THE CONSULATE GENERAL OF SWITZERLAND IN HONG KONG

Economy + Finance
HK PMI falls to lowest level since Dec 04: HK's business activity contracted for the second straight month in August, hitting its lowest level since December 2004 as a global economic slowdown pushed output to a five-year low. New orders in the private sector were the weakest in nearly four years although employment increased and the labour market remained reasonably tight, a survey of 300 private companies showed. The HK purchasing managers' index (PMI), based on the survey, fell to a seasonally adjusted 48.5 in August from 49.4 in July, holding below 50 – the dividing line between growth and contraction – for a second straight month. New orders also declined for a second straight month, and business from China decreased for a third month running.
Upside surprise for HK retail: HK retail sales rose 13.8% year-on-year in July, beating market expectations and accelerating for the first time in four months. "It is an upside surprise. It shows that the HK economy will not collapse even though it will slow," said Standard Chartered economist Frances Cheung.
Expect Exchange Fund losses: HK's HK$1.4 trillion Exchange Fund is likely to be in the red in the third quarter on the poor global market performance, warned HK Monetary Authority chief executive Joseph Yam. But the city's de facto central bank chief said investors should not expect the mainland government to help sustain the local bourse by implementing the "through-train" policy shortly. "Letting hot money flow out of China is something that needs to be done as soon as possible," said Yam. "But HK is only one of the possible destinations."
HK aims to set a standard for wine: HK is exploring the possibility of becoming the world's first city to establish a standard for wine storage facilities as part of its push to become Asia's wine hub. It recently signed Asia's first memorandum of understanding with France on wine-related business, a move aimed at making the city the region's centre for wine. Sources said a collaboration between the Productivity Council and the Trade Development Council would hopefully be implemented locally and then extended overseas if it were successful.
Wage limit could hurt freedom of economy: HK's economic freedom could suffer if minimum-wage legislation was introduced, a conservative think-tank based in Canada has warned. The Fraser Institute has consistently rated the city as the world's freest economy since the 1990s. In an interview with the South China Morning Post, the institute's executive director, Mark Mullins, said measures such as a statutory minimum wage were likely to reduce economic freedom in HK.
HK economy to take hit from turmoil, say officials: HK's economy will slow in this half of the year and its stock market will remain volatile as a result of contagion from the United States financial meltdown, according to Financial Secretary John Tsang. Mr Tsang, the Secretary for Financial Services and the Treasury Chan Ka and Joseph Yam, the chief executive of the HK Monetary Authority, tried to allay investors' worries amid a stock market slump and the uncertain fate of insurance giant American International Group sparked by the bankruptcy of Lehman Brothers. The government would closely monitor market developments as the bankruptcy-induced financial turmoil unfolded, Mr Tsang said.
Next few days crucial, says Yam: The next few days will be crucial because some of the largest financial organizations have serious confidence problems that require more than government action to solve, HK Monetary Authority chief Joseph Yam said. He said the city's financial system has no structural problem and the worries of investors over the HK subsidiaries of troubled US firms should be handled as isolated cases. "The current situation, especially in the US, is very complicated. But I think there isn't any structural problem in HK's financial system" Yam said.
Low jobless rate eclipsed by dark outlook, cutbacks: HK's jobless rate remained at a decade low of 3.2% last month, although there are growing fears of worsening unemployment in the near term as a less rosy economic outlook and increasing corporate cutbacks take their toll.
Job-seekers warned to expect hard times: New graduates and the unemployed may find it increasingly difficult to get jobs, a new study shows. The study conducted by the HK Institute of Human Resources Management shows overall growth in new jobs in the second quarter of 2008 was less than one percentage point, which was marginally lower than the first quarter. To add to the woes of job-seekers, the financial tsunami is causing a mood of uncertainty with most companies adopting a wait-and-see attitude on hiring staff.
No basis for bank run, HKMA says: The HK Monetary Authority (HKMA) and the government gave assurances that the Bank of East Asia is financially sound after rumours that it was in trouble sent thousands of jittery depositors to branches in a citywide bank run. HKMA said HK's fifth-biggest bank by assets had sufficient funds to meet the needs of its customers. Its capital adequacy ratio, which measures a bank's ability to absorb losses and protect depositors, was almost double that required. Financial Secretary John Tsang rejected the rumours as unfounded and malicious.
More layoffs are foreseen amid signs of slowing economy: More layoffs could be forthcoming because the economy is showing signs of slowing, Financial Secretary John Tsang said. The warning came two days after banking giant HSBC Holdings announced it was cutting 1,100 jobs worldwide - including 100 in HK, in the wake of the global financial chaos. The banking group's executive director for HK and China, Peter Wong, also said he expected layoffs to "continue to come in the financial sector".

