Hong Kong’s exports plunged by the most in 50 years as the global financial crisis slashed demand for Chinese products shipped through the territory.
Shipments fell 21.8 percent last month from a year earlier, the government said yesterday on its Web site, after shrinking 11.4 percent in December. The median estimate of nine economists surveyed by Bloomberg News was for a 20.5 percent decline.
Hong Kong’s government pledged on Wednesday to refund taxes and boost spending on infrastructure as deteriorating trade threatens to drive the economy into its first-full year contraction since the 1997 to 1998 Asian financial crisis. The global recession has ravaged Asia’s export-dependent economies, with Japan, South Korea and Taiwan reporting record drops in shipments last month.
“It’s not just Hong Kong, the financial crisis is dragging down the whole of Asia,” said Wang Qian (王黔), an economist at JPMorgan Chase & Co in Hong Kong. “The trade environment is going to get worse.”
The export decline was the biggest since March 1958.
Imports fell 27.1 percent last month from a year earlier, resulting in a trade surplus of HK$7.2 billion (US$930 million) last month, the government said.
A slump in the US housing market has caused more than US$1 trillion of losses at financial institutions globally, triggering a global recession and driving down demand. World trade will shrink this year for the first time in more than 25 years, the World Bank predicts.
Hong Kong’s declines were also because of the timing of the Lunar New Year holidays last month, which occurred in February last year.
The territory’s economy will probably shrink 2 percent to 3 percent this year, after a 2.5 percent expansion last year, Hong Kong Financial Secretary John Tsang (曾俊華) said on Wednesday. GDP contracted 2.5 percent in the fourth quarter of last year from a year earlier.
“A slowdown in exports leads to a loss in incomes for businesses and households, stalling investment and consumption,” said Sean Yokota, an economist at UBS AG in Hong Kong. “We won’t see a recovery in Hong Kong’s economy until global demand and exports start to stabilize.”
On a quarter-on-quarter basis, the territory has been in a recession since the third quarter. GDP shrank a seasonally adjusted 2 percent in the fourth quarter from the previous three months.
Hong Kong will spend HK$1.6 billion on a program aimed at creating 62,000 jobs and internships, Tsang said.
The Hong Kong government plans a 50 percent cut in salaries tax for the 2008-2009 fiscal year, with a ceiling of HK$6,000, benefiting 1.4 million taxpayers and costing about HK$4.1 billion, Tsang said. Property rates will be waived for two quarters.
Capital-works spending will be “very high,” including HK$39.3 billion this year and next year, the government said.