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Hello everyone, welcome to Sun Yat-sen's live interview. I'm Lily, Sun Yat-sen. Today's guest is Professor Lau Ka-chung, a Hong Kong economist. Hello, Professor. Hello. The president of the International Monetary Fund, IMF, said that artificial intelligence, AI, is just like a tsunami, which is going to hit the global labor market. It is very likely that in the next two years, it will affect the development of the economy. 60% of the jobs and 40% of the global jobs have almost no time to be prepared. In recent years, the global economy has become more vulnerable to impact, and there will be more impact in the future. What is the direction of Hong Kong's economy and Hong Kong dollars? Professor. The AI impact is not new. It has been talked about for a long time. AI has actually been on the ground for a while. AI was already there in the 1950s. At that time, the Turing test was in that era. In the 1980s, Japan was also very popular with a lot of machines and robots. It is said that there are a lot of AI. The biggest difference between AI in this era is that a lot of service industry activities can also promote AI. In the past, AI was only limited to a production process. Now it's in the service industry. In the service industry, many of our traditional face-to-face activities have been replaced by machines. Now in the service industry, more than 80% of people are in advanced countries. This ratio was not as high as it was decades ago. It's about half. Now in Hong Kong, the GDP ratio of the service industry is more than 90%. If the service industry is replaced by AI, this is really a threat. But think about it. For example, AI has been mechanized and intelligent. It has penetrated into our daily lives. The first place to enter is agriculture and industry. Are agriculture and industry completely useless? Actually, no. They use a lot of people. Take Amazon for example. Amazon claims to use a lot of machines, a lot of drones to deliver goods, and a lot of machines for logistics. But in some places, for example, when you put the goods in a box and wrap it, they use people to do it. They hire a lot of people to do it. In some places, AI is not fully mechanized yet, and it has no people. Many industries have a similar phenomenon. For example, when you make a phone call to a bank, there used to be a customer service staff answering your call. But now it's different. First, the machine screened a bit. AI has a chat box to chat with you for a while. AI may listen to your call on the phone. Now it's available. In the past, you had to press 1, 2, 3, 4, 5 to make a phone call. Now you have to press 1, 2, 3, 4, 5 to make a phone call. It's not like that now. Now it tells you what you need. After it tells you, it asks you if you need it. This process is already AI. But in some places, in the end, it's still a service between people. For now, it's not replaced by AI. For example, in the past, you had to do a lot of things by yourself. For example, you had to do a lot of things by yourself. Now you have to compile it. There are a lot of data to be collected and organized. There are a lot of things that analysts are doing. Maybe AI will give you a lot of data. I think it will save you a bit on the structural level. But at a certain level, it saves you a lot of work. At a certain level, it saves you a lot of work. It's not like the overall number of people is reduced a lot. You can see that AI has been very popular in recent years. In fact, in the early 2000s, there was a new AI theory. In the past ten years, AI has been widely used in many areas. And big data training has been trained for a long time. It has been popular for more than ten years. But have you seen that the unemployment rate has risen a lot? In fact, it hasn't. In many places, service is still the main focus. But the unemployment rate is still at a low level for many years. Let me tell you. Even if there is AI, you have to replace a lot of things right away. This is not a common saying now. In the future, there will be some replacements gradually. But I don't think it needs to be too pessimistic. Because every development of technology will worry about the unemployment rate. If you go back to the 19th century, there were a lot of manufacturing industries that were afraid of unemployment. But after the transformation, of course, they no longer do a lot of things by hand. They don't do a lot of things by hand, but they don't know how to do everything by machine. In the end, there are people controlling the machines. In fact, it's the same now. Even if you go to AI, it helps people in certain areas. But you still need people to do it. You can't let it do everything automatically. I know there are some banks, for example, there is no one in the whole stock exchange. Maybe there are two left. It's all machine trading. I can't say that there are two people left in the whole bank, and then all the machines do it. It's not like that now. So to a certain extent, there is always a need for people to operate machines. And after a new field, after a new breakthrough, new occupations are often born. There are many occupations that you never thought of before. For example, it's very simple. Now everyone basically