Domestic politics: LEGCO-Elections (7.9.2008)
Third of voters unsure where allegiance lies: A week from polling day, about one-third of voters remained undecided about which candidates they would support at the ballot box, a university survey showed. The pandemocrats and pro-establishment camps are believed to have consolidated their support after five weeks of canvassing. But the swing votes had added uncertainty in some constituencies where democrats were fighting for the last seats up for grabs, an analyst said.
Abode families tell of pressure to cast votes for the DAB: Desperate families of abode seekers say they have been pressured to vote for government-friendly candidates by a lobby group supporting the Democratic Alliance for the Betterment and Progress of HK. They say they have been bombarded with phone calls to go to the offices of the Association for Family Reunion to fill out applications for one-way entry permits for family members who have struggled for years to gain residency in HK. Once there, they say they are urged to vote for DAB candidates verbally and in posters on the premises.
Dearth of issues, better economy seen as factors in low turnout: The lack of clear and outstanding election issues amid improved socio-economic conditions was blamed for a lower turnout than in the last election. After the close of polling the turnout rate was provisionally put at 45%, well below the 55.6% in the Legislative Council election in 2004. Li Pang-kwong, an associate professor of political science at Lingnan University, said the low turnout could likely be attributed to improved social and economic conditions. "Last time, the ambience of the society was rather tense while the economic situation was far worse," he said "So there is less urgency this time for the voters to come out to express their views.
Liberal party shaken by crushing defeats: The Liberal Party was shaken to the core, with a crushing defeat in the Legislative Council elections. The party's chairman James Tien and vice-chairwoman Selina Chow both suffered shock defeats. And despite concerns over the lower-than-expected turnout, pan-democrats secured 23 seats in the legislature, enough to maintain a veto power over matters regarding constitutional and political development. Immediately following announcement of the results, Mr Tien declared he would step down from all public posts, withdraw from politics, and resign as party chairman.
Plea for unity among pan-democrats: The Democratic Party warned that the pan-democratic camp's 23 seats in the next Legislative Council could be meaningless if it failed to unite all members. Chairman Albert Ho said unity was essential for the camp to maintain its bargaining power in the legislature.

Domestic politics: other matters
HK ready for increased democracy: A move towards greater democracy for HK is important, says the new US consul general to the city, Joseph Donovan. "We think that HK is ready and moving towards a greater democracy," he said in an interview. "Obviously, we have a tremendous stake in HK's success, so we very, very strongly support the one country, two systems approach; we are very strong proponents and supporters of the Basic Law, including the provisions for a high degree of autonomy for HK and for eventual universal suffrage," he said.
HK still has core values, Tsang says: The city's unchanging core values and administrative efficiency should not be doubted because of individual incidents, Chief Executive Donald Tsang said. Mr Tsang addressed recent concerns over governance as he met more than 100 representatives from New Territories district groups on his forthcoming policy address. "Some people are worrying whether HK's core values have changed, and whether our administrative efficiency has dropped. We need to tell people our core values have not changed and our efficiency has not dropped. People's judgment should not be affected by one or two incidents," he said, without naming any incident. The latest opinion polls by the University of HK and Chinese University have found the chief executive's popularity has fallen to a new low, following controversial government decisions.
Rethink minimum wage law, say bosses: With job losses looming as a result of the global financial crisis and a slowing economy, employers are urging a rethink of talks over the implementation of a minimum wage law. With an announcement due next month on the issue, it is feared the measure could reduce employer flexibility at a time when consumers are being more careful with their money. The deputy chairman of the HK Federation of Industries, Stanley Lau, warned that a minimum wage may worsen what is already forecast to be a difficult time for employment.
Liberals won't fold if developers halt funds: The Liberal Party can afford to continue its services and electioneering in the districts even if property developers stop donating, former party chairman James Tien says. He was speaking after a leading developer said a group of major donors would discuss whether to continue funding the party following its crushing defeat in the Legislative Council election. A power struggle is under way in the party between those who advocate contesting direct elections despite the recent defeat of all its candidates and others who advocate focusing on functional-constituency elections.
Favourite for Legco presidency vows to retain DAB affiliation: Tsang Yok-sing has pledged to resign from the Executive Council if elected as Legislative Council president next month, but he says he will not quit the political party he founded. "The duty of the legislature is to monitor the executive authorities," he said. "It is inappropriate for the Legco president to take up most of the appointed posts offered by the government." But Mr Tsang has not yet decided whether to follow incumbent Rita Fan's practice of refraining from voting. Lawmakers are scheduled to elect the president on October 8.

