Hong Kong exports plunged as the global demand cools

Settembre 8, 2022

Everyone’s perfectly aware that the outbreak of covid 19 changed everything. And being at the borders of China, where everything began and where the lockdowns were tighter than everywhere, may have worsened things. This could be the case of Hong Kong (read here our last article concerning Xi Jinping’s visit to the city https://www.studio-pangea.com/en/xi-jinping-in-hong-kong/), already shocked by the pandemic and where exports (that represent the major business here) shrank in the last weeks, slipping into the second recession since the 2019 mass protests. More specifically, overall exports plummeted 8.9% only in July 2022, where the economists predicted a 4.8% fall, as shown in the following graph:

Source: https://tradingeconomics.com/hong-kong/exports-yoy

Same for the imports, that always in July fell by 9.9%, while the economists forecast a decrease of only 0.5%.

A government spokesperson attributed this performance to a worsening external environment that brought disruptions at the borders: export to China fell 10.7%, shipments to USA declined 15.8% and those to UK plunged 29.2%, while on the other Asian markets there were mixed results. Moreover, the aggressive monetary policy tightening in advanced economies are heavily weighing on the global demand, as the Ukrainian conflict and the pandemic-induced disruptions.

Looking forward, Hong Kong’s export is not at its best, but the loosening of some Covid-related quarantine and social distancing restrictions could boost in the second half of the year. The influence of the ‘Greater Bay Area’, where Hong Kong occupies a prominent position, should not be underestimated too. Strongly promoted by Beijing, it is an economic megalopolis consisting of 9 different mega-cities that all enjoy the same fiscal benefits. But the weakening of Hong Kong’s economic performance, with respect to the highly competitive area in which it is located, does not mean less attractiveness for foreign investors and their general interests. It’ll be very interesting to follow in which way the city government – more and more influenced by Beijing, but with strong tools in its hands – will be able to cope with being in the same boat as others.