Two forces of change will define 2017, to which Hong Kong is not immune. In the next five years, the chief executive will need to lead Hong Kong through a time of “deglobalisation” and rapid automation, and ensure the city creates enough jobs for economic prosperity.
First, the global economy is facing a trend of “deglobalisation”. Trade growth is at its lowest since the global financial crisis in 2008, due in part to weaker global demand and slowing investment. Given the antiglobalisation sentiments that led to Britain’s vote to leave the European Union and the election of Donald Trump in the US, the outlook is likely to remain bleak. Protectionism is on the rise. In addition, Hong Kong is also vulnerable to slowing growth in the Chinese economy, as it makes a transition to a consumption-led model. Jobs in industries supporting trade and investment are at risk as a result.
At the same time, Hong Kong’s economy is subject to a second force – the accelerating use of artificial intelligence (AI). In 2016, intelligent virtual assistants and neural machine translation went mainstream, and Google’s Go-playing AI beat some of the best human players. The rapid adoption of AI-powered systems that can be trained to recognise more complex speech and images, reason, and perform various work activities will reshape the human job landscape more quickly than most societies are able to comprehend.
According to a University of Warwick study, it is technically possible to automate a third to half of all current jobs. In Hong Kong, the impact on jobs can be directly felt in the banking and finance industry, where fintech, or financial technology, is on the rise. The automation and digitisation of industries in China also has knock-on effects on jobs in transport, logistics, retail and business services in Hong Kong.
As Hong Kong navigates this era of uncertainty, a new social compact needs to be forged, addressing the interests and needs of those who are left behind or experiencing downward mobility. When whole categories of jobs and whole industries are being eliminated, displaced middle-class workers, and even young graduates and professionals, will struggle to make ends meet. A programme to provide temporary basic income could be piloted on a diverse group, including employed and unemployed people, followed by analysis of how it affects recipients’ financial health and behaviour. Funding could come from venture capital, crowdfunding, and savings from reductions in social programmes with redundant benefits.
In addition, businesses can be encouraged to set up corporate universities that retrain workers for jobs that are needed
On the technology front, start-up activity in Hong Kong is increasingly vibrant and attracting global talent.
However, as demonstrated in Silicon Valley, the digital technology industry has created only a small fraction of jobs compared to traditional industries with far lower market capitalisation. The industry generates wealth but not sufficient employment, especially for less-skilled workers.
While technology should be embraced and adopted, it also needs to serve people broadly and not just a small group of winners.
Hong Kong-based technology enterprises that have multiplier effects on jobs – especially jobs outside the technology sector and outside the central business districts in the city – could be given tax incentives. These could then be channelled into partnership initiatives with elected officials in the districts and community organisations to create stable and meaningful jobs.
As a small economy, Hong Kong has always relied on openness and connectivity to larger economies in the region and the world. It needs to stay the course and continue to embrace openness, and expand ties with new markets beyond China and the West, including Southeast Asian nations and India.
The coming era of greater instability of the global economic order may be a “dark winter” that Hong Kong needs to live through. The new leader of the city will need to confront realities brought about by the forces of change, lift up the vulnerable, and invest in shared prosperity at a time of great transition.
Janet Pau is programme director of the Asia Business Council