(Reprinted from HKCER Letters, Vol.36, January 1996)



Economic Policies for Hong Kong: Beyond the Transition


A project is coordinated by the Hong Kong Centre for Economic Research with participating researchers from the Chinese University of Hong Kong, the City University of Hong Kong, Hong Kong Baptist University, Hong Kong Polytechnic University, Hong Kong University of Science and Technology, Lingnan College, the University of Hong Kong, and from overseas institutions.


The key to Hong Kong's economic success has been a simple, predictable, and transparent business and policy environment.

Experience shows that prosperity results from policies that protect private property rights, maintain open and competitive markets, and limit the role of the government.

The rapid structural change of our economy in recent years has generated considerable debate over the proper role of economic policy in the future. The impending restoration of sovereignty over Hong Kong from Britain to China has complicated these concerns. There is some anxiety as to whether the past business and policy environment will continue.

During this period of economic and political transition in Hong Kong, various interested parties will be reassessing our existing economic policies. Inevitably, some groups will advocate an agenda aimed at altering the present policy-making framework and reshaping the future course of public policy.

For this reason, it is both necessary and important for those familiar with economic affairs to articulate again the reasons behind the success of our economic system in the past, to identify what the challenges are for the future, to analyze and understand our economy sector by sector, and to develop appropriate policy solutions to achieve continued prosperity.

A challenging task lies before us and there is precious little time for it to be done.


Governments everywhere are sometimes pressured into adopting policies for reasons of expediency and to accommodate special interests; and the public sometimes supports policies which are not in its own interest due to ignorance about the long-term effects of those policies.

Sound policy decisions are more likely to emerge if the public and the government are better informed about the costs and benefits of various policy choices. To be better informed, they must be able to refer to reasoned arguments and documented evidence based on careful research.

In an open society, policymakers and the public have to be aware of the choices they face before there can be any real hope that good policies will be preserved or adopted and bad policies abandoned or avoided.

To meet this challenge, the Hong Kong Centre for Economic Research has initiated a scientific research project on a comprehensive range of general and specific economic policy issues.

To date, the Centre has successfully invited some 34 key economists from all the universities in Hong Kong and elsewhere to launch together the Hong Kong Economic Policy Studies Project.

This is the first concerted public effort undertaken by economists in Hong Kong. It represents a joint expression of our collective concern and hopes for Hong Kong and our faith in its economic future.

Most of the work by academic economists in Hong Kong is undertaken in relative isolation from debates in the public domain. Many useful results are buried in academic publications and written in a language inaccessible to the public. They often fail to make an impact on public opinion and policy.

Our approach is different. The project we propose is coherent and strategically designed to be relevant for public policy decisions. Our objectives are scientific rigor in analysis, practical relevance for policy decisions, and effective public communication.

The project proposes an integrated and coordinated set of 43 research studies into different aspects of the Hong Kong economy. Researchers for 36 of these studies have been successfully commissioned; others are still pending. All studies are expected to be completed and released in 1997.

The studies will be written in a language that can be understood by the public. Both Chinese and English editions will be published, and executive summaries will be provided to facilitate effective communication.

The project list that follows provides summary information of the research topics and researchers.

The Centre is actively soliciting specific funding to support the proposed Hong Kong Economic Policy Studies Project from private sources at this time. In view of the urgency of the project, work has already commenced on some of the studies before funding has been secured.

For additional information please contact:

Professor Y.C. Richard Wong, or Dr. Luk Yim Fai
The Hong Kong Centre for Economic Research
School of Economics and Finance
The University of Hong Kong
Pokfulam Road, Hong Kong
Telephone: 2547-8313
Facsimile: 2548-6319



1. PROJECT: Economic Policy: Past, Present, and Future

This study is a review of the reasons for economic success in Hong Kong during the post-war period, focusing on the policy of positive noninterventionism. It provides a detailed analysis of all major facets of the Hong Kong economy and society, based on the research results of all 43 proposed projects. Special emphasis is devoted to the articulation of the challenges and opportunities presented by the opening of China, the integration of Hong Kong with China under "one country, two systems," the rising competition from our neighbors amidst rapid structural transformation of the Hong Kong economy, and the globalization of world markets.

