NationStates

Greetings NS,

This week is a very happy week in Hong Kong SAR because the people here are getting 2,000 HKD worth of free money (but you have to use it up in two months) as part of an extended plan to hand everyone 5,000 HKD.

Sources:

https://www.google.com/amp/s/hongkongfp.com/2021/06/19/hkfp-guide-how-to-apply-for-hong-kongs-new-hk5000-spending-vouchers/

https://www.google.com/amp/s/amp.scmp.com/news/hong-kong/hong-kong-economy/article/3137772/registration-hong-kongs-hk5000-vouchers-open-early

I am very excited and I am very happy. I just got mine and I am having an absolute BLAST dining at the malls.

Now my fellow HK posters can kindly correct me if I’ve got the details wrong (and I’ll edit) but I believe the way it works is that everyone gets a first “injection” of 2,000 HKD that you have to use up in two months. Then you get another 2,000 with similar conditions and then a final, unconditional 1,000.

…

Two things to discuss:

1. Is it good or bad for the economy in the long term? Or neutral?

2. If you got the 5,000… how would you spend it?

Please provide explanations in your answers. My understanding of economics is not that great so I look forward to your answers.

Usually when I get an unexpected influx of money I invest it in stocks.

Is this just cold, hard cash or some kind of "coupon"? I remember I received some kind of cheque you could only use at a limited number of "local" businesses - I spent it all on a very expensive hotel.

If they're just giving you money I'm not entirely sure it's a good idea. Nothing is stopping you from splurging on Amazon or foreign business, while I assume the intent is to stimulate the local economy.

Esternial wrote:Usually when I get an unexpected influx of money I invest it in stocks.

Is this just cold, hard cash or some kind of "coupon"? I remember I received some kind of cheque you could only use at a limited number of "local" businesses - I spent it all on a very expensive hotel.

If they're just giving you money I'm not entirely sure it's a good idea. Nothing is stopping you from splurging on Amazon or foreign business, while I assume the intent is to stimulate the local economy.

IM is essentially correct, for example spending on even utilities doesn’t count as spending - it really needs to be on local economy to calculate you’ve spent the amount to qualify for the next instalment.

That’s not to say you can’t spend on an international retail brand in HK given it provides local employment. It doesn’t go into your bank or your credit card so what you can spend is limited to local purchases - i guess through Alipay and WeChat you can spend in China though that’s also, technically, local.

For my own view it’s probably decent though, frankly, I don’t need it, I’d rather the lower 50% received double the amount over me getting anything.

Plus HK has a budget surplus and only 8M population so it’s probably more feasible than, say, the US where investment into infrastructure and employment is better.

i don't know enough about HK's economic/fiscal situation and ruleset to actually offer an opinion about long-term sustainability/inflation/real resources v. debt but on balance more aggregate demand is usually good

Much like the stimulus checks here in America, I reckon it would be cooler as a recipient to receive these without conditions. But I guess from a government standpoint that doesn't help them reach their goal of stimulating the local economy.

What would I do with the money? Well, 5,000 HKD is useless to me so I'd have to get it converted to USD, about $645. With that, for one month I could pay my student loan bill, my cell phone bill, my credit card bill, and maybe two weeks worth of gas and groceries.

It’s been about 10years since I was last in Hong kong. I remember things being either really cheap or really expensive so I’ve no idea what effect this would have for most people.

It’s nice that the government is sending money instead of taking it.

The spending of money drives economies. When people have more money, they spend more money. Therefore, giving people money is (often) an effective way to boost an economy. I know basically nothing about the specifics of Hong Kong's economy, but this at least doesn't seem like a *bad* idea to me. I like the clause forcing people to actually spend the money instead of just saving it, that's quite clever.

Bombadil wrote:

Esternial wrote:Usually when I get an unexpected influx of money I invest it in stocks.

Is this just cold, hard cash or some kind of "coupon"? I remember I received some kind of cheque you could only use at a limited number of "local" businesses - I spent it all on a very expensive hotel.

If they're just giving you money I'm not entirely sure it's a good idea. Nothing is stopping you from splurging on Amazon or foreign business, while I assume the intent is to stimulate the local economy.

IM is essentially correct, for example spending on even utilities doesn’t count as spending - it really needs to be on local economy to calculate you’ve spent the amount to qualify for the next instalment.

