Here I want to note that the payment system, which is one of the Central Bank’s responsibilities entrusted it by Law, has operated adequately. Going back to the description of the macroeconomic scenario and associated risks, in the world economy the recent behavior of economic indicators, especially in developed countries, could be signaling a more protracted weakening of growth there. This scenario must be carefully evaluated, because other temporary factors related with the disruptive effects of the Japanese earthquake and the oil price hike may have played a role in recent developments. Should this risk of further weakening of developed countries materialize, the difference of the pace of growth with emerging economies would widen. This would exacerbate the interest rate differentials around the world, increasing capital flows toward emerging markets and aggravating forex tensions, obstructing macroeconomic policy making. Add to this that the risks in some European economies have intensified substantially these days and so far there is no defined solution, which has worsened the tensions in financial markets. Moreover, global imbalances are still unresolved, and it is unclear how the major adjustments needed for the fiscal consolidation of part of Europe and the United States will proceed. And it becomes more uncertain when considering that they must take place in an environment of lagging private demand and a still complex financial situation in banks, with large funding needs, exposure to public debt and a significant interconnection within Europe.
If we have faith in the operation of the market economy, the answer to the question whether we should worry is "No, we shouldn't ". What we are witnessing is no more than the inexorable playout of the process of comparative advantage - perhaps one of the most proven laws of economics. Comparative advantage hinges on relative factor endowments and their productivity. Some of these characteristics are, in large measure, static. Thus, for example, relative to other locations Hong Kong has an abundance of deep water but a dearth of flat land. This, very obviously, yields us a strength in port facilities over agriculture. Other characteristics evolve dynamically, such as our relatively well educated and qualified labour force; when this is set against the shortage of space, it is hardly surprising that Hong Kong should specialise more in providing high value-added services than in labour-intensive or space-hungry manufacturing. As regards absolute cost levels, it is the high value added by members of the workforce in particular sectors which generates and justifies their high pay. The fact that Hong Kong appears to be, overall, a rather expensive place, relative to the majority of neighbouring economies, is a consequence and symptom of its success. As anyone can see by just looking around, this doesn't mean that we can no longer win any business. But we can only afford to pay ourselves what we are worth.