Researcher: Yue-Chim Richard Wong, Professor, School of Economics and Finance, University of Hong Kong, and Director, Hong Kong Centre for Economic Research.



2. PROJECT: Inflation, Structural Change, and Business Cycles

High inflation rates in Hong Kong are a by-product of the rapid structural transformation of the economy from manufacturing into services under a monetary regime of fixed exchange rates. This study examines the reasons behind the persistence of high inflation, the impact on Hong Kong's competitiveness, and the consequences for savings, and proposes measures to moderate the inflationary process and to ameliorate its effects.

Researcher: Alan K.F Siu, Lecturer, School of Economics and Finance, University of Hong Kong, and Associate Director, Hong Kong Centre for Economic Research.

3. PROJECT: Monetary System of Hong Kong

This study analyzes the money supply process and the macroeconomic implications of the current linked exchange rate system. It will discuss the monetary role of the banking sector and the policies of the Monetary Authority, as well as examine the functioning of the system, in light of internal and external political and economic shocks. It will also explore the feasibility and desirability of alternative monetary regimes.

Researcher: Luk Yim-Fai, Lecturer, School of Economics and Finance, University of Hong Kong.

4. PROJECT: Public Finance

Fiscal conservatism is the central feature of public finance in Hong Kong. This is characterized by a low and simple tax regime, by noninterventionism in competitive markets, by the limiting of government spending, and the accumulation of budget surpluses in almost every year. An important source of public confidence in the linked exchange rate system is the huge foreign exchange reserves. Will the move towards a popularly elected legislature tip the balance away from fiscal conservatism? What policy measures can be adopted to prevent this from happening? How can Hong Kong retain its competitiveness given that our competitors are reducing their tax rates and deregulating their economies?

Researcher: Yuen Chi-Wa, Lecturer, School of Economics and Finance, University of Hong Kong.

5. PROJECT: Hong Kong's Monetary Regimes and the Linked Exchange Rate

A review of the history and performance of exchange rate systems in Hong Kong. The study analyzes the implications of adopting the linked exchange rate system in Hong Kong and evaluates the economic consequences for Hong Kong if alternative regimes had been put in place in 1983. In particular, how would Hong Kong have adapted to economic and political shocks? Are there therefore compelling reasons to preserve the linked exchange rate system? What set of institutions, rules, and policies have to be introduced if we wish the current system to withstand economic and political shocks in the future?

Researcher: Francis Ting-Ming Lui, Associate Professor, Department of Economics, and Director, Centre for Economic Development, Hong Kong University of Science and Technology.

Researcher: Kwan Yum-Keung, Assistant Professor, Department of Economics, Hong Kong University of Science and Technology.



6. PROJECT Hong Kong as a Financial Center: Evolution, Prospects, and Policies

During the past 25 years, Hong Kong has emerged as a major financial center in the Asian-Pacific Region, and arguably the fourth largest financial center of the world. Will this role survive the transfer of sovereignty in 1997 and beyond? This study analyzes the taxonomy of financial centers, examines the factors for Hong Kong's past success, and discusses Hong Kong's future as an international financial center in the post-colonial period. Competition from other centers and policy issues will also be addressed.

Researcher: Y.C. Jao, Reader, School of Economics and Finance, University of Hong Kong.

7. PROJECT: Financial Regulations

It is estimated that the Asia-Pacific region has to raise US$8 trillion to finance its infrastructure investments by the year 2004. Hong Kong has an important role to play as the fund-raising center for the region and for China. Regulations to ensure proper disclosure of information and to avoid abuse of fiduciary trust are relevant for maintaining investors' confidence in Hong Kong's capital markets. Of equal importance is the development of markets for derivative instruments, like futures and options, which can help investors to manage risk. The study will look at various regulatory issues and propose measures to enhance and ensure the integrity of the capital and derivative markets in Hong Kong.

Researcher: Richard Yan-Ki Ho, Professor and Dean, Faculty of Business, City University of Hong Kong.

8. PROJECT: Corporate Governance

Investors around the world expect greater transparency in the management of public listed companies. To enhance Hong Kong's role as a financial center, these expectations have to be addressed. Actual and potential conflicts between management and shareholders, and between majority and minority shareholders, have adverse affects on the ability of companies to raise capital. This study examines the set of rules and institutions that should be established to mitigate these conflicts, and at the same time avoid overregulation that results in the loss of economic efficiency. The focus is on the role of the Board of Directors, on remuneration of executives and directors, on accounting issues and disclosure requirements, insider trading, and disclosure and regulation of related transactions.