Relations HK - Mainland China
Beijing worried of financial contagion via HK: Beijing is worried that an overly liberal financial system in HK could invite financial contagion into China and disrupt critical economic growth, a government economist said. “China today has a very unique situation – it is one country with two financial systems – the HK system is very open, very liberal, very efficient, very modern” compared with the Chinese system as a whole, said HK's government economist Kwok Kwok-chuen. “But at the same time, China is also very worried that if we gradually open up our system and HK being so open, financial market contagion – if anything wrong happens in the outside world – could be brought into China through HK,” he told a Washington forum of the Carnegie Endowment for International Peace.
Experts express concern over gas deal: The government's surprise 20-year energy deal with the mainland may not benefit the public, experts say. "We don't know anything about the price of gas" in the new contract, said Bill Barron, an environmental economist at the University of Science and Technology. "It is not clear what the government has agreed to with regards to Chinese gas companies. It was very unprofessional of them. This reminds me of the Disneyland thing, where we didn't discover how bad the deal was until years later." Chief Executive Donald Tsang late last month signed a memorandum of understanding with the central government for state-owned China National Offshore Oil Corporation to supply gas to HK for 20 years.

Health
New amendment will restrict melamine levels in food: The government plans to introduce an amendment to food safety regulations to allow only trace amounts of melamine in food, Secretary for Food and Health York Chow said. Baby milk powder laced with melamine – used in plastics and fertilisers – has been blamed in the deaths of at least four children. Some 50,000 others have been sickened in the mainland. Melamine was added to the milk powers in the belief it would boost protein levels. “The Centre for Food and Safety has tested all milk powder for infants and those tainted milk had already been recalled,” York Chow said. He added that the new regulations would be even stricter than those in EU and the US. These should be sufficient to protect the health of infants and pregnant women.

Environment
Guangdong's air and water dirtier despite factory closures: Air and water contamination in Guangdong worsened in the first half of the year despite the closure of thousands of polluting factories - many of them HKowned - in the Pearl River Delta. A total of 53.4% of the province's rainfall in the first six months was categorised as acid rain, a 7.1 percentage point rise over the same time last year, a report released by the Guangdong Environmental Protection Bureau showed. Two-thirds of the 21 cities in the province were affected by acid rain.
Greens urge pollution shake-up: Greens have urged the government to step up the tightening of air-quality measuring standards - along international guidelines - after records in the past two months show air quality remains unsatisfactory. The administration said it had been carrying out a review and would finalise the new measuring standards next year.
Pollution is a threat to delta's development: Severe pollution in the Pearl River Delta is threatening to hurt the area's social and economic development, a top mainland environmental official has warned. Pan Yue, viceminister of environmental protection, said although the delta region remained an economic powerhouse, contributing more than 10% of the country's gross domestic product last year, it had also become one of the mainland's most polluted areas. "The Pearl River Delta has paid a great price in terms of environment and resources for the economic miracles it has created," Mr Pan told the Green China Forum in Shenzhen.
Delta-wide pollution effort needed: A marine scientist has urged the administration to step up cross-border efforts to improve water quality in the Pearl River estuary, which in turn would make HK's harbour cleaner. Paul Harrison, director of the Atmospheric, Marine and Coastal Environment Programme at the HK University of Science and Technology, said a sewage treatment scheme would not alone improve water quality around Victoria Harbour without cross-border co-operation.

Culture and education
Medical schools suffer from severe brain drain: HK's two medical schools are facing a severe shortage of experienced teaching staff as 120 senior members have left over the past three years. Two-thirds of those who departed were attached to the Chinese University of HK and the rest were from HK University. The departments most affected are surgery, medicine, obstetrics and gynaecology, and ophthalmology. Many of them had been in the field for more than 20 years and were at the peak of their careers. They set up their own clinics or joined private hospitals such as the HK Sanatorium and Hospital.

