Hong Kong is set to end the year in the midst of a full-blown recession, its finance chief said yesterday, as spiraling interest rates join strict COVID-19 controls in hammering the economy.
“There is a very high chance for Hong Kong to record a negative GDP growth for this year,” Hong Kong Financial Secretary Paul Chan (陳茂波) told reporters, adding that interest rates were being raised “at a pace that was never seen in the past three decades.”
Hong Kong’s monetary policy moves with the US Federal Reserve because its currency, one of the cornerstones of its business hub reputation, is pegged to the US dollar.
Photo: AFP
The Fed’s hawkish rate hikes, aimed at curbing soaring inflation, come at an especially difficult time for Hong Kong, dampening sentiment when the economy is struggling.
Hong Kong is currently in a technical recession — recording two consecutive quarters of negative growth this year.
The government has adhered to a version of China’s “zero COVID” policy for more than two-and-a-half years, enforcing strict controls and mandatory quarantine for international arrivals.
Chan signaled his support for making travel and business easier.
“The aspects related to the pandemic need to continue to improve in order for us to see larger investments, because people are more cautious in a high-interest-rates environment,” he said.
Business leaders have long been warning that the COVID-19 controls, combined with Beijing’s ongoing crackdown on dissent, have made it harder to attract talent and cut off Hong Kong internationally, especially as rivals reopen.
Hong Kong has seen a net outflow of more than 200,000 people in the past two years, a record population drop.
“Hong Kong should be ahead of other Asian cities, but now there’s a feeling that we’re falling behind and being left isolated,” Eden Woon (翁以登), the new head of the Hong Kong American Chamber of Commerce told the South China Morning Post in an article published yesterday.
“There are people leaving and the problems of retaining talent — all these things add up together and need to be addressed,” he added.
While the Hong Kong Monetary Authority has no choice but to follow the Fed, major banks such as Standard Chartered PLC and HSBC Holdings PLC had resisted that pressure.
However, HSBC yesterday raised its prime lending rate in Hong Kong by 12.5 basis points to 5.125 percent, the bank’s first rise in four years.
Others are likely to follow suit. That could affect the territory’s once hot property sector, with Goldman Sachs Group Inc estimating that prices could slide by about 20 percent over the next four years.
Hong Kong also experienced a recession in 2019 when months of huge and sometimes violent democracy protests rocked the business district.
When Lika Megreladze was a child, life in her native western Georgian region of Guria revolved around tea. Her mother worked for decades as a scientist at the Soviet Union’s Institute of Tea and Subtropical Crops in the village of Anaseuli, Georgia, perfecting cultivation methods for a Georgian tea industry that supplied the bulk of the vast communist state’s brews. “When I was a child, this was only my mum’s workplace. Only later I realized that it was something big,” she said. Now, the institute lies abandoned. Yellowed papers are strewn around its decaying corridors, and a statue of Soviet founder Vladimir Lenin
UNCERTAINTIES: Exports surged 34.1% and private investment grew 7.03% to outpace expectations in the first half, although US tariffs could stall momentum The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) yesterday raised its GDP growth forecast to 3.05 percent this year on a robust first-half performance, but warned that US tariff threats and external uncertainty could stall momentum in the second half of the year. “The first half proved exceptionally strong, allowing room for optimism,” CIER president Lien Hsien-ming (連賢明) said. “But the growth momentum may slow moving forward due to US tariffs.” The tariff threat poses definite downside risks, although the scale of the impact remains unclear given the unpredictability of US President Donald Trump’s policies, Lien said. Despite the headwinds, Taiwan is likely
UNIFYING OPPOSITION: Numerous companies have registered complaints over the potential levies, bringing together rival automakers in voicing their reservations US President Donald Trump is readying plans for industry-specific tariffs to kick in alongside his country-by-country duties in two weeks, ramping up his push to reshape the US’ standing in the global trading system by penalizing purchases from abroad. Administration officials could release details of Trump’s planned 50 percent duty on copper in the days before they are set to take effect on Friday next week, a person familiar with the matter said. That is the same date Trump’s “reciprocal” levies on products from more than 100 nations are slated to begin. Trump on Tuesday said that he is likely to impose tariffs
HELPING HAND: Approving the sale of H20s could give China the edge it needs to capture market share and become the global standard, a US representative said The US President Donald Trump administration’s decision allowing Nvidia Corp to resume shipments of its H20 artificial intelligence (AI) chips to China risks bolstering Beijing’s military capabilities and expanding its capacity to compete with the US, the head of the US House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party said. “The H20, which is a cost-effective and powerful AI inference chip, far surpasses China’s indigenous capability and would therefore provide a substantial increase to China’s AI development,” committee chairman John Moolenaar, a Michigan Republican, said on Friday in a letter to US Secretary of
RSS