There are ways to mitigate Hong Kong’s current unprecedented economic doldrums. But let me first acknowledge a few depressing facts. 2019 and 2020 are two of its most traumatic years socially and economically. However, Hong Kong has always bounced back and emerged stronger, and so it will do it again. This time, we can take comfort from the fact that Hong Kong went through the Asian financial crisis, the SARS outbreak, the global financial crisis and the current pandemic without any significant outflow of capital.

The National Security Law for Hong Kong seems to have quelled the social unrest that ravaged this once extraordinarily safe city for the greater part of last year. Meanwhile, it has been able to keep the number of COVID-19 infections well under control compared with many other places in the world, and the city’s massive financial reserves were able to help employers avoid some job cuts that would have made the pain even worse than it has been.

Unfortunately, the SAR is not bulletproof. COVID-19 is plunging its embattled economy further into recession. Unemployment has shot up to a nearly 16-year high of 6.4 percent in recent months, compared with 4.2 percent in January. Meanwhile, the SAR’s economy contracted 9 percent in the second quarter from a year earlier, according to the Census and Statistics Department; while the arrival of visitors declined drastically in the same period.

According to the Hong Kong Tourism Board, visitor arrivals from all points for the period of January — July was down by 91.2 percent, compared with the same period in 2019, resulting in the reduction of visitors from more than 40 million to just 3.5 million. 

The SAR government is aware of all these challenges and it is expected that Chief Executive Carrie Lam Cheng Yuet-ngor will unveil some countermeasures in her 2020 Policy Address this month. 

I think the government should focus on reducing unemployment, helping retailers and promoting innovation. My fellow contributor Winnie Tang has addressed this issue quite comprehensively in her piece “Policy Address should tackle youth unemployment” (Oct 8, China Daily Hong Kong Edition).

As to helping retailers, the number of visitors has dramatically decreased over the last year. Every person visiting the city will potentially spend money on taxis, bars, restaurants, hotels, various tourism hot spots and all kinds of consumables. Hong Kong needs that, since the region’s retail sales shrank 23.1 percent year-on-year in July, marking the 18th straight month of contraction. Consumer spending dropped to HK$26.5 billion (US$3.4 billion) in July, contributing to the 32.1 percent fall in sales for the first seven months of the year, from the same stretch in 2019.

Fewer sales means more unemployment and fewer retailers willing to rent space. What could the government do to help them? The government already issued the COVID-19 wage subsidies, but if the situation deteriorates further, a new batch of subsidies will have to be offered. 

But there is also a second option to boost retail sales and Hong Kong’s economy in general: Expand the border opening programs announced this week — the Hong Kong-Singapore Air Travel Bubble and allowing city residents in Guangdong and Macao to return with no quarantine required — by applying the measures to other cities on the Chinese mainland, and, finally, with other safe places in Asia, such as Thailand, South Korea and Japan.

Regarding innovation, Hong Kong is developing itself into a leading fintech hub. Its fintech sector has the potential to develop much faster now if it can leverage its involvement in the Guangdong-Hong Kong-Macao Greater Bay Area blueprint, coinciding with the changing consumer behavior as a result of the pandemic.

Reducing unemployment is of course important, but if we do so by creating more jobs in areas that bring added value to our society (like technology and innovation), Hong Kong’s future will be much brighter. Those economies that will thrive and prosper the most in these coming years are those which will fully embrace innovation.

Hong Kong has a strong R&D capability through its world-class universities. However, its overall R&D expenditure accounts for a relatively small proportion of GDP. Thus Hong Kong remains weaker than Singapore and the mainland in R&D expenditure, so more funds should be allocated to strengthen this area. According to the Census and Statistics Department, Hong Kong’s R&D expenditure as a ratio to GDP was at 0.86 percent in 2018, while the mainland’s hit a record high at 2.23 percent of its GDP in 2019.

What does a country or region need to innovate? Bright people and new ideas, of course, but also adequate government support. And Hong Kong has both, though more effort should be made to promote them.

To sum up, despite the huge challenges it currently faces, Hong Kong will emerge stronger, as it always does after an overwhelming crisis. Let us hope the 2020 Policy Address will set the stage for Hong Kong’s speedy recovery.

The author holds a doctorate in real estate law and economics, and has worked as a business analyst in Hong Kong.

The views do not necessarily reflect those of China Daily.