The official data from the Hong Kong Special Administrative Region (China) government (released on November 15) confirmed that the economic zone of the Administration in the third quarter of 2019 had fallen into recession for the first time in 10 years. Many experts agreed that this is due to negative impacts from America – China trade tensions as well as the on-going protest.
What the numbers are saying
Hong Kong’s economic growth in the third quarter of 2019 decreased by 3.2% compared to the previous quarter. It is similar to the preliminary statistics released in late October. This is the second consecutive quarter of decline, meaning that the Hong Kong economy fell into a technical recession in the third quarter of 2019. Compared to the same period last year, Hong Kong’s economic growth in the third quarter fell 2.9% and is similar to the preliminary figures released earlier.
Amid ongoing protests, analysts warn that the Hong Kong economy is likely to face a deeper and longer-lasting decline than what the financial and commercial center has experienced throughout the 2008 – 2009 global financial crisis and the SARS pandemic.
In a statement, the Hong Kong government said that ending the violence and restoring peace was the key to economic recovery. Therefore, the Hong Kong government would continue to carefully monitor the situation and provide the necessary measures to support businesses and ensure safety for the people.
Effects of the protests
The protests lasting more than five months have put the district into the worst crisis since 1997. Many tourists have canceled the trip. Retailers witnessed strong sales decline. The Hong Kong forex market is precarious. They are all adding to the pressure that Hong Kong is experiencing due to the slow Chinese economic growth and the prolonged trade war between the Americans and Chineses.
Hong Kong’s August retail sales recorded the worst: down 23% from the same period a year earlier, while September saw an 18.3% drop.
Hong Kong is one of the world’s most important financial centers, with assets totaling more than $6,000 billion from funds, banks and asset management.
Many businesses with ambitions to expand operations in China still see Hong Kong as a gateway to penetrate the mainland, while Chinese companies want to go through Hong Kong to access international capital.
According to data from HIS Markit, business in the private sector fell to its weakest level of 21 years in October 2019, while demand from mainland China has declined at the strongest pace since The survey began in July 1998.
How does Hong Kong deal with it?
The Hong Kong government has introduced a number of economic stimulus measures since August. However, due to maintaining high foreign exchange reserves to support the Hong Kong Dollar (HKD), these support packages are relatively small and not enough.
Analysts also expressed skepticism about the effectiveness of these measures. Due to the instability that is preventing businesses and consumers from investing and spending. Many stores closing down, which will result in many people losing their jobs.