Haver Analytics
Haver Analytics


Kelvin Ho-Por Lam

Kelvin Ho-Por Lam is a former Greater China economist with HSBC Global Markets. Before joining HSBC, he was a member of the Asia economics team at Citigroup Global Markets in Hong Kong. Prior to his return to Hong Kong in 2015, he was a UK economist at Santander in London and a property economist at MSCI Inc. In 2019, Mr. Lam was elected as a Hong Kong district councillor for the Southern district.   Kelvin graduated from the University of Southampton in 2001 where he studied economics and finance. He also holds an MSc degree in economics from the University of York and an MSc in management from the London School of Economics and Political Science.

Publications by Kelvin Ho-Por Lam

  • China’s National Peoples’ Congress (NPC) meeting kicked off today with Premier Li’s announcing its first Government Work Report. It’s definitely an interesting day for all China watchers and investors, as we are all looking for clues in China’s upcoming plans to prop up an economy that is grappling with deflation, a property market slump, heightened debt levels and low level of foreign direct investment. Before the meeting, many market participants are looking for bazooka-style stimulus or long-term structural reforms, however, the annual NPC is not really a platform for these policy announcements. Instead, we get a flurry of economic and budget targets, and a to-do-list for this coming year. In a nutshell, there is nothing juicy or new in this government report – with a couple of exceptions – it appears that China is still using old tools to fix the current economic problems.

    Let’s start with the targets, a couple of highlights. The 5% GDP growth target was in line with market expectations, and consistent with early growth targets released by the local governments. In my view, it is an aggressive target to achieve compared with last year’s, because 2023 growth target benefits from the low base in the year before when the economy was mired in zero Covid policy. By contrast, the base effects this year is unfavourable. Also, it is more difficult to hit target this year without any forms of fiscal and monetary support, given the deepening property market slump and lingering local government debt problems. The Chinese government realised the hurdles and hinted at further targeted stimulus, as Premier Li said in his speech “It is not easy for us to realise these targets. We need policy support and joint efforts from all fronts.”

    Interestingly, the unusual issuance of RMB 1tn central government bonds is a nice addition to the fiscal impulse from the local government special bonds quotas of RMB 3.9tn for 2024. This is the fourth time in the last 26 years to issue such sovereign bonds, the last couple of times it happened was in 2020 and 2023, to fund Covid-related expenses and post-disastrous reconstruction in north-eastern China after a major flood. We expected the central government to share the credit burden with the local governments going forward, because the hands of provincial authorities are tied. Local governments get a significant share of income from land sales to developers, but this is getting difficult on the back of tumbling demand for housing. Therefore, it makes sense for the central government to step in and allocate resources back to provinces, probably on more favourable debt servicing terms given its higher credibility and lower indebtedness.

    Property sector, which accounts for over 25% of the economy, saw no new concrete measures mentioned in this report. The NDRC did say they will try to address the root causes of the property malaise and mounting debt problems, but they stop short of spelling out what the solutions are. The crux of the property problem remains low level of confidence of prospective homebuyers, leading to a collapsed in demand for off-plan new housing. Homebuyers would rather sit on the sideline, worrying that troubled developers will not have sufficient funding to complete the projects. This in turn reduces the cashflow of property developers, including heathier ones. And the negative feedback loop repeats itself.

    But note a glimmer of hope that President Xi’s property slogan “housing is for living in, not speculation” is omitted in the policy wordings this time, suggesting that authorities are more determined to prop up the property market. Before this, mixed signals were sent to the market when property measures were relaxed, reducing the efficacy of the stimulus.

    Thus far, the government implemented a slew of measures to support the ailing real estate market, such as slashing the 5-year LPR, increasing the PSL funding, lowering the LTV requirements for first-time buyers and buy-to-let investors, also encouraging banks to lend more to white-listed property projects selected by local governments. Unfortunately, none of them had material impact on lifting sentiment or breaking the negative feedback loop. Rather, we continue to hear news in recent weeks about investors filing a lawsuit against Country Garden and Vanke delaying its debt repayments, further denting buyers’ confidence.

    In all, this is a fiscally expansionary budget, and it should cushion the economy currently in deflationary mode. The 5% growth target is only achievable with a strong dose of stimulus, so expect more targeting measures to be deployed. The Chinese authorities are still aiming for quality development over sheer growth, but structural changes for “new productive forces” and consumption to take hold won’t happen overnight, more stimulus measures are therefore needed in the interim period. But the lack of creative policymaking in Zhongnanhai to bridge this gap suggests that China may still be using old tools for new problems. We are not looking for sizable credit-fuelled stimulus in the past which would normally result in unproductive capacity, but timely and well-packaged policies that can address deficiency more quickly and broadly would vastly improve the recovery experience.

  • The widespread protests witnessed in China’s major cities over the weekend is something that has been brewing [1] for months. It is a cocktail of popular discontents with zero-covid restrictions (despite policy relaxation [2] earlier), constitutional changes [3] to remove the two-term presidential limit and a weaker economy [4], while the block fire [5] in Urumqi, Xinjiang was merely a flashpoint and had fanned the recent anti-government or “A4” [6] movement. The unfolding situation in China will have profound economic and geopolitical implications that will reverberate around the world.

    Certainly, this poses one of the most serious challenges to Xi’s rule, especially since he was re-elected as country leader in the recent 20th Party Congress. It will be interesting to see how the Chinese authorities respond to this unprecedented wave of protests - the most concerted and largest since the democratic student movement in 1989.

