Recession is deepening in Hong Kong amid Protests and the US-China Trade War. The City has already seen a decline in growth for consecutive quarters this year. And now, the ripples of economic recession in Hong Kong are being felt throughout the world.
Hong Kong, one of Asia’s biggest trade hubs, is experiencing undesirable circumstances – in the form of Recession, for quite some time now. Several economic indicators pass true to the test of the sinking economy. Retail sales plunged a record 23% in August analogous to the previous year as demand for luxury goods jettisoned precipitously. Tourism declined by 40% during the same time.
Exports, one of the major economy booster, are expected to reach to the worst level in a decade this year. The Hong Kong Trade Development Council cited the underlying warning as it slashed its growth forecasts for 2019. Though sentiments are not comparable, however, if it were, then they were on a new low this August for small and medium-sized businesses.
Along with the confirmation of a possible recession, advance third-quarter GDP figures due on October 31 may indicate even sluggish growth forecasts for the rest of the year. The lack of tourists implies months of weakening sales among retailers from the glitzy shops in Central to family-run small businesses. The city’s unemployment level increased for the first time in July for the last two years. If the protests continue, the layoffs and store closings will increase in the coming months and so will unemployment.
Why Hong Kong is Important for the World?
Hong Kong is one of the biggest trade hubs in the world. It shipped US$569.1 billion worth of goods around the globe in 2018. This amount reflects an 8.6% gain since 2014 and a 3.5% increase from 2017 to 2018. The country exports across the continents. In 2018, around 77.4% of Hong Kong’s exports were sent to Asian countries while 10.4% were sold to European importers. Hong Kong delivered another 9.2% worth of goods to North America.
The city is a major exporter of electrical machinery, computers, gems, precious metals, medical apparatus, plastics, plastic articles, clocks, watches including parts, toys, games, clothing, accessories, etc.
Hong Kong has a population of 7.2 million people. Therefore, its $569.1 billion exports represent roughly $79,900 for every resident. Since the protest geared up in June, the Hong Kong stock market of $4.9 trillion is going through a setback. As a consequence, the city stocks lost $500 billion.
In a ripple effect, India’s stock market also saw a drop of 1.65% due to the on-going protests. Subsequently, Japan’s Nikkei also saw a sharp fall of 1.5%.
Ahead of Carrie Lam's policy address on Wednesday, here's one of the biggest issues laid out in one very simple graphic.— David Ingles (@DavidInglesTV) October 15, 2019
Hong Kong home prices have doubled since the 1997 handover. And that's despite being underwater for the first 13 years! pic.twitter.com/y3Xjp5WPEC
Effect of Hong Kong Protests on the World
If the protests continue, there will be a shortage of supply, for materials imported from Hong Kong, in the rest of the world. This will lead to an increase in prices. The excessive increase in prices will cause people to move to alternatives meaning a reduction in demand and change of market trends. This effect will sustain even after the end of the protests.
Hong Kong trades with almost every developed and developing the country in the world including the US, Russia, India, the UK, and other European Countries. The impact of the market in Hong Kong will have a direct effect on the markets of these countries.
Moreover, Hong Kong is a major market for antique items, textiles, and handicrafts. Exports to Hong Kong in India decreased to 59.39 INR Billion in August from 64.43 INR Billion in July of 2019. If the situation in Hong Kong continues to degrade then many exporters from countries like India will suffer huge losses.
How the Chinese government manages to suppress the situation still remains to be seen. However, the effects would undoubtedly be catastrophic not just for Hong Kong but for the global economy as well.