Trade liberalisation, in its most far-reaching manifestation – China’s prospective entry into the WTO, brings enormous opportunity for Hong Kong to enlarge and deepen its intermediary role. Globalisation is transforming the way in which government and business relate to each other, and Hong Kong is in an excellent position as an open, lightly governed city to take advantage of the process. Technological advance offers new tools to realise the practical benefits of globalisation, particularly in the field of financial services, and Hong Kong is in the vanguard of the innovative work that is going on. 28. But these processes also carry risks and uncertainties, which can be reduced, through hard work and vigilance, but never eradicated. How much business will be diverted from Hong Kong to other cities after China enters the WTO? How should small, open markets like Hong Kong safeguard themselves against the shocks and threats which are transmitted more quickly, more sharply and more forcefully through globalisation? And how, when we frankly have very little idea of where innovation is taking us or of where the dead ends may be, do we cope with the volatilities and unknowns – not least in the financial projections of technology-led companies – of a white hot technological revolution? These are among the many challenges of living in a logistics, financial and digital hub. As one of the world’s most open and connected of cities, Hong Kong is better placed than most to respond to these challenges and to deepen further its role as a global city.
Another explanation some have offered is that there is a measurement problem – we are understating output growth and overstating price inflation. This type of issue, long flagged as a hedonic adjustment, seems most credible in particular market segments, such as in healthcare. Alan Blinder has posed this question: Would you rather have 1970 healthcare at 1970 prices or 2016 healthcare at 2016 prices? Based on the measurement of prices, 1970 healthcare is a much better deal. Yet, when offered this choice, almost all choose 2016 healthcare. Why? The reason is that people highly value the advances in healthcare technology, such as in cardiac care, or in the procedures that are practical today, such as hip and knee replacement, that simply weren’t available 50 years ago. BIS central bankers’ speeches  1  U.S. economic performance has also been held back by developments in the rest of the world. Growth outside of the United States has slowed. In the euro area, comparing the period from 2003 to 2008 to the period from 2010 to 2015, annual real GDP growth slowed from 1.9 percent to 0.8 percent. Japanese growth has remained muted over these periods at 0.1 percent and 1.0 percent respectively. In China, reported growth rates over these two periods slowed from 11.3 percent to 8.3 percent. These developments, along with policy and risk events that have increased demand for U.S. assets, have contributed to significant U.S. dollar appreciation over the last two years.