Trump victory brings HK challenges and opportunities
Updated: 2016-11-14 09:21
By Thomas Chan(HK Edition)
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Thomas Chan analyses what the election of Donald Trump in the US will mean for China and for the SAR and the impact it may have on HK's financial markets, economy and future policies
The victory of Donald Trump is unexpected to most elites of the US or Western establishment, but it is also expected after the surprise Brexit result earlier this year. Similar to the Brexit referendum, Trump's success is founded on the protest votes of ordinary people in the US against the elitist government that serves only the interests of the financial capital and Wall Street. However, just like Brexit, the protest needs to be sustained by institutional and even regime change. The new Republican president may be a bit off-track, but he is still a Republican president and the Republican Party is only a party for elections, not a party with an ideology and mass support like those in Europe. The real challenge for people who voted for Trump is whether he will be a different president from the two presidents Bush and from the pro-finance Democrats.
Trump needs a huge team of politicians and technocrats to support him. In getting this support it will not be done by clever talk alone. He needs to compromise and bargain with interest and political groups within and outside the Republican Party. This is not possible outside the US establishment. He also needs the cooperation of the Republican-dominated US Congress and again Republican-dominated state administrations. Other organized powers within the administration, the military and the intelligence community have often operated beyond the controls of the law and the presidential administration. These are no easy powers that Trump could dismiss. Nor are the many powerful lobbying groups of industries.
Examining the presidential 100-day action plan of Trump announced during the electoral campaign, one will find that he inherits many interests of the Republicans including those the Bush family has defended and promoted. At the top are oil and natural gas interests (including shale gas interests). Simply because of this, he will continue to create chaos in world oil markets so that the US can export oil and gas. He also supports the expansion of the military; this may not be in number of servicemen and overseas bases, but in terms of the arms race and selective provocations in theaters that the military and intelligence choose. So ISIS or similar organizations will be tolerated and even promoted to assist the hybrid warfare of the military and intelligence. He will also support proxy powers like Japan in Asia in a way unrestricted before. Political instability and hence financial stability (to help restore the strong US dollar policy) will be a sure consequence of his presidency, but more naked and brutal than the hypocritical Democrats. Trade protectionism will be the order of the day, although it is difficult for Trump to withdraw from NAFTA (North American Free Trade Agreement), and almost impossible to impose punishing tariffs on China's imports.
China-US tension will definitely continue. It depends very much on whether Trump could constrain the military and intelligence and compromise on the financial and trade fronts. China may have a breathing space to further pursue the Belt and Road strategy before Trump settles all domestic issues or after he has tried returning to a provocative foreign policy to divert domestic problems. No matter what Trump will do it seems the current Chinese leadership under President Xi Jinping has already made up its mind to pursue the resurgence of China.
China is strong and big enough to provide a solid growth foundation for its economy and its upgrading and transformation. The Belt and Road strategy expands even further the market for Chinese firms and economy. The Chinese policy would be consistent and persistent, especially if China has learned to deal with the US financially.
Given such a scenario, the Hong Kong SAR has challenges and opportunities. Challenges lie in the financial and trade pressures that the US will exert on China, which will definitely affect the financial economy of Hong Kong. Uncertainties in the US and world financial markets will also affect the real decisions and expectations of investors, both locally and from overseas, on their investments in the territory. The local housing bubble encountering increase rate hike(s) from the US and the loss of economic confidence arising from a chaotic world outside China means a likely chance of economic stagnation.
Hong Kong is fortunate that the Standing Committee of the National People's Congress has just ruled against pro-independence activities. This provides both a yardstick and an urge for the SAR government to defend more vigorously local rule of law and socio-political stability. If the SAR government does its job faithfully and effectively, Hong Kong should be better able to cope with external uncertainties. Even the legislature will return to its proper functions. A crucial factor is that the work of the SAR government should not be delayed or deterred by the upcoming Chief Executive election early next year. Just like the central government leadership under President Xi, the SAR government and its politically elected and appointed leaders should also be single-mind in working for the development of society and addressing the many problems the government has not dealt with adequately in the past.
A priority is the economic positioning of Hong Kong and a commitment to further development. This means the government should change its past ultra-conservative fiscal policy and use its reserves and budget funds more effectively to solve the worsening problems of poverty as well as for launching a more aggressive and extensive public housing scheme, building up the infrastructure for general upgrading of society - not for property speculation - and an overhaul of the education, science and technology policy. This has been regrettably lagging for decades if not for more than a century.
Trump's victory indicates a shift in world trends and Hong Kong should use this opportunity to de-learn, re-learn and work for a better future riding on the back of China's resurgence. If not, the city and its population will fail due to the challenges unleashed by international changes.
(HK Edition 11/14/2016 page1)