Hong Kong elected a new chief executive of the SAR on March 26, with former Chief Secretary for Administration Carrie Lam defeating former Finance Secretary John Tsang by a two-to-one margin in voting among the nearly 1,200 members of the Election Committee, a body who membership is tilted in favor of those with pro-Beijing leanings. Lam trailed Tsang by an average of about 25 percentage points in polls of popular opinion, but she was the preferred candidate of Communist Party leaders in Beijing, a factor that clearly proved decisive.

Lam will replace the embattled incumbent chief executive, C.Y. Leung, whose numerous missteps cost him the confidence of both the local electorate and the Chinese leadership, leading to his announcement earlier this year that he would not seek a second term. The chief executive-elect, who will take office on July 1, faces a high risk of being seen as unusually accommodating of Beijing, a perception that contributed to Leung’s fall from grace.

The incoming leader is keen to avoid the domestic tumult that has troubled Leung’s administration, to the displeasure of officials in Beijing. Toward the end, she has promised to ditch some of Leung’s most unpopular policies, including assessment tests that have put pressure on primary school students, and using profits from the government-owned mass transit authority to reduce fare and improve amenities on trains. But there is no chance that she will promote changes to the Basic Law demanded by opposition lawmakers in the LegCo, whose ranks have been supplemented by several newcomers affiliated with the more militant pro-democracy groups that spearheaded a protracted campaign of mass protests in the summer of 2014.

Real GDP growth slowed to an average 1.9% last year, from 2.4% in 2015, but an acceleration in the second half of 2016 points to the prospect of an improved performance this year, with robust activity in the construction sector underpinning strong domestic demand. The 2%–3% growth rate on which the government based its 2017/2018 budget projections is not out of the question, but may be difficult to achieve with a strong local dollar weakening the competitiveness of goods exports and potentially make Hong Kong less attractive for mainland tourists.

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