FROM THE ECONOMIST INTELLIGENCE UNIT
OVERVIEW: Hong Kong is gearing up for the Legislative Council (Legco) election that will be held on September 12th. Pro-democracy politicians are likely to do well in the election, making life even more uncomfortable for the unpopular chief executive, Tung Chee-hwa. Very strong second-quarter figures mean that GDP is likely to expand by 7.4% in 2004 and by 4.7% in 2005. Positive consumer price inflation has returned to Hong Kong, although consumer prices will still fall by 0.2% in annual average terms this year, before rising by 0.4% in 2005. The current-account surplus will fall from US$16.2bn (10.3% of GDP) in 2003 to US$13.6bn (8.4% of GDP) in 2005.
DOMESTIC POLITICS: On September 12th 2004 Hong Kong residents will cast their votes for a new Legco; directly elected seats will account for only one-half of the chamber. The election follows a year that has seen an unprecedented level of political activism in Hong Kong, characterised by an increase in pro-democracy and anti-government sentiment in the territory.
The standing committee of the National People's Congress (China's legislature) has already handed down an "interpretation" of Hong Kong's Basic Law (mini-constitution) ruling out both universal suffrage for the election of Hong Kong's next chief executive in 2007 and an expansion in the ratio of directly elected seats in the 2008 Legco election. However, this has failed to dampen demands for reform. In a sign that feelings still run high, organisers claimed that 82,000 people attended this year's candle-lit vigil in memory of the June 4th 1989 massacre in the Chinese capital, Beijing, up from the usual attendance of 40,000-50,000. More significantly still, on July 1st between 200,000 (according to the police) and 500,000 (estimated by organisers) people joined a pro-democracy march--not far short of the 500,000-700,000...