Hong Kong warns of political unrest as economy weakens

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Hong Kong's financial secretary warned Wednesday that political unrest would "unavoidably" damage the economy after riots rocked the city earlier this month, predicting a growth slowdown for 2016. In an unusually emotive budget speech John Tsang -- tipped as a possible contender to be the semi-autonomous city's next leader -- said the street battles had left him "distressed and angry". Tsang, who is part of a Beijing-friendly government and met with China's President Xi Jinping last year, used his speech to weigh in on Hong Kong's recent turmoil. Violence broke out on the first night of the Lunar New Year, February 8, after protesters gathered around illegal food hawkers in the busy commercial district of Mong Kok to protect them from health officials. Masked demonstrators hurled bricks at police, who in turn fired warning shots in the air -- a rare occurrence in Hong Kong. More than 30 protesters face charges of "rioting" and some have also complained of police violence. Among those charged are leaders of "localist" groups pushing for more autonomy, or even independence, from Beijing. It came against a backdrop of growing fear over China's influence on the city, which has worsened since the disappearance of five booksellers known for publishing titles critical of Beijing. Four of the men are now officially under criminal investigation on the mainland. "I was shocked that our city could have turned overnight into such a strange and alien place that I hardly recognised," said Tsang. "We anticipate that political disputes will only intensify over the coming months," he added, warning of possible "chaos". "Political volatility will unavoidably impact on our economy." Tsang said upcoming legislative elections in September would exacerbate tensions and traced the city's woes back to major pro-democracy rallies in 2014. Describing the economic outlook as "far from promising", Tsang said growth for 2016 would be between one and two percent -- down from last year's 2.4 percent -- weighed by US interest rate increases, a lull in exports and a slowdown in tourism to Hong Kong. The property market in Hong Kong had also taken a hit, with prices falling nine percent since October, Tsang added. The bleak forecast comes as China's economy slows, impacting regional and global markets. - 'Safe player' - In a city where the wealth gap is widening, Tsang announced a HK$38.8 billion ($5 billion) relief package, including a 75 percent reduction in salaries tax. But analysts said the giveaways may not be enough. "With a gradual economic decline in Hong Kong, this may not be sufficient to win the hearts and minds of people, especially with rising localism," Sonny Lo, a social scientist at the Hong Kong Institute of Education, told AFP. "The public expect a bolder approach to housing problems and the income gap," he said. Tsang also unveiled stimulus measures for industry and said the long-awaited Shenzhen-Hong Kong Stock Connect -- designed to open up stocks to investors both sides of the border -- was ready to go, subject to Beijing's green light. He finished with a quote from late US president John F. Kennedy, saying: "Our problems are man-made, therefore they can be solved by man." Lo said former civil servant Tsang's speech was an attempt to appease Beijing and woo residents. "He is a safe player... He has been toeing the line of the Hong Kong government and Beijing, and at the same time trying to engage with the public," said Lo. Small groups of protesters gathered outside the government offices during the speech, mainly to call for better pensions.

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