That’s not to say you can’t spend on an international retail brand in HK given it provides local employment. It doesn’t go into your bank or your credit card so what you can spend is limited to local purchases - i guess through Alipay and WeChat you can spend in China though that’s also, technically, local.

For my own view it’s probably decent though, frankly, I don’t need it, I’d rather the lower 50% received double the amount over me getting anything.

Plus HK has a budget surplus and only 8M population so it’s probably more feasible than, say, the US where investment into infrastructure and employment is better.

Oh?

For my own view it’s probably decent though, frankly, I don’t need it, I’d rather the lower 50% received double the amount over me getting anything.

^

What do you mean by this?

Kannap wrote:Much like the stimulus checks here in America, I reckon it would be cooler as a recipient to receive these without conditions. But I guess from a government standpoint that doesn't help them reach their goal of stimulating the local economy.

What would I do with the money? Well, 5,000 HKD is useless to me so I'd have to get it converted to USD, about $645. With that, for one month I could pay my student loan bill, my cell phone bill, my credit card bill, and maybe two weeks worth of gas and groceries.

Damn. This just reminds me of how EXPENSIVE everything is in North America.

If I tried drinking and dining out with 645 USD (I'm assuming the USA's prices are like Canada's) it would be gone SNAP like so fast. Over here... 5,000 HKD is a literal power trip if you know where to go (with almost no sales tax, high labor costs, regulations etc). I get that a low tax, deregulated free trade economy is bad for some segments of the population but when you reap the benefits... you reap it huge.

My friend came over here from Guelph, Ontario a few years back and I showed him this wonderful Italian restaurant combo meal for 25 USD (it had a giant salad, lasagna, bread, and a large entrée of clams along with a sugared drink) and he told me:

"THIS IS LITERALLY STEALING."

Infected Mushroom wrote:

Kannap wrote:Much like the stimulus checks here in America, I reckon it would be cooler as a recipient to receive these without conditions. But I guess from a government standpoint that doesn't help them reach their goal of stimulating the local economy.

What would I do with the money? Well, 5,000 HKD is useless to me so I'd have to get it converted to USD, about $645. With that, for one month I could pay my student loan bill, my cell phone bill, my credit card bill, and maybe two weeks worth of gas and groceries.

Damn. This just reminds me of how EXPENSIVE everything is in North America.

If I tried drinking and dining out with 645 USD (I'm assuming the USA's prices are like Canada's) it would be gone SNAP like so fast. Over here... 5,000 HKD is a literal power trip if you know where to go (with almost no sales tax, high labor costs, regulations etc). I get that a low tax, deregulated free trade economy is bad for some segments of the population but when you reap the benefits... you reap it huge.

My friend came over here from Guelph, Ontario a few years back and I showed him this wonderful Italian restaurant combo meal for 25 USD (it had a giant salad, lasagna, bread, and a large entrée of clams along with a sugared drink) and he told me:

"THIS IS LITERALLY STEALING."

$25 for a good meal is pretty normal in the US.

And it should actually be a good meal at that price. My local sub shop will sell you lunch for $10, but that's more junk food.

Thought this was purely a hypothetical when I saw it in General...probably is more beneficial than not.

Stellar Colonies wrote:Thought this was purely a hypothetical when I saw it in General...probably is more beneficial than not.

It’s real. And I’m so happy it’s real. There’s so much I, and others can do with this money.

Though in terms of economics, what would be the break off point where handing out money on this condition starts being more detrimental than beneficial? How do you calculate it?

And it’s good policy, why don’t western governments do it?

Stellar Colonies wrote:Thought this was purely a hypothetical when I saw it in General...probably is more beneficial than not.

I was also disappointed this wasn't one of IM's famed hypotheticals for me to tear apart.

Infected Mushroom wrote:

Stellar Colonies wrote:Thought this was purely a hypothetical when I saw it in General...probably is more beneficial than not.

It’s real. And I’m so happy it’s real. There’s so much I, and others can do with this money.

Indeed, it'll likely boost the economy to some degree.

Infected Mushroom wrote:Though in terms of economics, what would be the break off point where handing out money on this condition starts being more detrimental than beneficial? How do you calculate it?

I have no clue, my economic knowledge is fairly minimal.

Infected Mushroom wrote:And it’s good policy, why don’t western governments do it?

Many stopped clocks around the world, some have to be right today.