    Amongst the most energetic and idealistic, numerous students and at least 51 universities are again involved in this round of anti-government protests, suggesting that the movement is unlikely to die down easily. If the authorities cannot exert effective controls over the situation in the next couple of days, we should expect a series of policies to be implemented. In the policy toolbox, vaccinating the vulnerable and a further relaxation of Covid restrictions are on the cards, a potential mass arrest of activists and measures to restrict congregations and communications. Curfews may be widely imposed in affected cities, followed by an Iranian style internet shutdown [7] with authorities cutting off mobile internet and social media platforms. If everything fails, the worst-case scenario is a Tiananmen style crack-down, which is still a possibility if the Party is determined to cling on to power. In terms of geopolitics, China might employ a diversionary foreign policy, to divert public’s attention away, instigating disturbances in the South China Sea and Taiwan strait. However remote the possibility, experts might reassess the timeline for the annexation of Taiwan [8].

    Overall, the instability witnessed so far will likely linger on well into 2023 if no meaningful measures are implemented to avert the situation. The above-mentioned policies to restrict movement and information flow in major cities that generate a significant portion of the country’s economic output, if put into effect, will dent the economy further, dashing hopes for more job creation [9] which is key in promoting social stability. This truly is a dilemma for the Party. These measures will also have negative impacts on the world’s supply chains [10].

    References: [1] https://www.bbc.co.uk/news/world-asia-china-63633109 https://www.washingtonpost.com/world/2022/10/14/china-protest-sitong-bridge-haidian/ https://www.bbc.co.uk/news/world-asia-china-63447755 [2] https://www.bloomberg.com/news/articles/2022-11-11/these-are-the-20-measures-guiding-china-s-covid-easing-efforts [3] https://www.bloomberg.com/news/articles/2022-10-18/anti-xi-slogans-in-rare-beijing-protest-spread-within-china?leadSource=uverify%20wall [4] https://www.imf.org/en/News/Articles/2022/11/21/pr22401-imf-staff-completes-2022-article-iv-mission-to-the-peoples-republic-of-china#:~:text=Following%20the%20impressive%20recovery%20from,percent%20in%202023%20and%202024. [5] https://www.bbc.co.uk/news/world-asia-china-63752407 [6] https://www.independent.co.uk/news/world/protesters-china-blank-paper-white-covid-b2234009.html [7] https://www.forbes.com/sites/emmawoollacott/2022/09/22/iran-shuts-down-whatsapp-and-instagram-as-protests-spread/ [8] https://www.spectator.co.uk/article/a-chinese-invasion-of-taiwan-is-coming/ [9] https://foreignpolicy.com/2022/08/04/xi-china-unemployment-jobs-economy-crisis-youth-mao-great-leap-forward/ [10] https://edition.cnn.com/2022/11/25/tech/apple-foxconn-iphone-supply-china-covid-intl-hnk/index.html

  • Last week, Financial Secretary Paul Chan delivered the last Budget speech of his term at the height of the pandemic. In his expansionary budget, he announced counter-cyclical fiscal measures to the tune of $170bn, much higher than last year’s $120bn and one of the largest in Hong Kong’s history. If we include infrastructure and other spending, the whole package is expected to bolster the Covid-stricken economy by approximately 3 percentage points. So far, the media has focused largely on the “sweeteners” (the consumption vouchers and tax relief). However, we think there are other underlying issues that need to be addressed in this Budget.


    Concerns over forecasting errors - The government often made large revisions to the budget forecasts, we think this is due to outdated forecasting infrastructure and philosophy at the FSO. We compared budget estimates made since 2012, they tend to overestimate government expenditure and underestimate revenue. As a result, there is a negative bias to the fiscal balance estimates, as much as 5% of GDP. With so much at stake, a misallocation of resources because of inaccuracy of the forecast will have long term socio-economic implications.

    Rapid rise in recurrent expenditure growth - It is worth noting that recurrent expenditure has been rising faster than nominal GDP growth in recent years, deviating from the Golden Rule set out in the Basic Law. This is unsurprising given rapidly aging population and the enlarging wealth gap. While this underlying trend is unlikely to change, we think the government should widen its tax base when the time comes.

    Imbalanced economic development - The financial industry accounts for 23% of GDP but only 7% of employment, economic success is clearly not being felt so broadly in the society. While the government should continue to invest heavily in the new economy in order to generate more economic activity and revenues, they should also focus on revamping and realigning the education system to better match the future needs from the new economic structure, so that more locals can share the benefits of economic development.

    What to do with the Brain-Drain? - Many expatriates and locals had left Hong Kong because of social unrest and the adopted pandemic measures. Brain-drain is occurring in many key industries, including health services, finance and professional services. The government should focus on making policies to retain talents, but not just to attract new ones.

    Permanent housing for cage home residents - Currently there are at least 5000 individuals living in illegal cage housing, it makes sense to convert some of the quarantine centres (purposed built for city-wide Covid testing) into permanent home for residents living in these bedspace apartments, solving this decade long social problem.

    Highlights with charts can be found here.

    A longer version of this commentary is available here.

  • The decline in Hong Kong retail sales volume eased to -13.4% y/y in August compared to the 23.8% y/y drop in the previous month, declining for the nineteenth consecutive month. Although retail trade still suffered from double digit [...]

  • On a seasonally adjusted basis, the unemployment rate was unchanged at 6.1% in the three months to September, according to the Hong Kong Census and Statistics (see Figure 1). Note that the jobless rate has been hovering around this [...]

  • On a seasonally adjusted basis, the unemployment rate was unchanged at 6.1% in the three months to September, according to the Hong Kong Census and Statistics (see Figure 1). Note that the jobless rate has been hovering around this [...]