When SARS spread here last spring, employees at Lee Fung China Ware, a large store that sells porcelain, did not see a single overseas tourist for two months and sales to local residents plunged.
Business has mostly recovered this winter, but the store's base of customers has changed, perhaps permanently. The American and European tourists and businesspeople who previously snapped up figurines representing the Chinese zodiac signs have not yet returned in large numbers.
They have been replaced, however, by Chinese customers, both Hong Kong residents and visitors from the mainland, who are buying flower vases with feng shui designs in preparation for the Chinese New Year, said Lily Wong, a sales representative.
The store's sales mirror a broader shift in Hong Kong, and in East Asia generally, toward a greater reliance on the booming Chinese economy.
Hong Kong's recovery has been especially significant. Forecasters predict that its economy will expand 4.5 percent this year after shrinking sharply last spring during the SARS outbreak. The stock market rose 35 percent last year, after three losing years.
So much money has poured into the territory that the Hong Kong Monetary Authority has been unable to drive the Hong Kong dollar back down to its peg of 7.8 to the American dollar, despite repeated interventions in the last three months.
Asked if they thought 2004 would be a better year, economically speaking, than 2003, Hong Kong residents were more optimistic than people in any of the other 59 countries and territories where similar questions were posed, according to survey results released last week by Gallup and TNS, a market research firm.
Of course, doing worse than last year would be quite a feat, given that Hong Kong had more cases of SARS per million residents than anywhere else in the world.
The city depends on its roles as the trade and finance capital of China and the busiest transportation hub in Asia, both of which suffered during the two months when the World Health Organization discouraged travel here. And last year was Hong Kong's sixth consecutive year of declining prices, as the territory has suffered worse deflation than even Japan.
As a huge demonstration on New Year's Day showed, many in Hong Kong also remain dissatisfied with their government and eager for the introduction of greater democracy. But several signs now suggest that Hong Kong's recovery has staying power, at least as long as the mainland economy continues to boom.
Exports are strong, especially to Taiwan, Singapore and Thailand. Growth in exports to the US has been weaker, but that is lessening a dangerous dependence on the American market.
Re-exports of goods manufactured in mainland China, which dominate Hong Kong's trade, were 10 percent higher in November than in the same month a year earlier.
Exports of locally produced goods slipped 3 percent, but even that was a significant improvement after years of double-digit declines, said Paul Tang, the chief economist at the Bank of East Asia here.
The modest decline suggests that after years of factories moving across the border to lower-wage cities on the mainland, the remaining factories may be staying in Hong Kong, where patents and other intellectual property are much more easily protected.
Tourism, which produces low-wage jobs to replace some of those lost to the mainland, is expanding because of Beijing's decision to allow more visits here. The number of mainland tourists here in October was up 31 percent from a year earlier, even as the number of European tourists fell 11 percent and the number of American tourists dropped 15 percent.
Beijing regulators are also siding less with Shanghai's financial markets over Hong Kong's these days. Hu Jintao (胡錦濤), China's president since March, has relied less on former Shanghai officials than did his predecessor, Jiang Zemin (江澤民).
Renewed confidence here has produced a surge in local consumption as well. Because of Hong Kong's wealth and high savings rate, "whenever sentiment recovers, the economy recovers very strongly," said Joan Zheng, an economist here for J.P. Morgan.
A peculiarity of the renewed optimism is that the biggest source of unhappiness -- a decline of two-thirds in property prices since a bubble burst in 1997 -- has not really gone away. Prices dropped an additional 15 percent during the SARS outbreak last spring and summer, and rebounded last autumn only to the levels of last January.
"We worked ourselves back to where we were pre-SARS, and people are happy," said Peter Woo, a businessman who is chairman of the Hong Kong Trade Development Council. "And before they were feeling bad."
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source