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Recession Hits Hong Kong as GDP Growth Flat-lines
Protests against a proposed amendment to the Fugitive Offenders bill by the Hong Kong government entered their fifth month in November as the economic toll continues to mount.
Exacerbated by the US-China trade war, flat-lining tourism and retail industries, and a global growth downturn, the former British colony has now tipped into recession, an outcome that analysts regarded as almost inevitable back at the beginning of October.
No Growth, Despite Stimulus Package
News outlet Asia Times carries a gloomy list of firsts and lows for Hong Kong in 2019. Retail sales fell a record 23% year-on-year, and early October tourism was down 53.6% - another blow for an industry that saw its worst performance in 16 years this August. While hotels, rail networks, and real estate companies all struggled to absorb losses.
The economy was propped up by a US$2.4bn stimulus package in the summer, which eliminated 27 fees that companies in affected industries were forced to pay, along with child-care, utility, and rent subsidies for Hong Kong residents.
Hong Kong's GDP will hit a three-year slump this year though, with a predicted negative 0.6% growth rate for the second half of the year and a 0% increase over the twelve months. To put the latter figure into context, the city state's GDP growth has been between 5% and 10% in the last twenty years, as reported by TopRatedForexBrokers.
A Glimmer of Hope - Maybe
As the protests demonstrate, Hong Kong's links to mainland China have perhaps been more of a curse than a blessing lately. However, a 'phase one' agreement to end the US-China trade war is pending. Beijing, in exchange for the purchase of US$50bn in agricultural goods, wants Washington to remove a raft of tariffs on electronics and other Chinese products.
Ironically, the fate of Hong Kong's economy has been prolonged by mass protests on the other side of the world. South American nation Chile had been chosen as the host for the signing of the phase one agreement, but million-strong protests against political corruption, income equality, and an impoverished middle class forced Trump to cancel.
The signing may now be an all-North American affair, with the White House suggesting US states Alaska and Hawaii as a venue. Alternatively, and perhaps to tug on the heartstrings of the Chinese leadership, it may take place in Iowa, a struggling state that relies on trading farm goods with China.
One Country, Two Systems
Phase one will reportedly solve more than half of the trade issues facing the two countries – but several concerns remain for the US, largely surrounding Chinese restrictions on intellectual property and how technology companies are subsidized.
There's also the issue of trust between Trump and his Chinese counterpart, Xi Jinping, and the two countries as a whole. China is concerned that the US has the power to reimpose trade sanctions at will, while the White House has no way to force Beijing to comply.
For now, then, Hong Kong continues down a path of recession and economic strife, with its “one country, two systems” ideology perhaps more under threat than ever before.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.
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