The US-China Trade War has already ignited financial woes globally. As a result, stagnation in one of Asia’s biggest business hubs is adding to the scare of a worldwide economic meltdown.
In the recent weeks, Hong Kong’s protests have grown in scale and impact. Demonstrators rocked the terminal, targeting ticketing desks and baggage-claim areas, thus making travel functionally impossible. Consequently, the intensity of violence reached unprecedented heights when the riot police briefly clashed with the protesters. As per The New York Times, one officer drew a gun in an altercation but did not fire.
The Hong Kong agitations against the expedition bill are not just adding to the economic meltdown by accelerating it further.
Consequently, Hong Kong’s protests have now been firing up for almost two months. So, this has led to economic repercussions. In other words, the global economy is already under massive stress. Trade war between two big economies (US and China) has already engulfed the world in financial trouble.
A worldwide slowdown is bringing up sign of an impending recession. At the same time, the Hong Kong agitations against the expedition bill are not just adding to the economic meltdown by accelerating it further.
Risk of Recession
As per the Hong Kong government report, the Hong Kong economy shrank 0.3% in the first financial Quarter of this year compared to the previous year quarter. As a result, the government is also expecting GDP to fall 1% in the second financial Quarter compared to the previous one.
Financial Secretary Paul Chan has warned that Hong Kong is at the risk of recession if protests continue.
Furthermore, Financial Secretary Paul Chan has warned that Hong Kong is at the risk of recession if protests continue. According to a Bloomberg report, flag carrier Cathay Pacific Airways ticket sales have dipped to new lows in July. There’s no sign of improvement in future bookings with relentless protests showing no signs of dilution.
Above all, Hong Kong’s Disneyland visits have also remarkable come down in the past few months. In addition, the retail sector has also reported a slump. Owner of Cartier Richemont said that the export market of Swiss watches came down due to store closures and reduction in tourist arrivals.
Similarly, China and Taiwan already share a tumultuous relation due to the claims of Chinese government on the democratic nation, which it strenuously opposes. On the other hand, Australian Government has warned the supporters and opponents of Hong Kong’s protests after it led to scuffles in a Melbourne rally.
European Union has urged all the sides to engage in a peaceful dialogue.
European Union urged all the sides to engage in a peaceful dialogue. Chinese paramilitary forces carrying out the exercise in Shenzhen near Hong Kong’s border, which might be used to restrict the protests.
Trade War gets a new twist
An article in the Chinese Communist Party’s official newspaper, People’s Daily claimed foreign influences are at play and inciting Hong Kong’s protests and helping in prolonging the agitation.
China has accused foreign powers including US of inciting Hong Kong’s protests and helping in prolonging the agitation.
US President Trump has said that he would like to see China resolve the issue in a humanitarian fashion. Amid a global recession scare, Trump made this the grounds for a trade deal between China and the US.
I know President Xi of China very well. He is a great leader who very much has the respect of his people. He is also a good man in a “tough business.” I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting?— Donald J. Trump (@realDonaldTrump) August 14, 2019
Furthermore, the Chinese government is asserting pressure on big corporates to side with it. This was exemplified by the case of two Cathay Pacific Airlines’ pilots found participating in the protests were fired by the airline. On Friday, the CEO of the Airline, Rupert Hogg’s sudden departure was announced by the Chinese media. This is being seen as a clear warning from Beijing to corporates to side with China.
The demonstrations in Hong Kong are an inspiration to us all. It is the right of all people to protest for a better future. We stand with these brave protesters and call on the Chinese government to refrain from violence. pic.twitter.com/4oESjzBmlw— Bernie Sanders (@BernieSanders) August 19, 2019
Hong Kong is adamant, China is relentless
Recession in its place, Hong Kong’s protests are relentless in their rejection of the bill. The young citizens have labelled the bill as a threat to the democracy and identity of Hong Kong. The region is destined to be completely merged into China by 2047. However, young protesters are unhappy with recent Chinese moves which are considered as covert encroachment.
Furthermore, Hong Kong’s protests have taken a violent turn following the Airport incident. Consequently, Chinese officials linked the agitation to terrorism. This has enabled the Chinese media to staunchly urge Hong Kong police to respond more vigorously.
Hong Kong is destined to be completely merged into China by 2047, but young protesters are unhappy with recent Chinese encroachment moves.
Above all, China has an infamous history of crushing agitation with force. With the protests having turned violent, it now has a reason to come down and quash the agitation in a powerful way. Moreover, the situation shares an eerie similarity to the horrid Tiananmen Square incident. China forcefully annexed Aksai Chin (Ladakh) from India in 1962. Similarly, China’s move of annexing Tibet has been protested ever since.
Adding to the global slowdown
Since the protest geared up in June, Hong Kong stock market of US $4.9 trillion felt a setback. As a consequence, the city stocks almost lost the US $500 billion, including the sales, decline in real estate.
Chief Executive Carrie Lam said the government was lowering its 2019 GDP growth rate from 2-3% (original range) to 0-1%.
Likewise, India’s stock market saw drop of 1.65% due to the on-going turmoil in Hong Kong. The Nifty fell down 183 points, and Sensex fell 623 points. Subsequently, Japan’s Nikkei also saw a sharp fall of 1.5%.
As a result, this contraction in the second Quarter will be going to affect the 7 million people. To tackle this situation, Financial Secretary Paul Chan Mo-Po announced Hong Kong $19 billion (US $2.4 billion) for relief measures to constrain this financial burden.
Hong Kong protests could threaten city’s status as an international shipping hub, analysts say #HongKongProtests #HongKong #Hongkongprotest #HongKongProtesters #antiEALB #antiELABhk https://t.co/jv9FNPmxtu pic.twitter.com/XOP3h0pEgH— SCMP Economy (@scmpeconomy) August 19, 2019
The next few weeks could see an increased pressure from China to quell the agitation. Meanwhile, the economy is sinking and with it adding further weight to the globally incoming recession.
By: Abhishek Kumar Sushil & Chitresh Sehgal, DKODING Media