Researcher: K.C. Chan, Professor and Head, Department of Finance, Hong Kong University of Science and Technology.

9. PROJECT: Interactions between Financial and Property Markets in Hong Kong and China

Hong Kong has played a significant role in the development of property and financial markets in China, both as a participant, an intermediary, and a role model. This study identifies the key issues that have to be addressed to ensure continued development of these interactions, especially in the areas of land use system, risk management, the development of rules and institutions, and the reduction of regulatory barriers.

Researcher: Lau Pui-King, Priscilla, Associate Professor and Associate Head, Department of Business Studies, Hong Kong Polytechnic University.

10. PROJECT: Economic Prospects of the Insurance Industry of Hong Kong

The insurance industry is an important nonbank financial component in many well-established economies. In Hong Kong, the growing financial need and the rising standard of living in recent years have increased the demand for insurance and have led to the entry of new firms and the introduction of new products in the industry. The rapid change of the pace of the industry has given rise to various issues within and in connection with other financial sectors of the economy. The objective of this study is to document and to analyze these changes and issues, and to provide a framework of reference for policy consideration.

Researcher: Ben T.L. Yu, Lecturer, School of Economics and Finance, University of Hong Kong.



11. PROJECT: Hong Kong and the Pacific Community

Asia is becoming the focal point of global development. The relationship between Hong Kong and her neighbors is undergoing rapid changes, and will gather speed and intensity as Hong Kong becomes part of China. Facing competitive pressures from other Asian cities, feeling the repercussions of possible policy changes in the United States, Japan, and the ASEAN countries towards China, Hong Kong needs to conduct a thorough assessment of her strengths and weaknesses, seek out her new role in the Pearl River Delta area, and design polices to become the hub of economic activities in the Pacific community.

Researcher: Fan Yiu-Kwan, Dean, School of Business, and Director, Business Research Centre, Hong Kong Baptist University.

12. PROJECT: Trade and Investment Flows: Mainland China, Hong Kong, and Taiwan

This is a study of trade and investment flows among the three Chinese economies and of their significance in the world economy. In 1994, these three economies became the fourth largest exporter in the world. Mainland China is the largest recipient of direct foreign investment among developing economies, and most of that investment originated from Hong Kong and Taiwan. Will this growth be sustainable? What are its implications for each of the three Chinese economies and for the global system of international trade and investment flow? This study attempts an appraisal of the domestic, regional, and international factors that will either impede or facilitate the economic integration of this region in the future. It will also consider appropriate policy responses for Hong Kong.

Researcher: Fung Kwok-Chiu, Lecturer, School of Economics and Finance, University of Hong Kong, and Associate Director, Hong Kong Centre for Economic Research.

13. PROJECT: Structural Transformation and Integration of Hong Kong and South China

The phenomenal economic development of the Pearl River Delta, the economic powerhouse of Guangdong, since the opening of China in 1979, owes much to the contributions of Hong Kong entrepreneurs. In the past 15 years, the average annual growth rate in the Pearl River Delta has been 17 percent, a pace of growth unparalleled in history, vastly exceeding that of the Asian Dragons. In the process, the Hong Kong economy has been transformed beyond recognition. This study deals with the challenges ahead and the opportunities presented by further integration; it will attempt to analyze in detail the multifaceted process of economic development under "one country, two systems."

Researcher: Sung Yun Wing, Reader and Chairman, Department of Economics, Chinese University of Hong Kong. .

14. PROJECT: Tourism and Development

The tourism industry--hotels, travel agents, and retail outlets--is an important component in the services sector. As Hong Kong emerges as the gateway to China and a hub in the Pacific Rim, and air traffic volume is boosted on completion of the new airport, the tourism industry's expansion potential cannot be overlooked. Yet the composition of tourists, their spending behavior, their purpose of visit, and their duration of stay are much different from what they were a decade ago. The present study reviews these changes and analyzes the ways that Hong Kong can best prepare herself to capitalize on the opportunities afforded by this new wave of visitors.

