As Hong Kong is a small economy that is highly open to trade, it is also highly susceptible to global economic shocks. This is most recently evidenced by the GDP slowdown to 1.7% driven by negative trade developments and the inevitable drop in exports due to the global economic crisis. However, despite the weak global economy, Hong Kong's growth has rebounded due to the resilience of domestic demand along with low unemployment, most notably in low-skilled sectors. Additionally, beneficial fiscal policies providing counter-cyclical support to the economy have bolstered Hong Kong's economic health. Through such actions as waiving rates for properties, reducing public housing rents, increasing capital spending, and tax relief, Hong Kong's government has proactively strengthened its economy. Through these and other beneficial factors, Hong Kong is thus predicted to rebound to 3% GDP growth by 2013. Despite this positive economic projection, Hong Kong is not without potential risks to its financial stability through a variety of underlying causes. The most prevalent of these risks is undoubtedly the collapse of the Hong Kong real estate market caused by a sharp and abrupt price correction. The underlying cause would be attributed to a run-up in housing prices that have doubled their trough of 2008 to a record in the past four years. According to Himaras, “Hong Kong’s apartment prices have surged to become the world’s most expensive after low interest rates and limited supply fueled demand, prompting the government to tighten mortgage lending and add taxes.” Furthermore, as the property sector represents half of the outstanding loans for use in Hong Kong, a sharp fall in price would bring about falling collateral values and negati... ... middle of paper ... ...han doubled since 2009 and represent the largest exposure. However, the U.S. and U.K. financial systems continue to generally be the more systemically-important for Hong Kong SAR, even though Hong Kong’s cross-border exposures to the Mainland are larger.” Despite these relationships, Hong Kong should continue to benefit from the series of beneficial factors that have proved essential to their growing success. In doing so, Hong Kong's economic future should prove stable despite the potential risks in the years to come. Works Cited Himaras, Eleni. "Hong Kong at Risk of Property Price Correction, IMF Says." Bloomberg. 12 Dec. 2012. Web. 07 May 2013. "People's Republic of China—Hong Kong Special Administration Region." 2012 Article IV Consultation Discussions (2012). International Monetary Fund. Web. .
This paper aims to discuss the Short-Term and Long-Term Impacts of the Great Recession and
The second reason why China came to the forefront of the international finance scene following the East Asian financial crisis is China’s economic performance became the key to the current economic stability of East Asia. During 1997 - 1998, China was the only country in the region to sustain significant growth. In particular, maintaining the stability of the renminbi, was seen as the last hope of achieving equilibrium in the regional currency system and facilitating recovery (Garnaut, 1998). The Chinese government took up the challenge and made a firm commitment not to devalue the renminbi in the short term. China's decision not to devalue in the face of internal pressures has been credited for stabilizing Asia's economic situation.
East Asian Economies have experienced an outstanding record of high and sustained economic growth over the period of 1990s. In the period of 1965 to 1990, East Asia’s twenty three economies grew faster than other economies of all other regions. Most of this success is attributable to seemingly miraculous growth in just eight high performing Asian economies (HPAEs). Among these high performing Asian economies, China ranks as the world's 2nd largest economy after the United States since 2010. It has been the world's fastest-growing economy with consistent growth rates of around 10% over the past 30 years. A major contributor to China’s extraordinary growth has been its economic reforms coupled with the implementation of unorthodox policies.
The 2008 financial crisis led to a sharp increase in mortgage foreclosures primarily subprime leading to a collapse in several mortgage lenders. Recurrent foreclosures and the harms of subprime mortgages were caused by loose lending practices, housing bubble, low interest rates and extreme risk taking (Zandi, 2008). Additionally, expert analysis on the 2008 financial crisis assert that the cause was also due to erroneous monetary policy moves and poor housing policies. The federal government encouraged the expansion of risky mortgages to under-qualified borrowers. Congress pushed for the support of affordable housing through extended procurement of non-prime loans for applicants with low income (Zandi, 2008). The cutting down of interest rates to low levels to supplement for technology bubble of early twentieth century and the effects of Sept 11, a housing bubble was created. This move facilitated individuals with poor credit to obtain mortgages in high percentage when lenders created non-conventional mortgages by offering mortgages with extensive amortization periods, loans with interest and payment alternatives such as ARMs (Angelides et al, 2011). Ultimately, interest rates rose again and many subprime borrowers stopped paying for their mortgages when their interest rate were reset to higher monthly payments. This paper will discuss the impact of the financial crisis as a result of subprime mortgages.
