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Hong Kong leader moves to ease housing woes, says city in recession

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Hong Kong's Chief Executive Carrie Lam said the government will relax mortgage rules to help first-time home buyers break into the world's least-affordable real estate market.

[HONG KONG] Hong Kong Chief Executive Carrie Lam warned of an “unprecedented challenge” to the economy while unveiling measures to bolster growth, her latest attempt to stem months of increasingly violent protests.

In an annual policy speech on Wednesday delivered via video after pro-democracy lawmakers disrupted her attempt to speak in the legislature, Ms Lam said the economy entered a recession in the third quarter.

She announced policies aimed at the 20 per cent of Hong Kongers who live below the poverty line, from more compulsory land purchases for housing to cash for students to increased subsidies for low-income families.

“The violent incidents in the past few months have seriously damaged Hong Kong’s international image and undermined its attractiveness to overseas investors,” Ms Lam said. Still, she sounded a hopeful note, saying “I firmly believe that Hong Kong will be able to ride out this storm and move on.”

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Her administration has struggled for months to resolve escalating protests sparked by a since-withdrawn bill allowing extraditions to China that have expanded into broader demands for greater democracy. The violence intensified in October after Ms Lam invoked a rarely used emergency law to ban protesters from wearing masks, with protesters disrupting the subway system that serves as the economic backbone of the city.

The International Monetary Fund this week slashed its forecasts for Hong Kong’s economic growth, now estimating expansion of just 0.3 per cent in 2019, down from the 2.7 per cent forecast in April. The economy contracted in the second quarter, and figures due for publication on Oct 31 will almost certainly show gross domestic product shrinking in the third quarter.

As Ms Lam entered the legislature to give her speech, opposition lawmakers began shouting slogans and projected “Five demands, not one less” onto the podium. The sessions was quickly canceled, and Ms Lam faced calls to step down.

“It’s an historic moment for Hong Kong,” Claudia Mo, a lawmaker in the pro-democracy camp, told reporters outside the legislature. “She’s so terrified that she needs to hide away behind a camera.”

When Ms Lam finally spoke, she addressed the unrest early on, noting that many people were wondering if Hong Kong is “still a place we can live in peace.” She pledged to uphold the “one country, two systems” framework that guides its autonomy from the mainland while saying independence advocates wouldn’t be tolerated.

“I believe our society will agree that continued violence and spread of hatred would erode the core values of Hong Kong, disrupt social peace and undermine the excellent systems that took years of efforts to build,” Ms Lam said in her address. “I therefore appeal to every Hong Kong citizen to cherish the city in which we all have a share and to safeguard the core values we uphold so that Hong Kong can return to calmness.”

She followed that with a slew of measures aimed at poorer citizens. Highlights of the speech included:

• Reducing waiting times for public housing access

• Making easier for first-time buyers to get mortgages on properties

• Increasing land supply through compulsory purchases and land reclamation

• A HK2,500 (S$437) annual grant for students

• More subsidies for public transportation, lowering tolls

• Private treatment for construction workers injured at work

• Easier access for companies to the mainland market

“Housing is the toughest livelihood issue facing Hong Kong society,” Ms Lam said. “It is also a source of public grievances. I have never taken this matter lightly.”

The announcements came on top of a US$2.4 billion stimulus package announced by Financial Secretary Paul Chan in August to help bolster the economy. He also called on property owners and developers to offer rent relief to struggling retailers, noting that about 100 restaurants have shut down because of the unrest, affecting about 2,000 employees.

Still, Ms Lam’s bigger problem is her own legitimacy among protesters who view her as a stooge of the government in Beijing. Instead of economic issues they are demanding an investigation into incidents of police brutality and calling for the ability to pick a leader who will stand up to Beijing - areas where Ms Lam had no new proposals on Wednesday.

“When this government has lost all merit and all legitimacy, there’s no way Carrie Ms Lam can govern Hong Kong any more,” said pro-democracy lawmaker Alvin Yeung. “This is the end of it.”

BLOOMBERG