needs to know how to use a computer. This didn't happen 30 years ago. 30 years ago, it was very difficult for people to know how to use a computer. There weren't many people who knew how to type. But now everyone knows how to type, everyone knows how to use a computer. This kind of change will make some old things disappear, but some new things will appear. So that's basically the impact of AI. But I don't think it will have a direct impact on Hong Kong. Because in Hong Kong, if you look at the past few times, computer voting, computer payment systems, computer examinations, all of these are wrong every time. Without AI, no matter how smart you are, you can't do it, you can't do it well. So if you are in Hong Kong, you say that AI must be all over the place. I think that day is quite far away. So now AI is threatening Hong Kong, threatening jobs. I haven't seen this possibility yet. Yes, but if it reaches 60% of the developed economy in just two years, this is also very powerful. It's impossible. You have to be careful with the data. It may have a 60% chance of AI participation. Maybe that's what it means. But if you replace 60% of the people, let me tell you, now 100 people have 60 people who have nothing to do. 100 people have nothing to do, the unemployment rate is 60%. This is a very dubious prediction. I have no idea why the chance of unemployment will rise to 60%. That's not what it means. So if you have AI, it may participate in a certain level of calculation. Maybe the economic contribution will be very high, but it doesn't mean that you can replace a large proportion of people. I emphasize again, the unemployment rate in Europe and the United States is still a long-standing low, including Hong Kong. The unemployment rate in Hong Kong is 3%, which is also a long-standing low. Another news is the news from foreign media. President Biden announced this week that the tariffs on some mainland commodities will be increased by 1 to 3 times to protect American workers. Will the U.S. increase tariffs on the mainland have a big impact on Hong Kong? The current tariff is mainly focused on individual products, such as electric cars and solar panels. In those areas, the relationship with Hong Kong is not very good. Hong Kong is not very involved in these products. Even the sales ratio should not be very large. Of course, I am afraid that the level of tariffs will be widened in the future. Will Trump do it all over again after he takes office? If he does it all over again, the impact will definitely be great. However, if you look at the current number of tariffs, it doesn't seem to be going in that direction. Although Trump used to do this, he also claimed to do this, but when he did this, he didn't benefit from it. From the perspective of the U.S. pressure on the mainland, the U.S. mainly pressurized high-tech products. For high-tech products, the U.S. does not tend to use tariffs. The U.S. has a sanctioned order. For example, the president-signed products are not allowed to be purchased. This is not related to tariffs. Because tariffs are afraid that you will sell them. It is the export of the mainland and the import of the U.S. On the contrary, if the U.S. does not sell to you or does not want others to sell to you, this is not an export to the mainland, but an import. So the first thing to do is to pressurize the mainland. Secondly, from the perspective of tariffs in the mainland, it doesn't matter if the U.S. tariffs some low-priced products. The U.S. has always tolerated it, and even needs it. If you think about it, the inflation in Europe and the U.S. is not very low. If you keep talking about low-priced products on a large scale, for example, when you look at Taobao, it is very cheap and cheap. It can be sold for thousands of dollars. If you sell it so cheaply, for the U.S., lowering the inflation must be helpful. Even if it is not directly helpful, even if the U.S. does not import a lot of these products, the U.S. will still have a pressure to lower the prices. This is helpful for the inflation. I have said this before, more than once. But if you don't sell these products, you sell something that is technologically monopolized. You know, the solar panels in the new energy sector, the electric cars, the mainland has acquired a lot of patents in those fields. More than half. When it has acquired so many patents, when it takes over the entire market, for the U.S., first, it has a reputation to hold. When you hold the reputation, if you have to fight again in the future, no matter what kind of war, when it needs to be upgraded, this is a dead end. First, the U.S. and Europe will not let this happen. Second, although you have acquired patents, but the electric cars and new energy are not new. They have been around for decades. For decades, some factories in the U.S. and Europe have been doing this. To protect their jobs, especially this year's election, under the premise of getting votes, they have the motivation to do something. But when you see them do something, if you look at it, if it is not confirmed, for example, 100% tariff, 100% tariff is not a very ridiculous tariff. In the past, hundreds of percent of tariff have been issued. It's not low, but it's not ridiculous. Now, the tariff that