Researcher: Kwong Kai-Sun, Lecturer, Department of Economics, Chinese University of Hong Kong.

15. PROJECT: Hong Kong and Shanghai Relations

Researcher: (Pending)



16. PROJECT: Anti-Trust Policy and Legislative Intervention into Economic Activities

Whatever the excesses of free competition, no economy can benefit from legislative interventionism that is based on sheer sentiment, little understanding of the economics of anti-trust, and a lack of a deep understanding of the workings of the local economy. This study seeks to provide a framework of proper anti-trust policy suitable for an open economy like Hong Kong's, based on the in-depth analyses of several key and successful local industries. It will draw upon the positive and negative lessons of anti-trust activities of the U.S. and Britain. It seeks to dispel the influence of interest-group politics in anti-trust policymaking, and establish in its place one that takes economic efficiency as its central goal in the fostering of economic growth and overall prosperity.

Researcher: Leonard K.H. Cheng, Professor and Head, Department of Economics and Associate Dean, School of Business and Management, Hong Kong University of Science and Technology.

Researcher: Y. Joseph Lian, Lecturer, Department of Economics, and Director, Undergraduate Programmes, School of Business and Management, Hong Kong University of Science and Technology.

17. PROJECT: Telecommunications

From 1992 to 1995, Hong Kong made the legal and regulatory changes required to introduce competition into almost all aspects of its telecommunications industry. Even the exclusive license on international telecommunications has been significantly eroded through a variety of technological and regulatory measures. This study makes the case that Hong Kong's telecommunications industry now faces challenges of a radically different type. They are not primarily issues of domestic regulatory policy but involve both Hong Kong's relationship to regional and global players in the telecommunications industry and also the competitiveness of the trading economy. Telecom and IT can no longer be regarded as a matter of domestic regulatory policy but must be examined at the level of trade policy. The challenges facing the industry cluster around the following three areas: i) the role of Hong Kong in the development of China's telecommunications sector, ii) the resale of international capacity (and other forms of international competition) and its impact upon Hong Kong's local telecommunications interests, an issue which poses the question of whether a free trade in services regime would strengthen or weaken the regional competitiveness of H.K.'s economy, and iii) the adjustment to technological changes -- involving the convergence of broadcasting and telecommunications and the rise of the Internet -- which are undermining a legal and regulatory order built around an older generation of technology.

Researcher: Milton Mueller, Assistant Professor, Department of Communications, Rutgers University, New Jersey, U.S.A.

18. PROJECT: Restructuring the Hong Kong Energy Industry

This study on the energy industry answers questions about whether the existing market structures have served both the producers and consumers well, and whether industry restructuring is required to lower energy costs and raise the competitive power of Hong Kong. Better cooperation between Hong Kong and China in energy planning and development will also enhance the efficiency of the industry.

Researcher: Lam Pun-Lee, Assistant Professor, Department of Business Studies, Hong Kong Polytechnic University.

19. PROJECT: Communications and Media

Researcher: (pending)

20. PROJECT: Reforming the Water Supply and Sewage Industries

In Hong Kong, the water supply industry is a government monopoly. Experiences in other countries have shown that an improvement in the efficiency in the running of the industry can be achieved by privatization and deregulation. This study will address the policy questions related to water supply and sewage treatment. It will consider to what extent foreign experiences can be applied to Hong Kong and the financial implications in the privatization of the industry. The study will then make policy recommendations on improving the efficiency of the water supply industry.

Researcher: Chan Yu-Cheong, Assistant Professor, Department of Business Studies, Hong Kong Polytechnic University

Researcher: Lam Pun-Lee, Assistant Professor, Department of Business Studies, Hong Kong Polytechnic University.

21. PROJECT: Domestic Transport Policy

An integrated internal transport policy is sought, covering land-based transport modes including private cars, motorcycles, taxis, public buses, public and private light buses, and goods vehicles. Other public transport services such as the Mass Transit Railway, Kowloon Canton Railway, Light Rail Transit, trams, and ferries will hopefully be covered. The study aims to come up with a coherent regulatory and management framework on each transport mode. The proposed framework will depend on factors such as the extent of scale economies, as well as the obstacles encountered by the regulator in extracting the requisite information for conducting proper regulation. The need for public policy that enhances the provision of efficient transport services is suggested by, for instance, the recent controversy surrounding the expiration and subsequent renewal of China Motor Bus's franchise.

