Some personal context (and why I share this):

I moved from the US to Hong Kong 3 years ago and immediately noticed the 'vibe' of the city was not positive. In seeking to understand why, I dug in and realized that practically everything valuable to a country - economic foundation, control over destiny, identity, future opportunities, and standard of living - was in a poor condition, and getting worse over time.

A year ago, the Hong Kong protests broke out. What people saw was the yelling and shouting, the police brutality, the pleas for help. But what you didn't see was the economic impact. Airlines, hotels, and restaurants were hit the hardest. In my neighborhood in Sheung Wan, I've seen at least a dozen restaurants come and go within the past year.

It was not a good year to be a small business owner or in the wholesale, retail, catering, and hotels industry, and that's a good 30% (1m people) in Hong Kong.

The economic impact hits normal people the hardest (as it always does). The HK gov't will suffer, but it has a $HKD1.1T reserve, and is expected to eat into in the next two years to weather the storm. However, those who will be most affected by economic troubles will be the people of hong kong - the same people who went out to the streets by the millions.

Those who were hopeful for economic recovery were waiting for the new year in 2020, and a political win lifted Hong Kong's spirit of recovery for just about 2 weeks before covid arrived.

The reaction to covid after Chinese new year was beyond imagination. The attitude of the protestors were angry and desperate but lacked a true primal instincts for survival. However, the threat of an epidemic (sars 2) brought out primal fears as the entire population lined up outside dispensaries to buy masks and toilet paper, clean out supermarkets, and quarantine themselves in their small 400 sqft apartments for weeks.

HK went on lock down for 2 weeks to prevent the outbreak. It was the right move, as other countries that lacked the same vigilance are experiencing worse outcomes. But even with measures and the mitigated loss of health and life, the damage is still felt, only on a deeper psychological plane. The economic damage, as forecasted by many, is going to be much larger than we expect.

Covid kills not by overwhelming the entire body, but by shutting down major organs, such as the lungs. The body reacts allergically by swelling in the lungs, and because of the swelling, the lungs fill with fluid and become unable to absorb oxygen, which kills the patient. However, if you keep the patient alive by artificially supplying them with oxygen, the lungs will eventually start working again and the body will fight covid off and recover.

Hong Kong is going through something similar. The fundamental problems that plague it won't kill the city outright - but the symptoms might. Economic recession may cascade into something much worse than 1 million protestors yelling at the police.

There's an optimism, the same one that propels markets forward, that HK will survive and recover. And I share that optimism, along with an unspoken dread that it might not.

Some quotes from the article:

> “We can foresee the unemployment rate will rise further,” lawmaker Alice Mak Mei-kuen says, reiterating calls for an unemployment fund and opening up new jobs.

> Mak hopes the pan-democrats will not filibuster, and that the budget passes by the end of April.

> Hong Kong’s fiscal reserves are expected to drop to HK$908.5 billion in 2019-2020, Chan says, from HK$1.1 trillion.

> It comes from a 15 per cent jump in the government’s operating expenses to HK$611.4 billion and is equivalent to 22 months of public expenditure.

> In 2019-2020, the budget deficit is estimated to be HK$37.8 billion, the worst in 15 years, and accounting for 1.3 per cent of the estimated GDP.

> But in the coming financial year of 2020-2021, it will further snowball to an unprecedented level of HK$139 billion. The record deficit will account for 4.8 per cent of the estimated GDP and go well beyond the government’s fiscal principle of keeping it below 3 per cent of the GDP.

> For 2020-2021, total government revenue is estimated to be at HK$572.5 billion.

> Chan forecasts a budget deficit every year from 2019-20 until 2024-25.

> The government's growth estimate takes into account the coronavirus epidemic, coming after a contraction of 1.2 per cent in 2019.

> If the city's economy contracts this year, it would mean gross domestic product has shrunk two years in a row, something which has not happened since Hong Kong's return to Chinese rule in 1997.

> “It is hard to be optimistic on this year,” Chan says.