is likely to be issued is that you are more expensive than him. In Europe, for example, the electric car has a tariff of 50-60%, which is about the same as him. If you have a tariff of more than 50-60%, for example 100%, basically you are more expensive than him. More expensive than him, you can't sell it, you have to wait for him to do it. The result is very simple. He wants to sell more expensive things. If he wants to sell more expensive things, for example, the inflation pressure may have a negative impact. But since the tariff he is issuing is mainly two or three types, it is relatively narrow. Think about how much money people spend on electric cars and solar panels. In fact, it is not much. For some industries, it may be very powerful, but for the overall social economy, it is not a large proportion. So the impact on inflation is relatively small. I think everyone knows that if you look at it from the perspective of a counterattack, he is now choosing three or more types. At most, the counterattacks in the mainland are all the same. You may choose three or more types. Of course, it may be oil and gas. But it is very difficult for you to fight him. Because the things you sell are all cheaper than others. So if you look at the mainland, the biggest chance of his counterattack is to suppress the supply. He won't fight you for the price. He will fight you for the quantity. When he suppresses the supply, for example, if you want to buy something, he won't sell it to you. But in the past few years, Trump has seen that this kind of behavior is not very effective. Because when it's not too big, if you fight a trade war on tariffs, if it's not made in China, I don't know if this time the situation will be better. If Europe and the United States work together, and all the oil and gas products are all suppressed, the impact will be greater. It may be so. Because now Europe is basically against China, against the CCP. Let's talk about the next question. In the past three years, Hong Kong has been hit by the emigration and foreign exports. The economy has been hit in many ways. Hong Kong's HSBC Bank and several big banks have cancelled most of their cash refunds based on tax. The industry believes that the economy in Hong Kong is weak and the demand for commercial loans has decreased. The latest figures show that Hong Kong's high-quality office buildings have been hit hard. Financial and real estate prices have also risen. Does this show that the economy in Hong Kong is declining? The demand for commercial buildings and offices is mainly related to commercial activities. To a large extent, it is also related to foreign investment. There has been little foreign investment in recent years. Of course, many international centers but many have been cancelled and cannot be rented out. This is expected. This reflects the decline in Hong Kong's commercial activities. Of course, this is not the case For example, eating out, shopping, retail, etc. However, there is a big gap between the value of commercial activities in commercial centers and commercial villages. is much higher than the value of retail activities We do not need to say that the economy is declining. It is difficult to see a place that is declining. Hong Kong is not like Ukraine where the economy is declining but the growth is low. This is enough for Hong Kong to face this situation. In the first few years of the pandemic, the national security law has scared away foreign investment and has made large-scale commercial activities impossible. The GDP growth has been in a state of stagnation for the past few years. It is not a slow decline but it is similar to the time of the Great Recession. The trend of Hong Kong's GDP growth is a bit lower than before. First of all, the trend is not horizontal. It is not a long-term trend It is a downward trend. I don't know if the trend will stop or continue to decline. But the GDP growth depends on other factors such as the growth of the population. Although a large number of people are coming to Hong Kong, they are not high-quality people but middle- and lower-class people. Their income and expenses are not high. They can't afford a large number of people. Therefore, if the population and capital are both low, the overall output will be relatively poor. We are talking about manpower and capital. If capital and foreign investment are both weak, the economy will not grow much. If the trend of growth is close to zero, the situation will be similar to that of Japan. Japan is not declining every quarter. It is in a state of no growth and no performance. It seems that this is the situation in Hong Kong. The latest data shows that the total amount of Hong Kong's credit institutions is HK$10.09 trillion. In 2019, it was HK$10.89 trillion. The decline was 7.35%, which is a big decline. American economist, Robert Rurke, has long maintained a good relationship with China and Hong Kong. However, he is not optimistic about the current Hong Kong economy. He said in the British Financial Times that Hong Kong's stock market performance is not good, and it is difficult to improve Hong Kong's internal economic and Sino-US relations. He said that Hong Kong is over. That's all for today. Thank you for watching. See you next time.