Researcher: Timothy D. K. Hau, Lecturer, School of Economics and Finance, University of Hong Kong.

Researcher: Stephen T.F. Ching, Assistant Professor, Department of Economics and Finance, City University of Hong Kong.

22. PROJECT: Taxis

This study shows how regulations have affected the taxi business in Hong Kong and includes minor departures to consider minibus, bus, and private car regulations. Regulations have reduced the range of qualities available to customers, and they have forced the government to manage quality control in the business. In effect, we have a government taxi service in which taxi drivers have little incentive to follow the rules. The study will also turn to the possible objectives of regulators in Hong Kong, and to the similarities between actions of regulators elsewhere.

Researcher: C.D. Hall, Senior Lecturer, School of Economics and Finance, University of Hong Kong.

23. PROJECT: Port Facilities and Services

In this project, we study the market structure, firm behavior, and economic performance of Hong Kong's port services industry. The industry's evolution will be described and documented. Then the industry's probable future development will be projected from the perspective of Asia-Pacific's dynamic growth and China's increasing integration with the world economy. The study will explore the implications of competition from neighboring shipping centers in the region as well as of pressure to liberalize service trade under the Uruguay Round agreement. It will examine proposals to enhance efficiency and productivity in the industry.

Researcher: Leonard K.H. Cheng, Professor and Head, Department of Economics, and Associate Dean, School of Business and Management, Hong Kong University of Science and Technology.

Researcher: Yue-Chim Richard Wong, Professor, School of Economics and Finance, University of Hong Kong, and Director, Hong Kong Centre for Economic Research.

24. PROJECT: Airport and Air Services

The opening of China and the growth in intraregional trade in the Asia-Pacific region has transformed Hong Kong into an international entrepot. The physical transportation infrastructure is being stretched to capacity limits by the growth in the volume of merchandise trade and business travelers that comes through Hong Kong. The problem is further exacerbated by the growth of international tourism. Capacity limits is not the only factor hampering the ability of Hong Kong entrepreneurs to respond to new economic opportunities. The issue of regulatory barriers and restrictions in the airline and air cargo industry is of equal importance. Competition from neighboring countries vying to be an air hub also poses significant threats. The study focuses on how Hong Kong can maintain its position as a regional air hub.

Researcher: Joseph P. Schwieterman, Assistant Professor, School of Management of Public Services, DePaul University, Chicago, Illinois, U.S.A.



25. PROJECT: Advertising and Press Freedoms

Researcher: (Pending)

26. PROJECT: Legal Profession

Researcher: (Pending)

27. PROJECT: Accounting Profession

Researcher: (Pending)

28. PROJECT: Engineering Profession

Researcher: (Pending)

29. PROJECT: Medical and Health Profession

Researcher: (Pending)

30. PROJECT: Schools and Teachers

As Hong Kong moves into a service economy, the demands put on the education system to provide the requisite human resources is changing. The goal of this study is to assess the desirability and feasibility of introducing a voucher scheme in our education system. We will examine educational development in Hong Kong, with an emphasis on the historical decline in private schools. This will be studied in the context of government policy to subsidize aid-receiving schools and restrict private schools. We will then discuss the need to revitalize the private sector in education by introducing a voucher scheme to accommodate the diversifying demand of parents.. This suggestion may trigger reforms of schools and teachers that may benefit parents and students. We will address in detail the question of how such a scheme may be introduced in Hong Kong, either in whole or in part, and what the relevant policy considerations are.

Researcher: Chung Yue-Ping, Senior Lecturer, Department of Educational Administration and Policy, Chinese University of Hong Kong.



31. PROJECT: Industry and Technology Policy

There is much concern about whether Hong Kong can maintain its competitiveness in the face of the apparent greater technological advances achieved by its major competitors in the region. This study examines the competitiveness of Hong Kong's industries in both the manufacturing and service sectors over time and whether there is indeed a case for government intervention. The policy implications of recent analyses of economic growth as applied to the fast-growing economies in East Asia (particularly Hong Kong and South China) will be examined for their relevance in enhancing Hong Kong's competitiveness, including trade, industrial, and technology policies. We will quantify the miraculous growth performance of this region that has been attributable to the success (or failure) of these policies in the past, and draw policy inferences in order to sustain such economic success for the future.