Macau
Change in policy sees 33 shut out by Macau: At least 33 mainland tourists were denied entry to Macau under a tightened visa policy, after they had arrived by ferries from HK. Under the new policy, a separate travel permit is now required for mainlanders to enter the gambling city. The tourism industry fears the policy change could cut the number of mainlanders joining package tours to HK and Macau by 10%. While the impact on HK's economy is believed to be limited, observers warned that it would lead to less frequent visits to Macau by mainlanders, and dampen casino business.
Macau casino revenue rises 44% despite mainland visa restrictions: Macau casino revenue rose 44% to 9.6 billion patacas last month, despite being the third month of Beijing's measures to curtail the numbers of mainlanders visiting the city, according to a preliminary report. The tally, reported in the Beijing-backed Macao Daily News, is Macau's fifth-biggest month on record and compares with a 55% growth in casino revenue during the first six months of the year. Last month's expansion came despite a round of central government restrictions to the Individual Visitation Scheme (IVS) that has cut the number of times mainlanders travelling independent of tour groups can apply to visit the city.
Population boom putting pressure on land resources: Already the most densely populated place on Earth, Macau faces the challenge of sustaining a rapidly rising population in the next two decades. A surge in residents, driven by its casino boom, is putting increasing pressure on Macau's infrastructure and land resources, analysts say. The city has 551,900 residents, according to the latest census data. The population is forecast to hit 705,000 in 2016 and 829,000 in 2031, according to the Statistics and Census Bureau. Economist and gaming analyst Zeng Zhonglu said the city would need to improve its transport network and reclaim more land.
SJM dives after Citi downgrades Macau gaming: Shares in gaming magnate Stanley Ho's SJM Holdings fell 7.55% cent to HK$1.96 after Citigroup analysts downgraded the Macau gaming sector. SJM's shares have fallen HK$1.12 or 36% cent below the HK$3.08 offer price from the company's undersubscribed HK$3.85 billion initial share sale in July. A separate Citi report slashed the brokerage's growth expectations for Macau plays because of concerns over government restrictions on development of the gaming industry, falling profit margins and forecast slowing growth.

Varia
Brand HK rated top in the world - bar one: HK, which brands itself as Asia's world city, has been ranked second on a global branding index of 192 locations compiled by an American consultancy firm - just pipped for first place by Singapore. The ratings, which will be reviewed every quarter, are based on news coverage in 38 leading publications around the world.
Tourism Board may miss this year's target as arrivals dip: The Tourism Board may miss its target of 30.4 million visitors this year after about 80,000 fewer arrivals were recorded last month amid a worsening global economic outlook, executive director Anthony Lau warned. This would not be the first time the board had failed to achieve its full-year target. In 2006, 25.25 million visitors came to HK, below the targeted 27 million. But given increasingly bleak prospects for this year, the economic downturn is expected to have a far deeper impact on the global appetite for international tourism than initially anticipated.
Mainland visa restrictions on foreigners in HK to be lifted: Mainland visa restrictions imposed on foreigners in HK during the Beijing Olympics last month will be lifted from October 16, travel agents say. The long-awaited move will be a relief to many of the city's foreign businesspeople and tourists, who have been burdened with extra red tape over the past six months as the mainland increased security measures.

Press articles related to Switzerland and Swiss matters
Scientists beaming after test of big atom smasher (SCMP, 11.9.2008): A small blip on a computer screen sent champagne corks popping among physicists in Switzerland. Near Chicago, researchers at a "pyjama party" who watched via satellite let out an early morning cheer. The blip was literally of cosmic proportions, representing a new tool to probe the birth of the universe. The world's largest atom smasher passed its first test as scientists said their powerful tool is almost ready to reveal how the tiniest particles were first created after the "big bang", which many theorise was the massive explosion that formed the stars, planets and everything.
DKSH bullish on Chinese thirst for luxury products (SCMP, 15.9.2008): The mainland's bid to drive its manufacturing-based companies up the value chain and into the services sector is winning a new breed of investors into mainland markets, Zurich-based DKSH Holding believes. The Swiss global marketing, services and distribution group has given its backing to Beijing's push to remodel the mainland economy and believes the strategy will lead to a surge in the contribution of services to the country's growth. "China's expanding servicesoriented economy will benefit the tourism industry and boost demand for affordable luxuries, which are our focus areas and expertise," DKSH chief executive Joerg Wolle said.

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