To support the counterargument that China is not an economic threat to Asian stability I will demonstrate how China is experiencing the same economic prosperity and drawbacks as any other Asian state. Case in point, due to surging energy prices, there are increased transportation costs for moving goods from one place to another and the difficulties of a scattered supply chain are encouraging some Chinese firms that had previously outsourced components to Southeast Asia to relocate their associated research-and-development and operational activities within China to other Asian states. Therefore, processing-related imports have declined from over 40 percent of China’s total impor...
“The housing market will get worse before it gets better” –James Wilson. The collapse of the United States housing market in in 2008 was one of the most devastating moments for the world economy. The United Sates being arguably the most important and powerful nation in the world really brought everyone down with this event. Canada was very lucky, thanks to good planning and proper preventatives to avoid what happened to the United States. There were many precursor events that occurred that showed a distinct path that led to the collapse of the housing market. People were buying house way out of their range because of low interest rates, the banks seemingly easily giving out massive loans and banks betting against the housing market. There were
Hong Kong has adopted its current exchange rate system i.e. linked exchange rate system since October 17, 1983. The linked exchange rate system is the cornerstone of the financial system of Hong Kong. The linked exchange rate system ensures that the Hong Kong dollar has a relatively stable value against other currencies. This stability plays an important part in supporting Hong Kong’s role as an international financial center. I’m writing this paper to discuss the operation, costs and benefits of the linked exchange rate system and possible resolution to its problems, and I believe that the linked exchange rate system has performed successfully over the past 30 years.
Rotemberg, Julio, 2008, Subprime Meltdown: American Housing and Global Financial Turmoil, Harvard Business School Case Study 9-708-042.
Xingzhong, LI Daokui David YIN. "The International Monetary System in the Era of Post-Financial Crisis: What Policy Options Does China Have?[J]." Journal of Financial Research 2 (2010): 005
In order to understand the concept of financialization and the housing market on the global and local level, one must know that there is a global pool of money that is simply the worlds savings bank. In 2000 the pool had $36 trillion and has since doubled in size (Blumberg 2008). Its most recent profit increase was a result of developing countries and cities such as India, Abu Dhabi, and China making money. This doubled the cash pool available for investments, but left fewer solid investments for the taking. The solution was residential mortgages and the US housing market. The investment managers thought the low-risk high-return investment in the housing market was a good, stable idea. The glo...
China has also expanded their trading industries with countries such as South Korea, Japan, Taiwan, ASEAN, India, Russia and Hong Kong. This has not satisfied the Chinese greed for income as they also export and import goods to American countries, name...
Stoltenberg, Clyde D. "China's Special Economic Zones: Their Development and Prospects." Asian Survey. 6th ed. Vol. 24. Berkeley, CA: University of California., 1984. 637-52. JSTOR, 1984. Web. 16 Nov. 2013
In recent times, Hong Kong has played huge role when it comes to analysing economic development in China (Chan, 2015). The cultural differences can be explained in terms of business relationships between both countries. In Hong Kong, the help of robust legal system can effectively influence the business relationships. This legal system has been developed based on one country two systems have really business relationships to grow between mainland China and Hong Kong (Chan, 2015). The availability of quality legal centres has really influenced the level of business relationships a great deal. The Hong Kong is truly regarded and assumed as the international legal hub in a great way (Smith, 2013). There are cultural differences found in both countries in terms of business relationship. The linguistic difference is quite difference as Hong Kong has been much more influenced by the Cantonese culture therefore; they like to speak in Cantonese whereas the mainland China uses Mandarin as their language (Smith,
Despite the fact that recent reports have shown that the Chinese currency is currently facing descending pressures, it is, however, likely to improve in the future because of the enhanced terms of trade, current account surplus that is growing, and high net saving. Another reason that will make the Chinese RMB to do well in the future it is because the currency has solid fundamentals and the economy of the country is significantly increasing at a higher rate than the GDP rates. Due to the growing Chinese economy to being the second largest economy, the Chinese currency yuan has been acknowledged by the International Monetary Fund (IMF) as a major global
Debt crisis is becoming common and faced by most citizens in Malaysia. Between June 1997 and January 1998 a financial crisis swept like a brush fire through the "tiger economies" of SE Asian. Over the previous decade the SE Asian states of Thailand, Malaysia, Singapore, Indonesia, Hong Kong, and South Korea, had registered some of the most impressive economic growth rates in the world. Their economies had expanded by 6% to 9% per annum compounded, as measured by Gross Domestic Product. This Asian miracle, however, appeared to come to an sudden end in late 1997 when in one country after another, local stock markets and currency markets imploded. When the dust started to settle in January 1998 the stock markets in many of these states had lost over 70% of their value, their currencies had depreciated against the US dollar by a similar amount, and the once proud leaders of these nations had been forced to go cap in hand to the International Monetary Fund (IMF) to beg for a massive financial assistance. (W.L.Hill, n.d.)