Kannap wrote:

Stellar Colonies wrote:Thought this was purely a hypothetical when I saw it in General...probably is more beneficial than not.

I was also disappointed this wasn't one of IM's famed hypotheticals for me to tear apart.

When I assumed so, I half-expected many of the replies to be accusing the hypothetical payment to be some kind of bribe.

Infected Mushroom wrote:

Kannap wrote:Much like the stimulus checks here in America, I reckon it would be cooler as a recipient to receive these without conditions. But I guess from a government standpoint that doesn't help them reach their goal of stimulating the local economy.

What would I do with the money? Well, 5,000 HKD is useless to me so I'd have to get it converted to USD, about $645. With that, for one month I could pay my student loan bill, my cell phone bill, my credit card bill, and maybe two weeks worth of gas and groceries.

Damn. This just reminds me of how EXPENSIVE everything is in North America.

If I tried drinking and dining out with 645 USD (I'm assuming the USA's prices are like Canada's) it would be gone SNAP like so fast. Over here... 5,000 HKD is a literal power trip if you know where to go (with almost no sales tax, high labor costs, regulations etc). I get that a low tax, deregulated free trade economy is bad for some segments of the population but when you reap the benefits... you reap it huge.

My friend came over here from Guelph, Ontario a few years back and I showed him this wonderful Italian restaurant combo meal for 25 USD (it had a giant salad, lasagna, bread, and a large entrée of clams along with a sugared drink) and he told me:

"THIS IS LITERALLY STEALING."

Well 5,000 HKD is about 803 CAD and you lived in Canada for a bit so…

Why does Hong Kong have its own currency if it got handed over to China after 1997?

Saiwania wrote:Why does Hong Kong have its own currency if it got handed over to China after 1997?

Aside from an international treaty stating HK wouldn't change for the first 50 years.. at the time the Chinese renminbi wasn't convertible at all, if you were a foreigner in China you couldn't even use local currency, you had to use Foreign Exchange Currency (FEC), which was only accepted at a few outlets.

As a major finance centre HK pretty much had to retain its own currency.

Saiwania wrote:Why does Hong Kong have its own currency if it got handed over to China after 1997?

Same reason places like Bermuda and French Guinea have their own currencies.

Kannap wrote:

Saiwania wrote:Why does Hong Kong have its own currency if it got handed over to China after 1997?

Same reason places like Bermuda and French Guinea have their own currencies.

Do you mean French Guiana? Because French Guinea doesn’t exist anymore. And French Guiana doesn’t have its own currency

Thermodolia wrote:

Kannap wrote:
Same reason places like Bermuda and French Guinea have their own currencies.

Do you mean French Guiana? Because French Guinea doesn’t exist anymore. And French Guiana doesn’t have its own currency

In this circumstance, yes, I got now defunct French Guinea and present French Guiana confused lol.

Curse the Europeans for their naming colonies similar names.

And don't even get me started on Spanish Guinea, French Guinea, and Portuguese Guinea becoming Equatorial Guinea, Guinea, and Guinea-Bissau because that really grinds my gears.

nothing like a windfall to keep the proles quiet, hm? "here, your five thousand, now stfu"

Diahon wrote:nothing like a windfall to keep the proles quiet, hm? "here, your five thousand, now stfu"

Probably.. if you wanted to get really conspirational you might think that the way you spend is very trackable, there's a thing called the yellow economy, whereby you go to outlets that support the protests as opposed to the blue economy where you support the government. Having to use Octopus, Alipay or WeChat means it's easy to see where you tend to go.

The original 10K went straight into your bank account.

It's not a particular issue really, but I'd rather it went to alleviate housing pressures or those who really need it over everyone, many of whom don't really need it.

I love how in Hong Kong we’re getting 5,000.

I hear there’s a plan like this in Taiwan but you’re only getting a fraction of this amount (3,000 NT dollars).

I supose bribing people to be pro Chinese is better than smacking them over the head and locking them up.

I never really got the economic logic of direct stimulus as opposed to government investment. $25 to a restaurant and $25 to a school has the same effect on aggregate demand (assuming the differences in MPC between the chains of spending are irrelevant), but the second has a much greater effect on GDP in the long run, since (certain) government investments like education or physical infrastructure tend to have massive returns to GDP compared to private investment. The HK government really ought to be spending this money on improving economic infrastructure, whether that be transportation, education or whatever.