Researcher: Kwong Kai-Sun, Lecturer, Department of Economics, Chinese University of Hong Kong.



32. PROJECT: Social Welfare Policy

Making provisions for those threatened by the extremes of disability and poverty is an accepted duty of society. This study assesses existing schemes and develops a well-articulated framework for understanding the role of government in the provision of social security in Hong Kong. Hong Kong should avoid slipping inadvertently into the welfare state syndrome that has threatened economic progress in many nations.

Researcher: William M.C. Chan, Lecturer, Department of Economics, Chinese University of Hong Kong.

33. PROJECT: Income Inequality and Economic Growth

Hong Kong has experienced rapid economic growth and population growth in the past three decades. The rapid restructuring of the economy from manufacturing to services leads to a substantial shift in employment patterns. The growing importance of services suggests a general upgrading in labor demand. While the labor market adjusted smoothly to changes in labor demand, the wage dispersion widened. If there is a rising demand for education, it will increase the wage gap between educated and uneducated workers. This study analyzes the changes in the distribution of income among individuals as well as among households over time. This study will also discuss how income inequality is affected by government policies.

Researcher: Lui Hon-Kwong, Lecturer, Department of Marketing and International Business, Lingnan College.

34. PROJECT: Old Age Security Schemes

The Hong Kong Government has for some time been considering adopting a comprehensive retirement scheme. Since most of the developed countries in the world have implemented various types of retirement schemes, it is important for Hong Kong to learn from their experiences. On the other hand, the demographic, socio-economic, political, and historical conditions of Hong Kong are different from other countries. An in-depth study on these conditions is necessary before any formal proposal on retirement schemes should be made. This study will examine the experiences of the countries adopting different schemes. Relevant factors that may affect a scheme for Hong Kong will be investigated. Some theoretical implications will also be discussed.

Researcher: Francis Ting-Ming Lui, Associate Professor, Department of Economics and Director, Centre for Economic Development, Hong Kong University of Science and Technology.

35. PROJECT: Health Care Services Delivery and Financing

This study examines alternative pricing and financing mechanisms with a view to recommending a system for Hong Kong that is both cost-effective and able to deliver needed services to all Hong Kong residents in an affordable way.

Researcher: Ho Lok-Sang, Reader and Director, Centre for Public Policy Studies, Lingnan College.

36. PROJECT: Crime and Punishment

The study will apply the economic approach in crime and punishment in Hong Kong. It will emphasize the issues of types of crimes and their magnitude in Hong Kong, an estimation of social crimes, the structure of the penal system, the impact of the economy and the deterrent effect of the penal system on crimes, and the effectiveness of law enforcement agencies in controlling crime.

Researcher: Leung Siu-Fai Associate Professor, Department of Economics, Hong Kong University of Science and Technology.



37. PROJECT: Hong Kong's Planning System and Procedure

The economic opportunities for Hong Kong in the wake of the opening of China requires a rapid pace of urban development and redevelopment to keep in step. The study analyzes the development of town planning in Hong Kong and suggests reforms to enhance efficiency in development. This study reviews the evolution of the planning system from 1939 to the present as an institutional arrangement assigning and attenuating private property rights. It also examines issues of forward planning, such as whether CDA zoning will violate resource use and transfer rights. The myths and facts of sustainable development will also be examined. The study will include a full discussion of the development control process such as re-zoning and planning permission procedures, the planning enforcement mechanism, and institutional design issues and reforms.

Researcher: Lai Wai-Chung, Lecturer, Department of Surveying, University of Hong Kong.

38. PROJECT: Public Housing

More than half of the population in Hong Kong lives in some form of publicly subsidized housing. The long-term implications of this for the development of the economy in general, and on property markets and public finances in particular, have never been carefully studied. What would be the implications for public housing demand if the population of Hong Kong were to increase significantly after 1997, as it already has in the two years in 1993 and 1994? Are the current public housing policies an efficient way of providing low-cost shelter for the public? Is access to public housing fair? What are the alternatives in the face of growing demand and rising prosperity? Unlike previous studies of public housing, this study adopts an economic approach to the problem and seeks to propose long-term solutions based on a reliance on market incentives to address the problem of housing provision in Hong Kong.

