Hong Kong is counting the economic cost of almost six months of political unrest, with the territory expected to post its first budget deficit since the early 2000s.
Hong Kong Financial Secretary Paul Chan (陳茂波) made the announcement to lawmakers yesterday, explaining that the ongoing turmoil has hurt economic growth by about 2 percentage points this year.
There is more bad news: Retail sales data for October due later yesterday would show a “very enormous” decline, Chan said.
Arrivals from China plunged 45.9 percent yesr-on-year in October, the biggest decline on record, meaning that the annual “Golden Week” holiday in China failed to translate into a tourist bump for local retailers.
Overall, visitors to Hong Kong fell almost 44 percent in the month.
For retail businesses, that raises the stakes for the coming months.
Many proprietors will have to make hard choices: whether to continue the fight into next year or give up as leases come up for renewal and employee bonuses must be paid.
Iris Pang (彭藹嬈), an economist with ING Bank NV in Hong Kong, sees a 70 percent chance of a wave of store closures among retailers if spending continues to be weak.
The situation is especially dire for catering companies, which typically enjoy brisk business during the holidays, but face the prospect of cancellations during periods of unrest.
“Make or break is the correct description for most catering businesses in Hong Kong as some of them have continued in the business just because their rental agreement has yet to be due,” Pang said. “It is very likely that many catering businesses will close their business if their revenue doesn’t make a comeback during this holiday.”
Hong Kong’s large retailers face a similar predicament.
Cosmetics retailer Sa Sa International Holdings Ltd (莎莎國際控股) could close about 30 stores next year depending on how the market shakes out and “the results of discussions with the owners on rent reduction,” the company said in an e-mailed statement.
Sa Sa shares have tumbled more than 40 percent this year.
Chow Tai Fook Jewellery Group Ltd (周大福珠寶) plans to cut costs by seeking bigger rent discounts, reducing advertising and reviewing store networks in Hong Kong and Macau, the company said in a Webcast, after reporting that first-half net income sank 21 percent.
The company has leases at more than 40 stores in Hong Kong and Macau expiring in the next fiscal year.
Hong Kong has been one of the world’s largest centers for sales of luxury watches, but it has taken a hammering this year. Swiss watch exports to mainland China surpassed those to Hong Kong for the first time in October.
“If the situation persists, by the end of the year many watch companies will have to shut down business,” Oriental Watch Holdings Ltd (東方表行) finance director Alain Lam (林慶麟) said. “At the end of the year, suppliers will ask for payment and employees will demand a one-month bonus — this may cut off the cash flow of some companies.”
Oriental Watch Holdings has managed to negotiate 8 to 10 percent discounts in rent from some landlords and would attempt to arrange better deals as leases come up, Lam said.
However, there is no guarantee the company can retain its significant presence in Hong Kong, as it has healthier operations elsewhere.
“If the numbers don’t work out, we will close stores,” he said. “We are shifting our strategic focus to mainland China, aggressively.”
AIRLINE IN TROUBLE
Separately, Hong Kong Airlines Ltd (HKA, 香港航空) must improve its financial situation by the end of this week or risk losing its license, aviation regulators said.
The territory’s third-biggest carrier — which is already delaying salaries for much of its staff — must get an injection of cash and keep it at an appropriate level, the Hong Kong Air Transport Licensing Authority (ATLA) said in a statement.
Failure to do so risks further action, including the loss or suspension of its license, ATLA said.
The regulator plans to announce its decision by Saturday.
“ATLA found the situation extremely worrying,” it said.
The Hong Kong Transport and Housing Bureau also expressed “grave dissatisfaction and deep concern” that Hong Kong Airlines’ financial position had not significantly improved.
Meanwhile, the Hong Kong Civil Aviation Department asked the company to confirm whether it is able to continue operating and still comply with regulations.
The outcome could determine if its Air Operating Certificate is suspended or revoked, the department said in a statement.
The airline did not immediately respond to requests for comment.
The carrier announced changes to its route network on Friday last week, including the discontinuation of direct flights to Vancouver, Ho Chi Minh City and Tianjin.
Just a few years ago, the millennial generation — generally defined as those born from the early 1980s through the mid-1990s — was synonymous with youthful rebellion. However, now, as the millennials ease into early middle age, they are finding their path out of their parents’ basement to be a lot harder than it was for earlier generations. The fundamental problem is that millennials are not building wealth. The wealth of the median US household headed by someone 35 or younger has actually shrunk in inflation-adjusted terms since the mid-2000s, even as the wealth of older Americans has continued to grow. An
Gogoro Inc (睿能創意) yesterday launched its first electric bicycle, the Gogoro Eeyo 1, in Taiwan, after unveiling the bike in New York in late May and in France on Tuesday. The company said it would also introduce the series in other European countries such as Germany and the Netherlands. The “Eeyo project” is the fourth of Gogoro’s eight projects that concentrate on smart transportation, which includes Gogoro’s electric scooter, battery swap system and electric scooter sharing service, company founder and chief executive officer Horace Luke (陸學森) told a media briefing in Taipei. “There are various types of city commuters. We will not
EXPERIMENTAL DRUG: While news about a COVID-19 vaccine is more eye-catching, developing a treatment would be more viable, the Senhwa boss said Senhwa Biosciences Inc (生華科) aims to raise NT$1.5 billion (US$50.57 million) by issuing 15 million new common shares in the third quarter of this year to fund the research of new drugs, including the experimental drug Silmitasertib for the treatment of COVID-19, the company said on Monday. That would be the firm’s largest fundraising effort after it raised more than NT$1.4 billion from an initial public offering on the Taipei Exchange (TPEX) in April 2017, chief financial officer Sarah Chang (張小萍) told the Taipei Times by telephone. The price of the new shares would depend on the firm’s average share price
NOT A PANACEA: Offering 5G services would not solve the problem of declining telecom incomes, chairman Sheih Chi-mau said, expecting a flat 5G telecom revenue Chunghwa Telecom Co (中華電信) yesterday became the nation’s first telecom to debut its 5G services, offering tiered tariffs that include a threshold of NT$599 and flat rates, as it aims to switch half of its subscribers to the 5G network within three years. Subscribers would have unlimited data transmission for monthly fees starting at NT$1,399 — the same flat rate as when the company launched its 4G service in 2014 — and they can subscribe to the highest-rate plan for NT$2,699 per month for faster data transmission speeds and larger bandwidth, the company said. Data transmission speeds would be within the range