Worst Still to Come for HK Amid Crisis
‘Financial tsunami’ bigger than ‘97, banker says
South China Morning Post Maria Chan, Cheung Chi-fai
and Agencies in Washington and Paris
5 October 2008
Despite the passage of the US government’s US$700 billion bank bailout, Hong Kong must brace for belt-tightening amid the global “financial tsunami”, the city’s labour chief and a top banker said yesterday.
HSBC Asia-Pacific executive director Peter Wong Tung-shun warned the impact of the crisis would be “far more severe” than that of the 1997-98 East Asian financial crisis.
“This will affect Hong Kong and the whole world,” he said. The effects would be felt for another 12 months and recovery would take “much longer” than a decade ago.
So far investors - including buyers of minibonds backed by bankrupt US bank Lehman Brothers, who scuffled with bank security staff yesterday - have been the biggest losers locally from the crisis. But both men warned its impact would grow.
Mr Wong expected Hong Kong businesses would have to control costs, but said mass layoffs were unlikely. Matthew Cheung Kin-chung, the secretary for labour and welfare, forecast jobs would go, however.
He said: “The financial tsunami will have a far-reaching impact. Enterprises may need to make manpower changes and there is a chance unemployment will rise, particularly in the finance and property sectors. Consumption will likely be hit too.”
China joined governments around the world in welcoming the US House of Representatives’ 263-171 vote in favour of the bailout.
The mainland’s central bank said authorities had contingency measures to minimise the impact of the crisis. The People’s Bank of China said it would strengthen co-ordination with the US and other countries to stabilise global financial markets.
“All countries have to co-operate in view of the current financial crisis,” a PBOC statement quoted Premier Wen Jiabao as saying. Maintaining rapid economic growth would be China’s biggest contribution to the global economy, he said.
Before signing the bailout bill into law, US President George W. Bush thanked lawmakers, saying: “We have acted boldly to help prevent the crisis on Wall Street becoming a crisis in communities across our country.”
Friday’s vote capped an extraordinary two weeks of tumult in Congress and on Wall Street, punctuated by urgent warnings from Mr Bush that the country confronted the gravest economic disaster since the Great Depression if lawmakers failed to act. And it was followed by sombre reminders on Wall Street, where enthusiasm over the rescue gave way to worries about obstacles still facing the economy, sending the Dow Jones Industrial Average down 157 points.
US Treasury Secretary Henry Paulson pledged quick action to get the programme up and operating.
Highlighting the ferocity with which the global crisis has swept into Europe, Belgium and Luxembourg scrambled to find a buyer for the rest of financial group Fortis after the Netherlands nationalised most of its Dutch units. Last week the three governments had injected €11.2 billion (HK$120.4 billion) to keep it afloat.
In Paris, the leaders of Europe’s four biggest economic powers held crisis talks on the global financial meltdown, despite disputes that killed off talk by French President Nicolas Sarkozy of a joint bailout package for European banks.
German Chancellor Angela Merkel and British Prime Minister Gordon Brown only confirmed they would attend after France quietly backed away from a joint fund. German Economy Minister Michael Glos warned “very well paid” bankers they must put their own houses in order.
