A Blessing In Disguise

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DINAS PENDIDIKAN DAN KEBUDAYAAN KABUPATEN SUKABUMI SMK TERPADU AL-ITTIHAD Jalan Raya Purabaya Km. 36 Sukabumi 0266 6345003 Kode Pos 43187 ____________________________________________________________________________________ _ NOTA BENE A Blessing In Disguise Since Britain voted to leave the European Union in June the pound has fallen by almost 17 percent against the dollar despite a slight rebound recently. The “flash crash” on Oct. 7 when the pound tumbled 6 percent just within minutes bolstered fears of a “hard Brexit” among global investors. As Martin Wolf chief economics commentator at the Financial Times has put it the market has taught Prime Minister Theresa May “a good lesson”. Undoubtedly the plunge in the pound has triggered widespread repercussions not only in Britain but also across the global market in the short run. But is the plummeting pound totally a bad thing for the British economy in the long run Probably not because we believe there may actually be a silver lining to it as it has provided both the British people and their government with a rare opportunity to reflect on their over-reliance on the financial sector and property market as engines of growth of their economy over the past two decades. In the meantime the lesson the British have drawn from the falling pound may also provide some very useful insight for Hong Kong whose economic growth has also been too dependent on financial investment and the property market to the extent that high property prices are already hurting Hong Kong competitiveness. As one of the major global financial centers Britain undoubtedly relies heavily on the financial sector as the main pillar of its economy. Britain’s EU membership has further reinforced its role as a global financial hub by helping to attract hot money flows from around the world into London thereby further boosting the size of its financial industry and its share of the GDP. At the same time however it has hollowed out a large chunk of the British manufacturing industry and undermined the diversity of the economy.

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Suffice it to say a strong and dominant financial industry in Britain is like a powerful drug: the more successful it is the more the country is addicted to it leading to the decline of other economic sectors such as manufacturing and exacerbating the country’s dependence on it as the sole growth powerhouse. As such we believe there is indeed an upside to the plummeting pound as it can lead to a period of national introspection in Britain over its economic structure as well as a sense of urgency and determination among its people to rectify its highly unbalanced economy. Recent economic figures speak volumes about how a weak pound could be a blessing in disguise for Britain. The fact that the Purchasing Managers’ Index PMI of Britain an indication of factory activities in the country jumped to an average 53 in August and September Editor’s note: a huge acceleration from just 48.3 in July suggests that the falling pound has significantly boosted British exports and the country’s economy is actually performing better than initially feared right after the referendum in June. Even in the worst-case scenario in which the EU will impose tariffs on British products entering the continental Europe the extra costs for British manufacturers are likely to be offset by a weak pound. As regards Hong Kong our dependence on the financial sector the property market and offshore hot money flows particularly from the mainland is even heavier than that of Britain with the manufacturing sector almost completely eliminated from our economy. Something good that isnt recognized at first ENGLISH LANGUAGE

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