Researcher: Rosanna Wong Yick-Ming, Chairman, Hong Kong Housing Authority.

Researcher: Yue-Chim Richard Wong, Professor, School of Economics and Finance, University of Hong Kong, and Director, Hong Kong Centre for Economic Research.

Researcher: Y. Joseph Lian, Ph.D., University of Minnesota. Lecturer, Department of Economics, and Director, Undergraduate Programmes, School of Business and Management, Hong Kong University of Science and Technology.

39. PROJECT: Private Housing Market

The opening of China, the changing economic structure of Hong Kong, and the growth of population are important factors in driving up housing and land prices in Hong Kong in recent years. The current fall in property prices is in part precipitated by government intervention into the housing and mortgage loan markets. The long-term implications of such policies are worrisome. In particular, this intervention might slowdown the longterm provision of private housing, which would lead to a greater reliance on public housing as an alternative. The financing aspects of property development are also of concern. This study analyzes these issues in great depth and proposes market solutions to address the problem of private housing development in light of the long-term forecast of the demand for private housing in Hong Kong.

Researcher: Alan K.F. Siu, Lecturer, School of Economics and Finance, University of Hong Kong, and Associate Director, Hong Kong Centre for Economic Research.

40. PROJECT: Behavior and Structure of Property Markets

The Hong Kong property market is alleged to be dominated by a few large developers whose land banks are supposedly sufficient to supply the private residential market for four years. The public suspects that developers have collusive practices at both land auctions and the housing market. These are serious allegations because collusion in both the input and output markets allows developers to extract monopoly rents. On the other hand, effective competition in any one market implies that monopoly rents obtained in the other market would be dissipated and there would be no incentive to collude. This study attempts a full study of various types of pricing, and of sale and bidding behavior in both the input and output side of the property market. A proper understanding of such behavior is essential for guiding public policy.

Researcher: Yue-Chim Richard Wong, Professor, School of Economics and Finance, University of Hong Kong, and Director, Hong Kong Centre for Economic Research.

Researcher: Stephen T.F. Ching, Assistant Professor, Department of Economics and Finance, City University of Hong Kong



41. PROJECT: Immigration Policy

This project reviews the changes over time in the immigration policy of Hong Kong with respect to immigrants from mainland China. It aims to study the impact of the inflow of Chinese immigrants on the Hong Kong economy. In particular,, the project addresses the following issues: (1) the impact of Chinese immigration on wages, (2) the impact of Chinese immigration on economic growth, as an additional source of labor supply and entrepreneurs, (3) the impact on income distribution, (4) the economic performance of Chinese immigrants and their assimilation into the Hong Kong economy, and (5) the policy on Chinese immigration after 1997.

Researcher: Liu Pak-Wai, Professor, Department of Economics and Pro-Vice-Chancellor, Chinese University of Hong Kong. Research Director, Hong Kong Centre for Economic Research.

42. PROJECT: Labour Markets

The labor force of Hong Kong has undergone significant changes both in its overall size and in its composition. The transformation of the economy has also induced large shifts in the pattern of sectoral demand for labor. This study documents and explains the flexibility of the local labor market in face of an uncertain environment. This study will also discuss how government policies affect the operation of the labor market, with special emphasis on manpower training policies.

Researcher: Wing Suen, Lecturer, School of Economics and Finance, University of Hong Kong.

Researcher: William M.C. Chan, Lecturer, Department of economics, Chinese University of Hong Kong.



43. PROJECT: Market Mechanisms and Environment

Pollution has long been viewed as a problem that only governments can tackle. So it becomes natural that people call for more and more regulation to reduce pollution. But governmental command and control is riddled with problems that lead to inefficient and ineffective pollution control. It is important to look at fresh new ideas and develop a problem-solving approach to pollution issues. The study will explore the idea of market mechanisms as a better way to solve environmental problems.

Researcher: Jo Ann Kwong, University of Michigan, Director of Public Affairs, Atlas Economic Research Foundation, Washington, D.C.


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The Hong Kong Centre for Economic Research
School of Economics and Finance
The University of Hong Kong
Phone: (852) 2547-8313 Fax: (852) 2548-6319
email: hkcer@econ.hku.hk