 2023

Most Popular

House prices could fall 30%. Should investors be worried about a repeat of 2008?
Investments

House prices could fall 30%. Should investors be worried about a repeat of 2008?

Some analysts are predicting that house prices could fall as much as 30%, which, when compared to the fact that prices have jumped 28% since April 201…
24 Jan 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced on 2 February – we look at what to expect.
26 Jan 2023
Is the State Pension triple lock doomed to fail?
Pensions

Is the State Pension triple lock doomed to fail?

The State Pension triple lock guarantees an increase in the state pension every year, but this assumes government income grows every year as well, whi…
25 Jan 2023